VOLUNTEER CAPITAL CORP / TN /
10-K405, 1996-04-01
EATING PLACES
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<PAGE>   1
                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

                                  FORM 10-K

/X/    Annual Report Pursuant to Section l3 or l5(d) of The Securities 
       Exchange Act of l934
       For the fiscal year ended December 31, 1995.

                                     or
/ /   Transition Report pursuant to Section 13 or 15(d) of the Securities
      Exhange Act of 1934
      For the transition period from                  to
                                    ----------------    -------------------

                        Commission file number 1-8766

                        VOLUNTEER CAPITAL CORPORATION
                        -----------------------------
           (Exact name of Registrant as specified in its charter)


             Tennessee                                       62-0854056
- -----------------------------------------         ------------------------------
   (State or other jurisdiction of                        (I.R.S. Employer 
   incorporation or organization)                       Identification Number)


            P. O. Box 24300
         3401 West End Avenue
          Nashville, Tennessee                                  37203
- ----------------------------------------          ------------------------------
(Address of principal executive offices)                      (Zip Code)

Registrant's telephone number, including area code 6l5/ 269-1900
                                                   -------------

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

<TABLE>
<CAPTION>
Title of Class:                                                   Name of each exchange on which registered:   
- ---------------                                                   ------------------------------------------   
<S>                                                               <C>                                          
Common stock, par value $.05 per share.                           New York Stock Exchange                      
Series A junior preferred stock purchase rights                   New York Stock Exchange                      
</TABLE>


Securities registered pursuant to Section l2(g) of the Act:    None

     Indicate by check mark whether the registrant:  (l) has filed all reports
required to be filed by Section l3 or l5(d) of the Securities Exchange Act of
l934 during the preceding l2 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes  X      No
    ---        ---
     Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein,
and will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.   /X/
     The aggregate market value of the voting stock held by non-affiliates of
the registrant, computed by reference to the last sales price on the New York
Stock Exchange of such stock as of March 25, 1996, was $42,267,960,  assuming
that (i) all shares beneficially held by members of the Company's Board of
Directors are shares owned by "affiliates,"  a status which each of the
directors individually disclaims and (ii) all shares held by the Trustee of the
Volunteer Capital Corporation Employee Stock Ownership Plan are shares owned by
an "affiliate."
     The number of shares of the Company's Common Stock, $.05 par value,
outstanding at March 25, 1996, was 5,276,972.

                     DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Company's Annual Report to Shareholders for the fiscal
year ended December 31, 1995, are incorporated by reference into Parts I and
II.
     Portions of the Proxy Statement for the 1996 Annual Meeting of
Shareholders to be held May 14, 1996, are incorporated by reference into Part
III.



<PAGE>   2


                                    PART I

ITEM 1.  BUSINESS

     Volunteer Capital Corporation (the "Company") operates 58 franchised
Wendy's Old Fashioned Hamburgers restaurants ("Wendy's Restaurants") located in
Louisiana, Massachusetts, North Carolina and South Carolina, making it a major
franchisee of Wendy's International, Inc. ("Wendy's International").  The
Company has been a franchisee of Wendy's International since 1975.  Wendy's
restaurants are quick-service, limited menu restaurants that feature hamburgers
and boneless breast of chicken sandwiches, an all-you-can-eat food bar and
complementary items.

     The Company also operates as a proprietary concept nine J. Alexander's
full-service, casual dining restaurants located in Tennessee, Ohio,
Florida, Kansas, Alabama and Illinois.  J. Alexander's is a traditional
restaurant with an American menu that features prime rib of beef;
mesquite-grilled steaks, seafood and chicken; pasta; salads and soups; assorted
sandwiches, appetizers and desserts; and a full-service bar.  Management
believes quality food, outstanding service and value are critical to the
success of J. Alexander's.

     Management intends to concentrate on development of new J. Alexander's
restaurants and may also consider use of the Company's capital resources for
acquisitions of restaurants similar to J. Alexander's.

     Unless the context requires otherwise, all references to the Company
include Volunteer Capital Corporation and its subsidiaries.

     Information concerning net sales and operating results of the Company's
Wendy's Restaurants and J. Alexander's restaurants is set forth in
"Management's Discussion and Analysis" on pages 16 through 23 of the Company's
1995 Annual Report to Shareholders.

     For information concerning business segments, see Note K on page 38 of the
Company's 1995 Annual Report to Shareholders.


                         WENDY'S RESTAURANT OPERATIONS

     Menu and Format.  Each of the Company's Wendy's Restaurants offers a
relatively standard menu.  Hamburgers are prepared using only fresh beef and
with  the customer's choice of cheese, tomato and various condiments.  Other
menu items include boneless breast of chicken sandwiches, the SuperBar (an
all-you-can-eat hot and cold food buffet), chili, french fried and baked
potatoes, prepared salads, a child's meal, Frosty Dairy Dessert, and an
assortment of soft drinks and other non-alcoholic beverages.

     Selected lower-priced menu items offered as the Super Value Menu
constitute an important part of Wendy's product offerings.  Specialty premium
sandwiches are also featured as part of certain promotions.  In addition, the
Company has continued to promote its SuperBars, which feature a double-sided
Garden Spot salad bar, a Mexican food section and an Italian-style pasta
section, as one of its primary menu offerings.

     The Company currently operates 24 Wendy's Restaurants in the greater
Greenville and Spartanburg, South Carolina/Asheville, North Carolina region; 11
restaurants in the greater Columbia, South Carolina area; seven restaurants in
the Myrtle Beach, South Carolina area; 10 restaurants in Baton Rouge, Louisiana;
and six restaurants in western Massachusetts.  At current development costs and
due to various restrictions placed upon the Company's Wendy's division as a
franchisee, the Company is having difficulty locating sites which meet its
investment criteria.  For that reason, the Company does not presently anticipate
developing any additional Wendy's restaurants in 1996. The Company anticipates
that any future development and/or acquisition of Wendy's restaurants generally
will occur in the market areas in which the Company currently operates.  The
Company believes that the clustering of Wendy's Restaurants in defined
geographic markets allows the Company to take advantage of advertising,
operating and administrative efficiencies.  The Company has no exclusive
development rights in any of its current market areas; however, it may develop
and acquire additional Wendy's restaurants, subject to the approval of Wendy's
International.



                                      2
<PAGE>   3


     Agreements with Wendy's International.  The Company and Wendy's
International have executed a separate Unit Franchise Agreement for each
Wendy's Restaurant, which grants the Company an exclusive franchise for that
Wendy's Restaurant to use the trademarks, service marks and certain other
rights of Wendy's International.  Each Unit Franchise Agreement has a 20-year
term (with varying renewal periods subject to certain conditions) and requires
the Company to pay Wendy's International an initial franchise fee for that
Wendy's Restaurant and a monthly fee equal to 4% of the restaurant's gross
sales.  Additionally, the Company must spend an amount equal to 4% of the sales
of each restaurant for advertising and promotion, which includes the current
2.5% contribution to a national cooperative advertising fund.

     Under the terms of the Unit Franchise Agreements, Wendy's International
agrees to provide certain ongoing services to the Company, including training
programs, operations manuals and standard building plans and specifications.
Wendy's International has the right to supervise, determine and approve the
quality of service and food preparation at the Company's Wendy's Restaurants,
which it periodically inspects for compliance with Wendy's established
operating standards.  Any continuing material noncompliance with these
standards gives Wendy's International the right to terminate the Unit Franchise
Agreement for that restaurant.  The Company has never received any such notice
from Wendy's International with respect to restaurants it operates.
Termination of any single Unit Franchise Agreement would not affect the
Company's rights under other Unit Franchise Agreements for its Wendy's
Restaurants.

     The Company has agreed with Wendy's International that any proposed sale
or transfer which would reduce the Company's direct or indirect ownership of
its Wendy's Restaurants to less than 51% is subject to a right of  first
refusal or, in certain circumstances, consent, by Wendy's International.  In
addition, any sale, transfer, assignment or encumbrance of a Unit Franchise
Agreement requires the prior written consent of  Wendy's International.  The
Company has also granted to Wendy's International a right of first refusal or,
in certain circumstances, consent, in the event that the Company receives an
acceptable bona fide offer from a third party to acquire the Company's business
through an exchange offer, merger, share exchange, sale of assets or other
transaction of similar effect.  These agreements, under certain circumstances,
may discourage a third party from acquiring or attempting to acquire the
Company.

                     J. ALEXANDER'S RESTAURANT OPERATIONS

     General.  J. Alexander's is a quality casual dinner house with an American
theme.  J. Alexander's strategy is to provide a broad range of high-quality
menu items that are intended to appeal to a wide range of consumer tastes and
are served by a courteous, friendly and well-trained service staff.  The
Company believes that quality food, outstanding service and value are critical
to the success of J. Alexander's.

     Each restaurant is open from 11:00 a.m. to 11:00 p.m. Sunday through
Thursday and 11:00 a.m. to 12:00 midnight on Friday and Saturday.  Entrees
available at lunch and dinner range in price from $5.75 to $24.95.  The Company
estimates that the average check per customer, excluding alcoholic beverages, is
approximately $12.75. J. Alexander's net sales during fiscal 1995 were $25.6
million, of which alcoholic beverage sales accounted for approximately 15%.

     The Company opened its first J. Alexander's restaurant in Nashville,
Tennessee in May 1991.  Since that time, the following restaurants have been
developed:


<TABLE>
<CAPTION>
                    Location                    Date Opened
                    --------                    -----------
                    <S>                      <C>
                    Franklin, Tennessee      September, 1992
                    Dayton, Ohio              December, 1992
                    Columbus, Ohio               April, 1994
                    Oak Brook, Illinois        October, 1994
                    Ft. Lauderdale, Florida   February, 1995
                    Hoover, Alabama             August, 1995
                    Toledo, Ohio              November, 1995
                    Overland Park, Kansas     December, 1995
</TABLE>


The Company plans to open five J. Alexander's restaurants in 1996, four of
which are currently being developed in Cleveland, Ohio; Plantation, Florida;
Chattanooga, Tennessee; and Troy, Michigan, a leased location.  The Cleveland
restaurant is scheduled to open in the second quarter of 1996, with the
remaining three restaurants scheduled for third quarter openings.  A fifth new
restaurant is expected to open before year-end along with a smaller test
version of J. Alexander's which serves dinner only.



                                      3
<PAGE>   4
     Menu.  The J. Alexander's menu is designed to appeal to a wide variety of
tastes and features prime rib of beef; mesquite-grilled steaks, seafood and
chicken; pasta; salads and soups; and assorted sandwiches, appetizers and
desserts.  As a part of the Company's commitment to quality, soups, pasta
sauces, salsa, salad dressings and desserts are made daily from scratch;
steaks, chicken and seafood are grilled over genuine mesquite wood; all steaks
are U.S.D.A. Choice Beef, aged a minimum of 21 days and cut by hand in the
kitchen; and imported Italian pasta, topped with fresh grated imported Reggiano
Grassi parmesan cheese, is used.

     Emphasis on quality is present throughout the entire J. Alexander's menu.
Milkshakes are made from Haagen-Dazs ice cream, with flavoring being the only
addition.  Desserts such as chocolate cake, carrot cake and banana cream pie
are prepared in-house, and each restaurant bakes its featured croissants.  Each
J. Alexander's also makes its own tortilla chips and prepares fresh tortilla
strips and baked croutons for its salads.

     Customer Service.  Management believes that prompt, courteous and
efficient service is an integral part of the J. Alexander's concept.  The
management staff of each restaurant are referred to as "coaches" and the other
employees as "champions".  The Company seeks to hire coaches who are committed
to the principle that quality products and service are key factors to success
in the restaurant industry.  Each J. Alexander's restaurant typically employs
five to six fully-trained concept coaches and two kitchen coaches.  The coaches
typically have previous experience in full-service restaurants and complete an
intensive 18-week J. Alexander's development program involving all aspects of
restaurant operations.  Coaches for each new J. Alexander's restaurant also
train at an existing restaurant prior to the opening of a new J. Alexander's.

     Each J. Alexander's has approximately 55 to 70 service personnel, 25 to 30
kitchen employees, 10 hostpersons and six to eight bartenders.  The Company
places significant emphasis on its initial training program.  In addition, the
coaches hold training breakfasts for the service staff to further enhance their
product knowledge.  Management believes J. Alexander's restaurants have a low
table to server ratio, which is designed to provide better, more attentive
service.  The Company is committed to employee empowerment, and each member of
the service staff is authorized to provide complimentary entrees in the event
that a guest has an unsatisfactory dining experience or the food quality is not
up to the Company's standards.  Further, all members of the service staff are
trained to know the Company's product specifications and to alert management as
to any potential problems.

     Quality Assurance.  A key position in each J. Alexander's restaurant is
the quality control coordinator.  This position is staffed by a coach who
inspects each plate of food before it is served to a guest.  The Company
believes that this product inspection by a member of management is a
significant key to maintaining consistent, high food quality in its
restaurants.

     Another important component of the quality assurance system is the
preparation of taste plates.  Certain menu items are periodically taste-tested
by a coach to ensure that only the highest quality food is served in the
restaurant.  The Company also uses a mystery shopper program to monitor service
staff performance, food quality and customer satisfaction.

     Restaurant and Site Selection.  The J. Alexander's restaurants built
from 1992 through 1995 are freestanding structures that contain approximately
7,400 square feet and seat approximately 230 people.  The exterior typically
combines brick, fieldstone and copper with striped awnings covering the windows
and entrance.  The restaurants' interiors are designed to provide a comfortable
dining experience and feature high ceilings, wooden trusses with exposed pipes
and an open kitchen immediately adjacent to the reception area.  The initial
cost of developing the J. Alexander's restaurants, including land, building and
equipment and excluding pre-opening costs, has ranged from approximately
$2,300,000 to $3,900,000.  While the cost of land has been a significant
variable in development cost, costs related to site preparation and buildings
have also varied considerably.  Management is presently developing additional
building images for J. Alexander's and expects that the cost of additional new
units, including the cost of land, will be within the range of $3,000,000 to
$3,800,000.  Pre-opening costs are expected to be approximately $250,000 for
each restaurant.

     The Company is actively seeking to acquire additional sites for new J.
Alexander's restaurants primarily in the midwestern and the southeastern areas
of the United States.  The timing of restaurant openings depends upon the
selection and availability of suitable sites and other factors.  The Company
has no current plans to franchise J. Alexander's restaurants.



                                      4



<PAGE>   5


     The Company believes that its ability to select high profile restaurant
sites is critical to the success of the J. Alexander's operations.  The Company
employs a Director of Real Estate and a Manager of Real Estate whose primary
responsibilities are to seek out and evaluate possible restaurant locations in
attractive mid-sized and larger metropolitan areas.  After preliminary site
analysis is performed and evaluated, members of the Company's senior management
team visit the proposed location and evaluate the particular site and the
surrounding area.  The Company analyzes a variety of factors in the site
selection process, including local market demographics, the number, type and
success of competing restaurants in the immediate and surrounding area and
accessibility to and visibility from major thoroughfares.  The Company also
obtains an independent market analysis to verify its own conclusion that a
potential restaurant site meets the Company's criteria.  The Company believes
that this site selection strategy results in quality restaurant locations.

                                  COMPETITION

     The restaurant industry is highly competitive.  The Company believes that
the principal competitive factors within the industry are site location,
product quality, service and price; however, menu variety, attractiveness of
facilities and customer recognition are also important factors.  The Company's
restaurants compete not only with numerous other quick-service and casual
dining restaurants with national or regional images, but also with other types
of food service operations in the vicinity of each of the Company's
restaurants.  These include other restaurant chains or franchise operations
with greater public recognition, substantially greater financial resources and
higher total sales volume than the Company.  The restaurant business is often
affected by changes in consumer tastes, national, regional or local economic
conditions, demographic trends, traffic patterns and the type, number and
location of competing restaurants.

                                 SEASONALITY

     The business of the Company is moderately seasonal, primarily to the
extent that sales and operating profits in the Wendy's Restaurants have
traditionally been lower in the winter months (most notably January and
February) than in other months.  The Company's seven Wendy's restaurants in
Myrtle Beach, South Carolina have historically experienced a significant
increase in sales and operating profits during the months of June, July and
August, and lower sales and operating profits during the fall and winter
months, principally as a result of seasonal tourist traffic.

                                   PERSONNEL

     As of December 31, 1995, the Company employed approximately 2,900 persons.
The Company believes that its employee relations are good.  It is not a party
to any collective bargaining agreements.


                             GOVERNMENT REGULATION

     Each of the Company's restaurants is subject to various federal, state and
local laws, regulations and administrative practices relating to the sale of
food and, in the case of J. Alexander's, alcoholic beverages, and sanitation,
fire and building codes.  Restaurant operating costs are also affected by other
governmental actions that are beyond the Company's control, which may include
increases in the minimum hourly wage requirements, workers' compensation
insurance rates and unemployment and other taxes.  Difficulties or failures in
obtaining the required licenses or approvals could delay or prevent the opening
of a new restaurant.

     Alcoholic beverage control regulations require each of the Company's J.
Alexander's restaurants to apply for and obtain from state authorities a license
or permit to sell liquor on the premises and, in some states, to provide service
for extended hours and on Sundays.  Typically, licenses must be renewed annually
and may be revoked or suspended for cause at any time. The failure of any
restaurant to obtain  or retain any required liquor licenses would adversely
affect the restaurant's operations.  In certain states, the Company may be
subject to "dram-shop" statutes, which generally provide a person injured by an
intoxicated person the right to recover damages from the establishment which
wrongfully served alcoholic beverages to the intoxicated person.  The Company
carries liquor liability coverage as part of its comprehensive general liability
insurance.



                                      5

<PAGE>   6

     The Americans with Disabilities Act ("ADA") prohibits discrimination on
the basis of disability in public accommodations and employment.  The ADA
became effective as to public accommodations in January 1992 and as to
employment in July 1992.  Construction and remodeling projects since January
1992 have taken into account the requirements of the ADA; however, the Company
could be required to further modify its restaurants' physical facilities to
comply with the provisions of the ADA.

                                  RISK FACTORS

     In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company is including the following
cautionary statements identifying important factors that could cause the
Company's actual results to differ materially from those projected in forward
looking statements of the Company made by, or on behalf of, the Company.

      Risks Associated with Growth.  The Company's continued growth depends to
a large extent on its ability to open new J. Alexander's restaurants and to
operate them profitably, which will depend on a number of factors, including the
selection and availability of suitable locations, the hiring and training of
sufficiently skilled management and other personnel and other factors, some of
which are beyond the control of the Company.  There can be no assurance that the
Company will be able to open the anticipated number of J. Alexander's in a
timely manner or that, if opened, those restaurants can be operated profitably. 
The Company currently operates nine J. Alexander's restaurants, of which only
five have been open for more than one year.  Consequently, the earnings achieved
to date by these J. Alexander's restaurants may not be indicative of future
operating results.  Furthermore, because of the Company's relatively small J.
Alexander's restaurant base, an unsuccessful new restaurant could have a more
adverse effect on the Company's results of operations than would be the case in
a restaurant company with a greater number of restaurants.

     Franchisee Relationship with Wendy's International.  As a franchisee of
Wendy's International, the success of the Company is, in large part, dependent
upon the overall success of the Wendy's restaurant system, including the
financial condition, management and marketing success of Wendy's International
and the successful operation of Wendy's restaurants owned by other franchisees.
Significant matters relating to the Company's growth and operational
strategies must be coordinated with, and approved by, Wendy's International.
In particular, Wendy's International must approve the opening by the Company of
any new Wendy's restaurant.  Under its franchise agreements with Wendy's
International, the Company does not have exclusive development rights in its
market areas.  Wendy's International also maintains discretion over the menu
items that may be offered in the Company's restaurants.  By virtue of franchise
and other agreements, the Company is required to pay to Wendy's International
technical assistance fees upon the opening of new restaurants and monthly
royalty and national advertising fees.  These agreements also provide for the
termination of the Company as a franchisee upon the failure of the Company to
comply with certain restrictions and obligations imposed on the Company.

     The Company has agreed with Wendy's International that any proposed sale
or transfer which would reduce the Company's direct or indirect ownership of
its Wendy's restaurants to less than 51% is subject to a right of first refusal
or, in certain circumstances, consent, by Wendy's International.  In addition,
any sale, transfer, assignment or encumbrance of an individual restaurant's
Unit Franchise Agreement requires the prior written consent of Wendy's
International.  The Company has also granted to Wendy's International a right
of first refusal or, in certain circumstances, consent, in the event that the
Company receives an acceptable bona fide offer from a third party to acquire
the Company's business through an exchange offer, merger, share exchange, sale
of assets or other transaction of similar effect.

     Competition.  The restaurant industry is intensely competitive with
respect to price, service, location and food quality, and there are many
well-established competitors with substantially greater financial and other
resources than the Company.  Some of the Company's competitors have been in
existence for a substantially longer period than the Company and may be better
established in the markets where the Company's restaurants are or may be
located.  The restaurant business is often affected by changes in consumer
tastes, national, regional or local economic conditions, demographic trends,
traffic patterns and the type, number and location of competing restaurants.


                                      6
<PAGE>   7


     Over most of the last two years, the Company's Wendy's division has been
experiencing intense pressure as a result of the competition among the four big
hamburger fast food chains (McDonald's, Burger King, Wendy's, and Hardee's).
This competition has been reflected not only in the advertising campaigns of
each chain, but also in significant price discounting.  Because the Company's
Wendy's division still accounts for a significant portion of the Company's
revenues, the competitive pressures in the fast food industry can be expected to
continue to have an impact on the Company's results of operations.

     Fluctuations in Quarterly Results.  The Company's quarterly results of
operations are affected by seasonality in the Company's business, timing of the
opening of new J. Alexander's and Wendy's restaurants, and fluctuations in the
cost of food, labor, employee benefits, and similar costs over which the Company
has limited or no control.  The Company's business may also be affected by
inflation.  In the past, management has attempted to anticipate and avoid
material adverse effects on the Company's profitability from increasing costs
through its purchasing practices and menu price adjustments, but there can be
no assurance that it will be able to do so in the future.

     Government Regulation.  The restaurant industry is subject to extensive
state and local government regulation relating to the sale of food and
alcoholic beverages, and sanitation, fire and building codes.  Termination of
the liquor license for any J. Alexander's restaurant would adversely affect the
revenues for the restaurant.  Restaurant operating costs are also affected by
other government actions that are beyond the Company's control, which may
include increases in the minimum hourly wage requirements, workers'
compensation insurance rates and unemployment and other taxes.  Implementation
of mandatory health care coverage could adversely affect the Company's
operations.  Difficulties or failure in obtaining required licensing or other
regulatory approvals could delay or prevent the opening of a new J. Alexander's
or Wendy's restaurant.  The suspension of, or inability to renew, a license
could interrupt operations at an existing restaurant, and the inability to
retain or renew such licenses would adversely affect the operations of the new
restaurants.

ITEM 2.  PROPERTIES

     As of December 31, 1995, the Company had 58 Wendy's Restaurants in
operation, nine J. Alexander's casual dining restaurants in operation and two
J. Alexander's restaurants under construction.  The following table gives the
locations of, and describes the Company's interest in, the land and buildings
used in connection with the above:



<TABLE>
<CAPTION>
                                              Site Leased
                          Site and Building   and Building      Site and Building
                            Owned by the      Owned by the       Leased to the
                               Company          Company             Company           Total
 <S>                           <C>              <C>                <C>              <C>
 Wendy's Restaurants:
   Louisiana                      9                1                   0               10
   Massachusetts                  5                0                   1                6
   North Carolina                 1                1                   3                5
   South Carolina                 7                6                  24               37
                               ----             ----               -----            -----
                                 22                8                  28               58  

J. Alexander's Restaurants:
   Alabama                        1                0                   0                1    
   Florida                        1                1                   0                2    
   Illinois                       1                0                   0                1    
   Kansas                         1                0                   0                1    
   Ohio                           3                1                   0                4    
   Tennessee                      1                0                   1                2    
                               ----             ----               -----            -----    
                                  8                2                   1               11    
                               ----             ----               -----            -----    
   Total                         30               10                  29               69    
                               ====             ====               =====            =====
</TABLE>


(a)  Certain of the Company's assets have been pledged as collateral
     under various debt agreements as detailed in  "Note C - Long-Term Debt and 
     Obligations Under Capital Leases" of the Company's 1995 Annual Report to
     Shareholders.
(b)  In addition to the above, the Company leases six properties which
     are in turn leased to others.
(c)  See Item 1. for additional information concerning the Company's 
     restaurants.



                                      7
<PAGE>   8



    Substantially all of the Company's restaurant lease agreements may be
renewed at the end of the initial term (generally 15 to 25 years) for periods
ranging from five to 20 years.  Most of these leases provide for minimum rentals
plus additional rent based on a percentage of the restaurant's gross sales in
excess of specified amounts.  These leases usually require the Company to pay
all real estate taxes, insurance premiums and maintenance expenses with respect
to the leased premises, except that in some of the Company's more recent leases
a portion of such expenses will be credited against any additional rent based on
a percentage of gross sales which may be due.

    Corporate offices for the Company are located in leased office space in
Nashville, Tennessee.  The Company leases offices in Greenville and Columbia,
South Carolina; and Baton Rouge, Louisiana, from which administrative services
are provided for the Company's Wendy's Restaurants in those market areas.

ITEM 3.  LEGAL PROCEEDINGS

    As of March 25, 1996, the Company was not a party to any pending legal
proceedings material to its business.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of security holders during the fourth
quarter of 1995.

EXECUTIVE OFFICERS OF THE COMPANY

     The following list includes names and ages of all of the executive
officers of the Company indicating all positions and offices with the Company
held by each such person and each such person's principal occupations or
employment during the past five years.  All such persons have been appointed to
serve until the next annual appointment of officers and until their successors
are appointed, or until their earlier resignation or removal.

<TABLE>
<CAPTION>
Name and Age                            Background Information
- ------------                            ----------------------
<S>                                     <C>
Dennis J. Cleary, 39                    Vice President of Total Quality Management, Inc., a
                                        wholly-owned subsidiary of the Company, since January 1991; 
                                        Vice President of the Company since July 1993.  Management Partner 
                                        of Grady's, Inc., a full-service, casual dining restaurant chain from 
                                        1982 to December 1990.

R. Gregory Lewis, 43                    Chief Financial Officer since July 1986; Vice President of Finance and 
                                        Secretary since August 1984.

Richard D. May, 43                      President of VCE Restaurants, Inc., a wholly-owned subsidiary of the Company,  since 
                                        October 1989; Vice President of the Company since October 1986.

Mark A. Parkey, 33                      Director of Finance and Administration of the Company since January 1993; Audit Manager 
                                        with Steele, Carter and Martin, a public accounting firm, from June 1991 to January 1993; 
                                        Audit Manager with Ernst & Young LLP, a public accounting firm, from July 1984 to June 1991.

Lonnie J. Stout II, 49                  Chairman since July 1990; Director, President and Chief Executive Officer since May 1986.
</TABLE>




                                      8
<PAGE>   9

                                   PART II


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

     The information required under this item is incorporated by reference to
the section entitled "Price Range of Common Stock" on page 43 and the Note to
the "Five-Year Financial Summary" on page 41 of the Company's Annual Report to
Shareholders for the fiscal year ended December 31, 1995.

ITEM 6.  SELECTED FINANCIAL DATA

     The information required under this item is incorporated by reference to
the section entitled "Five-Year Financial Summary" on page 41 of the Company s
Annual Report to Shareholders for the fiscal year ended December 31, 1995.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

     The information required under this item is incorporated by reference to
the section entitled "Management's Discussion and Analysis" on pages 16 through
23 of the Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1995.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The information required under this item is incorporated by reference to
the "Consolidated Financial Statements" of the Company and its subsidiaries on
pages 24 through 38 and the "Quarterly Results of Operations" on page 40 of the
Company's Annual Report to Shareholders for the fiscal year ended December 31,
1995.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None.



                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required under this item with respect to directors of the
Company is incorporated herein by reference to the "Proposal No. 1: Election of
Directors" section and the "Compliance with Section 16(a) of the Securities
Exchange Act of 1934" section of the Company's Proxy Statement for the 1996
Annual Meeting of Shareholders to be held May 14, 1996.  (See also "Executive
Officers of the Company" under Part I of this Form 10-K.)

ITEM 11.  EXECUTIVE COMPENSATION

     The information required under this item is incorporated herein by
reference to the "Executive Compensation" section of the Company's Proxy
Statement for the 1996 Annual Meeting of Shareholders to be held May 14, 1996.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required under this item is incorporated herein by
reference to the "Security Ownership of Certain Beneficial Owners and
Management" section of the Company's Proxy Statement for the 1996 Annual
Meeting of Shareholders to be held May 14, 1996.



                                      9


<PAGE>   10


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required under this item is incorporated herein by
reference to the "Certain Relationships and Related Transactions" section of
the Company's Proxy Statement for the 1996 Annual Meeting of Shareholders to be
held May 14, 1996.

                                    PART IV

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

<TABLE>
<S>                 <C>
(a) (1) and (2)     The information required under Item 14, subsections (a)(1) and (a)(2) is set forth in a supplement filed
                    as part of this  report beginning on page F-1.

(a) (3)  Exhibits:

    (3)(a)          Charter as currently in effect (Exhibit 3(a) of the Registrant's Report on Form 10-K for the year ended December
                    30, 1990, is incorporated herein by reference).

    (3)(b)          Bylaws as currently in effect (Exhibit 3(b) of the Registrant's Report on Form 10-K for the year ended December
                    30, 1990, is incorporated herein by reference).

    (4)(a)          Form of Indenture dated as of May 19, 1983, between the Registrant and First American National Bank of  
                    Nashville, Trustee (Exhibit 4 of the Registrant's quarterly report on Form 10-Q for the quarter ended June 30,
                    1983, is incorporated herein by reference).

    (4)(b)          Rights Agreement dated May 16, 1989, by and between Registrant and NationsBank (formerly Sovran Bank/Central
                    South) including Form of Rights Certificate and Summary of Rights (Exhibit 3 to the Report on Form 8-K dated 
                    May 16, 1989, is incorporated herein by reference).

   (10)(a)          Form of Unit Franchise Agreement with Wendy's International, Inc. and Volunteer Quality Foods, Inc., Volunteer
                    Louisiana, Inc. and Wendy's of South Carolina, Inc., respectively (Exhibit 13(a)-7 to Registration No. 2-61076
                    is incorporated herein by reference).

   (10)(b)          Agreement between Registrant and Wendy's International, Inc.  dated June 30, 1976 (Exhibit 5 to the Registrant's
                    Report on Form 8-K dated August 1976 is incorporated herein by reference).

   (10)(c)          Purchase Agreement between Registrant and Wendy's International, Inc. dated November 30,1982 (Exhibit 2(a) to 
                    the Registrant's Report on Form 8-K filed as of December 30, 1982, is incorporated herein by reference).

   (10)(d)          Lease  dated  December 30, 1988, by and  between   Calendar  Court  Corporation  and  Volunteer Capital East, 
                    Inc. (Exhibit 10(p) of the Registrant's Report on Form 10-K for the year ended January 1, 1989, is incorporated
                    herein by reference).

   (10)(e)          Asset Purchase Agreement dated May 16, 1989, between Registrant, RTM Winners, L.P. and Winners Corp. of 
                    Georgia, Inc. (Appendix A of the Registrant's Proxy Statement for Special Meeting of Shareholders, August 18, 
                    1989, is incorporated herein by reference).

   (10)(f)          Employee Stock Ownership Plan (Exhibit 1 to the Registrant's Report on Form 8-K dated June 25, 1992, is 
                    incorporated herein by reference).

   (10)(g)          Employee Stock Ownership Trust Agreement dated June 25, 1992 between Registrant and Third National Bank in
                    Nashville.  (Exhibit 2 to the Registrant's Report on Form 8-K dated June 25, 1992, is incorporated herein by 
                    reference).

   (10)(h)          Secured Promissory Note dated June 25, 1992 from the Volunteer Capital Corporation Employee Stock Ownership 
                    Trust to Registrant (Exhibit 4 to the Registrant's Report on Form 8-K dated June 25, 1992, is incorporated 
                    herein by reference).


</TABLE>


                                      10
<PAGE>   11


<TABLE>
   <S>         <C>

   (10)(i)     Pledge and Security Agreement dated June 25, 1992, by and between Registrant and Third National Bank in Nashville
               as the Trustee for the Volunteer Capital Corporation Employee Stock Ownership Trust (Exhibit 5 to the Registrant's 
               Report on Form 8-K dated June 25, 1992, is incorporated herein by reference).

   (10)(j)     $30,000,000 Loan Agreement dated August 29, 1995 by and between Volunteer Capital Corporation, VCE Restaurants,
               Inc., Total Quality Management, Inc. and NationsBank of Tennessee, N.A.

   (10)(k)     $30,000,000 Line of Credit note dated August 29, 1995 by and between Volunteer Capital Corporation, VCE Restaurants,
               Inc., Total Quality Management, Inc. and NationsBank of Tennessee, N.A.

EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS

   (10)(l)     Written description of Salary Continuation Plan (description of Salary Continuation Plan included in the 
               Registrant's Proxy Statement for Annual Meeting of Shareholders, May 10, 1994, is incorporated herein by reference).

   (10)(m)     Form of Severance Benefits Agreement between the Registrant and Messrs. Stout, Lewis and May  (exhibit (10)(j) of 
               the Registrant's Report on Form 10-K for the year ended December 31, 1989, is  incorporated herein by reference).

   (10)(n)     1982 Incentive Stock Option Plan (incorporated by reference to pages B-1 through B-6 of Registration Statement No. 
               2-78140).

   (10)(o)     Amended and restated 1982 Employee Stock Purchase Plan (incorporated by reference from the Registrant's Current 
               Report on Form 8-K filed March 29, 1996).

   (10)(p)     1985 Stock Option Plan (incorporated by reference to pages 15 through 20 of the Registrant's Proxy Statement for 
               Annual Meeting of Shareholders, May 8, 1985, and Exhibit A to the Registrant's Proxy Statement for Annual Meeting 
               of Shareholders, May 11, 1993.)

   (10)(q)     1990 Stock Option Plan for Outside Directors (Exhibit A of the Registrant's Proxy Statement for Annual Meeting of 
               Shareholders, May 8, 1990, is incorporated herein by reference).

   (10)(r)     1994 Employee Stock Incentive Plan (incorporated by reference to Exhibit 4(c) of Registration Statement
               No. 33-77476).

   (11)        Statement regarding computation of per share earnings.

   (13)        Annual Report to Shareholders of Volunteer Capital Corporation for the year ended December 31, 1995 (furnished for
               the information of the Commission only and not deemed "filed" as part of this Report on Form 10-K except for those 
               portions which are specifically incorporated herein by reference).

   (21)        List of subsidiaries of Registrant.

   (23)        Consent of Independent Auditors.

</TABLE>

(b)  Reports on Form 8-K:

     The Company did not file any reports on Form 8-K during the last quarter
of the period covered by this report.

(c)  Exhibits -- The response to this portion of Item 14 is submitted as a
     separate section of this report.

(d)  Financial Statement Schedules - The response to this portion of Item 14 is
     submitted as a separate section of this report.


                                      11
<PAGE>   12


                                   SIGNATURES

        Pursuant to the requirements of Section l3 or l5(d) of the Securities
Exchange Act of l934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                            VOLUNTEER CAPITAL CORPORATION


Date:   3/27/96             By:  /s/Lonnie J. Stout II
                                 -----------------------------------------------
                                 Lonnie J. Stout II
                                 Chairman, President and Chief Executive Officer


        Pursuant to the requirements of the Securities Exchange Act of l934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

          Name                                                Capacity                              Date
- ---------------------------               ----------------------------------------------        ------------
<S>                                       <C>                                                     <C>
/s/Lonnie J. Stout II                     Chairman, President, Chief Executive Officer            3/27/96
- ----------------------------                and Director                                        ------------
   Lonnie J. Stout II                          

/s/R. Gregory Lewis                       Vice President and Chief Financial Officer              3/27/96
- ----------------------------                (Principal Financial Officer)                       ------------
   R. Gregory Lewis                         

/s/Mark A. Parkey                         Director of Finance and Administration                  3/27/96
- ----------------------------                (Principal Accounting Officer)                      ------------
   Mark A. Parkey                           


 /s/Earl Beasley, Jr.                     Director                                                3/26/96
- ----------------------------                                                                    ------------
   Earl Beasley, Jr.

/s/E. Townes Duncan                       Director                                                3/26/96
- ----------------------------                                                                    ------------
   E. Townes Duncan

 /s/Garland G. Fritts                     Director                                                3/26/96
- ----------------------------                                                                    ------------
    Garland G. Fritts

/s/ John L.M. Tobias                      Director                                                3/26/96
- ----------------------------                                                                    ------------
    John L.M. Tobias

/s/Toby S. Wilt                           Director                                                3/26/96
- ----------------------------                                                                    ------------
   Toby S. Wilt
</TABLE>




                                      12
<PAGE>   13





                           ANNUAL REPORT ON FORM 10-K

                       ITEM 14(a)(l) AND (2), (c) AND (d)

        INDEX OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

                         FINANCIAL STATEMENT SCHEDULES

                                CERTAIN EXHIBITS

                      FISCAL YEAR ENDED DECEMBER 31, 1995

                 VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES

                              NASHVILLE, TENNESSEE





                                      13
<PAGE>   14


FORM 10-K--ITEM 14(A)(1) AND (2)

VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES

INDEX OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES



The following consolidated financial statements of Volunteer Capital
Corporation and subsidiaries, included in the annual report of the registrant
to its shareholders for the fiscal year ended December 31, 1995, are
incorporated by reference in Item 8:

     Consolidated statements of income--Years ended December 31, 1995, January
       1, 1995 and January 2, 1994

     Consolidated balance sheets--December 31, 1995 and January 1, 1995

     Consolidated statements of cash flows--Years ended December 31, 1995,
       January 1, 1995 and January 2, 1994

     Consolidated statements of stockholders equity--Years ended December 31,
       1995, January 1, 1995 and January 2, 1994

     Notes to consolidated financial statements

The following consolidated financial statement schedule of Volunteer Capital
Corporation and subsidiaries is included in Item l4(d):

     Schedule II - Valuation and qualifying accounts

All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.


                                      14

<PAGE>   15


SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES




<TABLE>
<CAPTION>
                      COL. A                        COL. B                 COL. C                    COL. D         COL. E
- ------------------------------------------------   ----------     -----------------------------     ------------   ----------
                                                                           Additions


                                                   Balance at     Charged to       Charged to                        Balance
                                                   Beginning       Costs and     Other Accounts      Deductions-      at End
                  Description                      of Period       Expenses        Describe            Describe      of Period
- ------------------------------------------------   ----------     ----------    ---------------     -----------    ------------
<S>                                                 <C>                                               <C>             <C>
Year ended December 31, 1995:                                   
   Valuation allowance for deferred tax assets....  $3,071,000                                        $3,071,000 (1)  $        0
                                                                                        
Year ended January 1, 1995:                                                             
   Valuation allowance for deferred tax assets....  $5,730,000                                        $2,659,000 (2)  $3,071,000
                                                                                        
Year ended January 2, 1994:                                                            
   Valuation allowance for deferred tax assets....  $8,178,000                                        $2,448,000 (3)  $5,730,000
</TABLE>                                                        




(1)   Includes a $2,085,000 reduction in the beginning of the year valuation
      allowance reflecting a change in circumstances which resulted in a 
      judgement that a corresponding amount of the Company's deferred tax assets
      will be realized in future years.  The remainder of the reduction results
      primarily from changes in the deferred tax items.

(2)   Includes a $2,100,000 reduction in the beginning of the year valuation
      allowance reflecting a change in circumstances which resulted in a 
      judgement that a corresponding amount of the Company's deferred tax assets
      will be realized in future years.  The remainder of the reduction results
      primarily from changes in the deferred tax items.

(3)   Includes a $1,500,000 reduction in the beginning of the year valuation
      allowance reflecting a change in circumstances which resulted in a
      judgement that a corresponding amount of the Company's deferred tax assets
      will be realized in future years.  The remainder of the reduction results
      primarily from changes in the deferred tax items.










                                      15

<PAGE>   16

                         VOLUNTEER CAPITAL CORPORATION

                                 EXHIBIT INDEX





<TABLE>
<CAPTION>
                                                                               
Reference Number                                                               
per Item 601 of                                                                
Regulation S-K        Description                                              
- ----------------      -----------
   <S>                <C>                                                      
   (11)               Statement regarding computation of per share             
                      earnings.                                                
                                                                               
                                                                               
   (13)               Portions of Annual Report to Shareholders of Volunteer 
                      Capital Corporation for the year ended                   
                      December 31, 1995 (furnished for the                     
                      information of the Commission only and not               
                      deemed "filed" as part of this Report on                 
                      Form 10-K except for those portions which are            
                      specifically incorporated herein by reference).          
                                                                               
   (21)               List of subsidiaries of Registrant.                      
                                                                               
   (23)               Consent of Ernst & Young LLP, independent auditors.    
                                                                             
   (27)               Financial Data Schedule (for SEC use only).            


</TABLE>























                                      16


<PAGE>   1

EXHIBIT 11--STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES


<TABLE>
<CAPTION>
                                                                                         Years Ended
                                                                      ----------------------------------------------
                                                                      DECEMBER 31         January 1        January 2
                                                                          1995              1995             1994
                                                                      ------------   ----------------    -----------
<S>                                                                    <C>               <C>               <C> 
Earnings per common and dilutive common equivalent share            
                                                                    
  Net income.................................................          $5,016,000        $4,830,000        $4,301,000
                                                                       ==========        ==========        ========== 
   Adjustment of shares outstanding:                               
     Weighted average shares outstanding.....................           5,257,000         5,187,000         4,388,000
     Net additional shares issuable, based on the treasury           
         stock method........................................             221,000           194,000           218,000
                                                                       ----------        ----------        ---------- 
     Adjusted shares outstanding.............................           5,478,000         5,381,000         4,606,000
                                                                       ==========        ==========        ========== 
  Per share amount............................................         $      .92        $      .90        $      .93
                                                                       ==========        ==========        ==========
Earnings per common share, assuming full dilution                   
                                                                    
  Net income...............................................            $5,016,000        $4,830,000        $4,301,000
                                                                       ==========        ==========        ========== 
   Adjustment of shares outstanding:                               
     Weighted average shares outstanding....................            5,257,000         5,187,000         4,388,000
     Net additional shares issuable, based on the treasury         
       stock method.........................................              222,000           194,000           238,000
                                                                       ----------        ----------        ---------- 
     Adjusted shares outstanding............................            5,479,000         5,381,000         4,626,000
                                                                       ==========        ==========        ========== 
  Per share amount...........................................          $      .92        $      .90        $      .93
                                                                       ==========        ==========        ========== 
</TABLE>




(1) The computations of earnings per common and dilutive common equivalent share
    and earnings per common share, assuming full dilution, are base on the 
    weighted average number of common shares outstanding each period after 
    considering the effect of stock options using the treasury stock method.  
    Shares issuable upon the conversion of convertible subordinated debentures 
    have not been included as the effect of their inclusion would be 
    antidilutive.






<PAGE>   1
                                                                     Exhibit 13
MANAGEMENT'S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS

OVERVIEW

         Volunteer Capital Corporation operated 58 franchised Wendy's Old
Fashioned Hamburgers restaurants and nine proprietary J. Alexander's
full-service, casual dining restaurants at December 31, 1995.

         Income before income taxes increased by $400,000, or 13%, in fiscal
1995 as compared to 1994. Restaurant operating income in the J. Alexander's
division increased by $1,528,000, or 120%, over 1994, more than offsetting a
$568,000 decline in the Wendy's division during the same period, $469,000 of
increased general and administrative expenses and $91,000 of additional other
expense (net interest expense plus other income). Net income for 1995 included
a $1,782,000 credit to the deferred income tax provision associated with the
recognition of all of the Company's remaining deferred tax assets for financial
reporting purposes.

         Income before income taxes increased by $32,000 in fiscal 1994 as
compared to 1993. Restaurant operating profit increased in both the Wendy's and
J. Alexander's divisions ($82,000 and $199,000, respectively) and other expense
decreased by $352,000, with the combined effect of these items more than
offsetting an increase in general and administrative expenses of $601,000. Net
income for 1994 included a $2,100,000 credit to the deferred income tax
provision associated with the recognition of a portion of the Company's
deferred tax assets for financial reporting purposes.


WENDY'S RESTAURANT OPERATIONS

         Results of the Company's Wendy's restaurant operations before
allocation of other income, corporate overhead and net interest expense were as
follows:

<TABLE>
<CAPTION>
                                                                       Years Ended
- ---------------------------------------------------------------------------------------------------------------
(Dollars in thousands)                     DECEMBER 31, 1995         January 1, 1995           January 2, 1994
- ---------------------------------------------------------------------------------------------------------------
                                                        %                        %                         %
                                           AMOUNT   OF SALES        Amount    of Sales        Amount   of Sales
- ---------------------------------------------------------------------------------------------------------------
<S>                                       <C>        <C>           <C>        <C>           <C>          <C>
Net sales                                 $53,694     100.0%       $50,991     100.0%       $49,758      100.0%
Restaurant costs and expenses:                                                                          
   Cost of sales                           18,612      34.7         17,583      34.5         17,549       35.3
   Labor and related costs                 15,407      28.7         14,391      28.3         13,448       27.0
   Depreciation and amortization of                                                                     
     restaurant property and equipment      1,907       3.5          1,694       3.3          1,537        3.1
   Royalties                                2,149       4.0          2,041       4.0          1,992        4.0
   Other operating expenses                 9,841      18.3          8,936      17.5          8,968       18.0
- ---------------------------------------------------------------------------------------------------------------
                                           47,916      89.2         44,645      87.6         43,494       87.4
- ---------------------------------------------------------------------------------------------------------------
Restaurant operating income               $ 5,778      10.8%       $ 6,346      12.4%       $ 6,264       12.6%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>



16     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   2

MANAGEMENT'S DISCUSSION AND ANALYSIS

         The Company operated 58 Wendy's restaurants at December 31, 1995; 55
restaurants at January 1, 1995; and 52 restaurants at January 2, 1994. Weighted
average sales per unit were as follows:

<TABLE>
<CAPTION>
                                                                                       Period to Period
                                                  Years Ended                        Increase (Decrease)
- --------------------------------------------------------------------------------------------------------
                                DECEMBER 31        January 1        January 2                 
                                    1995              1995            1994           1995-94     1994-93
- --------------------------------------------------------------------------------------------------------
<S>                                <C>              <C>               <C>              <C>          <C>
Weighted, for all units            $958,000         $973,000          $971,000         (1.5)%       0.2%
- --------------------------------------------------------------------------------------------------------
</TABLE>

         Total Wendy's sales increased by 5.3% in fiscal 1995 as compared to
fiscal 1994. This increase is attributable entirely to new units as sales in
restaurants open for all of both 1995 and 1994 decreased by 1.9%. The Company
estimates that menu prices, after considering promotional discounts, were
relatively constant during 1995 as compared to 1994. Management has
consistently focused its efforts for a number of years on several key areas in
which it believes the Company, as a franchisee, can most directly influence
sales trends and operating results. These include emphasis on quality of
operations and guest service, consistent marketing efforts, competitive menu
pricing and facility image and enhancements. However, continued competition in
the quick-service restaurant industry in general and intense retail price
competition by other major hamburger chains in particular have continued to
adversely impact weighted average sales per unit since mid-1994. The Wendy's
division results are directly affected by major competition among the big four
hamburger chains (McDonald's, Burger King, Wendy's and Hardee's). Over the last
ten years, almost all of the marketing efforts of the Wendy's system have been
through national marketing campaigns. Conventional wisdom is that this is the
best way to maximize marketing and advertising expenditures in a competitive
environment. The Company's contribution to the national advertising
co-operative represents 2.5% of the Wendy's division's sales, and contributions
to various regional Wendy's co-operatives that buy television media to support
the national marketing programs comprise a large portion of the Company's local
advertising budget, demonstrating the importance of a successful national
marketing campaign in meeting sales objectives. Although the Wendy's division
was somewhat behind the Company's business plan through the first half of 1995,
management believed the division could make up a significant portion of the
shortfall in the last half of the year. However, after posting flat same store
sales in the third quarter and an increase in October, the division had a major
same store sales decline in both November and December and ended the year down
approximately 2% in same store sales. Because of the tremendous amount of
financial and operating leverage employed in the business, this resulted in a
significant decline in division operating income (9.0%, or $568,000 for the
year).  The Company believes that most of its competitive sales problems are in
direct relationship to the Burger King $.99 Whopper campaign that was present
throughout most of 1995 and various value promotions employed by McDonald's
during the year. The Wendy's system suffered an overall same store sales
decline in the fourth quarter of 1995 reflecting, at least in part, weak
national advertising during the period.





17     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   3

MANAGEMENT'S DISCUSSION AND ANALYSIS

         The development of new Wendy's restaurants by other franchisees in
certain of the Company's market areas, and to a lesser degree the opening of
new restaurants by the Company near its existing restaurants, have also
negatively affected the Company's sales in certain locations. Sales declines
have been most pronounced in the Company's North and South Carolina markets,
which represent 42 of its 58 Wendy's units. A number of programs and products
have been targeted at these markets by the Company in an attempt to reverse the
declining sales trends. In addition, the Company has initiated major remodeling
projects at a number of its restaurants in these markets. During the last half
of 1995, six restaurants were closed for an average of almost two weeks each
relative to this effort. Management estimates these closings had a negative
short-term impact on sales of approximately $200,000 and on division operating
income of approximately $100,000, but believes the remodeling program is
essential to maintaining a strong competitive position in these markets.
Management continues to believe that aggressive core product discounting is
counterproductive because of its negative impact on margins. 
         The Company's same store sales trends have remained down through the
first two months of 1996, and management believes sales trends could remain
under considerable pressure for an indefinite period, especially if major
competitors continue to aggressively discount their products.
         In 1994, total Wendy's sales increased by 2.5% as compared to fiscal
1993, with the increase attributable entirely to new units. Sales in
restaurants open for all of both 1994 and 1993 decreased by 0.1%. The Company
estimates that menu prices, after considering promotional discounts, increased
by approximately 1.2% during 1994 as compared to 1993.
         Cost of sales, which includes the cost of food and paper supplies,
increased as a percentage of sales from 1994 to 1995 primarily due to the
increased cost of paper supplies. Ground beef costs remained favorable in 1995,
but were somewhat offset by higher produce costs during the year. Cost of sales
decreased as a percentage of sales from 1993 to 1994 due to decreases in raw
food costs, primarily ground beef, and the effect of higher menu prices.
         Restaurant labor and related costs as a percentage of sales increased
in 1995 as compared to 1994, reflecting the combined effect of higher wages and
the decline in weighted average sales per unit. Restaurant labor and related
costs as a percentage of sales increased in 1994 as compared to 1993 reflecting
increased staffing in 1994 designed to continue to improve the level and speed
of service to guests, as well as higher pay rates and the relatively high
start-up labor costs at the three restaurants which opened in 1994, which more
than offset the effect of higher menu prices.
         Depreciation and amortization of restaurant property and equipment
increased as a percentage of sales from 1994 to 1995 and from 1993 to 1994,
principally reflecting the impact of higher depreciation associated with both
new and remodeled restaurants and, with respect to the 1995 increase, the
impact of decreased same store sales.
         Other restaurant operating expenses consist of expenses incurred at
the unit level as well as costs associated with supervising and supporting
restaurant operations. These costs principally include supervisory salaries,
advertising, rent, utilities, taxes, insurance, maintenance and supplies. These
costs, as a percentage of sales, increased from 1994 to 1995 reflecting
increased rent and amortization of pre-opening costs associated with new unit
development, as well as increased local advertising and a decline in same store
sales. Other restaurant operating expenses, as a percentage of sales, decreased
from 1993 to 1994 due primarily to lower advertising costs resulting from a
more favorable cooperating advertising arrangement negotiated with the
Company's primary soft drink supplier.





18     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   4

MANAGEMENT'S DISCUSSION AND ANALYSIS


J. ALEXANDER'S RESTAURANT OPERATIONS
         The Company operated nine J. Alexander's restaurants at December 31,
1995, compared with five at January 1, 1995, and three at January 2, 1994. The
sixth J. Alexander's restaurant opened February 13, 1995, in Ft. Lauderdale,
Florida; the seventh August 28, 1995, in Hoover, Alabama; the eighth November
13, 1995, in Toledo, Ohio; and the ninth December 4, 1995, in Overland Park,
Kansas.
         Given the success of the Company's J. Alexander's restaurants to date
and the opportunities it believes exist in the casual dining segment of the
food service industry, the Company intends to continue to develop new J.
Alexander's restaurants at a significant rate. It is management's objective,
however, to manage this growth at a pace which can be supported not only by the
Company's ability to locate and acquire acceptable sites and provide the
long-term capital resources needed for development, but also by its ability to
recruit and develop highly qualified management personnel capable of providing
the outstanding levels of food quality and service which management believes
are critical to J. Alexander's success.
         Results of the J. Alexander's restaurant operations before allocation
of other income, corporate overhead and net interest expense were as follows:

<TABLE>
<CAPTION>
                                                                       Years Ended
- -----------------------------------------------------------------------------------------------------------------
(Dollars in thousands)                     DECEMBER 31, 1995         January 1, 1995           January 2, 1994
- ------------------------------------------------------------------------------------------------------------------
                                                         %                         %                        %
                                         AMOUNT       OF SALES     Amount      of Sales     Amount       of Sales
- ------------------------------------------------------------------------------------------------------------------
<S>                                     <C>            <C>       <C>             <C>       <C>             <C>
Net sales                               $25,594        100.0%    $14,704         100.0%    $10,816         100.0%
Restaurant costs and expenses:
   Cost of sales                          9,095         35.5       5,244          35.7       3,817          35.3
   Labor and related costs                7,748         30.3       4,581          31.2       3,297          30.5
   Depreciation and amortization of
   restaurant property and equipment      1,033          4.0         540           3.6         366           3.3
   Other operating expenses               4,913         19.2       3,062          20.8       2,258          20.9
- ------------------------------------------------------------------------------------------------------------------
                                         22,789         89.0      13,427          91.3       9,738          90.0
- ------------------------------------------------------------------------------------------------------------------
Restaurant operating income             $ 2,805         11.0%    $ 1,277           8.7%    $ 1,078          10.0%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

         Net sales for the J. Alexander's division increased 74% in 1995 as
compared to 1994, due primarily to the opening of new restaurants. Same store
sales, which include comparable sales for all restaurants open for more than 12
months, averaged $80,000 per week in 1995, a 9.4% increase from $73,100 in
1994. The Company estimates that menu prices increased approximately 5% in
1995, after no significant increase in 1994, and believes that the sales
increases noted above reflect acceptance and recognition by consumers of the
high level of food quality and service which J. Alexander's provides its
guests.
         Net sales for the J. Alexander's division increased 35.9% in 1994 as
compared to 1993. Same store sales per unit averaged $74,600 per week during
1994, a 7.0% increase from $69,700 during 1993.
         Cost of sales decreased as a percentage of sales in 1995 compared to
1994, as the favorable effect of increased menu prices and improved efficiency
in the two restaurants opened in 1994 more than offset higher costs associated
with the start-up of operations at the four restaurants which opened in 1995.
The Company expects newly opened restaurants to experience operating losses in
their initial months of operation prior to becoming profitable. Cost of sales
increased as a percentage of sales from 1993 to 1994, reflecting higher costs
associated with the start-up of operations at the two restaurants which opened
during 1994.





19     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   5

MANAGEMENT'S DISCUSSION AND ANALYSIS

         Restaurant labor and related costs decreased as a percentage of sales
in 1995 compared to 1994, due in large part to the favorable effect of
increased menu prices. This factor, combined with the effect of sales increases
at the Columbus and Oak Brook restaurants which opened in 1994, more than
offset higher benefits expense and higher costs associated with the start-up of
operations at the restaurants opened in 1995. Restaurant labor and related
costs increased as a percentage of sales from 1993 to 1994, reflecting higher
costs associated with the start-up of operations at the two restaurants which
opened during 1994.
         Other restaurant operating expenses decreased as a percentage of sales
from 1994 to 1995, and from 1993 to 1994. The 1995 decrease primarily reflects
reduced training costs, operating efficiencies achieved at higher sales levels
and the favorable effects of increased menu prices, which more than offset
additional rent expense related to the Ft. Lauderdale and Toledo restaurants
and other operating expenses associated with the opening of the four
restaurants in 1995. The 1994 decrease primarily reflects reduced amortization
of pre-opening costs and operating efficiencies achieved at higher revenue
levels, which more than offset an increase in training costs and additional
supervisory expenses incurred as a result of new store openings.


GENERAL AND ADMINISTRATIVE EXPENSES
         General and administrative expenses, which include certain costs
related to both the Wendy's and J. Alexander's operations, decreased to 5.4% of
revenues in 1995 from 5.8% of revenues in 1994. Actual general and
administrative expenditures increased by $469,000 in 1995 as compared to 1994,
primarily due to the addition of personnel and other activities associated with
the expanded J. Alexander's operations. General and administrative expenses
directly associated with J. Alexander's were approximately $1,150,000 in 1995,
up from approximately $735,000 in 1994. As a percentage of sales, general and
administrative expenses increased from 5.3% in 1993 to 5.8% in 1994,
principally due to the addition of personnel associated with expanding the J.
Alexander's division.


OTHER INCOME (EXPENSE)
         Interest expense decreased by $209,000 in 1995 as compared to 1994,
and by $119,000 in 1994 as compared to 1993, principally due to increases in
interest expense capitalized in connection with new restaurant development.
         Interest income decreased by $275,000 in 1995 as compared to 1994 due
to the net effect of decreased investment balances, resulting primarily from
the development of new restaurants, and increased interest rates. Interest
income increased by $213,000 in 1994 as compared to 1993 due principally to the
net effect of increased investment balances as a result of the proceeds from
the sale of stock by the Company through an underwritten public offering in
September 1993 and lower interest rates.
         Expenses associated with the write-off of restaurant facilities and
equipment that have been replaced in connection with various remodeling
projects are reflected in "Other, net".


LIQUIDITY AND CAPITAL RESOURCES
         Cash provided by operating activities represents a primary source of
liquidity for the Company and is also expected to be a resource for meeting
future capital needs. The Company's cash flow from operations has increased
during each of the last three fiscal years, totaling $7,586,000, $5,706,000 and
$5,050,000 in fiscal years 1995, 1994 and 1993, respectively. In addition, the
Company had cash and marketable securities of $2,739,000 on hand at December
31, 1995.
         The Company's primary investing activity has historically been capital
expenditures for the development and maintenance of its restaurants. Capital
expenditures totaled $20,255,000, $11,276,000 and $3,479,000 for 1995, 1994 and
1993, respectively.





20     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   6

MANAGEMENT'S DISCUSSION AND ANALYSIS

         During 1995, capital expenditures of $4,640,000 for the Wendy's
division included completion of three new restaurants (all of which were ground
leases), facilities upgrades (including significant remodeling projects at six
restaurants in Columbia, South Carolina) and miscellaneous equipment
replacements. Capital expenditures for J. Alexander's restaurants were
$15,503,000 and consisted primarily of completion of the restaurant in Ft.
Lauderdale, Florida; acquisition of property and construction of restaurants in
Hoover, Alabama and Overland Park, Kansas; construction of the restaurant in
Toledo, Ohio; and acquisition of property and partial completion of restaurants
in Cleveland, Ohio and Plantation, Florida (a suburb of Ft. Lauderdale). The
Ft. Lauderdale and Toledo restaurants are ground leases.
         During 1994, capital expenditures of $3,868,000 for the Wendy's
division included completion of three new restaurants (two of which were ground
leases), facilities upgrades and miscellaneous equipment replacements. Capital
expenditures for J. Alexander's restaurants were $7,368,000 and consisted
primarily of completion of the restaurant in Columbus, Ohio, acquisition of
property and construction of the restaurant in Oak Brook, Illinois, and partial
completion of the restaurant in Ft. Lauderdale, Florida.
         During 1993, capital expenditures of $1,912,000 for the Wendy's
division included completion of a new restaurant, facilities upgrades and
miscellaneous equipment replacements. Capital expenditures for J. Alexander's
restaurants were $1,525,000 and consisted primarily of acquisition of property
and related construction in progress at the Columbus, Ohio restaurant.
         During 1993, the Company sold an additional 1,000,000 shares of common
stock at $10 per share in an underwritten public offering. Net proceeds from
the stock offering totaled $9,176,000.
         Management expects the primary needs for capital resources in the
future will be for the development of new J.  Alexander's restaurants and for
the maintenance of existing restaurants. Management may also consider
acquisitions of additional Wendy's restaurants and restaurants similar to J.
Alexander's. The Company's planned capital expenditures for 1996 total
approximately $23,500,000.
         The Company plans to open five J. Alexander's restaurants in 1996,
four of which are currently being developed in Cleveland, Ohio; Plantation,
Florida; Chattanooga, Tennessee; and Troy, Michigan, a leased location. The
Cleveland restaurant is scheduled to open in the second quarter of 1996, with
the remaining three restaurants scheduled for third quarter openings. A fifth
new restaurant is expected to open before year-end along with a smaller test
version of J.  Alexander's which serves dinner only. The initial cost of
developing new J. Alexander's restaurants, including the cost of land, has
ranged from $2,300,000 to $3,900,000, excluding pre-opening costs. While the
cost of land has been a significant variable in development cost, costs related
to site preparation and buildings have also varied considerably. Management is
presently developing additional building images for J.  Alexander's and expects
that the cost of additional new units, including the cost of land, will be
within the range of $3,000,000 to $3,800,000. The initial capital investment
required for opening a new J. Alexander's restaurant would be significantly
lower than indicated above, however, if property is leased rather than
purchased. Management estimates that pre-opening costs will be approximately
$250,000 for each restaurant.
         With respect to building additional Wendy's restaurants, management
seeks investments that strategically enhance operations and offer cash returns
that exceed the Company's long-term after-tax weighted average cost of capital,
estimated by management to be approximately 14%. With a build-out cost of
$900,000 to $1,000,000 (assuming the land for the restaurant is purchased), and
considering the restrictions placed upon the Company's Wendy's division as a
franchisee (both financial as well as operating), the Company is having
difficulty locating sites which meet its investment criteria. For that reason,
the Company does not presently anticipate developing any additional Wendy's
restaurants in 1996. It is expected that because of their age, up to $3,000,000
of capital expenditures will be required annually to maintain and improve the
Company's existing Wendy's restaurants for 1996 and 1997.





21     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   7

MANAGEMENT'S DISCUSSION AND ANALYSIS

         The Company does not have significant capital needs for purposes other
than restaurant development. Maturities of long-term debt through 1997 are
relatively small because the Company has previously purchased in the market a
sufficient amount of its convertible subordinated debentures to meet sinking
fund requirements on that issue through that date. Even though working capital
decreased from $10,699,000 at January 1, 1995, to a deficit of $2,227,000 at
December 31, 1995, primarily as the result of the use of a substantial portion
of the Company's cash and cash equivalents to fund restaurant development,
requirements for funding accounts receivable and inventories are relatively
small and the Company does not have significant working capital needs. The
Company obtained a $30,000,000 line of credit during the third quarter of 1995
and expects this credit line, together with internal cash flow, to be adequate
to fund the Company's development program for 1996 and part, if not all, of
1997. Management will also be reviewing additional alternatives throughout 1996
which it believes could be available for financing its development plan.


INCOME TAXES
         Under the provisions of Statement of Financial Accounting Standards
(SFAS) No. 109 "Accounting for Income Taxes," the Company had gross deferred
tax assets of $6,006,000 and $6,962,000 and gross deferred tax liabilities of
$470,000 and $440,000 at December 31, 1995, and January 1, 1995, respectively.
The deferred tax assets at December 31, 1995, relate primarily to $10,031,000
of net operating loss carryforwards and $1,999,000 of tax credit carryforwards
available to reduce future federal income taxes. Realization of the deferred
tax assets is dependent principally on future earnings from existing and new
restaurants. Prior to 1995, a valuation allowance responsive to uncertainties
associated with future earnings was established. No such allowance was deemed
necessary as of December 31, 1995.
         Prior to 1993, the valuation allowance was established at an amount
necessary to fully reserve the net deferred tax asset balances, after giving
consideration to deferred tax assets that were realizable through offsets to
existing taxable temporary differences. Although the Company has been
profitable since 1990, it incurred operating losses for certain years prior to
that time. Further, the Company's principal business is operating restaurants
in the highly competitive quick-service segment of the restaurant industry as a
franchisee which does not have strategic control over its business. The Company
also operates with a high degree of financial and operating leverage, with a
significant portion of operating costs being fixed or semi-fixed in nature. Any
significant decrease in same store sales has a compounding effect in decreasing
operating income. Because of these factors and the Company's involvement with
the start-up of its J.Alexander's restaurant operations which incurred
operating losses from 1990 through 1992, management was unable to conclude
prior to 1993 that it was more likely than not that the net deferred tax assets
would be utilized.
         In 1993, the Company completed another profitable year, reported
operating profits from its J. Alexander's operations and raised additional
equity capital. Because of these factors, management further assessed the
likelihood of realization of its deferred tax assets, using as its principal
basis its forecast of future taxable income which was adjusted by applying
varying probability factors to the achievement of this forecast. As the result
of this assessment, the beginning of the year valuation allowance was reduced
by $1,500,000 in the fourth quarter of 1993, with a corresponding credit to
deferred tax expense.





22     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   8

MANAGEMENT'S DISCUSSION AND ANALYSIS

         In 1994, the Company was profitable for the fifth consecutive year and
was successful in developing its fourth and fifth J. Alexander's restaurants.
As a result, management reduced the beginning of the year valuation allowance
by $2,100,000 in the fourth quarter of 1994, with a corresponding credit to
deferred tax expense.
         In 1995, the Company again increased its profitability and
successfully expanded its J. Alexander's division to nine restaurants from a
base of five restaurants. Based upon these factors and its forecast of future
taxable income, management concluded during the fourth quarter of 1995 that it
was more likely than not that the Company's net deferred tax assets would
ultimately be realized. Accordingly, the beginning of the year valuation
allowance was reduced by $2,085,000 in the fourth quarter of 1995, resulting in
a credit to deferred tax expense of $1,782,000 and a credit to additional
paid-in capital, representing the income tax benefit associated with the
exercise or disposition of certain employee stock options, of $303,000.
         Approximately $16,300,000 of future taxable income would be needed to
realize the $5,536,000 net deferred tax asset at December 31, 1995. None of the
Company's carryforwards expire until 1998.


IMPACT OF ACCOUNTING CHANGES
         There are no pending accounting pronouncements that, when adopted, are
expected to have a material effect on the Company's results of operations or
its financial condition.



IMPACT OF INFLATION AND OTHER FACTORS
         Virtually all of the Company's costs and expenses are subject to
normal inflationary pressures and the Company is continually seeking ways to
cope with their impact. By owning a number of its properties, the Company
avoids certain increases in occupancy costs. New and replacement assets will
likely be acquired at higher costs but this will take place over many years. In
general, the Company tries to pass on increased costs and expenses by
increasing menu prices over time, as permitted by competition. However, the
Company believes its flexibility in increasing menu prices in its Wendy's
restaurants is limited because of the competitive state of the quick-service
restaurant industry and the value pricing strategies adopted by Wendy's and
most of its major competitors.
         The Clinton administration continues to analyze and propose new
legislation which could adversely impact the entire business community. Minimum
wage measures, if passed, could increase the Company's operating costs. The
Company would attempt to offset increased costs through additional improvements
in operating efficiencies and menu price increases.





23     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   9

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                Years Ended
- -------------------------------------------------------------------------------------------------------------------
                                                      DECEMBER 31               January 1                 January 2
                                                          1995                     1995                     1994
- -------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                     <C>                      <C>
Net sales                                              $79,288,000             $65,695,000              $60,574,000
Costs and expenses:
   Cost of sales                                        27,707,000              22,827,000               21,366,000
   Restaurant labor and related costs                   23,155,000              18,972,000               16,745,000
   Depreciation and amortization of restaurant
      property and equipment                             2,940,000               2,234,000                1,903,000
   Royalties                                             2,149,000               2,041,000                1,992,000
   Other operating expenses                             14,754,000              11,998,000               11,226,000
- -------------------------------------------------------------------------------------------------------------------
        Total restaurant operating expenses             70,705,000              58,072,000               53,232,000
- -------------------------------------------------------------------------------------------------------------------
Income from restaurant operations                        8,583,000               7,623,000                7,342,000
General and administrative expenses                      4,308,000               3,839,000                3,238,000
- -------------------------------------------------------------------------------------------------------------------
Operating income                                         4,275,000               3,784,000                4,104,000
- -------------------------------------------------------------------------------------------------------------------
Other income (expense):
   Interest expense                                     (1,416,000)             (1,625,000)              (1,744,000)
   Interest income                                         579,000                 854,000                  641,000
   Other, net                                               20,000                  45,000                   25,000
- -------------------------------------------------------------------------------------------------------------------
        Total other income (expense)                      (817,000)               (726,000)              (1,078,000)
- -------------------------------------------------------------------------------------------------------------------
Income before income taxes                               3,458,000               3,058,000                3,026,000
Income tax benefit                                       1,558,000               1,772,000                1,275,000
- -------------------------------------------------------------------------------------------------------------------
Net income                                             $ 5,016,000             $ 4,830,000              $ 4,301,000
- -------------------------------------------------------------------------------------------------------------------
Earnings per share:
   Primary                                             $       .92             $       .90              $       .93
   Fully diluted                                       $       .92             $       .90              $       .93
- -------------------------------------------------------------------------------------------------------------------
Weighted average number of shares:
   Primary                                               5,478,000               5,381,000                4,606,000
   Fully diluted                                         5,479,000               5,381,000                4,626,000
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.





24     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   10

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                        DECEMBER 31      January 1
                                                                                            1995             1995
- ------------------------------------------------------------------------------------------------------------------
                                                       ASSETS
<S>                                                                                     <C>            <C>
CURRENT ASSETS
   Cash and cash equivalents                                                            $ 2,234,000    $14,802,000
   Short-term investments                                                                   505,000      1,000,000
   Accounts and notes receivable, including current portion of direct financing
   leases, net of allowances for possible losses                                            313,000        155,000
   Inventories at lower of cost (first-in, first-out method) or market                      848,000        577,000
   Deferred income taxes                                                                  1,541,000        699,000
   Prepaid expenses and other current assets                                                484,000        215,000
- ------------------------------------------------------------------------------------------------------------------
        TOTAL CURRENT ASSETS                                                              5,925,000     17,448,000
INVESTMENT SECURITIES                                                                            --        510,000
OTHER ASSETS
   Direct financing leases, net of unearned income of $245,000 and $305,000 at
      December 31, 1995, and January 1, 1995, respectively, and current portion             379,000        434,000
   Other                                                                                    712,000        672,000
- ------------------------------------------------------------------------------------------------------------------
                                                                                          1,091,000      1,106,000
PROPERTY AND EQUIPMENT, at cost, less allowances for depreciation and amortization       46,915,000     29,776,000
DEFERRED INCOME TAXES                                                                     3,995,000      2,752,000
DEFERRED CHARGES, less accumulated amortization of $2,008,000 and
   $1,397,000 at December 31, 1995, and January 1, 1995, respectively                     2,214,000      1,714,000
- ------------------------------------------------------------------------------------------------------------------
                                                                                        $60,140,000    $53,306,000
- ------------------------------------------------------------------------------------------------------------------
                                          LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
   Accounts payable                                                                     $ 3,704,000    $ 3,089,000
   Accrued expenses and other current liabilities                                         4,151,000      3,310,000
   Current portion of long-term debt and obligations under capital leases                   297,000        350,000
- ------------------------------------------------------------------------------------------------------------------
        TOTAL CURRENT LIABILITIES                                                         8,152,000      6,749,000
LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES, (including $1,984,000
   and $2,048,000 due to a related party at December 31, 1995, and
   January 1, 1995, respectively) net of portion classified as current                   18,512,000     18,847,000
DEFERRED COMPENSATION AND OTHER DEFERRED CREDITS                                            501,000        406,000
STOCKHOLDERS' EQUITY
   Common Stock, par value $.05 per share: Authorized l0,000,000 shares;
     issued 5,276,972 and 5,240,481 shares at December 31, 1995,
     and January 1, 1995, respectively                                                      264,000        262,000
   Preferred Stock, no par value: Authorized 1,000,000 shares; none issued                       --             --
   Additional paid-in capital                                                            29,199,000     28,718,000
   Retained earnings (accumulated deficit)                                                4,540,000       (476,000)
- ------------------------------------------------------------------------------------------------------------------
                                                                                         34,003,000     28,504,000
   Note receivable--Employee Stock Ownership Plan                                        (1,028,000)    (1,200,000)
- ------------------------------------------------------------------------------------------------------------------
        TOTAL STOCKHOLDERS' EQUITY                                                       32,975,000     27,304,000
COMMITMENTS AND CONTINGENCIES
- ------------------------------------------------------------------------------------------------------------------
                                                                                        $60,140,000    $53,306,000
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.





25     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   11

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                      Years Ended
- -------------------------------------------------------------------------------------------------------------------
                                                                       DECEMBER 31       January 1        January 2
                                                                           1995             1995            1994
- --------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>             <C>              <C>
OPERATING ACTIVITIES
   Net income                                                          $ 5,016,000     $ 4,830,000      $ 4,301,000
   Adjustments to reconcile net income to net cash
     provided by operations:
     Depreciation and amortization of property
       and equipment                                                     3,033,000       2,317,000        1,990,000
     Amortization of deferred charges                                      611,000         443,000          404,000
     Employee Stock Ownership Plan expense                                 172,000         170,000          172,000
     Deferred income tax benefit                                        (1,782,000)     (2,100,000)      (1,500,000)
     Other, net                                                            192,000         172,000           (3,000)
     Changes in assets and liabilities:
       (Increase) decrease in accounts receivable                         (147,000)        (80,000)          65,000
       Increase in inventories                                            (271,000)        (70,000)         (59,000)
       (Increase) decrease in prepaid expenses
         and other current assets                                         (269,000)         63,000           12,000
       Increase in deferred charges                                     (1,111,000)       (773,000)        (204,000)
       Increase (decrease) in accounts payable                             615,000         511,000         (269,000)
       Increase in accrued expenses and other
         current liabilities                                             1,432,000         207,000          101,000
       Increase in deferred credits                                         95,000          16,000           40,000
- -------------------------------------------------------------------------------------------------------------------
         NET CASH PROVIDED BY
           OPERATING ACTIVITIES                                          7,586,000       5,706,000        5,050,000
INVESTING ACTIVITIES
   Proceeds from maturities and sales of investments                     1,005,000       1,507,000        6,132,000
   Purchase of property and equipment                                  (20,909,000)    (10,376,000)      (4,163,000)
   Other, net                                                              (37,000)        (29,000)         (70,000)
- -------------------------------------------------------------------------------------------------------------------
         NET CASH (USED) PROVIDED BY
           INVESTING ACTIVITIES                                        (19,941,000)     (8,882,000)       1,903,000
FINANCING ACTIVITIES
   Payments on and retirement of debt and
   obligations under capital leases                                       (393,000)       (381,000)        (282,000)
   Sale of stock and exercise of stock options                             180,000         604,000        9,277,000
- -------------------------------------------------------------------------------------------------------------------
         NET CASH (USED) PROVIDED BY
           FINANCING ACTIVITIES                                           (213,000)        223,000        8,995,000
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                       (12,568,000)     (2,953,000)      15,948,000
Cash and cash equivalents at beginning of year                          14,802,000      17,755,000        1,807,000
- -------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                               $ 2,234,000     $14,802,000      $17,755,000
- -------------------------------------------------------------------------------------------------------------------
</TABLE>


See notes to consolidated financial statements.





26     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   12

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                         Note Receivable-
                                                                                             Employee
                                                                 Additional    Retained       Stock        Total
                                     Outstanding     Common       Paid-In      Earnings     Ownership   Stockholders'
                                       Shares         Stock       Capital      (Deficit)      Plan         Equity
- ---------------------------------------------------------------------------------------------------------------------
<S>                                   <C>           <C>        <C>           <C>            <C>
BALANCES AT
   JANUARY 3, 1993                    4,092,489     $205,000   $18,894,000   $(9,607,000)   $(1,542,000) $ 7,950,000
Exercise of stock options
   and sale of stock
   under Employee Stock
   Purchase Plan                         24,760        1,000       100,000            --             --      101,000
Shares issued through
   public offering                    1,000,000       50,000     9,126,000            --             --    9,176,000
Reduction of note
   receivable--
   Employee Stock
     Ownership Plan                          --           --            --            --        172,000      172,000

Net income                                   --           --            --     4,301,000             --    4,301,000
- ---------------------------------------------------------------------------------------------------------------------
BALANCES AT
   JANUARY 2, 1994                    5,117,249      256,000    28,120,000    (5,306,000)    (1,370,000)  21,700,000
Exercise of stock options
   and sale of stock
   under Employee Stock
   Purchase Plan                        123,232        6,000       598,000            --             --      604,000
Reduction of note
   receivable--
   Employee Stock
     Ownership Plan                          --           --            --            --        170,000      170,000
Net income                                   --           --            --     4,830,000             --    4,830,000
- ---------------------------------------------------------------------------------------------------------------------
BALANCES AT
   JANUARY 1, 1995                    5,240,481      262,000    28,718,000      (476,000)    (1,200,000)  27,304,000
Exercise of stock options,
   including tax benefits,
   and sale of stock under
   Employee Stock
   Purchase Plan                         36,491        2,000       481,000            --             --      483,000
Reduction of note
   receivable--
   Employee Stock
   Ownership Plan                            --           --            --            --        172,000      172,000
Net income                                   --           --            --     5,016,000             --    5,016,000
- ---------------------------------------------------------------------------------------------------------------------
BALANCES AT
   DECEMBER 31, 1995                  5,276,972     $264,000   $29,199,000   $ 4,540,000    $(1,028,000) $32,975,000
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>


See notes to consolidated financial statements.





27     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A--SIGNIFICANT ACCOUNTING POLICIES
         PRINCIPLES OF CONSOLIDATION: The consolidated financial statements
include the accounts of the Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Certain reclassifications have been made in the prior years' consolidated
financial statements to conform to the 1995 presentation.
         FISCAL YEAR: The Company's fiscal year ends on the Sunday closest to
December 31 and each quarter consists of thirteen weeks.
         CASH EQUIVALENTS: Cash equivalents consist of highly liquid
investments with an original maturity of three months or less when purchased.
         INVESTMENTS: Short-term investments and investment securities consist
primarily of obligations of the U.S.  Government and its agencies and corporate
notes and bonds with maturities of greater than three months. Investments with
maturities of greater than one year are classified as long-term.
         The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 115 "Accounting for Certain Investments in Debt and Equity Securities" in
1994. The Company's investments are classified as "held to maturity"
investments and reported at amortized cost. The aggregate market value of
short-term investments and investment securities was approximately $511,000 at
December 31, 1995, and $1,507,000 at January 1, 1995. Cash equivalents of
$1,005,000 and $13,736,000 at December 31, 1995, and January 1, 1995,
respectively, consisted principally of commercial paper, banker's acceptances
and federal government agency securities and were carried at cost, which
approximates fair market value.
         PROPERTY AND EQUIPMENT: Depreciation and amortization are provided on
the straight-line method over the following estimated useful lives:
buildings-20 to 25 years, restaurant and other equipment-three to l0 years, and
capital leases and leasehold improvements-lesser of life of assets or terms of
leases.
         DEFERRED CHARGES: Costs in excess of net assets acquired are being
amortized over periods of 20 to 40 years using the straight-line method. Debt
issue costs are amortized principally by the interest method over the life of
the related debt. Wendy's Old Fashioned Hamburgers franchise costs are being
amortized over 20 years using the straight-line method.
         INCOME TAXES: The Company accounts for income taxes under the
liability method required by SFAS No. 109 "Accounting for Income Taxes." SFAS
No. 109 requires that deferred tax assets and liabilities be established based
on the difference between the financial statement and income tax bases of
assets and liabilities using existing tax rates.  Realization of deferred tax
assets, which relate primarily to operating loss and tax credit carryforwards,
is dependent on future earnings from existing and new restaurants. Prior to
1995, a valuation allowance responsive to uncertainties associated with future
earnings was established. No such allowance was deemed necessary as of December
31, 1995.
         EARNINGS PER SHARE: The computations of earnings per share are based
on the weighted average number of common shares outstanding after considering
the effect of stock options using the treasury stock method. Shares issuable
upon the conversion of convertible subordinated debentures have not been
included as the effect of their inclusion would be antidilutive.





28     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         PRE-OPENING COSTS: Costs of hiring and training personnel and certain
other costs relating to a new restaurant are capitalized and generally
amortized over the restaurant's first 12 months (Wendy's) or 24 months (J.
Alexander's) of operations. At December 31, 1995, and January 1, 1995,
pre-opening costs totaled $1,026,000 and $611,000, respectively, net of
accumulated amortization of $651,000 and $143,000.
         FAIR VALUE OF FINANCIAL INSTRUMENTS: The following methods and
assumptions were used by the Company in estimating its fair value disclosures
for financial instruments:
              Cash and cash equivalents: The carrying amount reported in the 
         balance sheet for cash and cash equivalents approximates fair value.
              Short-term investment: At December 31, 1995, this investment is
         classified as held to maturity and reported at amortized cost in 
         accordance with SFAS No. 115. Fair value is estimated from quoted 
         market prices.
              Long-term debt: The carrying amount of the Company's borrowings 
         with variable interest rates approximates their fair value. The fair 
         value of the Company's convertible subordinated debentures was 
         determined based on quoted market prices. Due to the immaterial 
         amounts involved, fair value of other fixed rate long-term debt was 
         estimated to approximate its carrying amount.
              Contingent liabilities: In connection with the sale of its Mrs.
         Winner's Chicken & Biscuit restaurant operations and the
         disposition of certain Wendy's restaurant operations, the Company
         remains secondarily liable for certain real and personal property
         leases. The Company does not believe it is practicable to estimate the
         fair value of these contingencies and does not believe exposure to
         significant loss is likely.
         DEVELOPMENT COSTS: Certain direct and indirect costs are capitalized
in conjunction with acquiring and developing new J. Alexander's restaurant
sites and amortized over the life of the related building. Development costs
capitalized during 1995 totaled $182,000. No development costs were capitalized
relative to J. Alexander's prior to 1995.
         SELF-INSURANCE: The Company is generally self-insured, subject to
stop-loss limitations, for losses and liabilities related to its group medical
plan and, except for the state of Ohio, for workers' compensation claims.
Losses are accrued based upon the Company's estimates of the aggregate
liability for claims incurred using certain estimation processes applicable to
the insurance industry and, where applicable, based on Company experience.
         STOCK BASED COMPENSATION: The Company accounts for its stock
compensation arrangements in accordance with APB Opinion No. 25 "Accounting for
Stock Issued to Employees" and intends to continue to do so.
         ADOPTION OF NEW ACCOUNTING RULES: In March 1995, the Financial
Accounting Standards Board issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount.  SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company will adopt SFAS No. 121
in the first quarter of fiscal 1996 and, based on current circumstances, does
not believe the effect of adoption will be material.





29     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         USE OF ESTIMATES IN FINANCIAL STATEMENTS: Judgment and estimation are
utilized by management in certain areas in the preparation of the Company's
financial statements. Some of the more significant areas include reserves for
self-insurance of group medical claims and workers' compensation benefits.
Management believes that such estimates have been based on reasonable
assumptions and that such estimates are adequate.


NOTE B--PROPERTY AND EQUIPMENT
        Balances of major classes of property and equipment are as follows:

<TABLE>
<CAPTION>
                                                                                DECEMBER 31      January 1
                                                                                   1995             1995
- ----------------------------------------------------------------------------------------------------------
<S>                                                                            <C>             <C>
Land                                                                           $ 9,810,000     $ 7,669,000
Buildings                                                                       22,049,000      15,875,000
Buildings under capital leases                                                   2,917,000       2,917,000
Leasehold improvements                                                          11,186,000       5,873,000
Restaurant and other equipment                                                  17,119,000      13,496,000
Construction in progress (estimated additional cost to complete at
  December 31, 1995, $3,750,000)                                                 4,495,000       2,061,000
- ----------------------------------------------------------------------------------------------------------  
                                                                                67,576,000      47,891,000
Less allowances for depreciation and amortization                               20,661,000      18,115,000
- ----------------------------------------------------------------------------------------------------------
                                                                               $46,915,000     $29,776,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>

NOTE C--LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES

         Long-term debt and obligations under capital leases at December 31,
1995, and January 1, 1995, are summarized below:

<TABLE>
<CAPTION>
                                                   December 31, 1995                    January 1, 1995
                                                Current         Long-Term           Current          Long-Term
- ---------------------------------------------------------------------------------------------------------------
<S>                                              <C>            <C>                  <C>            <C>
Convertible Subordinated
   Debentures, 8.25%, due 2003                   $     --       $15,614,000          $     --       $15,614,000
Mortgage and installment notes, at fixed
   and variable interest rates, currently 9.75%
   to 12.00%, secured by properties with a
   carrying value of $2,655,000 at
   December 31, 1995, payable through 2003         33,000         2,011,000            30,000         2,093,000
Obligations under capital leases, 8.12% to
   13.36% interest, payable through 2008          264,000           887,000           320,000         1,140,000
- ---------------------------------------------------------------------------------------------------------------
                                                 $297,000       $18,512,000          $350,000       $18,847,000
- ---------------------------------------------------------------------------------------------------------------
</TABLE>


         Maturities of long-term debt and estimated sinking fund payments,
excluding obligations under capital leases, for the five years succeeding
December 31, 1995, are as follows: 1996-$33,000; 1997-$36,000; 1998-$1,864,000;
1999-$1,875,000; 2000-$1,875,000.


30     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   16

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         The Convertible Subordinated Debentures due 2003 are convertible into
common stock of the Company at any time prior to maturity at $17.75 per share,
subject to adjustment in certain events. At December 31, 1995, 879,662 shares
of common stock were reserved for issuance upon conversion of the outstanding
debentures. The debentures are redeemable upon not less than 30 days' notice at
the option of the Company, in whole or in part, at 100% of the principal
amount, together with accrued interest to the redemption date. The effective
interest rate on the debentures is 8.68%. The Debenture Indenture provides for
annual sinking fund payments commencing June 1, 1993, which will retire at
least 75% of the debentures prior to maturity. The Company has previously
purchased a portion of the debentures on the open market which, pursuant to the
terms of the Debenture Indenture, will be used in satisfaction of future
sinking fund requirements and are sufficient to satisfy those requirements
through 1997. 
         During 1995, the Company entered into an unsecured bank line of credit
agreement which provides for up to $30,000,000 of revolving credit for the
purpose of financing future capital expenditures. Interest is payable monthly
with the interest rate, at the Company's option, at the bank's prime rate or
the bank's LIBOR rate plus 1.5% or 2.5%, depending on compliance with certain
ratios set forth in the agreement. In addition, a fee of 1/4% on any unused
portion of the facility is payable on a quarterly basis. All outstanding
principal, interest and expenses under the agreement become due July 1, 1998,
unless the Company exercises its option to convert amounts outstanding under
the line of credit to a seven year term loan. The agreement requires the
Company to meet certain restrictive financial and other covenants, including
limitations on other borrowing, all of which were met as of December 31, 1995.
No borrowings were outstanding under the agreement as of December 31, 1995.
         Cash interest payments amounted to $1,732,000 , $1,728,000 and
$1,776,000, in 1995, 1994 and 1993, respectively. Interest costs of $316,000,
$118,000 and $31,000 were capitalized as part of building and leasehold costs
in 1995, 1994, and 1993, respectively.
         The carrying value and estimated fair value of the Company's long-term
debt are summarized in the following table (see Note A):

<TABLE>
<CAPTION>                                       
                                                                                     December 31, 1995
- -----------------------------------------------------------------------------------------------------------
                                                                                                  Estimated
                                                                              Carrying Value     Fair Value
- -----------------------------------------------------------------------------------------------------------
<S>                                                                             <C>             <C>
Convertible subordinated debentures                                             $15,614,000     $15,028,000
Mortgage and installment notes                                                    2,044,000       2,044,000
- -----------------------------------------------------------------------------------------------------------
Total                                                                           $17,658,000     $17,072,000
- -----------------------------------------------------------------------------------------------------------
</TABLE>





31     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE D--LEASES
         At December 31, 1995, the Company was lessee under both ground leases
(the Company leases the land and builds its own buildings) and improved leases
(lessor owns the land and buildings) for restaurant locations. These leases are
operating leases except for the building portions of the improved leases which
are typically capital leases. Real estate lease terms are generally for 15 to
25 years and, in many cases, provide for rent escalations and for one or more
five-year renewal options. The Company is generally obligated for the cost of
property taxes, insurance and maintenance.  Certain real property leases (both
capitalized and operating) provide for contingent rentals based upon 5%-7% of
net sales. In addition, the Company is lessee under other noncancelable
operating leases, principally for office space.
         Accumulated amortization of buildings under capital leases totaled
$2,549,000 at December 31, 1995, and $2,406,000 at January 1, 1995.
Amortization of leased assets is included in depreciation and amortization
expense.
         Total rental expense amounted to:

<TABLE>
<CAPTION>
                                                                              Years Ended
- ----------------------------------------------------------------------------------------------------------
                                                               DECEMBER 31      January 1        January 2
                                                                  1995             1995             1994
- ----------------------------------------------------------------------------------------------------------
<S>                                                           <C>              <C>              <C>
Minimum rentals under operating leases                        $1,800,000       $1,292,000       $1,247,000
Contingent rentals                                               395,000          404,000          414,000
Less: Sublease rentals                                          (313,000)        (314,000)        (314,000)
- ----------------------------------------------------------------------------------------------------------
                                                              $1,882,000       $1,382,000       $1,347,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>


         At December 31, 1995, future minimum lease payments under capital
leases and noncancelable operating leases with initial terms of one year or
more are as follows:

<TABLE>
<CAPTION>
                                                                                  Capital        Operating
                                                                                  Leases           Leases
- ---------------------------------------------------------------------------------------------------------
<S>                                                                           <C>             <C>
1996                                                                          $  376,000      $ 1,612,000
1997                                                                             313,000        1,492,000
1998                                                                             204,000        1,377,000
1999                                                                             147,000        1,279,000
2000                                                                             113,000        1,144,000
Thereafter                                                                       461,000        9,153,000
- ---------------------------------------------------------------------------------------------------------
                                                 Total minimum payments        1,614,000      $16,057,000
- ---------------------------------------------------------------------------------------------------------
                                                  Less imputed interest         (463,000)
- ---------------------------------------------------------------------------------------------------------
                               Present value of minimum rental payments        1,151,000
- ---------------------------------------------------------------------------------------------------------
                           Less current maturities at December 31, 1995         (264,000)
- ---------------------------------------------------------------------------------------------------------
                             Long-term obligations at December 31, 1995       $  887,000
- ---------------------------------------------------------------------------------------------------------
</TABLE>


         Minimum future rentals receivable under subleases for operating leases
at December 31, 1995, amounted to $2,545,000.





32     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   18

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         In addition to the leases summarized above, the Company leases five
previously owned Wendy's restaurant properties from a corporation principally
owned by a Director of the Company and his wife at an aggregate minimum annual
rental of approximately $265,000, which is subject to adjustment in certain
events, plus contingent rentals based on sales. The leases are renewable at the
Company's option for two additional five year periods. The Company also has an
option to repurchase the properties throughout the terms of the leases. As a
result of this option to purchase, the transaction has been recorded as a
financing rather than as a sale, in compliance with SFAS No. 98. Accordingly,
the assets sold continue to be carried on the Company's Consolidated Balance
Sheet and the original proceeds of $2,180,000, reduced for contingent rent
payments, have been recorded as long-term debt on the balance sheet. Contingent
rent payments totaled $49,000, $54,000 and $68,000 in 1995, 1994 and 1993,
respectively.

         The future minimum lease payments, which will be recorded principally
as interest expense, under the terms of the related lease agreements are as
follows:

<TABLE>
<CAPTION>
                 ---------------------------------------------------
                 <S>                                      <C>
                 1996                                     $  265,000
                 1997                                        265,000
                 1998                                        265,000
                 1999                                        265,000
                 2000                                        265,000
                 Thereafter                                  795,000
                 ---------------------------------------------------
                                                          $2,120,000
                 ---------------------------------------------------
</TABLE>

         The Company leases one additional Wendy's restaurant from affiliates
of the Director referenced above. This agreement calls for annual lease
payments of approximately $17,000 through June 1997.


NOTE E--INCOME TAXES
         At December 31, 1995, the Company had net operating loss carryforwards
of $10,031,000 for income tax purposes that expire in the years 2000 through
2004. Tax credit carryforwards (consisting primarily of investment tax credits
which expire in the years 1998 through 2001) of $1,999,000 are also available
to reduce future federal income taxes.





33     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   19

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets as
of December 31, 1995, and January 1, 1995, are as follows:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
                                                                                DECEMBER 31      January 1
                                                                                   1995             1995
- ----------------------------------------------------------------------------------------------------------
<S>                                                                            <C>             <C>
Deferred tax liabilities:
   Tax over book depreciation                                                  $   26,000       $  133,000
   Pre-opening costs                                                              368,000          232,000
   Other--net                                                                      76,000           75,000
- ----------------------------------------------------------------------------------------------------------
      Total deferred tax liabilities                                              470,000          440,000
- ----------------------------------------------------------------------------------------------------------
Deferred tax assets:
   Capital/finance leases                                                         107,000          146,000
   Deferred compensation accruals                                                 158,000          139,000
   Self-insurance accruals                                                         58,000           78,000
   Net operating loss carryforwards                                             3,410,000        4,605,000
   Tax credit carryforwards                                                     1,999,000        1,800,000
   Other--net                                                                     274,000          194,000
- ----------------------------------------------------------------------------------------------------------
      Total deferred tax assets                                                 6,006,000        6,962,000
      Valuation allowance for deferred tax assets                                      --       (3,071,000)
- ----------------------------------------------------------------------------------------------------------
                                                                                6,006,000        3,891,000
- ----------------------------------------------------------------------------------------------------------
Net deferred tax assets                                                        $5,536,000       $3,451,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>

         Prior to 1993, the valuation allowance was established at an amount
necessary to fully reserve the net deferred tax asset balances, after giving
consideration to deferred tax assets that can be realized through offsets to
existing taxable temporary differences. In the fourth quarter of 1995, 1994 and
1993, the beginning of the year valuation allowance was reduced by $2,085,000
(of which $303,000 was credited to additional paid-in capital), $2,100,000 and
$1,500,000, respectively, reflecting a change in circumstances which resulted
in a judgment that a corresponding amount of the Company's deferred tax assets
will be realized in future years. The valuation allowance decreased by
$3,071,000 (including the $2,085,000 decrease discussed above), $2,659,000
(including the $2,100,000 decrease discussed above) and $2,448,000 (including
the $1,500,000 decrease discussed above) during 1995, 1994 and 1993,
respectively, as the result of changes in the deferred tax items.





34     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         Significant components of the Company's income tax benefit are as
follows:

<TABLE>
<CAPTION>
                                                                                Years Ended
- ----------------------------------------------------------------------------------------------------------
                                                               DECEMBER 31      January 1        January 2
                                                                  1995             1995             1994
- ----------------------------------------------------------------------------------------------------------
<S>                                                          <C>              <C>              <C>
Currently payable:
   Federal                                                   $    80,000      $    66,000      $    61,000
   State                                                         144,000          262,000          164,000
- ----------------------------------------------------------------------------------------------------------
     Total                                                       224,000          328,000          225,000
Deferred                                                      (1,782,000)      (2,100,000)      (1,500,000)
- ----------------------------------------------------------------------------------------------------------
Income tax benefit                                           $(1,558,000)     $(1,772,000)     $(1,275,000)
- ----------------------------------------------------------------------------------------------------------
</TABLE>

         The Company's consolidated effective tax rate differed from the
federal statutory rate as set forth in the following table:

<TABLE>
<CAPTION>
                                                                                Years Ended
- ----------------------------------------------------------------------------------------------------------
                                                               December 31      January 1        January 2
                                                                  1995             1995             1994
- ----------------------------------------------------------------------------------------------------------
<S>                                                          <C>              <C>              <C>
Tax expense computed at federal statutory rate (34%)         $ 1,176,000      $ 1,040,000      $ 1,029,000
State and local income taxes                                     144,000          262,000          164,000
Alternative minimum tax                                           80,000           66,000           61,000
Non-deductible expenses                                           19,000           23,000            6,000
Benefit of net operating loss carryforwards                   (1,195,000)      (1,063,000)      (1,035,000)
Recognition of deferred tax assets                            (1,782,000)      (2,100,000)      (1,500,000)
- ----------------------------------------------------------------------------------------------------------
Income tax benefit                                           $(1,558,000)     $(1,772,000)     $(1,275,000)
- ----------------------------------------------------------------------------------------------------------
</TABLE>


         Income tax payments were $175,000, $338,000 and $214,000 in 1995, 1994
and 1993, respectively.


NOTE F--STOCK OPTIONS AND BENEFIT PLANS
         Under the Company's 1994 Employee Stock Incentive Plan, officers and
key employees of the Company may be granted options to purchase shares of the
Company's common stock. In addition, the 1990 Stock Option Plan for Outside
Directors provides for the granting of options to purchase the Company's common
stock at the fair market price at the date of the grant to members of the
Company's Board of Directors who are not employees. Options to purchase the
Company's common stock also remain outstanding under the Company's 1982
Incentive Stock Option Plan and 1985 Stock Option Plan, although the Company no
longer has the ability to issue additional shares under these plans.





35     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         A summary of options under the Company's option plans is as follows:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Options                                                                           Shares       Option Prices
- ------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>             <C>
Outstanding at January 3, 1993                                                   333,356        $1.38-$ 5.88
Issued                                                                           108,950         7.50- 10.50
Exercised                                                                        (13,966)        1.38-  3.00
Expired or cancelled                                                              (1,284)        1.38- 10.38
- ----------------------------------------------------------------------------------------
Outstanding at January 2, 1994                                                   427,056         1.38- 10.50
Issued                                                                           121,100         7.25- 13.00
Exercised                                                                       (106,366)        1.38-  5.88
Expired or cancelled                                                                (366)        1.38- 10.38
- ----------------------------------------------------------------------------------------
Outstanding at January 1, 1995                                                   441,424         1.38- 13.00
Issued                                                                           146,700         7.56-  9.75
Exercised                                                                        (15,166)        1.38-  7.63
Expired or cancelled                                                             (10,250)        7.25- 11.50
- ----------------------------------------------------------------------------------------
Outstanding at December 31, 1995                                                 562,708        $1.38-$13.00
- ----------------------------------------------------------------------------------------
</TABLE>

         Options exercisable and shares available for future grant are as
follows:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
                                                                                DECEMBER 31      January 1
                                                                                   1995             1995
- ----------------------------------------------------------------------------------------------------------
<S>                                                                               <C>              <C>
Options exercisable                                                               313,393          257,109
Shares available for grant                                                        226,450          368,100
- ----------------------------------------------------------------------------------------------------------
</TABLE>


         The Company has an Employee Stock Purchase Plan under which 110,324
shares of the Company's common stock are available for issuance. Shares issued
under the plan totaled 21,335, 16,877 and 10,794, in 1995, 1994 and 1993,
respectively.
         The Company has a Salary Continuation Plan which provides retirement
and death benefits to certain officers.  The expense recognized under this plan
was $61,000, $54,000 and $55,000 in 1995, 1994 and 1993, respectively.
         The Company has a Savings Incentive and Salary Deferral Plan under
Section 401(k) of the Internal Revenue Code which allows qualifying employees
to defer a portion of their income on a pre-tax basis through contributions to
the plan. All Company employees with at least 1,000 hours of service during the
twelve month period subsequent to their hire date, or any calendar year
thereafter, and who are at least 21 years of age are eligible to participate.
For each dollar of participant contributions, up to 3% of each participant's
salary, the Company makes a minimum 10% matching contribution to the plan. For
1995, 1994 and 1993, the Company made a 20% matching contribution to the plan
and recognized expense of $23,000, $19,000 and $15,000, respectively.





36     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE G--EMPLOYEE STOCK OWNERSHIP PLAN
         The Company has established an Employee Stock Ownership Plan (ESOP) for
the purpose of enabling employees of the Company to share in its growth and
prosperity and to accumulate capital for their future economic security. In
1992, the ESOP purchased 457,055 shares of Company common stock from the Massey
Company, a trust created by the late Jack C. Massey, the Company's former Board
Chairman, and the Jack C. Massey Foundation at $3.75 per share for an aggregate
purchase price of $1,714,000. The Company funded the ESOP by loaning it an
amount equal to the purchase price. The loan is secured by a pledge of the
unallocated stock held by the ESOP and is to be repaid in ten annual principal
payments of approximately $172,000 plus interest on the outstanding principal
balance at an annual rate of 9%. The Company expects to continue making annual
contributions to the ESOP which will allow the ESOP to repay the Company and
which will result in annual net expense to the Company of approximately
$172,000. The Company recorded ESOP expense, and a corresponding reduction in
the ESOP note receivable, of $172,000 in 1995, $170,000 in 1994 and $172,000 in
1993. The note receivable from the ESOP has been reported as a reduction from
the Company's stockholders' equity.
         All company employees with at least 1,000 hours of service during the
twelve month period subsequent to their hire date, or any calendar year
thereafter, and who are at least 21 years of age are eligible to participate.
The ESOP generally requires five years of service with the Company in order for
an ESOP participant's account to vest. Allocation of stock is being made to
participants' accounts annually over a ten-year period as the ESOP's loan is
repaid and is in proportion to each participant's compensation for each year.
At December 31, 1995, and January 1, 1995, shares allocated under the ESOP
totaled 182,822 and 137,117, respectively.
         For purposes of computing earnings per share, the 457,055 shares
originally purchased by the ESOP are included as outstanding shares in the
weighted average share calculation.


NOTE H--SHAREHOLDER RIGHTS PLAN
         During 1989, the Board of Directors adopted a shareholder rights plan
for the Company. The purpose of the shareholder rights plan is to protect the
interests of the Company's shareholders if the Company is confronted with
coercive or unfair takeover tactics by encouraging third parties interested in
acquiring the Company to negotiate with the Board of Directors.
         The shareholder rights plan is a plan by which the Company has
distributed rights ("Rights") to purchase (at the rate of one Right per share
of common stock) one-hundredth of a share of no par value Series A Junior
Preferred (a "Unit") at an exercise price of $12.00 per Unit. The Rights are
attached to the common stock and may be exercised only if a person or group
acquires 20% of the outstanding common stock or initiates a tender or exchange
offer that would result in such person or group acquiring 10% or more of the
outstanding common stock. Upon such an event, the Rights "flip-in" and each
holder of a Right will thereafter have the right to receive, upon exercise,
common stock having a value equal to two times the exercise price. All Rights
beneficially owned by the acquiring person or group triggering the "flip-in"
will be null and void. Additionally, if a third party were to take certain
action to acquire the Company, such as a merger or other business combination,
the Rights would "flip-over" and entitle the holder to acquire shares of the
acquiring person with a value of two times the exercise price. The Rights are
redeemable by the Company at any time before they become exercisable for $0.01
per Right and expire in 1999. In order to prevent dilution, the exercise price
and number of Rights per share of common stock will be adjusted to reflect
splits and combinations of, and common stock dividends on, the common stock.





37     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE I--COMMITMENTS AND CONTINGENCIES
         In connection with the sale of its Mrs. Winner's Chicken & Biscuit
restaurant operations in 1989 and certain previous dispositions, the Company
remains secondarily liable for certain real and personal property leases with
remaining terms of one to 10 years. The total amount of lease payments
remaining on these leases at December 31, 1995, was approximately $4 million.
Additionally, in connection with the disposition of certain Wendy's restaurant
operations, primarily the southern California Wendy's restaurants in 1982, the
Company remains secondarily liable for certain real property leases with
remaining terms of four to 11 years. The total amount of lease payments
remaining on these leases as of December 31, 1995, was approximately $2.6
million.



NOTE J--ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
         Accrued expenses and other current liabilities included the following:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
                                                                                December 31      January 1
                                                                                   1995             1995
- ----------------------------------------------------------------------------------------------------------
<S>                                                                             <C>             <C>
Taxes, other than income taxes                                                  $1,062,000      $  811,000
Salaries and wages                                                                 686,000         641,000
Insurance                                                                          710,000         313,000
Interest                                                                           120,000         136,000
Other                                                                            1,573,000       1,409,000
- ----------------------------------------------------------------------------------------------------------
                                                                                $4,151,000      $3,310,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>

NOTE K--BUSINESS SEGMENTS
         For the years ended December 31, 1995, January 1, 1995, and January 2,
1994, retail food operations constituted a dominant segment in accordance with
SFAS No. 14 "Financial Reporting for Segments of a Business Enterprise."





38     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   24

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

THE BOARD OF DIRECTORS AND STOCKHOLDERS
VOLUNTEER CAPITAL CORPORATION

         We have audited the accompanying consolidated balance sheets of
Volunteer Capital Corporation and subsidiaries as of December 31, 1995 and
January 1, 1995, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the three fiscal years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
         We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
         In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Volunteer Capital Corporation and subsidiaries at December 31, 1995 and January
1, 1995, and the consolidated results of their operations and their cash flows
for each of the three fiscal years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.



Nashville, Tennessee                              /s/ Ernst & Young LLP
February 19, 1996                                 ---------------------
                                                      Ernst & Young LLP




39     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   25

QUARTERLY RESULTS OF OPERATIONS

         The following is a summary of the quarterly results of operations for
the years ended December 31, 1995, and January 1, 1995 (dollars in thousands,
except per share amounts):

<TABLE>
<CAPTION>
                                                                   1995 Quarters Ended  
- ------------------------------------------------------------------------------------------------------------
                                                APRIL 2          JULY 2         OCTOBER 1        DECEMBER 31
- ------------------------------------------------------------------------------------------------------------
<S>                                             <C>            <C>               <C>               <C>
Net sales                                       $18,100        $20,005           $20,550           $20,633
Income from restaurant operations                 1,949          2,196             2,317             2,121
Net income                                          688            913               984             2,431(1)
Earnings per share:
   Primary                                         $.13           $.17              $.18              $.44
   Fully diluted                                   $.13           $.17              $.18              $.43
</TABLE>


<TABLE>
<CAPTION>
                                                                   1994 Quarters Ended
- ------------------------------------------------------------------------------------------------------------
                                                April 3          July 3         October 2        January 1
- ------------------------------------------------------------------------------------------------------------
<S>                                             <C>            <C>               <C>               <C>
Net sales                                       $14,944        $16,998           $16,872           $16,881
Income from restaurant operations                 1,589          2,039             2,035             1,960
Net income                                          512            723               819             2,776(2)
Earnings per share:
   Primary                                      $   .10        $   .13           $   .15           $   .52
   Fully diluted                                $   .10        $   .13           $   .15           $   .49
</TABLE>


(1) Includes tax benefit of $1,782 related to recognition of deferred tax
    assets in accordance with Statement of Financial Accounting Standards
    No. 109 "Accounting for Income Taxes"(SFAS No. 109).
(2) Includes tax benefit of $2,100 related to recognition of deferred tax
    assets in accordance with SFAS No. 109.





40     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   26

FIVE-YEAR FINANCIAL SUMMARY

<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)                        Years Ended
- ------------------------------------------------------------------------------------------------------------   
                                          DECEMBER 31    January 1    January 2     January 3    December 29
                                              1995         1995          1994        1993(1)        1991
- ------------------------------------------------------------------------------------------------------------   
<S>                                        <C>            <C>           <C>           <C>          <C>
OPERATIONS
- ------------------------------------------------------------------------------------------------------------   
Net sales                                  $79,288        65,695        60,574        50,092       42,467
Income from restaurant operations          $ 8,583         7,623         7,342         5,535        4,320
General and administrative expenses        $ 4,308         3,839         3,238         2,891        2,559
Income before extraordinary item           $ 5,016(2)      4,830(3)      4,301(4)      2,064        1,194
Net income                                 $ 5,016(2)      4,830(3)      4,301(4)      2,064        3,380
Depreciation and amortization              $ 3,644         2,760         2,394         1,942        1,615
Cash flow from operations                  $ 7,586         5,706         5,050         3,590        3,159
Capital expenditures                       $20,255        11,276         3,479         7,105        1,701

FINANCIAL POSITION
- ------------------------------------------------------------------------------------------------------------ 
Cash and investments                       $ 2,739        16,312        20,772        10,904       15,724
Property and equipment, net                $46,915        29,776        20,989        19,604       14,310
Total assets                               $60,140        53,306        46,419        33,979       33,405
Long-term obligations                      $18,512        18,847        19,250        19,633       19,949
Stockholders' equity                       $32,975        27,304        21,700         7,950        7,881

PER SHARE DATA                                                                                              
- ------------------------------------------------------------------------------------------------------------   
Earnings per share-primary:
   Income before extraordinary item        $   .92           .90           .93           .48          .27
   Net income                              $   .92           .90           .93           .48          .72
Earnings per share-assuming full dilution:           
   Income before extraordinary item        $   .92           .90           .93           .47          .27
   Net income                              $   .92           .90           .93           .47          .72
Stockholders' equity                       $  6.25          5.21          4.24          1.94         1.96
Market price at year end                   $ 9 1/2             6            11         6 3/4        2 5/8

WENDY'S RESTAURANT DATA
- ------------------------------------------------------------------------------------------------------------   
Net sales                                  $53,694        50,991        49,758        46,547       41,014
Weighted average annual sales per unit     $   958           973           971           923          818
Units open at year end                          58            55            52            51           51

J. ALEXANDER'S RESTAURANT DATA
- ------------------------------------------------------------------------------------------------------------   
Net sales                                  $25,594        14,704        10,816         3,545        1,453
Weighted average annual sales per unit     $ 3,980         3,735         3,605         2,608        2,015
Units open at year end                           9             5             3             3            1
</TABLE>


(1) Due to the Company's fiscal year policy, fiscal year 1992 includes 53
    weeks as compared to 52 weeks for the other years presented.
(2) Includes tax benefit of $1,782 related to recognition of deferred tax
    assets in accordance with Statement of Financial Accounting Standards
    No. 109 "Accounting for Income Taxes" (SFAS No. 109).
(3) Includes tax benefit of $2,100 related to recognition of deferred tax
    assets in accordance with SFAS No. 109.  
(4) Includes tax benefit of $1,500 related to recognition of deferred tax
    assets in accordance with SFAS No. 109.

Note:  The Company has never paid cash dividends on its common stock. Payment
of future dividends will be within the discretion of the Company's Board of
Directors and will depend, among other factors, on earnings, capital
requirements and the operating and financial condition of the Company.





41     VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES
<PAGE>   27

                            CORPORATE INFORMATION

TRANSFER AGENT AND REGISTRAR            
  SunTrust Bank, Nashville, N.A.
  c/o SunTrust Bank, Atlanta, N.A.
  P.O. Box 4625
  Atlanta, Georgia 30302                 
  (800) 568-3476

INDEPENDENT AUDITORS
  Ernst & Young LLP
  Nashville, Tennessee

CORPORATE OFFICES
  3401 West End Avenue
  P.O. Box 24300
  Nashville, Tennessee 37202
  (615) 269-1900

NYSE SYMBOL
  VCC                               

ANNUAL MEETING
  The Annual Meeting of Shareholders will be held May 14, 1996, at 9:30 a.m.,
Nashville time, at the Nashville City Club, SunTrust Bank Building, 201 Fourth 
Avenue North, Nashville, Tennessee.

FORM 10-K
  A copy of the Company's annual report to the Securities and Exchange
Commission on Form 10-K may be obtained without charge by any stockholder by
writing directly to:
  R. Gregory Lewis
  Vice President and Chief Financial Officer
  3401 West End Avenue
  P.O. Box 24300
  Nashville, Tennessee 37202

PRICE RANGE OF COMMON STOCK
  The common stock of Volunteer Capital Corporation is listed on the New York
Stock Exchange under the symbol VCC. The approximate number of record holders
of the Company's common stock at December 31, 1995, was 1,500. The following
table summarizes the price range of the Company's common stock for each quarter
of 1995 and 1994, as reported from price quotations from the New York Stock
Exchange:

<TABLE>
<CAPTION>
                                 1995                      1994
                          ------------------       --------------------  
                           Low         High          Low          High
                          ------      ------       -------      -------
   <S>                    <C>         <C>          <C>          <C>
   1st Quarter            $6 1/8      $ 8 1/4      $10 1/2      $14
   2nd Quarter             7 3/8       10            9 1/2       13
   3rd Quarter             9 1/8       12 1/2        6 1/2       10
   4th Quarter             8 3/8       12 3/8        5 5/8        8 1/2
</TABLE>


43    VOLUNTEER CAPITAL CORPORATION AND SUBSIDIARIES

<PAGE>   1


EXHIBIT 21--SUBSIDIARIES OF VOLUNTEER CAPITAL CORPORATION



<TABLE>
<CAPTION>
                                            STATE OF                      NAME UNDER WHICH     
SUBSIDIARY                               INCORPORATION                    BUSINESS IS DONE    
- ----------                               -------------                   -----------------    
<S>                                      <C>                           <C>
VCE Restaurants, Inc.                    Tennessee                     Wendy's Old Fashioned Hamburgers

Total Quality Management, Inc.           Tennessee                     J. Alexander's Restaurant

M & W Management Corporation             Kansas                        J. Alexander's Restaurant
</TABLE>










<PAGE>   1
EXHIBIT 23--CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

        We consent to the incorporation by reference in this Annual Report
(Form 10-K) of Volunteer Capital Corporation of our report dated February 19,
1996, included in the 1995 Annual Report to Shareholders of Volunteer Capital
Corporation.

        Our audits also included the financial statement schedule of Volunteer
Capital Corporation listed in Item 14(a). The schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.  

        We also consent to the incorporation by reference in the following
Volunteer Capital Corporation Registration Statements:

        a.  Form S-8 Registration Statement (No. 33-77478) pertaining to the
            1985 Stock Option Plan, filed on May 25, 1994;

        b.  Form S-8 Registation Statement (No. 33-77476) pertaining to the
            1994 Employee Stock Incentive Plan, filed on April 6, 1994;

        c.  Form S-8 Registration Statement (No. 33-39870) pertaining to the
            1990 Stock Option Plan for Outside Directors, filed April 9, 1991;

        d.  Form S-8 Registration Statement (No. 33-4483) pertaining to the
            1985 Stock Option Plan, filed on April 1, 1986;

        e.  Form S-8 Registration Statement (No. 2-78140) pertaining to the
            1982 Incentive Stock Option Plan, filed on June 25, 1982; and 

        f.  Form S-8 Registration Statement (No. 2-78139) pertaining to the
            1982 Employee Stock Purchase Plan, filed on June 25, 1982;



of our report dated February 19, 1996, with respect to the consolidated
financial statements incorporated herein by reference, and our report included
in the preceding paragraph with respect to the financial statement schedule
included in this Annual Report (Form 10-K) of Volunteer Capital Corporation.


                                        ERNST & YOUNG LLP

Nashville, Tennessee
March 27, 1996


<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1995
<PERIOD-START>                             JAN-02-1995
<PERIOD-END>                               DEC-31-1995
<CASH>                                           2,234
<SECURITIES>                                       505
<RECEIVABLES>                                      313
<ALLOWANCES>                                         0
<INVENTORY>                                        848
<CURRENT-ASSETS>                                 5,925
<PP&E>                                          67,576
<DEPRECIATION>                                  20,661
<TOTAL-ASSETS>                                  60,140
<CURRENT-LIABILITIES>                            8,152
<BONDS>                                         18,512
                                0
                                          0
<COMMON>                                           264
<OTHER-SE>                                      32,711
<TOTAL-LIABILITY-AND-EQUITY>                    60,140
<SALES>                                         79,288
<TOTAL-REVENUES>                                79,288
<CGS>                                           27,707
<TOTAL-COSTS>                                   50,862
<OTHER-EXPENSES>                                19,843
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                               1,416
<INCOME-PRETAX>                                  3,458
<INCOME-TAX>                                    (1,558)
<INCOME-CONTINUING>                              5,016
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     5,016
<EPS-PRIMARY>                                      .92
<EPS-DILUTED>                                      .92
        

</TABLE>


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