RALLYS HAMBURGERS INC
S-3/A, 1998-08-25
EATING PLACES
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<PAGE>   1
   
    As filed with the Securities and Exchange Commission on August 25, 1998
                                                      Registration No. 333-55949
    

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                              ---------------------
                                 AMENDMENT NO. 1
                                       TO
                                    FORM S-3
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933
                              ---------------------
                            RALLY'S HAMBURGERS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                DELAWARE                                         62-1210077
    (STATE OR OTHER JURISDICTION                              (I.R.S. EMPLOYER
    OF INCORPORATION OR ORGANIZATION)                        IDENTIFICATION NO.)

   
                       14255 49TH STREET NORTH, BUILDING 1
                            CLEARWATER, FLORIDA 33762
                                 (727) 519-2000
    

               (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
        INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                              ---------------------

                               JAMES J. GILLESPIE
   
                       14255 49TH STREET NORTH, BUILDING 1
                            CLEARWATER, FLORIDA 33762
                                 (727) 519-2000
    

            (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
                   INCLUDING AREA CODE, OF AGENT FOR SERVICE)

                                   COPIES TO:
                             JANET S. MCCLOUD, ESQ.
         CHRISTENSEN, MILLER, FINK, JACOBS, GLASER, WEIL & SHAPIRO, LLP
                      2121 AVENUE OF THE STARS, 18TH FLOOR
                          LOS ANGELES, CALIFORNIA 90067
                                 (310) 553-3000

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
         time after the effective date of this Registration Statement.

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

                If the only securities being registered on this Form are being
offered pursuant to dividend or interest investment plans, please check the
following box.
                If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box.

<PAGE>   2


                If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
                If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.
                If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box.


                         CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
                                                                      Proposed           Proposed
                                             Amount                    Maximum            Maximum
        Title of Each Class of                to be                Offering Price        Aggregate               Amount of
      Securities to be Registered          Registered                 Per Unit          Offering Price       Registration Fee
                                                                        (1)                 (1)                    (2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                      <C>              <C>                      <C>      
 Common Stock, $0.10 par value            8,476,036                 $  2.125         $  18,011,576           $   5,313
                                          shares (3)
===================================================================================================================================
</TABLE>

(1)     Estimated solely for purposes of calculating the Registration Fee.
(2)     Calculated pursuant to Rule 457(c) under the Securities Act of 1933.
   
(3)     Includes 4,566,700 shares of Common Stock issuable upon conversion of 
        outstanding Preferred Stock, which was converted at the Annual Meeting 
        of Stockholders on June 11, 1998.
    

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.


<PAGE>   3




   
    

PROSPECTUS

                                8,476,036 SHARES
                            RALLY'S HAMBURGERS, INC.
                                  COMMON STOCK

   
                All of the 8,476,036 shares of common stock, $.10 par value per
share ("Rally's Common Stock"), of Rally's Hamburgers, Inc., a Delaware
corporation (the "Company" or "Rally's"), to which this Prospectus relates will
be offered by certain stockholders of the Company named herein. All of such
stockholders do not necessarily intend to sell their shares of Rally's Common
Stock, but they may decide to do so in the future. See "Risk Factors-Shares
Eligible for Future Issuance and Sale; Dilution of Voting Power" and "Selling
Stockholders." The Company will not receive any proceeds from the sale of
Rally's Common Stock offered hereby. The shares of Rally's Common Stock offered
by the selling stockholders may be sold on the NASDAQ National Market (the
"NMS"), at prices then prevailing, in negotiated transactions or otherwise. With
respect to transactions on the NMS, any selling stockholder will pay the regular
commissions of brokers for effecting such sales. The last reported sale price of
Rally's Common Stock, which is traded under the symbol "RLLY," on the NMS on
August 24, 1998 was $1.2813 per share.
    

                SEE "RISK FACTORS" COMMENCING ON PAGE 2 FOR A DISCUSSION OF
CERTAIN INFORMATION THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT
IN RALLY'S COMMON STOCK.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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

                NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY
UNDERWRITER, DEALER OR AGENT. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE COMPANY OR ANY OF ITS AFFILIATES SINCE THE RESPECTIVE DATES
OF THIS PROSPECTUS.

   
    

   
                 The date of this Prospectus is August 25, 1998
    


<PAGE>   4


                                  RISK FACTORS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

                THIS PROSPECTUS CONTAINS OR INCORPORATES BY REFERENCE
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED. DISCUSSIONS CONTAINING SUCH FORWARD-LOOKING STATEMENTS
MAY BE FOUND IN THE MATERIAL SET FORTH UNDER "RISK FACTORS" AS WELL AS WITHIN
THE PROSPECTUS GENERALLY, INCLUDING THE DOCUMENTS INCORPORATED BY REFERENCE
HEREIN. ALSO, DOCUMENTS SUBSEQUENTLY FILED BY THE COMPANY WITH THE COMMISSION
AND INCORPORATED HEREIN BY REFERENCE MAY CONTAIN FORWARD-LOOKING STATEMENTS. THE
COMPANY CAUTIONS INVESTORS THAT ANY FORWARD-LOOKING STATEMENTS MADE BY THE
COMPANY ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND THAT ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF
VARIOUS FACTORS, INCLUDING BUT NOT LIMITED TO THE FOLLOWING:

   
                (i)      The Company competes with numerous well established
                            competitors who have substantially greater financial
                            resources and longer operating histories than the
                            Company. Competitors have increasingly offered
                            selected food items and combination meals, including
                            hamburgers, at discounted prices, and continued
                            discounting by competitors may adversely affect
                            revenues and profitability of Company restaurants.

                (ii)     The Company will be negatively impacted if the 
                            Company is unable to achieve same store sales 
                            increases. Sales increases will be dependent, 
                            among other things, on success of Company 
                            advertising and promotion of new and existing menu 
                            items. No assurances can be given that such 
                            advertising and promotions will in fact be 
                            successful.
    

The Company may also be negatively impacted by other factors common to the
restaurant industry such as: changes in consumer tastes away from red meat and
fried foods; increases in the cost of food, paper, labor, health care, workers'
compensation or energy; an inadequate number of hourly paid employees; and/or
decreases in the availability of affordable capital resources. The Company
cautions the reader that this list of risk factors may not be exhaustive,
particularly with respect to future filings.

Decreasing Restaurant Sales

   
                Comparable store sales for Company-operated restaurants open for
a full year declined each fiscal quarter from the second quarter of 1996 through
the fourth quarter of 1997. Total Comparable store sales were approximately
$132.6 million and $127.4 million for Company-operated restaurants for the
12-month periods ended June 15, 1997, and June 14,1998, respectively, a decrease
of approximately 3.9%. During 1998, the Company has experienced a 1.6% increase
in comparable store sales during the first quarter followed by a 5.2% decrease
in comparable store sales during the second quarter. Annual comparable store
sales have been declining since fiscal year 1992. Management believes the
decrease in comparable restaurant sales over this time period is primarily
attributable to increased sales pressure from competitor discounting. See "Risk
Factors -- Competitive Environment."
    


                                       2
<PAGE>   5


HISTORY OF NET LOSSES

   
                The Company reported net losses of $860,000 and $2.7 million
during the first two quarters of 1997 and 1998, respectively. While the Company
reported income from operations of $4.1 million and $3.3 million during 1996 and
1997, respectively, the Company has reported losses before extraordinary items
in each of its last three fiscal years. The primary offset to the Company's
income from operations was interest expense of $8.6 million and $7.4 million in
1996 and 1997, respectively. In addition, interest expense of $3.7 million and
$3.4 million was recorded during the first two quarters of 1997 and 1998,
respectively. Restaurant margins before advertising expense increased in 1997 to
18.2% from 15.2% in the prior year due primarily to reduced food, paper and
labor costs as a percentage of sales. Advertising expense was 7.1% of sales in
1997 compared to 5.0% of sales in 1996. Although the Company's management has
been able to implement programs that have resulted in improved food, paper and
labor costs, the Company's debt structure and related interest expense will
necessitate a significant increase in sales to eliminate net losses in future
periods.
    

COMPETITIVE ENVIRONMENT

                The fast food restaurant industry is highly competitive and can
be significantly affected by many factors, including changes in local, regional
or national economic conditions, changes in consumer tastes, consumer concerns
about the nutritional quality of quick-service food and increases in the number
of, and particular location of, competing quick-service restaurants. Factors
such as inflation, increases in food, labor and energy costs, the availability
and cost of suitable sites, fluctuating interest and insurance rates, state and
local regulations and licensing requirements and the availability of an adequate
number of hourly-paid employees can also adversely affect the fast food
restaurant industry. In addition, major chains, which have operating concepts
similar to or competitive with the Company and which also have substantially
greater financial resources and longer operating histories than the Company,
dominate the fast food restaurant industry. The Company competes primarily on
the basis of food quality, price and speed of service. A significant change in
pricing or other marketing strategies by one or more of these competitors could
have an adverse impact on sales, earnings and growth of the Company. All of the
major fast food chains have increasingly offered selected food items and
combination meals at discounted prices. Beginning generally in the summer of
1993, the major fast food hamburger chains began to intensify their promotions
of value priced meals, many specifically targeting the $.99 price point at which
the Company sells many of 



                                       3
<PAGE>   6

its products. This increased promotional activity has been sustained, and
management believes that it has had a negative impact on the Company's sales.
While the Company cannot predict the duration of this promotional activity or
the extent to which this pricing may become more or less competitive, such
pricing could have a continued adverse effect on the Company's sales and
earnings.

CERTAIN FINANCING CONSIDERATIONS; LEVERAGE

   
                As of June 14, 1998, the Company had outstanding approximately $
58.3 million principal amount of its 9 7/8% Senior Notes due 2000 (the "Senior
Notes"), with a required sinking fund payment of approximately $ 1.6 million due
in 1999, which is a significant portion of the capitalization of the Company. As
such: (i) the ability of the Company to obtain additional financing in the
future for working capital, capital expenditures, debt service requirements or
other purposes may be impaired; (ii) a substantial portion of the Company's cash
flow from operations will be required to service the Company's interest expense
and principal repayment obligations; and (iii) the Company's level of
indebtedness may make it more vulnerable in the event of a sustained downturn in
its business or a general economic decline. The ability of the Company to
satisfy its obligations under the Senior Notes will be dependent upon, among
other factors, the Company successfully increasing revenues and sustaining
operational profitability.
    

INVESTMENT IN CHECKERS DRIVE-IN RESTAURANTS, INC.

   
                Pursuant to an Exchange Agreement, dated as of December 8, 1997
(the "Exchange Agreement"), between Rally's, CKE Restaurants, Inc. ("CKE"),
Fidelity National Financial, Inc. ("Fidelity"), GIANT GROUP, LTD. ("GIANT') and
the other persons who may sell shares of Rally's Common Stock pursuant hereto,
Rally's acquired approximately 19.1 million shares of the common stock, $.001
par value per share ("Checkers Common Stock"), of Checkers Drive-In Restaurants,
Inc., a Delaware corporation ("Checkers"), approximately 26.1% of the
outstanding Checkers Common Stock. Rally's is now the largest stockholder of
Checkers, which develops, produces, owns, operates and franchises approximately
483 quick-service "double drive-thru" restaurants in approximately 23 states. In
addition, Rally's has announced that it may acquire up to one million shares of
Checkers Common Stock in the open market. As a result of its acquisition of
Checkers Common Stock, Rally's recorded losses net of amortization on investment
in affiliate of approximately $720,000 in fiscal 1997 and $240,000 during the
first two quarters of 1998. Checkers reported losses from operations in each of
its last four fiscal years. However, during the first two quarters of 1998,
Checkers reported operating income of $2.7 million and net income of $187,000.
Checkers' comparable sales continued to decrease in fiscal 1997, but have
increased 7.5% during the first two quarters of 1998. While Checkers, under the
direction of new top management, has implemented programs to improve food, paper
and labor costs, no assurance can be given that such programs will enable
Checkers to sustain comparable store sales increases that was experienced during
the first two quarters of 1998. In addition, no assurance can be given that
Rally's will not be required to record losses in the future as a result of its
investment in Checkers. See


                                       4
<PAGE>   7


"Risk Factors-Reliance on Key Personnel," "--Shares Eligible for Future Issuance
and Sale; Dilution of Voting Power" and "Selling Stockholders."
    

RELIANCE ON KEY PERSONNEL

                Significant management changes have occurred since the end of
the third quarter of fiscal 1997. In November 1997, James J. Gillespie became
the Chief Executive Officer of Rally's and Checkers. In March 1998, Harvey
Fattig became Executive Vice President and Chief Operating Officer of the
Company and Checkers. In December 1997, Joseph N. Stein, Executive Vice
President and Chief Administrative Officer of Checkers, became Executive Vice
President and Chief Financial Officer of the Company. In addition, effective
November 30, 1997, Rally's and Checkers entered into a Management Services
Agreement pursuant to which Checkers has agreed to provide key services to
Rally's, including: executive management; financial planning and accounting;
franchise; purchasing; and human resources. As a result of this arrangement, the
positions of substantially all of Rally's corporate personnel were eliminated by
the end of January 1998, and Checkers' corporate personnel is providing
substantially all services necessary for the day-to-day operations of Rally's
business. In addition to Messrs. Gillespie, Fattig and Stein, James T. Holder,
Senior Vice President, General Counsel and Secretary of Checkers serves as
Senior Vice President, Assistant General Counsel and Secretary of the Company.
The Company's success will be dependent on the ability of the new senior
management team of the Company and Checkers to manage the operations of both
companies. In addition, the Company's and Checkers' ability to attract and
retain experienced successful executives to the management team will affect the
Company's performance. The loss of one or more members of senior management
could adversely affect the Company's business and development.


SHARES ELIGIBLE FOR FUTURE ISSUANCE AND SALE; DILUTION OF VOTING POWER

   
                As of June 14, 1998, (i) 29,597,164 shares of Rally's Common
Stock were outstanding (ii) 11,760,000 shares of Rally's Common Stock were
reserved for issuance in connection with the exercise of outstanding options and
warrants, and (iii) options to purchase 4,236,601 shares of Rally's Common Stock
were available for grant under the Company's stock option plans. The Company is
obligated to register the shares of Rally's Common Stock offered hereby pursuant
to the Exchange Agreement. The holders of such shares are entitled to sell the
shares covered hereby in the open market, subject to any limitations under
federal securities laws resulting from their relationship to the Company. There
can be no assurance that any of these sales will not have an adverse effect on
the market price for Rally's Common Stock.
    

                The Company may issue additional shares of Rally's Common Stock
and preferred stock in the future in connection with acquisitions, corporate
combinations, financing activities or employee compensation plans. Sales of
substantial amounts of Rally's 




                                       5
<PAGE>   8


Common Stock in the open market or the availability of such shares for sale
could adversely affect the market for Rally's Common Stock.

CONTROLLING STOCKHOLDERS

   
                As of June 14, 1998, (i) CKE owned 9,412,507 shares of Rally's
Common Stock (approximately 31.8% of the outstanding shares), and beneficially
owned 1,525,488 shares underlying options or warrants exercisable within 60 days
("Exercisable Securities"); (II) Fidelity held 2,408,874 shares of Rally's
Common Stock (approximately 8.1% of the outstanding shares) and beneficially
owned 1,096,687 shares underlying Exercisable Securities; and (iii) Giant held
3,225,618 shares of Rally's Common Stock (approximately 10.9% of the outstanding
shares). Giant has entered into an arrangement with CKE and Fidelity with
respect to the election of directors of Rally's. Therefore, CKE and Fidelity
have the practical ability to elect the Company's Board of Directors and to have
a significant influence on matters put to a vote of the Company's stockholders.
    

POSSIBLE VOLATILITY OF STOCK PRICE

                Rally's Common Stock, which is quoted on the NMS, has
experienced, and could experience in the future, significant price and volume
fluctuations which could adversely affect its market price. In addition, the
Company believes that factors such as quarterly fluctuations in the financial
results of the Company, the overall economy and the financial markets could
cause the price of Rally's Common Stock to fluctuate substantially.

LITIGATION

   
                For a description of certain litigation of which the Company is
a party, see "Item 3. Legal Proceedings" of the Company's Annual Report on Form
10-K for the fiscal year ended December 28, 1997 and "Item 1. Legal Proceedings"
of the Company's Quarterly Report on Form 10-Q for the period ended June 14,
1998, which are incorporated herein by reference.
    



GOVERNMENT REGULATION

                The restaurant business is subject to extensive federal, state
and local government regulations relating to the development and operations of
fast food restaurants, including regulations relating to building, parking,
ingress and egress and zoning requirements and the preparation and sale of food
and laws that govern the Company's relationship with their respective employees,
such as minimum wage requirements, overtime and working conditions and
citizenship requirements. The failure to obtain or retain food licenses or
substantial increases in the minimum wage could adversely affect operations. The
Company does not anticipate that the increases in the minimum wage will result
in material upward pressure on the Company's prevailing wage scale. The Company
is also subject to federal regulation and ceratin state laws which regulate the
offer and sale of franchises to their respective franchisees.




                                       6
<PAGE>   9



                                   THE COMPANY

   
                Rally's is one of the largest chains of double drive-thru
restaurants in the United States. At March 22, 1998, the Rally's system included
approximately 478 restaurants in 18 states, primarily in the Midwest and the
Sunbelt, comprised of 229 Company-owned and operated restaurants and 249
franchised restaurants, including 27 Company owned restaurants in Western
markets which are operated as Rally's restaurants by CKE under an operating
agreement which began in July 1996. Two additional restaurants covered by such
agreement have been converted to Carl's Jr. format and are not included in the
above store count. The Company's restaurants offer high quality fast food served
quickly and at everyday prices generally below the regular prices of the four
largest hamburger chains. The Company serves the drive-thru and take-out
segments of the quick-service restaurant market. The Company opened its first
restaurant in January 1985 and began offering franchises in November 1986. The
Company's executive offices are located at 14255 49th Street North, Building 1,
Clearwater, Florida 33762 and its telephone number is (727) 441-3500.
    




                                       7

<PAGE>   10



                              SELLING STOCKHOLDERS

   
                All of the shares of Rally's Common Stock being offered hereby
were purchased in a private placement pursuant to the Exchange Agreement or were
issued upon conversion of Rally's Series A Participating Preferred Stock (the
"Series A Stock"). Pursuant to the Exchange Agreement, the Company is required
to register the offer and sale of all shares of Rally's Common Stock acquired
pursuant to the Exchange Agreement, including shares received upon conversion of
the Series A Stock. See "Risk Factors-Investment in Checkers Drive-In
Restaurants, Inc."

                The following table sets forth: (i) the names of the persons who
acquired shares of Rally's Common Stock pursuant to the Exchange Agreement; (ii)
the number of shares of Rally's Common Stock beneficially owned by each such
person as of June 14, 1998 (other than shares of Common Stock received upon
conversion of the Series A Stock); (iii) the number of shares of Rally's Common
Stock received upon conversion of the Series A Stock; (iv) the number of shares
of Rally's Common Stock which may be sold by each such person pursuant hereto;
and (v) the number of shares of Rally's Common Stock to be owned, and the
corresponding percentage of the total number of shares of Rally's Common Stock
to be outstanding, assuming the sale of all of the shares of Rally's Common
Stock offered pursuant hereto.
    

   
<TABLE>
<CAPTION>                                                                                BENEFICIAL OWNERSHIP
                                                                                              AFTER SALE
                                                                                      ----------------------------      
                                                     SHARES                           SHARES TO BE
                                                     ISSUED                              OWNED        
                                                      UPON             SHARES           ASSUMING      PERCENTAGE OF
                                    SHARES         CONVERSION         WHICH MAY        ALL OFFERED     OUTSTANDING
                                 BENEFICIALLY      OF SERIES A           BE             SHARES ARE       COMMON
SELLING STOCKHOLDER                OWNED(1)         STOCK (2)         OFFERED(3)           SOLD         STOCK (4)
- -------------------              ------------      -----------       -----------       -----------     -----------
<S>                              <C>                 <C>             <C>           <C>                <C> 
CKE Restaurants, Inc.            8,076,095 (5)       2,861,900       5,659,980           5,278,015        17.0%

Fidelity National Financial,     3,128,461 (6)         377,100         745,773           2,759,788         9.0%
Inc. 

GIANT GROUP, LTD                 3,180,718              44,900          88,769           3,136,849        10.6%

David Gotterer (7)                 498,068 (8)          25,500          50,338             473,230         1.6%


Burt Sugarman (9)                  916,504 (10)         25,500          50,338             891,666         2.9%


Mary Hart Sugarman                 191,486 (11)         61,100         120,802             131,784          *

A J Sugarman                         9,185               6,100          12,055               3,230          *

David Malcolm(12)                   59,702              61,000         120,802                   0          *

Terry Christensen (9)              395,392 (13)         12,400          24,562             383,230         1.3%

Al Sugarman                          9,925              10,200          20,125                   0          *

The Travelers Indemnity          1,351,574 (14)        563,900         563,900           1,351,574         4.4%
Group

William P. Foley II (15)           544,553 (16)        101,800         201,353             445,000         1.5%

Frank P. Willey(17)                 49,776              50,900         100,676                   0          *

Carl A. Strunk(17)                  39,892              14,400          28,556                   0          *

Andrew F. Puzder (18)              229,725 (19)         10,200          20,125             219,000          *
</TABLE>
    




                                       8
<PAGE>   11

   
<TABLE>
<S>                                <C>                  <C>              <C>                <C>                        <C>
Patrick F. Stone(20)                   9,925               10,200           20,125                   0                   *
William Imparato(17)                  19,910               50,900           40,370                   0                   *
Daniel D. Lane(21)                    39,850               40,700           80,550                   0                   *
Danny Lane                             9,925               10,200           20,125                   0                   *
Cary H. Thompson(17)                   9,925               10,200           20,125                   0                   *
Stephen C. Mahood(17)                 19,851               20,400           40,251                   0                   *
Carl L. Karcher(21)                   49,776               50,900          100,676                   0                   *
Carl N. Karcher  (21)                 46,003 (22)          20,400           40,251              26,152                   *
W. Howard Lester(21)                  59,702               61,100          120,802                   0                   *
C. Thomas Thompson  (23)             454,925 (24)          10,200           20,125             445,000                 1.5%
Byron Allumbaugh(21)                  19,851               20,400           40,251                   0                   *
Ernie Smith                            9,925               10,200           20,125                   0                   *
Ron Maudsley                           9,925               10,200           20,125                   0                   *
Paul DeFalco                           9,975               13,700           23,675                   0                   *
Peter Zarcades                        14,933               15,300           30,233                   0                   0
Brian Malk                            10,393               10,600           20,933                   0                   0
Simon Malk                             2,270                2,300            4,570                   0                   0
Andrew Malk                            2,270                2,300            4,570                   0                   0
                                  19,480,390            4,597,100        8,476,036          15,544,518
</TABLE>
    

______________________

*  Represents less than 1% of class.


                (1) For purposes of this table, a person or a group of persons
is deemed to have "beneficial ownership" as of a given date of any shares which
such person has the right to acquire within 60 days after such date. For
purposes of computing the percentage of outstanding shares held by each person
or group of persons named above on a given date, any shares which such person or
persons has the right to acquire within 60 days after such date are deemed to be
outstanding, but are not deemed to be outstanding for the purpose of computing
the percentage ownership of any other person.

   
                (2) The persons named above collectively held an aggregate of
45,667 shares of the Company's Series A Stock issued pursuant to the Exchange
Agreement. The Series A Stock provided that it would be converted into Rally's
Common Stock (at a ratio of 1/100, subject to adjustment), if and only if such
conversion is approved by the Company's stockholders. The Series A Stock was
approved for conversion by the Company's stockholders at the Annual Meeting of
Stockholders ON June 11, 1998.
    




                                       9
<PAGE>   12


   
                (3)  The column representing the "Shares Which May Be Offered"
equals the sum of the shares of Rally's Common Stock acquired (i) in December
1997 pursuant to the Exchange Agreement and (ii) in June 1998 upon conversion of
the Series A Stock.

                (4)  Based on 29,597,164 shares of Rally's Common Stock
outstanding as of June 14, 1998, including 4,566,700 shares issued upon
conversion of the Series A Stock. Shares of Rally's Common Stock subject to
options or warrants exercisable within 60 days ("Exercisable Securities") are
deemed outstanding for purposes of computing the percentage of class of the
person or entity holding such options or warrants but are not deemed outstanding
for computing the percentage of class for any other person or entity.
    

                (5)  Includes 6,550,607 shares of Rally's Common Stock held
directly and 1,525,488 shares of Rally's Common Stock underlying Exercisable
Securities.

                (6)  Includes 2,031,774 shares of Rally's Common Stock held
directly and 1,096,687 shares of Rally's Common Stock underlying Exercisable
Securities.

                (7)  Director of Rally's and GIANT.

   
                (8)  Includes 466,615 shares of Rally's Common Stock underlying
Exercisable Securities, but excludes 22,500 shares underlying options held by
Mr. Gotterer, as to which shares he disclaims beneficial ownership since a
business partner is entitled to the beneficial ownership of such shares upon any
exercise of such options.
    

                (9)  Director of Rally's, GIANT and Checkers.

   
                (10) Includes 891,666 shares of Rally's Common Stock underlying
Exercisable Securities. Excludes 3,180,718 shares owned by GIANT of which Mr.
Sugarman may be deemed to be a controlling person. Mr. Sugarman disclaims
beneficial ownership of the shares owned by GIANT. Also excludes shares of
Rally's Common Stock beneficially owned by AJ Sugarman and Mary Hart Sugarman,
Mr. Sugarman's minor child and spouse, respectively, as to which Mr. Sugarman
disclaims beneficial ownership. Mr. Sugarman is the Chairman of the Board,
President and Chief Executive Officer of GIANT and beneficially owns
approximately 55.2% of the outstanding common stock of GIANT.
    

                (11) Includes 104,692 shares of  Rally's Common Stock underlying
Exercisable Securities.

                (12) Director of GIANT.

                (13) Includes 380,615 shares of Rally's Common Stock underlying 
Exercisable Securities.

   
                (14) Includes 866,787 shares of Rally's Common Stock underlying
Exercisable Securities. The Travelers Indemnity Company is a subsidiary of
Travelers Group, Inc.
    




                                       10
<PAGE>   13



                (15) Chairman of the Board of Rally's, Checkers, CKE and
Fidelity; Chief Executive Officer of CKE and Fidelity.

                (16) Includes 445,000 shares of Rally's Common Stock underlying
Exercisable Securities.

                (17) Executive Officer of Fidelity and CKE.

                (18) Director of Rally's; Executive Officer of Fidelity and CKE.

                (19) Includes 219,000 shares of Rally's Common Stock underlying
Exercisable Securities.

                (20) Executive Officer of Fidelity.

                (21) Director of CKE.

                (22) Includes 23,076 shares of Rally's Common Stock held
directly and 3,076 shares of Rally's Common Stock underlying Exercisable
Securities.

                (23) Director of Rally's and Checkers; Executive Officer of CKE.

   
                (24) Includes 445,000 shares of Rally's Common Stock underlying
Exercisable Securities.
    


                              CERTAIN LEGAL MATTERS

   
                Certain legal matters in connection with the validity of the
shares of Common Stock to which this Prospectus relates will be passed upon for
the Company by James T. Holder, Esq., Senior Vice President, Assistant General
Counsel and Secretary of the Company.
    

                                     EXPERTS

                The financial statements and schedule incorporated by reference
in this Prospectus and elsewhere in this Registration Statement, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.

                              AVAILABLE INFORMATION

                The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports, proxy statements and get other
information with the Securities and Exchange Commission (the "Commission"). Such
periodic reports, proxy statements and 




                                       11
<PAGE>   14


other information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at its Chicago Regional Office at 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and at its New York Regional Office at 7 World
Trade Center, Suite 1300, New York, New York 10048. Copies of such materials can
be obtained upon written request from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. The Commission also maintains a site on the
World Wide Web at http://www.sec.gov that contains reports, proxy statements and
other information regarding registrants that file electronically with the
Commission. The Company's Common Stock is quoted on the NMS, and reports, proxy
statements and other information concerning the Company may be inspected at the
offices of the National Association of Securities Dealers, Inc., 1735 K Street,
N.W., Washington, D.C. 20006.

                This Prospectus constitutes part of a Registration Statement on
Form S-3 (including all amendments and exhibits, the "Registration Statement")
filed by the Company with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). This Prospectus does not contain all of the
information set forth in the Registration Statement, certain items of which are
contained in schedules and exhibits to the Registration Statement as permitted
by the rules and regulations of the Commission. Reference is hereby made to the
Registration Statement and the exhibits thereto for further information with
respect to the Company. Any statements contained herein concerning the
provisions of any contract, agreement or other document are not necessarily
complete, and in each instance, reference is made to the copy of such contract,
agreement or other document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission. For further information, reference is made
to the Registration Statement, including exhibits and schedules thereto. The
Registration Statement can be inspected and copied at the Public Reference Room
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549.

                 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

   
                The following documents, which have been filed by the Company
with the Commission, are incorporated herein and specifically made a part hereof
by this reference: (i) the Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1997, as amended (the "1997 10-K"); (ii) the Company's
Quarterly Reports on Form 10-Q for the periods ended March 22, 1998 and June 14,
1998; (iii) the Company's Proxy Statement dated May 15, 1998; and (iv) the
description of Rally's Common Stock which is contained in the Company's
Registration Statement on Form 8-A dated September 19, 1989. In addition, all
documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering made hereby shall be deemed to be incorporated by
reference into this Prospectus and to be part hereof from the respective dates
of filing of such documents with the Commission. Any statement contained herein
or in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such 
    





                                       12
<PAGE>   15


statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.

   
                This Prospectus incorporates documents by reference which are
not presented herein or delivered herewith. The Company will provide without
charge to each person to whom this Prospectus is delivered, upon written or oral
request, a copy of any or all of the documents that are incorporated herein by
reference, other than exhibits to such documents not specifically incorporated
by reference therein. Such requests should be addressed to the Company's
principal office: Rally's Hamburgers, Inc., 14255 49th Street North, Building 1,
Clearwater, Florida 33762, Attention: James T. Holder, Esq., telephone (727)
519-2000.
    




                                       13
<PAGE>   16






   
                                                                      8,476,036
                                                                       SHARES
                                                                   COMMON STOCK
    


                            TABLE OF CONTENTS

   
<TABLE>
<CAPTION>
                                                                  Page
                                                                  ----
<S>                                                               <C> 
Risk Factors  . . . . . . . . . . . . . . . . . . . . . . . . . .   2

The Company   . . . . . . . . . . . . . . . . . . . . . . . . . .   7
  
Selling Stockholders  . . . . . . . . . . . . . . . . . . . . . .   8

Certain Legal Matters . . . . . . . . . . . . . . . . . . . . . .  11

Experts   . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11

Available Information  . . . . . . . . . . . . . . . . . .  . . .  11

Documents Incorporated By Reference   . . . . . . . . . . . . . .  12

</TABLE>
    


                                                                   PROSPECTUS
   
                                                                AUGUST 25, 1998
    




                                       14
<PAGE>   17




                                     PART II
                   INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 14.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

                The following is a statement of estimated fees and expenses
payable or reimbursable by the Registrant in connection with the offer and sale
of the Common Stock, subject to future contingencies.

   
<TABLE>
                        <S>                                                                <C>      
                        SEC registration fee ........................................      $   5,313
                        Legal fees ..................................................         25,000
                        Accountants' fees ...........................................          1,000
                        Blue sky fees ...............................................          5,000
                        Miscellaneous ...............................................         15,000
                                                                                           ---------
                              TOTAL                                                        $  51,313
</TABLE>
    


ITEM 15.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.

            Section 145 of the Delaware General Corporation Law ("DGCL")
provides that a Delaware corporation may indemnify any person against expenses,
judgments, fines and amounts paid in settlements actually and reasonably
incurred by any such person in connection with a threatened, pending or
completed action, suit or proceeding in which he is involved by reason of the
fact that he is or was a director, officer, employee or agent of such
corporation, provided that (i) he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and (ii) with respect to any criminal action or proceeding, he had
no reasonable cause to believe his conduct was unlawful. If the action or suit
is by or in the name of the corporation, the corporation may indemnify any such
person against expenses actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification may be made in
respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the corporation, unless and only to the extent that the Delaware Court
of Chancery or the court in which the action or suit is brought determines upon
application that, despite the adjudication of liability but in light of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expense as the court deems proper.

            Section 51 of the Company's Bylaws provides for indemnification of
persons to the extent permitted by the DGCL.

            In accordance with Section 102(b)(7) of the DGCL, the Company's
Certificate of 




                                      II-1
<PAGE>   18


Incorporation, as amended, limits the personal liability of its directors for
violations of their fiduciary duty. The Certificate of Incorporation eliminates
each director's liability to the Registrant or its stockholders for monetary
damages except (i) for any breach of the director's duty of loyalty to the
Registrant or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
the section of the Delaware law providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions, or
(iv) for any transaction from which a director derived an improper personal
benefit. The effect of this provision is to eliminate the personal liability of
directors for monetary damages for actions involving a breach of their fiduciary
duty of care, including any such actions involving gross negligence. This
provision will not, however, limit in any way the liability of directors for
violations of the Federal securities laws.

            Rally's carries Directors' and Officers' liability insurance, with
coverage of $40 million, which is maintained in effect on a yearly basis,
expiring on April 1, 1999.

            The above discussion of the Company's Certificate of Incorporation
and Bylaws and Sections 102(b)(7) and 145 of the DGCL is not intended to be
exhaustive and is qualified in its entirety by such Certificate of
Incorporation, Bylaws and statues.

ITEM 16.  EXHIBITS

            (a) The following is a list of exhibits filed herewith as a part of
this Registration Statement:

   
<TABLE>
<CAPTION>
            Exhibit Number             Description of Document
            --------------             -----------------------
            <S>                        <C>
              5                        Opinion of James T. Holder, Esq.
            23.1                       Consent of Arthur Andersen LLP
            23.2                       Consent of  James T. Holder, Esq. (see Exhibit 5)
             24                        Power of Attorney (see page II-4)
</TABLE>
    


   
    

ITEM 17.  UNDERTAKINGS

            (a) The undersigned Registrant hereby undertakes:

            (1) To file, during any period in which offers or sales are being
made of the securities registered hereby, a post-effective amendment to this
Registration Statement:

                     (i)  to include any prospectus required by Section 10(a)(3)
                     of the Securities Act of 1933, as amended (the "Act");

                     (ii) to reflect in the prospectus any facts or events
                     arising after the effective 




                                      II-2
<PAGE>   19


                    date of this Registration Statement (or the most recent
                    post-effective amendment thereof) which, individually or in
                    the aggregate, represent a fundamental change in the
                    information set forth in this Registration Statement.
                    Notwithstanding the foregoing, any increase or decrease in
                    volume of securities offered (if the total dollar value of
                    securities offered would not exceed that which was
                    registered) and any deviation from the low or high end of
                    the estimated maximum offering range may be reflected in the
                    form of prospectus filed with the Securities and Exchange
                    Commission (the "Commission") pursuant to Rule 424(b) if, in
                    the aggregate, the changes in volume and price represent no
                    more than 20 percent change in the maximum aggregate
                    offering price set forth in the "Calculation of Registration
                    Fee" table in the effective registration statement; and

                    (iii)      to include any material information with respect
                    to the plan of distribution not previously disclosed in
                    this Registration Statement or any material change to such 
                    information in this Registration Statement.




                                      II-3
<PAGE>   20



provided, however, that the undertakings set forth in paragraphs (a)(1)(i) and
(a)(1)(ii) above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Commission by the Registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act")
that are incorporated by reference in this Registration Statement.

      (2) That, for the purpose of determining any liability under the Act, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

      (3) To remove from registration by means of a post-effective amendment any
of the securities being registered hereby which remain unsold at the termination
of the offering.

      (b) The undersigned Registrant hereby undertakes, that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in this Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

      (h) Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.



                                      II-4
<PAGE>   21




                                   SIGNATURES

   
            Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Clearwater, State of Florida, on the 19th day of
August, 1998.
    

                                       RALLY'S HAMBURGERS, INC.


   
                                       BY                 *
                                         ---------------------------------------
                                           James J. Gillespie
                                           President and Chief Executive Officer
    

                                POWER OF ATTORNEY

            We, the undersigned directors and officers of Rally's Hamburgers,
Inc. do hereby constitute and appoint James J. Gillespie, Joseph N. Stein and
James T. Holder or any of them, our true and lawful attorneys and agents, to do
any and all acts and things in our name and behalf in our capacities as
directors and officers and to execute any and all instruments for us and in our
names in the capacities indicated below, which said attorneys and agents, or
either of them, may deem necessary or advisable to enable said corporation to
comply with the Securities Act of 1933, as amended, and any rules, regulations,
and requirements of the Securities and Exchange Commission, in connection with
this Registration Statement, including specifically, but without limitation,
power and authority to sign for us or any of us in our names and in the
capacities indicated below, any and all amendments (including post-effective
amendments) to this Registration Statement, or any related registration
statement that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, as amended; and we do hereby ratify and confirm all that
the said attorneys and agents, or either of them, shall do or cause to be done
by virtue hereof.

            Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

   
<TABLE>
<CAPTION>
SIGNATURE                                TITLE                                    DATE
- ---------                                -----                                    ----
<S>                           <C>                                             <C> 
*                             President, Chief Executive Officer              August 24, 1998
James J. Gillespie                       and Director
</TABLE>
    




                                      II-5
<PAGE>   22



                          (Principal Executive Officer)

   
<TABLE>
<S>                                                         <C>                                          <C>


                *                                           Senior Vice President, Chief                 August 24, 1998
- ------------------------------------------                  Administrative Officer and Chief
Joseph N. Stein                                             Financial Officer
                                                            (Principal Financial Officer)
                                                                                            


                *                                           Director                                     August 24, 1998 
- ------------------------------------------ 
William P. Foley, II



                *                                           Director                                     August 24, 1998
- ------------------------------------------
Terry N. Christensen

                *                                           Director                                     August 24, 1998
- ------------------------------------------ 
Willie D. Davis



                                                            Director                                     August __, 1998
- ------------------------------------------ 
David Gotterer


                *                                           Director                                     August 24, 1998
- ------------------------------------------
Ronald B. Maggard


                *                                           Director                                     August 24, 1998
- ------------------------------------------
Andrew F. Puzder
</TABLE>
    




                                      II-6
<PAGE>   23


   
<TABLE>
<S>                                                         <C>                                          <C>
                 *                                          Director                                     August 24, 1998
- ------------------------------------------
Burt Sugarman


                 *                                          Director                                     August 24, 1998
- ------------------------------------------
C. Thomas Thompson


*BY:   /s/ JAMES T. HOLDER
       -----------------------------------
       JAMES T. HOLDER
       ATTORNEY-IN-FACT
</TABLE>
    





                                      II-7

<PAGE>   1
                                                                       EXHIBIT 5


                                August 24, 1998


Rally's Hamburgers, Inc.
14255 49th Street North
Clearwater, Florida 33762

     Re:  Registration Statement on Form S-3 (File No. 333-55949)

Gentlemen:

     You have requested my opinion as Assistant General Counsel for Rally's 
Hamburgers, Inc., a Delaware corporation (the "Company"), in connection with
the offer and sale by certain of the Company stockholders of up to 8,476,036
shares (the "Shares") of the Company's Common Stock, $0.001 par value per
share. The Shares are the subject of the Company's Registration 
Statement on Form S-3 (File No. 333-55949), as amended (the "Registration
Statement").

     In rendering my opinion herein, I have assumed, with your permission: the
genuineness and authenticity of all signatures on original documents submitted
to me; the authenticity of all documents submitted to me as originals; the
conformity to originals of all documents submitted to me as copies or
facsimiles; the continued accuracy of all certificates and other documents from
public officials dated earlier than the date of this letter; the Registration
Statement being declared effective by the Securities and Exchange Commission;
the issuance by any necessary regulatory agencies of appropriate permits,
consents, approvals, authorizations and orders relating to the offering and sale
of the Shares; the offer and sale of the Shares being made in the manner set
forth in the Registration Statement and pursuant to said permits, consents
approvals, authorizations and orders; the receipt of full and valid
consideration for the Shares. In addition, I have made such legal and factual
examinations and inquiries as I have deemed necessary or appropriate for
purposes of this opinion.

     Based on the foregoing, it is my opinion that, when issued, the Shares are
validly issued, fully paid and non-assessable.

     This opinion is addressed solely to the Company, and no one else has the
right to rely upon it, nor may anyone release it, quote from it, or employ it
in any transaction other than those discussed herein without the written
consent of the undersigned; however, the undersigned hereby consents to the
filing of this opinion as an exhibit to, and the references to the undersigned
contained in, the Registration Statement.

                                       Respectfully submitted,
                                      
                                       /s/  James T. Holder

                                       James T. Holder
                                       Senior Vice President and General Counsel

<PAGE>   1



                                                                    EXHIBIT 23.1

                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

        As independent public accountants, we hereby consent to the 
incorporation by reference in this registration statement of our report dated
February 27, 1998 included in Rally's Hamburgers, Inc.'s Form 10-K for the year
ended December 28, 1997 and to all references to our Firm included in or made a
part of this registration statement.


     
                                                        Arthur Andersen LLP


   
Louisville, KY
August 24, 1998
    




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