RYANS FAMILY STEAKHOUSES INC, ARS, 1996-03-29

RYANS FAMILY STEAKHOUSES INC
ARS, 1996-03-29
EATING PLACES

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(Photo appears depicting a family outside of a Ryan's Family Steak House)

1995
ANNUAL REPORT
Ryan's Family Steak Houses, Inc.

<PAGE>

2 COMPANY PROFILE:

Since 1977, Ryan's Family Steak Houses, Inc. has been engaged in the
development, operation and franchising of family restaurants. A Ryan's
restaurant features "Steaks, Buffet & Bakery" and provides a great meal to its
customers at a reasonable price. At March 6, 1996, 231 company-owned and 25
franchised Ryan's were in operation. The Company also operated three casual
dining concepts on a test basis, consisting of five restaurants as follows:
Caliente Grille or Chilaca Grille (2), Laredo Grill (2) and Bellissimo's Italian
Eatery (1).

Sales by company-owned restaurants amounted to $513 million in 1995 and
$448 million in 1994. Systemwide sales, which include sales by franchised
restaurants, for 1995 and 1994 were approximately $560 million and $499 million,
respectively.

The Company, headquartered in Greer, South Carolina, employed
approximately 16,000 persons at March 6, 1996.

MISSION STATEMENT:

To be an innovative, profitable, growth company, committed to customer
satisfaction by always providing high quality food at affordable prices with
friendly service in clean and pleasant surroundings.

WE STRIVE:

* To put people first -- customers and team members.

* To attract and maintain a strong team of individuals recognized as standouts
in each area of focus.

* To promote safety, responsibility and a high level of ethics in our
workplace.

* To be environmentally aware and work to preserve our natural resources.

* To utilize materials and services that provide the best cost/value ratio
without sacrificing quality.

* To enhance long-term shareholder wealth.

Restaurant Sales
(In millions of dollars)

(Bar graph appears here with the following plot points.)

91 92 93 94 95
296 349 394 448 513

Net Earnings
(In millions of dollars)

(Bar graph appears here with the following plot points.)

91 92 93 94 95
23.3 29.3 28.5 30.5 33.2

Earnings Per Share
(In cents)

(Bar graph appears here with the following plot points.)

91 92 93 94 95
44 55 53 57 62

Restaurants Open At Year-End

(Bar graph appears here with the following plot points.)

91 92 93 94 95
Company Owned 142 165 194 212 231
Franchised 35 35 34 30 26
Total 177 200 228 242 257

<PAGE>

TO OUR SHAREHOLDERS

(Photo of Charles D. Way appears here)

We are pleased to report that fiscal 1995 was a good year for Ryan's
Family Steak Houses, Inc. Sales and earnings again reached record levels. For
the year ended January 3, 1996, restaurant sales exceeded $513 million, up from
$448 million during 1994. Net earnings for 1995 increased to $33.2 million
compared to $30.5 million in 1994, resulting in net earnings per share of 62
cents and 57 cents, respectively. Fiscal 1995 marked our 18th year of record
sales and our 16th year of record earnings.

During the year, 21 Ryan's restaurants were opened and five
underperforming units were closed, resulting in 226 company-owned Ryan's at the
end of the year. Franchisees operated another 26 Ryan's Family Steak Houses. The
Company also opened three casual-dining restaurants during 1995, two of which
were conversions of closed Ryan's units. Of our five casual-dining restaurants,
two feature Tex-Mex fare, two are upscale western-style steakhouses and one
features Italian food, served buffet style, in a lively marketplace setting. The
financial results of each of these test concepts are being thoroughly studied
before any further expansion plans are determined.

We are very pleased that Ryan's same-store sales increased 1.8% during
the year. Additionally, the final quarter of 1995 marked the fifth quarter in a
row of increased same-store sales and increased average unit sales. We are also
very pleased that our new units again opened at record sales levels - an average
of $3.1 million! We attribute much of this sales improvement to the
installation of scatter bars in our units and to improved customer service
levels. The scatter bar format breaks the Mega Bar(R) buffet into
five island bars for easier customer access and expanded food variety. Scatter
bars had been installed in 208 Ryan's restaurants by year-end. We anticipate
that all company-owned Ryan's will operate with scatter bars by the end of the
first quarter of 1996.

We recognize the necessity of remaining committed to our top priority -
our customers, and during the year we continued our focus on in-store training
programs to help our team members enhance our customers' overall dining
experience. Additionally, we increased team member hours per restaurant and
implemented a Team Leader program in each unit to ensure consistent, excellent
service. Although payroll costs were increased, we believe the improved customer
service contributed to our unit sales gains.

During 1995, marketing became an integral part of our business
strategy. Following the success of our 1994 advertising activities in the
Charleston, South Carolina area, we expanded our advertising program during 1995
to the Atlanta, Georgia metro area covering 20 restaurants and completed a
follow-up campaign in Charleston. These experiences have convinced us that
advertising is an effective means of attracting new customers, and, accordingly,
during the first quarter of 1996, we began media campaigns in the Greenville,
South Carolina and Augusta, Georgia markets as part of our overall 1996
marketing plan. During 1996, we plan to run media campaigns, consisting of both
television and radio advertising, in markets encompassing 67 stores, including
follow-up efforts in Charleston and Atlanta.

For 1996 we plan to open 28 to 30 new company-owned Ryan's units and to
remodel approximately 40 restaurants. Although January sales were soft due to
bad weather, February sales rebounded nicely, and we're enjoying continued sales
gains in March. Payroll costs appear to be well controlled, and due to a
company-wide focus on store-level profitability, we believe that we will see
some modest margin improvements in 1996. We are aggressively working on lowering
the cost of our new restaurants in order to be as efficient as possible with our
cash flow. Overall, we are very excited about the Company's prospects in 1996
and expect another record year.

Earlier this month, Ryan's announced the commencement of a multi-year
program to repurchase 6.4 million shares, or approximately 12%, of the Company's
outstanding common shares. We expect this program to enhance shareholder value
as a greater percentage of future net earnings will be attributed to each share
remaining after the repurchase. In other words, each remaining shareholder will
own a greater piece of the Ryan's "pie". We expect to incur additional debt as a
result of this program, but feel that the resultant financial structure will be
conservative by industry standards and provide our shareholders with adequate
safety for their investments. We have received many favorable comments from the
investment community regarding this program, and we feel that our shareholders
will benefit from this program over time.

During the year, our average unit sales were $2.3 million which far
exceeds the industry average of approximately $1.4 million for the family
steakhouse segment. Additionally, Ryan's was the highest rated family steakhouse
chain in America in the most recent annual Choice in Chains Awards conducted by
RESTAURANTS AND INSTITUTIONS magazine. Ryan's surpassed every other family
steakhouse chain in every single category. Further, Ryan's was the number one
overall winner of all restaurants in America for seniors. This national survey
further demonstrates the tremendous strides being made every day by our team
members in each of our restaurants to place our customers first.

Again, we are very excited about our prospects during 1996. We are
making the right moves in our business and are committed to being the best
restaurant company. Our customers will benefit because we will continue to
provide high quality food at affordable prices with friendly customer service.
Our shareholders will benefit over time as we grow and structure the company in
a prudent and profitable manner.

We truly appreciate your continued support.

Sincerely,

(Signature of Charles D. Way)
Charles D. Way
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER

March 29, 1996

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TEN YEAR FINANCIAL SUMMARY

1995(b) 1994 1993

<S> <C> <C> <C>
CONSOLIDATED STATEMENTS OF EARNINGS DATA:
Restaurant sales ............................................... $ 513,168,000 448,214,000 393,865,000
Operating expenses:
Food and beverage .......................................... 208,304,000 181,743,000 161,886,000
Payroll and benefits ....................................... 146,869,000 125,338,000 110,834,000
Depreciation and amortization .............................. 21,412,000 19,775,000 17,462,000
Other operating expenses ................................... 61,811,000 54,764,000 45,154,000
Total operating expenses ............................. 438,396,000 381,620,000 335,336,000

General and administrative expenses ........................ 22,751,000 19,249,000 16,143,000
Interest expense ........................................... 1,853,000 873,000 178,000
Revenues from franchised restaurants ....................... (1,736,000) (755,000) (2,546,000)
Other income ............................................... (937,000) (806,000) (566,000)
Earnings before income taxes and cumulative effect
of change in method of accounting .......................... 52,841,000 48,033,000 45,320,000
Income taxes ................................................... 19,682,000 17,489,000 16,778,000
Earnings before cumulative effect of change in method
of accounting .............................................. 33,159,000 30,544,000 28,542,000
Cumulative effect on prior years of change in method
of accounting .............................................. -- -- --
Net earnings .......................................... $ 33,159,000 30,544,000 28,542,000
Per share amounts: (a)
Earnings before cumulative effect of
change in method of accounting ........................ .62 .57 .53
Cumulative effect of change in method of accounting ........ -- -- --
Net earnings .......................................... $ .62 .57 .53
Weighted average shares .................................... 53,450,000 53,603,000 53,696,000

SELECTED OTHER CONSOLIDATED DATA:
Working capital (deficit) ....................................... $(102,192,000) (90,934,000) (75,350,000)
Current ratio ................................................... 0.1/1 0.1/1 0.1/1
Cash provided by operations ..................................... $ 61,807,000 54,749,000 48,602,000
Property and equipment additions ................................ 71,342,000 66,748,000 71,282,000
Total assets .................................................... 430,829,000 379,756,000 333,521,000
Long-term debt .................................................. -- -- --
Total current and long-term debt ................................ 72,200,000 65,700,000 58,100,000
Shareholders' equity ............................................ 302,694,000 269,355,000 238,706,000
Company-owned restaurants open at end of year ................... 231 212 194
</TABLE>

(a) Per share amounts have been retroactively adjusted to reflect all common
stock splits, each effected in the form of a dividend. See "Stock Split History"
on page 22 for further details.

(b) Indicates a 53-week period.

(c) The Company adopted Financial Accounting Standards Board's Statement
109, "Accounting for Income Taxes," effective January 2, 1992.

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1992 1991 1990 1989(b) 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C>
349,378,000 296,117,000 270,274,000 238,176,000 190,681,000 152,929,000 103,307,000

142,468,000 124,831,000 114,854,000 104,057,000 83,547,000 66,304,000 45,501,000
95,446,000 80,847,000 70,931,000 61,305,000 45,122,000 33,959,000 22,257,000
17,377,000 12,153,000 10,520,000 9,015,000 7,070,000 4,812,000 3,092,000
38,306,000 32,654,000 27,511,000 23,596,000 18,284,000 13,630,000 9,007,000
293,597,000 250,485,000 223,816,000 197,973,000 154,023,000 118,705,000 79,857,000

13,730,000 11,695,000 11,333,000 9,225,000 8,379,000 7,282,000 4,630,000
144,000 102,000 103,000 -- -- -- --
(2,813,000) (2,846,000) (2,827,000) (2,629,000) (1,910,000) (1,353,000) (908,000)
(619,000) (373,000) (447,000) (621,000) (433,000) (970,000) (774,000)

45,339,000 37,054,000 38,296,000 34,228,000 30,622,000 29,265,000 20,502,000
17,032,000 13,747,000 14,233,000 12,777,000 11,360,000 12,435,000 9,691,000

28,307,000 23,307,000 24,063,000 21,451,000 19,262,000 16,830,000 10,811,000

1,000,000(C) -- -- -- -- -- --

29,307,000 23,307,000 24,063,000 21,451,000 19,262,000 16,830,000 10,811,000

.53 .44 .46 .41 .37 .32 .21
.02(C) -- -- -- -- -- --
.55 .44 .46 .41 .37 .32 .21
53,636,000 53,238,000 52,675,000 52,682,000 52,398,000 52,580,000 50,685,000
(49,105,000) (44,008,000) (36,974,000) (25,043,000) (15,185,000) (10,162,000) 13,871,000
0.1/1 0.1/1 0.1/1 0.1/1 0.2/1 0.2/1 3.3/1
43,134,000 37,810,000 36,459,000 30,214,000 29,879,000 24,530,000 17,538,000
54,239,000 43,905,000 46,060,000 32,035,000 44,445,000 48,052,000 22,637,000
274,539,000 237,520,000 205,454,000 165,172,000 141,787,000 105,273,000 78,252,000
-- -- -- -- 10,000,000 -- --
36,000,000 30,700,000 26,600,000 16,500,000 16,800,000 5,200,000 --
209,679,000 176,863,000 152,099,000 127,182,000 105,352,000 85,581,000 67,907,000
165 142 126 110 96 76 55
</TABLE>

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Shown for the years indicated are (i) items in the consolidated statements
of earnings as a percent of restaurant sales and (ii) the number of restaurants
open at the end of each year.

Percent Change
Percent of 1995 1994
Restaurant Sales vs vs
1995 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C>
Restaurant sales .......................... 100.0% 100.0% 100.0% 14.5% 13.8%
Operating expenses:
Food and beverage ................. 40.6 40.5 41.1 14.6 12.3
Payroll and benefits .............. 28.6 28.0 28.1 17.2 13.1
Depreciation ...................... 3.7 3.9 3.9 10.7 12.9
Amortization of pre-opening costs . 0.4 0.5 0.5 (9.3) 15.6
Other operating expenses .......... 12.1 12.2 11.5 12.9 21.3
Total operating expenses ...... 85.4 85.1 85.1 14.9 13.8

General and administrative expenses ....... 4.4 4.3 4.1 18.2 19.2
Interest expense .......................... 0.4 0.2 -- 112.3 390.4
Revenues from franchised restaurants ...... (0.3) (0.1) (0.6) 129.9 (70.3)
Other income .............................. (0.2) (0.2) (0.1) 16.3 42.4

Earnings before income taxes .............. 10.3 10.7 11.5 10.0 6.0
Income taxes .............................. 3.8 3.9 4.3 12.5 4.2

Net earnings ...................... 6.5% 6.8% 7.2% 8.6% 7.0%

Restaurants Open
at End of Year
Ryan's:
Company-owned ..................... 226 210 194 7.6% 8.2%
Franchised ........................ 26 30 34 (13.3) (11.8)
252 240 228 5.0 5.3
Other restaurant concepts:
Company-owned ..................... 5 2 -- 150.0 100.0
Total ............................. 257 242 228 6.2% 6.1%
</TABLE>

<PAGE>

RESULTS OF OPERATIONS
1995 COMPARED TO 1994

Total restaurant sales increased by $65.0 million, or 14.5%, to $513.2
million in 1995 from $448.2 million in 1994 due to sales from new restaurants,
the 53rd week in fiscal 1995 and an increase in same-store sales.

(Photo of two people at the MegaBar(R) appears here)

Sales from new restaurants accounted for approximately 75% of the
sales increase. During 1995, the Company opened 24 new restaurants, including
3 casual-dining units, and closed 5 underperforming units, two of which were
converted to casual-dining units. At the end of 1995 and 1994, the Company
owned and operated 231 and 212 restaurants, respectively. New restaurant
sales also benefited from above-average sales volumes. Annualized average
unit sales at the 21 new Ryan's restaurants opened during 1995 amounted to
$3.1 million compared to chainwide Ryan's average unit sales of $2.3 million.

The 1995 reporting period consisted of 53 weeks compared to a 52-week
period in 1994. Sales during the additional week in 1995 amounted to
approximately $9.6 million.

Sales during 1995 also benefited from a 1.8% increase in same-store sales.
In computing same-store sales, the Company averages weekly sales for those units
operating for at least 18 months. Management attributes the improvement
principally to the installation of scatter bars in its restaurants and to
improved customer service levels. The scatter bar format breaks the Mega Bar(R)
into five island bars for easier customer access and more food variety. At
January 3, 1996, scatter bars had been installed in 208 Ryan's restaurants, or
92% of all company-owned units. Management anticipates that by the end of March
1996, substantially all company-owned Ryan's will operate with scatter bars.
During the fourth quarter of 1994, a program to increase customer service levels
was implemented, featuring increased team member hours per restaurant and
chainwide training programs. Although payroll costs were increased as a result
of the program (see second succeeding paragraph), management believes that the
resultant improved customer service was a contributing factor in 1995's
same-store sales improvement.

Total operating expenses increased 14.9% to $438.4 million in 1995 from
$381.6 million in 1994. Such costs, as a percentage of sales, were 85.4% during
1995 and 85.1% during 1994. Thus, the Company's operating margins at the
restaurant level were 14.6% in 1995 and 14.9% in 1994.

The major factor affecting 1995's operating costs were higher payroll and
benefit costs, which increased to 28.6% of sales in 1995 from 28.0% in 1994.
This increase can be attributed to the strategically implemented payroll
increase designed to improve customer service levels and featuring increased
team member hours per restaurant and chainwide training programs. Food and
beverage costs increased slightly to 40.6% of sales in 1995 from 40.5% in 1994.
All other operating costs, including depreciation and amortization of
pre-opening costs, decreased to 16.2% of sales in 1995 compared to 16.6% in 1994
due principally to: (1) the favorable impact of higher same-store sales on the
many fixed costs, such as utilities and depreciation, included in this category
and (2) lower store closing costs, which amounted to $1.2 million in 1995
compared to $1.7 million in 1994. These costs represent the expected carrying
and disposal costs of closed restaurants held for sale. From inception through
December 1995, the Company has closed 10 restaurants (5 during 1995 compared to
4 during 1994) and sold, converted or leased 6 such properties, thereby holding
4 properties for sale at January 3, 1996.

General and administrative expenses increased 18.2% from $19.2 million in
1994 (4.3% of sales) to $22.8 million in 1995 (4.4% of sales) due principally to
increases in manager training and advertising costs. Media advertising amounted
to 0.1% of sales during 1995 and is expected to increase to 0.3% of sales in
1996 as the Company expands its advertising coverage.

Interest expense amounted to $1,853,000 in 1995 compared to $873,000 in
1994. The increase results principally from less capitalized

<PAGE>

interest, which reflects 1995's lower level of construction activity in relation
to the Company's outstanding debt. Approximately 58% of interest incurred in
1995 was capitalized as part of the cost of construction in progress compared to
68% in 1994. Also, the Company's effective average interest rate increased to
6.3% in 1995 compared to 4.6% in 1994 due to increases in market-level interest
rates.

Revenues from franchised restaurants increased significantly to $1.7 million
in 1995 from $755,000 in 1994 due principally to restored royalty fee
payments from the Company's largest franchisee, Family Steak Houses of
Florida, Inc. Prior to the third quarter of 1994, this franchisee had
not paid any royalty fees since August 1993. In July 1994, an agreement
with the franchisee regarding both future and past-due royalty fees was
reached, and payments recommenced, initially satisfying an adjusted
outstanding receivable balance. The details of this agreement are noted
below (see "1994 COMPARED TO 1993"). All required payments subsequent to
the agreement have been made in a timely manner, and, accordingly, the
revenue recognition, albeit on a cash basis, has been restored. At
January 3, 1996, there were 26 franchised Ryan's compared to 30 at
December 28, 1994.

(Photo of a family eating at Ryan's Family Steak House appears her)

Based upon the above changes to revenues and expenses, earnings before
income taxes increased to $52.8 million in 1995 from $48.0 million in 1994.

The effective income tax rate for 1995 was 37.2% compared to 36.4% in 1994.
The higher 1995 effective rate can be attributed to less benefit in 1995 from
certain tax-planning strategies.

Net earnings increased to $33.2 million in 1995 (6.5% of sales) from $30.5
million in 1994 (6.8% of sales). Earnings per share amounted to 62 cents in 1995
and 57 cents in 1994.

1994 COMPARED TO 1993

Total restaurant sales increased by $54.3 million, or 13.8%, to $448.2
million in 1994 from $393.9 million in 1993. Substantially all of the increase
resulted from the unit growth of company-owned restaurants, which totaled 212
and 194 at the end of 1994 and 1993, respectively. During 1994, the Company
opened 22 new restaurants, including 2 casual-dining concepts, and closed 4
underperforming units, one of which was converted to a casual-dining concept.

The sales increases resulting from new restaurants were partially offset by
a 0.5% decline in same-store sales. Same-store sales were flat during
the first quarter, down 1.6% on average during the second and third
quarters, and up 1.1% during the fourth quarter. The first quarter
benefited from favorable weather conditions when compared to 1993. From
September 1994 onward, sales trends improved monthly, and, as noted, the
fourth quarter's same-store sales were up. Management attributes most of
the improvement to the rollout of scatter bars into its restaurants. At
December 28, 1994, scatter bars had been installed in 105 Ryan's
restaurants, or 50% of all company-owned units. Certain new restaurants
in 1993 and all new 1994 restaurants have opened with scatter bars.

Total operating expenses increased 13.8% to $381.6 million in 1994 from
$335.3 million in 1993. Such costs, as a percentage of sales, were 85.1% during
both 1994 and 1993. Thus, the Company's operating margins at the restaurant
level were 14.9% in both 1994 and 1993.

The major factors affecting 1994's operating costs were lower food and
beverage costs and higher other operating expenses. Food and beverage costs
decreased to 40.5% of sales in 1994 from 41.1% in 1993. Decreases in beef,
chicken and soft drink syrup prices were partially offset by higher potato
costs. Other operating expenses increased to 12.2% of sales in 1994 from 11.5%
in 1993 due principally to significantly higher store closing costs, which
amounted to $1.7 million in 1994 compared to $100,000 in 1993. Other operating
expenses were also affected by higher utility and store advertising and
promotional costs. Payroll and benefit costs decreased slightly to 28.0% of
sales in 1994 from 28.1% in 1993. Depreciation and amortization of pre-opening
costs remained steady at 4.4% of sales in both 1994 and 1993.

General and administrative expenses increased 19.2% from $16.1 million in
1993 (4.1% of sales) to $19.2 million in 1994 (4.3% of sales). Increases in
personnel and advertising costs were partially offset by lower legal costs.

<PAGE>

Interest expense amounted to $873,000 in 1994 compared to $178,000 in 1993.
The increase results principally from less capitalized interest, which reflects
1994's lower level of construction activity in relation to the Company's
outstanding debt. Approximately 68% of interest incurred in 1994 was capitalized
as part of the cost of construction in progress compared to 88% in 1993. Also,
the Company's effective average interest rate increased to 4.6% in 1994 compared
to 3.6% in 1993.

Revenues from franchised restaurants declined significantly from $2.5
million in 1993 to $755,000 in 1994. While the number of franchised units
decreased from 34 at the end of 1993 to 30 at the end of 1994, the most
important factor affecting franchise revenues was the nonrecognition of royalty
income from the Company's largest franchisee, Family Steak Houses of Florida,
Inc. ("Family"). Prior to the third quarter of 1994, this franchisee had not
paid any royalty fees since August 1993. In July 1994, an agreement was reached
with Family regarding both past-due and future royalty fees. This agreement
provided for a $236,000 cash payment by Family, the relinquishment of Family's
exclusive development rights in certain counties in South Florida and the
Florida panhandle (subject to first refusal and buy-back rights of Family), an
$800,000 long-term note payable to the Company and a reduction in the royalty
fee rate from 4.25% to 3% until April 30, 1997, at which time the rate will
increase to 4%. The relinquishment of development rights was valued at $500,000
and treated as a partial write-off of Family's past-due royalty fees. In
addition, the agreement with Family decreased the required number of Ryan's
restaurants in operation to 24 through the end of 1996 and to 25 at the end of
1997. Pursuant to the agreement, the required number of restaurants in operation
will then increase by 1 for each year after 1997. All required payments from
Family to the Company subsequent to the agreement have been received in a timely
manner. However, due to Family's payment history, the Company's accounting
policy regarding Family's royalty fees was changed during 1994 to a cash basis
pending collection of an outstanding $579,000 receivable balance at December 29,
1993. This receivable was fully paid during 1994, and, accordingly, all royalty
fees received thereafter, including payments required under the long-term note
payable, have been recognized as revenue when received.

Based upon the above changes to revenues and expenses, earnings
before income taxes increased to $48.0 million in 1994 from $45.3 million in
1993.

The effective income tax rate for 1994 was 36.4% compared to 37.0% in
1993. The lower 1994 effective rate can be attributed to the full year's
impact of tax-planning strategies that were implemented in May 1993.

Net earnings increased to $30.5 million in 1994 (6.8% of sales) from
$28.5 million in 1993 (7.2% of sales). Earnings per share amounted to 57
cents in 1994 and 53 cents in 1993.

LIQUIDITY AND CAPITAL RESOURCES

The Company's restaurant sales are primarily derived from cash. Inventories
are purchased on credit and are rapidly converted to cash. Therefore, the
Company does not maintain significant receivables or inventories, and other
working capital requirements for operations are not significant.

At January 3, 1996, the Company's working capital was a $102.2 million
deficit compared to a $90.9 million deficit at December 28, 1994. Included in
these amounts are borrowings of $72.2 million and $65.7 million, respectively,
under bank lines of credit (see sixth succeeding paragraph). The increased
deficit is due principally to $6.5 million of additional borrowings incurred
during 1995 for capital expenditures and increases in current liabilities,
particularly accounts payable and self-insurance accruals. The Company does not
anticipate any adverse effect from the current working capital deficit due to
significant cash flow provided by operations, which amounted to $61.8 million in
1995 and $54.7 million in 1994.

Total capital expenditures increased to $71.3 million in 1995 from $66.7
million in 1994 due to: (1) an increase in new company-owned restaurants (24 in
1995 compared to 22 in 1994), (2) higher remodeling costs, which included 82
scatter bar installations (compared to 62 in 1994) and (3) higher capitalized
interest. In 1995, 87% of the financing for capital expenditures was obtained
from internally generated funds. Another $6.5 million was obtained from
borrowings under bank lines of credit. In 1994, borr owings of $7.6 million were
required.

The Company is also actively testing several casual-dining concepts.
Included in 1995's restaurant count were 5 such units, representing 3 different
concepts. Three of these restaurants were converted from existing Ryan's, while
the other 2 units were new construction. Further expansion of these concepts
will be limited pending review of their operating results.

The Company is currently concentrating its efforts on company-owned stores
and is not actively pursuing any additional franchised locations, either
domestically or internationally.

During 1996, total capital expenditures are estimated at approximately $75
million. The Company plans to build and open 28 to 30 new restaurants, remodel
approximately 40 restaurants and install scatter bars in 18 restaurants, thereby
completing the scatter bar installation program.

<PAGE>

On March 13, 1996, management announced its intention to repurchase an
aggregate 6.4 million shares of the Company's common stock through December
1998. Repurchases will be made from time to time on the open market or in
privately negotiated transactions in accordance with applicable securities
regulations, depending on market conditions, share price and other factors. As
part of this multi-year plan, management expects that 1996 aggregate repurchase
transactions will amount to approximately $25 million.

Management estimates that external funding requirements in 1996 will range
from $40 million to $44 million. The remainder of the Company's funding
requirements are expected to be met by internally generated cash from
operations. The Company currently has several uncommitted bank lines totaling
$160 million at various short-term rates of which $72.2 million was utilized at
January 3, 1996. During mid-1996, management intends to refinance this
outstanding short-term debt and to finance a portion of its 1996 needs with
long-term bank debt. The Company is currently in negotiation with a bank group
to provide this funding. Management believes that the Company's anticipated
overall borrowing arrangements, which are expected to include uncommitted bank
lines in addition to the long-term bank debt at both fixed and floating interest
rates, will be sufficient to meet its 1996 requirements.

IMPACT OF INFLATION

The Company's operating costs that may be affected by inflation consist
principally of food, payroll and utility costs. A significant number of the
Company's restaurant team members are paid at the minimum wage, and,
accordingly, legislated changes to the minimum wage will affect the Company's
payroll costs. The Federal minimum wage last increased in April 1991, and, while
no additional increases to the Federal minimum wage have been legislated, the
topic continues to be actively debated within the Federal government. Other
changes to the minimum wage may also be legislated at the state level.

The Company considers its current price structure to be very competitive.
This factor, among others, is considered by the Company when passing cost
increases on to its customers. Sales prices were increased approximately 3% in
1995 and 2% in 1994.

SHAREHOLDER RIGHTS AGREEMENT

In January 1995, the Company adopted a Shareholder Rights Agreement (the
"Agreement") and declared a dividend of one Common Stock Purchase Right (a
"Right") for each outstanding share of common stock of the Company. The Rights
become exercisable in certain limited circumstances outlined in the Agreement
involving the acquisition or potential acquisition of beneficial ownership of
15% or more of the Company's common stock and are initially exercisable to
acquire a one-half share of the Company's common stock at an exercise price of
$25, subject to adjustment as outlined in the Agreement. Thereafter, upon the
occurrence of certain events specified in the Agreement, the Rights entitle
holders (other than certain persons described in the Agreement) to acquire upon
exercise common stock (or, in certain circumstances, cash, property, other
securities of the Company or securities of the acquiror)having a market value of
twice the exercise price of the Rights.

(Photo of two Ryan's customers at the Mega Bar(R) appears here)

The Rights may be redeemed by the Company under certain circumstances
outlined in the Agreement. Until a Right is exercised, the holder of a Right, as
such, has no rights as a shareholder of the Company. The Rights expire on
February 10, 2005.

IMPACT OF NEW ACCOUNTING STANDARDS

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", and, in October 1995, issued SFAS No. 123, "Accounting for
Stock-Based Compensation". Both standards are required to be adopted in fiscal
1996. The Company has not yet completed its analysis of the effect of
implementing the standards. It is expected that the impact on the Company's
results of operations and financial position will not be material.

<PAGE>

CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
Year Ended
January 3, December 28, December 29,
1996 1994 1993
<S> <C> <C> <C>
Restaurant sales .................................. $ 513,168,000 448,214,000 393,865,000
Operating expenses:
Food and beverage ......................... 208,304,000 181,743,000 161,886,000
Payroll and benefits ...................... 146,869,000 125,338,000 110,834,000.
Depreciation .............................. 19,228,000 17,367,000 15,379,000
Amortization of pre-opening costs ......... 2,184,000 2,408,000 2,083,000
Other operating expenses .................. 61,811,000 54,764,000 45,154,000
Total operating expenses ............. 438,396,000 381,620,000 335,336,000
General and administrative expenses ............... 22,751,000 19,249,000 16,143,000
Interest expense .................................. 1,853,000 873,000 178,000
Revenues from franchised restaurants .............. (1,736,000) (755,000) (2,546,000)
Other income ...................................... (937,000) (806,000) (566,000)
Earnings before income taxes ..................... 52,841,000 48,033,000 45,320,000
Income taxes ...................................... 19,682,000 17,489,000 16,778,000

Net earnings .............................. $ 33,159,000 30,544,000 28,542,000

Net earnings per common and common equivalent share $ .62 .57 .53
Weighted average shares ........................... 53,450,000 53,603,000 53,696,000
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
January 3, December 28,
1996 1994
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents .......................................... $ 1,299,000 695,000
Receivables ........................................................ 1,731,000 1,665,000
Inventories ........................................................ 4,045,000 2,843,000
Deferred income taxes .............................................. 2,923,000 2,563,000
Other current assets ............................................... 1,491,000 1,227,000
Total current assets ........................................... 11,489,000 8,993,000

Property and equipment:
Land and improvements .............................................. 95,093,000 86,154,000
Buildings .......................................................... 233,674,000 200,997,000
Equipment .......................................................... 144,638,000 137,968,000
Construction in progress ........................................... 31,311,000 27,845,000
504,716,000 452,964,000
Less accumulated depreciation ...................................... 92,495,000 87,988,000
Net property and equipment ..................................... 412,221,000 364,976,000

Other assets ............................................................... 7,119,000 5,787,000
$430,829,000 379,756,000

Liabilities and Shareholders' Equity
Current liabilities:
Notes payable ...................................................... 72,200,000 65,700,000
Accounts payable ................................................... 16,975,000 12,615,000
Income taxes payable ............................................... 745,000 438,000
Accrued liabilities ................................................ 23,761,000 21,174,000
Total current liabilities ..................................... 113,681,000 99,927,000

Deferred income taxes ...................................................... 14,454,000 10,474,000

Shareholders' equity:
Common stock, $1.00 par value; authorized 100,000,000 shares; issued and
outstanding 53,462,000 shares in 1995 and 53,434,000 shares in 1994 . 53,462,000 53,434,000
Additional paid-in capital ....................................... 6,751,000 6,599,000
Retained earnings .................................................. 242,481,000 209,322,000
Total shareholders' equity .................................... 302,694,000 269,355,000
Commitments ................................................................ $430,829,000 379,756,000
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS 13

<TABLE>
<CAPTION>
Year Ended
January 3, December 28, December 29,
1996 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings ................................................. $ 33,159,000 30,544,000 28,542,000
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization .............................. 22,420,000 20,802,000 18,229,000
Loss (gain) on sale of property and equipment .............. 417,000 219,000 (83,000)
Decrease (increase) in:
Receivables ............................................ (66,000) 186,000 (649,000)
Inventories ............................................ (1,202,000) (159,000) (430,000)
Other current assets ................................... (2,447,000) (2,096,000) (2,747,000)
Other assets ........................................... (1,348,000) (1,639,000) (1,057,000)
Increase (decrease) in:
Accounts payable ....................................... 4,360,000 1,671,000 2,261,000
Income taxes payable ................................... 307,000 (865,000) (138,000)
Accrued liabilities .................................... 2,587,000 6,659,000 4,950,000
Deferred income taxes .................................. 3,620,000 (573,000) (276,000)

Net cash provided by operating activities ..................... 61,807,000 54,749,000 48,602,000

Cash flows from investing activities:
Proceeds from sale of property and equipment ............... 3,459,000 3,043,000 311,000
Capital expenditures ....................................... (71,342,000) (66,748,000) (71,282,000)
Net cash used in investing activities ......................... (67,883,000) (63,705,000) (70,971,000)
Cash flows from financing activities:
Net proceeds from notes payable ............................ 6,500,000 7,600,000 22,100,000
Proceeds from the issuance of common stock ................. 180,000 105,000 485,000
Net cash provided by financing activities ..................... 6,680,000 7,705,000 22,585,000
Net increase (decrease) in cash and cash equivalents........... 604,000 (1,251,000) 216,000
Cash and cash equivalents - beginning of year ................. 695,000 1,946,000 1,730,000
Cash and cash equivalents - end of year ....................... $ 1,299,000 695,000 1,946,000

Supplemental disclosure -
Cash paid during the year for:
Interest, net of amount capitalized .................... $ 1,741,000 782,000 178,000
Income taxes ........................................... 16,784,000 19,493,000 17,021,000
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. Description of Business and Summary of Significant Accounting Policies

Description of Business--Ryan's Family Steak Houses, Inc. operates a
chain of 231 company-owned and 26 franchised (as of January 3, 1996) restaurants
located principally in the southern and midwestern United States. The Company
was organized in 1977 and completed its initial public offering in 1982.

Principles of Consolidation--The consolidated financial statements
include the financial statements of Ryan's Family Steak Houses, Inc. and its
eight wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.

Fiscal Year--The Company's fiscal year ends on the Wednesday nearest
December 31, resulting in years of either 52 or 53 weeks. The year ended
January 3, 1996 comprises 53 weeks, and the years ended December 28, 1994 and
December 29, 1993 each comprise 52 weeks.

Cash and Cash Equivalents--Cash and cash equivalents include cash
and short-term investments with initial maturities of three months or less
that are stated at cost plus accrued interest which approximates market
value.

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

Other Current Assets--Other current assets consist of prepaid expenses
and unamortized pre-opening costs, which represent certain costs, including team
member training, incurred before a restaurant is opened. Pre-opening costs are
expensed over the first 52 weeks of a restaurant's operations.

Property and Equipment--Property and equipment are stated at cost.
Depreciation is calculated principally on the straight-line method over the
following estimated useful lives: buildings and land improvements--25 to 31
years and equipment--5 to 10 years. Buildings and land improvements on leased
property are amortized straight-line over the shorter of the expected lease term
or estimated useful life of the asset.

Other Assets--Other assets consist principally of a long-term
prepayment of store inventories and the cash surrender values of officer life
insurance policies.

Income Taxes-- Income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.

Earnings Per Share--Earnings per share are computed based on the
weighted average number of common and common equivalent shares outstanding.
Common equivalent shares are represented by shares under option.

Franchise Revenues--The Company grants franchises to operators who in
turn pay initial fees and royalties for each restaurant. The initial franchise
fee is recorded as income when each restaurant commences operations. Franchise
royalties, which are based on a percentage of monthly sales, are recognized as
income on the accrual basis. In the event that a franchisee experiences payment
difficulties or, in management's opinion, may be susceptible to such
difficulties, franchise royalties may be recognized as income on the cash basis.

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

Reclassifications--Certain prior year amounts in the accompanying
consolidated financial statements have been reclassified to conform to the 1995
presentation.

<PAGE>

15
NOTE 2. Other Current Assets

Other current assets consist of the following:

1995 1994

Unamortized pre-opening costs $1,115,000 1,002,000
Prepaid expenses ............ 376,000 225,000
$1,491,000 1,227,000

NOTE 3. Income Taxes

Income tax expense for the years ended January 3, 1996,
December 28, 1994 and December 29, 1993 consists of:

1995 1994 1993
Current:
U.S. Federal .. $ 15,016,000 16,540,000 14,942,000
State and local 1,046,000 1,522,000 2,112,000
16,062,000 18,062,000 17,054,000
Deferred:
U.S. Federal .. 3,319,000 (298,000) 165,000
State and local 301,000 (275,000) (441,000)
3,620,000 (573,000) (276,000)
Income taxes .......... $ 19,682,000 17,489,000 16,778,000

Income taxes differ from the amounts computed by applying the U. S.
Federal statutory corporate rate of 35 percent to earnings before income
taxes as follows:
<TABLE>
<CAPTION>

1995 1994 1993

Tax at Federal statutory rate ....................................... $18,494,000 16,812,000 15,862,000

Increase (decrease) in taxes due to:
Adjustment to deferred tax assets and liabilities for enacted
changes in tax laws and rates ............................... -- -- 213,000
State income taxes, net of Federal income tax benefit ....... 876,000 811,000 1,086,000
Other ....................................................... 312,000 (134,000) (383,000)
Income taxes ........................................................ $19,682,000 17,489,000 16,778,000

</TABLE>

<PAGE>

The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax liabilities
at January 3, 1996 and December 28, 1994 are presented below:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance for
doubtful accounts ...................................................... $ 281,000 346,000
Self-insurance, principally due to accrual for
financial reporting purposes ........................................... 2,942,000 2,477,000
Other .................................................................. 149,000 100,000
Total gross deferred tax assets ..................................... 3,372,000 2,923,000
Less valuation allowance ............................................ -- --
Net deferred tax assets ............................................. 3,372,000 2,923,000

Deferred tax liabilities:
Building and equipment, principally due to
differences in depreciation ............................................ (14,492,000) (10,348,000)
Deferral of pre-opening costs for financial reporting purposes.......... (287,000) (363,000)
Other .................................................................. (124,000) (123,000)
Total gross deferred tax liabilities ................................ (14,903,000) (10,834,000)
Net deferred taxes .................................................. $(11,531,000) (7,911,000)
</TABLE>

The Company did not establish a valuation allowance for deferred tax
assets as of January 3, 1996 or December 28, 1994. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not
be realized. The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the periods in which
those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable
income, and tax planning strategies in making this assessment and,
accordingly, believes it is more likely than not the Company will realize the
benefits of these deductible differences at January 3, 1996.

NOTE 4. Notes Payable and Interest Cost
The Company has several unsecured lines of credit from banks
aggregating $160 million at various short-term rates, of which
$72.2 million and $65.7 million had been utilized at January 3, 1996
and December 28, 1994, respectively. All borrowings under these
lines are unsecured and mature in 90 days or less.
The Company capitalizes interest cost as a component of the cost of
new restaurant construction. A summary of interest cost incurred follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>

Interest cost capitalized............................................................$ 2,514,000 1,824,000 1,281,000
Interest cost charged to income ...................................................... 1,853,000 873,000 178,000
Total interest cost incurred ................................................. $4,367,000 2,697,000 1,459,000

</TABLE>

<PAGE>
17
NOTE 5. Leases
The Company has several noncancelable operating land leases for
restaurant sites with initial terms that expire over the next 10 to 30 years.
These leases contain renewal options for periods ranging from 5 to 15 years
and require the Company to pay all executory costs such as property taxes,
utilities and insurance. Rental payments are based on contractual amounts as
set forth in the lease agreements and do not include any contingent rentals.
Rental expense for operating leases amounted to $104,000 in 1995, $97,000 in
1994 and $94,000 in 1993.
Future lease payments under the noncancelable operating leases as of
January 3, 1996 are:
<TABLE>
<CAPTION>

YEAR-END:
<S> <C>
1996............................................................... $ 97,000
1997............................................................... 116,000
1998............................................................... 132,000
1999............................................................... 135,000
2000............................................................... 135,000
Later years, through 2008.......................................... 987,000
Future lease payments.............................................. $ 1,602,000
</TABLE>

NOTE 6. Other Accrued Liabilities
Other accrued liabilities consist of the following:

1995 1994

Accrued compensation ............... $ 4,474,000 3,820,000
Accrued taxes (other than income)... 6,201,000 4,984,000
Self-insurance accruals ............ 6,795,000 5,767,000
Other accrued expenses ............. 6,291,000 6,603,000
$23,761,000 21,174,000

NOTE 7. Shareholders' Equity
The components of shareholders' equity are as follows:

$1 Par Value Additional
Common Paid-In Retained
Stock Capital Earnings

Balances at December 30, 1992 ................................. $53,337,000 6,106,000 150,236,000
Net earnings .......................................... -- -- 28,542,000
Issuance of common stock under Stock Option Plans ..... 78,000 289,000 --
Tax benefit from exercise of nonqualified stock options -- 118,000 --
Balances at December 29, 1993 ................................. 53,415,000 6,513,000 178,778,000
Net earnings .......................................... -- -- 30,544,000
Issuance of common stock under Stock Option Plans ..... 19,000 67,000 --
Tax benefit from exercise of nonqualified stock options -- 19,000 --
Balances at December 28, 1994 53,434,000 6,599,000 209,322,000
Net earnings .......................................... -- -- 33,159,000
Issuance of common stock under Stock Option Plans ..... 28,000 133,000 --
Tax benefit from exercise of nonqualified stock options -- 19,000 --
Balances at January 3, 1996 ................................... $53,462,000 6,751,000 242,481,000
</TABLE>

<PAGE>

18
On January 26, 1995, the Board of Directors adopted a Shareholder
Rights Agreement (the "Agreement") and declared a dividend of one Common
Stock Purchase Right (a "Right") for each outstanding share of common
stock to shareholders of record on February 10, 1995. Such Rights only
become exercisable ten business days after (i) a public announcement
that a person or group, except for certain exempt persons specified in
the Agreement, (an "Acquiring Person") has acquired beneficial ownership
of 15% or more of the Company's common stock; or (ii) a person or group
commences or publicly announces its intention to commence a tender or
exchange offer for an amount of the Company's common stock that would
result in the ownership by such person or group of 15% or more of the
common stock.

Each Right may initially be exercised to acquire a one-half
share of the Company's common stock at an exercise price of $25, subject
to adjustment. Thereafter, upon the occurrence of certain events
specified in the Agreement (for example, if the Company is the surviving
corporation of a merger with an Acquiring Person), the Rights entitle
holders other than the Acquiring Person to acquire upon exercise common
stock having a market value of twice the exercise price of the Rights.
Alternatively, upon the occurrence of certain other events specified in
the Agreement (for example, if the Company is acquired in a merger or
other business combination transaction in which the Company is not the
surviving corporation), the Rights would entitle holders other than the
Acquiring Person to acquire upon exercise common stock of the acquiring
company having a market value of twice the exercise price of the Rights.

The Rights may be redeemed by the Company at a redemption price
of $.001 per Right at any time prior to the tenth business day following
public announcement that a 15% position has been acquired and before the
final expiration date of the Rights. After the redemption period has
expired, the Company's right of redemption may be reinstalled under
certain circumstances outlined in the Agreement. The Rights will expire
on February 10, 2005.

NOTE 8. Stock Option Plans

The Company has adopted stock option plans which authorize the grant
of options to purchase common stock to directors, officers and key
employees. Under the terms of the latest plan, which expires in 2001, a
committee of non-employee directors has the authority to determine the
eligibility, tax treatment, term, vesting schedule and exercise price.
Historically, the Company has always granted options at market value on
the day of grant, used various vesting schedules, and set expiration
dates generally ten years from the date of grant. All options granted
since 1991 must be held for at least 6 months prior to exercise.

Further information relating to options is as follows:

1995 1994 1993

<S> <C> <C> <C>
Options outstanding at beginning of year .......................... 2,562,081 1,689,011 1,378,274
Options granted ................................................... 615,150 1,087,570 468,400
Options exercised ................................................. (28,450) (18,800) (72,863)
Options forfeited ................................................. (295,275) (195,700) (84,800)
Options outstanding at end of year ................................ 2,853,506 2,562,081 1,689,011

Options fully vested at end of year ............................... 1,730,462 1,465,034 1,280,982
Common shares reserved for future grants at end of year ........... 638,830 960,055 1,854,450
Option prices per common share:
Exercised during the year ................................. $4.00 to $4.00 to $4.00 to
$7.63 $6.13 $8.13
Outstanding at end of year ................................ $4.00 to $4.00 to $4.00 to
$13.25 $13.25 $13.25

</TABLE>

<PAGE>

19
NOTE 9. Team Member Retirement Plan
On March 1, 1992, the Company implemented a defined contribution
retirement plan, which covers all team members who have at least one year of
service and are at least 21 years of age. Participating team members may
contribute from 1% to 15% of their compensation to the plan. The Company
matches team member contributions up to 6% of compensation at a 25% rate. All
plan assets are invested in a nationally recognized family of mutual funds.
Retirement plan expense, including administrative costs, amounted to $539,000
in 1995, $488,000 in 1994 and $438,000 in 1993.

NOTE 10. Quarterly Consolidated Financial Data (Unaudited)
Quarterly consolidated financial results for 1995 and 1994 are
summarized as follows (in thousands, except per share data):

<TABLE>
<CAPTION>
Quarter Total
First Second Third Fourth Year

<S> <C> <C> <C> <C> <C>
1995:
Restaurant sales................................................$117,266 131,363 131,786 132,753 513,168
Restaurant operating profit (a) .............................. 16,278 19,893 19,000 19,601 74,772
Net earnings ......................................... 7,313 9,056 8,678 8,112 33,159
Per share data:
Net earnings ......................................... 0.14 0.17 0.16 0.15 0.62

1994:
Restaurant sales ............................................. 106,892 114,777 115,011 111,534 448,214
Restaurant operating profit (a) .............................. 16,085 18,500 17,334 14,675 66,594
Net earnings ........................................ 7,269 8,827 7,840 6,608 30,544
Per share data:
Net earnings ......................................... 0.14 0.16 0.15 0.12 0.57

</TABLE>

(A) RESTAURANT SALES LESS OPERATING EXPENSES. OPERATING EXPENSES ARE COMPRISED
OF COST AND EXPENSES ASSOCIATED DIRECTLY WITH OR ALLOCATED TO PRODUCTS SOLD AT
THE COMPANY'S RESTAURANTS.

NOTE 11. Disclosures About the Fair Value of Financial Instruments
The Company's significant financial instruments are cash and cash
equivalents, receivables, notes payable, accounts payable and accrued
liabilities, all of which are classified as either current assets or current
liabilities. Their carrying amounts approximate their fair values because of
the short maturities of these instruments.

NOTE 12. Subsequent Event
On March 13, 1996, management announced its intention to repurchase
an aggregate 6.4 million shares of the Company's common stock through
December 1998. Repurchases will be made from time to time on the open
market or in privately negotiated transactions in accordance with
applicable securities regulations, depending on market conditions, share
price and other factors. In addition, management intends to refinance
the Company's short-term debt outstanding at January 3, 1996 and to
finance a portion of its 1996 needs, which will include funds required
for the repurchase program, with a long-term bank credit facility. The
Company is currently in negotiation with a bank group to provide this
funding. The Company's overall debt structure, upon closing of the new
bank facility, is expected to consist of uncommitted short-term bank
lines and long-term notes payable to banks with interest at both fixed
and floating rates.

<PAGE>
20 INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
Ryan's Family Steak Houses, Inc.

We have audited the accompanying consolidated balance sheets of
Ryan's Family Steak Houses, Inc. and subsidiaries as of January 3, 1996
and December 28, 1994, and the related consolidated statements of
earnings and cash flows for each of the years in the three-year period
ended January 3, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated 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 consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Ryan's Family Steak Houses, Inc. and subsidiaries at January 3, 1996
and December 28, 1994, and the results of their operations and their
cash flows for each of the years in the three-year period ended January
3, 1996, in conformity with generally accepted accounting principles.

(Signature of KPMG Peat Marwick LLP appears here)

Greenville, South Carolina
January 24, 1996, except for Note 12,
as to which the date is March 13, 1996
PICTURED OPPOSITE:
Directors: Top Row - C. Way; J. Cockman; B. Edwards; B. MacKenzie - Second
Row - E. McCranie; H. Roberts, Jr.; J. Shoemaker, Jr.

Officers: Top Row - C. Way; E. McCranie; J. Jamison; M. Graham - Second Row -
J. Hart; F. Grant, Jr.; A. Shaw; I. Turbow
Third Row - J. Gleitz; P. Franklin; T. Barnhill; R. Erwin

<PAGE>
21
DIRECTORS:

Charles D. Way (Picture appears here
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER of Charles D. Way)

James D. Cockman (Picture appears here
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, of James D. Cockman)
OCEAN FRESH EXPRESS INTERNATIONAL SEAFOOD

Barry L. Edwards (Picture appears here
EXECUTIVE VICE PRESIDENT, TREASURER of Barry L. Edwards)
AND CHIEF FINANCIAL OFFICER, AMRESCO, INC.

Brian S. MacKenzie (Picture appears here
PRESIDENT AND CHIEF EXECUTIVE OFFICER, of Brian S. KacKenzie)
BUILDER MARTS OF AMERICA, INC.

G. Edwin McCranie (Picture appears here
EXECUTIVE VICE PRESIDENT of G. Edwin McCranie)

Harold K. Roberts, Jr. (Picture appears here
PARTNER, ROBERTS AND MORGAN, CPA'S; of Harold K. Roberts. Jr.)
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, STATEWIDE TITLE, INC.

James M. Shoemaker, Jr. (Picture appears here
MEMBER, WYCHE, BURGESS, FREEMAN & PARHAM, P.A. of James M. Shoemaker, Jr.)

OFFICERS:

Charles D. Way (Picture appears here
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER of Charles D. Way)

G. Edwin McCranie (Picture appears here
EXECUTIVE VICE PRESIDENT of G. Edwin McCranie)

John C. Jamison (Picture appears here
VICE PRESIDENT-REAL ESTATE of John C. Jamison)

Morgan A. Graham (Picture appears here
VICE PRESIDENT-CONSTRUCTION of Morgan A. Graham)

James R. Hart (Picture appears here
VICE PRESIDENT-HUMAN RESOURCES of James R. Hart)

Fred T. Grant, Jr. (Picture appears here
VICE PRESIDENT-FINANCE AND CHIEF FINANCIAL OFFICER of Fred T. Grant, Jr.)

Alan E. Shaw (Picture appears here
VICE PRESIDENT-OPERATIONS of Alan E. Shaw)

Ilene T. Turbow (Picture appears here
Vice President-Marketing of Ilene T. Turbow)

Janet J. Gleitz (Picture appears here
CORPORATE SECRETARY of Janet J. Gleitz)

Philip J. Franklin (Picture appears here
REGIONAL VICE PRESIDENT of Philip J. Franklin)

Timothy V. Barnhill (Picture appears here
REGIONAL VICE PRESIDENT of Timothy V. Barnhill)

Richard B. Erwin (Picture appears here
REGIONAL VICE PRESIDENT of Richard B. Erwin)

<PAGE>

22 CORPORATE INFORMATION

EXECUTIVE OFFICES
Ryan's Family Steak Houses, Inc.
405 Lancaster Avenue (29650)
Post Office Box 100
Greer, South Carolina 29652
(864) 879-1000

GENERAL COUNSEL
Wyche, Burgess, Freeman & Parham, P.A.
Greenville, South Carolina

TRANSFER AGENT
Wachovia Bank of North Carolina, N.A.
Corporate Trust Department
Post Office Box 3001
Winston-Salem, North Carolina 27102
(800) 633-4236

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Greenville, South Carolina

FORM 10-K
A copy of the Company's Form 10-K Report for fiscal 1995,
as filed with the Securities and Exchange Commission, may be obtained without
charge by writing to the Corporate Secretary
at the executive offices of the Company.

ANNUAL MEETING
The annual meeting will be held at:
Greenville/Spartanburg Airport Marriott
Greenville, South Carolina
Thursday, April 25, 1996 at 11:00 a.m.
All shareholders are cordially invited to attend.

COMMON STOCK DATA
The Company's common stock trades on The NASDAQ Stock Market under the symbol
RYAN.

The Company has never paid cash dividends on its common stock and does
not expect to pay such dividends in the foreseeable future. Management
of the Company presently intends to retain all available funds for
expansion of the business. Future dividend policy will depend upon the
Company's earnings, capital requirements, financial condition and other
relevant matters.

QUARTERLY INFORMATION
To enhance the timeliness and efficiency of our quarterly shareholder
communications, we are eliminating printed quarterly reports and,
instead, will be mailing to our shareholders of record the quarterly
press release on the day it becomes available to the media. If your
shares are held in street name (i.e. in a brokerage account), you may
call our Investor Relations Department at (864) 879-1000 to receive the
quarterly earnings release on a regular basis.

MARKET PRICE OF COMMON STOCK
1995
Quarter: High Low
First $ 8.1/8 6 3/4
Second 8 6 1/8
Third 8 1/2 6 1/4
Fourth 8 6 3/8

1994
Quarter: High Low
First $9 1/8 7 1/4
Second 8 1/16 7
Third 7 1/4 5 3/8
Fourth 7 1/2 5 5/8

The closing price quotation on the Company's common stock
on March 6, 1996 was $ 7 1/8 per share.
STOCK SPLIT HISTORY
3-for-2......................... January 1983
2-for-1......................... April 1983
3-for-2......................... February 1985
3-for-2......................... February 1986
3-for-2......................... May 1986
3-for-1......................... May 1987

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RYAN'S FAMILY STEAK HOUSES IN EACH STATE AT MARCH 6, 1996 23

Map of the following states appears below:
MI, IA, IN, OH, IL, KS, MO, WV, VA, KY, TN, NC, OK,
AR, SC, GA, AL, MS, TX, LA, FL

Alabama - 10
Arkansas - 5
Florida - 26
Georgia - 28
Illinois - 5
Indiana - 13
Iowa - 3

Kansas - 3
Kentucky - 9
Louisiana - 16
Michigan - 10
Mississippi - 7
Missouri - 11
North Carolina - 17

Ohio - 14
Oklahoma - 6
South Carolina - 24
Tennessee - 17
Texas - 24
Virginia - 7
West Virginia - 1

<PAGE>

(Photo of young girl drinking milk appears here)

RYAN'S FAMILY STEAK HOUSES, INC.

405 Lancaster Avenue (29650)
Post Office Box 100
Greer, South Carolina 29652
(864) 879-1000