SHONEYS INC, 10-K405/A, 1996-02-23

SHONEYS INC
10-K405/A, 1996-02-23
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
(Mark one)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the Fiscal Year Ended October 29, 1995

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the Transition Period to
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Commission file number 0-4377
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SHONEY'S, INC.
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(Exact name of registrant as specified in its charter)

Tennessee 62-0799798
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1727 Elm Hill Pike, Nashville, TN 37210
(Address of principal executive offices) (Zip Code)

Registrants telephone number, including area code (615) 391-5201

Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, par value $1 per share New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Liquid Yield Option Notes, Due 2004 New York Stock Exchange

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

Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to Form 10-K. [X]

As of January 22, 1996, there were 37,884,265 shares of Shoney's,
Inc., $1 par value common stock held by non-affiliates with an
aggregate market value of $322,016,253.

As of January 22, 1996, there were 41,614,113 shares of Shoney's,
Inc. $1 par value common stock outstanding.

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<PAGE>

PART I

Item 1. Business.

(a) General development of business.

Shoney's, Inc. (the "Company") operates and franchises a chain of 1,524
restaurants in 34 states. The diversified food service chain consists of
three restaurant divisions: Shoney's, Captain D's and a Casual Dining group.
Based on sales, Shoney's, Inc. is the 20th largest chain restaurant
operator. <F1> Shoney's Restaurants are family restaurants offering full
table service and a broad menu. Captain D's are quick-service restaurants
specializing in seafood. The Company also operates three casual dining
restaurants, as follows: Fifth Quarter - a special occasion steakhouse,
BarbWire's - a country & western themed steakhouse and Pargo's - a
contemporary casual dining restaurant featuring a wide variety of fresh,
made-from-scratch dishes.

The Company's commissary includes five distribution centers that support
Company and franchised restaurant operations by providing most of the
necessary food and supplies. In addition, the commissary includes certain
manufacturing operations for meat products, prepackaged cole slaw and
certain bakery products.

The Company's fiscal year ends on the last Sunday in October. Fiscal
years 1995 and 1994 included 52 weeks while fiscal year 1993 included 53
weeks. As a result, the comparisons between the most recent fiscal years
are affected due to the reduced number of days in fiscal years 1994 and
1995.

Reorganization. On January 16, 1995, the Company's Board of Directors
announced a reorganization designed to improve the performance and growth
of the Shoney's Restaurant concept. The reorganization included divestiture
of certain non-core lines of business including Lee's Famous Recipe, a chain
of over 200 quick-service restaurants specializing in chicken, and Mike Rose
Foods, Inc., a manufacturer of dressings, sauces, condiments and various
dry-blend products for the foodservice industry. The divestiture process
now is completed, with the sale of Lee's Famous Recipe closing on September
29, 1995 and the sale of Mike Rose Foods, Inc. closing on November 17, 1995.

These discontinued lines of business had net property, plant and
equipment of $10.6 million at October 29, 1995 and $32.0 million at October
30, 1994, had annual revenues of $86.7 million and $93.7 million for the
1995 and 1994 fiscal years, respectively, and had earnings before interest
and taxes of $13.1 million and $16.5 million for the 1995 and 1994 fiscal
years, respectively. In fiscal 1995, these discontinued lines of business
represented approximately 2.5% of net property, plant and equipment, 7.6%
of consolidated revenues and 18.2% of consolidated earnings before interest
and taxes. The discontinued lines of business were disposed of for amounts
in excess of their carrying values. Certain one-time charges associated
with the reorganization and divestitures were accrued as they were incurred.
The sale of Lee's Famous Recipe resulted in a gain of approximately $5.5
million, net of tax. The sale of Mike Rose Foods, Inc., which will be
reflected in the Company's 1996 first quarter results of operations, will
result in a gain of approximately $22.0 million, net of tax.

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<F1> Based on 1995 annual survey for U.S. food service revenues
published by Nation's Restaurant News (August 7, 1995).

-1-
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Shoney's Restaurants

Concept. Shoney's Restaurants are full-service, family dining
restaurants that generally are open 18 hours each day, and serve breakfast,
lunch, and dinner. Shoney's Restaurants menu is diversified to appeal to
a broad spectrum of customer tastes. The menu includes traditional items
such as hamburgers, sandwiches, chicken, seafood, homestyle entrees and
vegetables, a variety of pasta and stir-fry dishes, steaks and desserts.
Shoney's also offers its signature features of the soup, salad and fruit bar
and the all-you-care-to-eat breakfast bar.

In addition to its regular menu, Shoney's Restaurants often feature
promotional menu items offering special entrees for a limited time. These
promotional menu items are used to promote new guest trials and generate
greater dining frequency from existing guests. Promotions also serve as a
vehicle to test new items that, if popular, may be added to the regular
menu. The Company, in conjunction with its franchisees, is continually
modifying the menu to adapt to new food trends, shifts in consumer demands
(e.g., more interest in health conscious dining) and to keep the menu
appealing to our guests. Management believes that the Shoney's concept
offers greater operational stability than some of its competitors because
of the wide variety offered in the menu.

Shoney's seeks to differentiate itself from competing restaurants by
offering excellent service, warm hospitality and attractive prices to afford
a high-quality overall dining experience. Shoney's Restaurants place
significant emphasis on the quality of food ingredients, proper preparation
methods and attractive food presentation. Buildings are generally brick
veneer or dryvit exteriors and usually include exterior awnings along with
halide lighting for greater visibility at night. The Company's franchise
agreements require that all franchised Shoney's Restaurants conform to
express standards of appearance, service, food quality and menu content.

History. Shoney's Restaurants have been in operation since 1952. There
are 882 restaurants in the system, 356 company-owned and 526 franchised
restaurants, operating in 34 states as of October 29, 1995. During fiscal
1995, the Company opened 17 restaurants with a net decrease of 5 restaurants
and franchisees opened 11 restaurants with a net decrease of 35 restaurants.

The Shoney's concept accounted for 52% of the Company's revenues in
fiscal 1995. Sales at company-owned units for fiscal year 1995 were
$546,669,000 compared to $541,446,000 for fiscal year 1994. Earnings before
interest and taxes for fiscal year 1995 were $25,532,000 compared with
$50,906,000 in 1994. Comparable store sales for fiscal 1995 decreased 3.2%,
including a menu price increase of 0.4%. The average sales volume of
Company-owned units in 1995 was $1,525,000 compared with average sales
volume of $1,548,000 in 1994.

The Company continued its capital expenditure program for the Shoney's
Restaurants in 1995. Overall capital expenditures in 1995 for Shoney's
Restaurants were $28,305,000, with $12,499,000 for remodeling of 107 units
compared to the overall expenditure of $53,214,000 in 1994, with $18,429,000
for remodeling of 77 units. Management believes the remodeling program is
an important element of the operational improvement program for its Shoney's
Restaurants and the Company will continue this program in 1996 with another
100 units scheduled for remodeling at a projected cost of $12,500,000.

During 1994, the marketing staff of Shoney's Restaurants was
strengthened and reorganized on a geographic basis to better target
advertising and promotional programs to specific markets. During 1995, the
Company named Bernstein-Rein as the new advertising agency of record for
Shoney's

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Restaurants. The Company's marketing strategies continue to focus on
advertising designed to increase both guest frequency and new guest trial.
In October 1995, the Company announced that it had entered into an agreement
with television and film star Andy Griffith to serve as the celebrity
spokesperson for Shoney's Restaurants in both television, radio, and in-
store media beginning in November 1995. The theme of the advertising is
focused on the quality and value of Shoney's "Classic American Food".

Captain D's

Concept. Captain D's are quick-service seafood restaurants and offer
in-store or drive-through service. They are generally open every day from
11 a.m. until 11 p.m, serving lunch and dinner. The typical Captain D's has
90 seats and employs 20 people, including three management personnel.

Captain D's menu is designed to capitalize on the trend toward increased
per capita consumption of fish and seafood in the U.S. that has developed
in response to increased public awareness of the benefits of fish and
seafood in a well-balanced diet. To broaden the menu's appeal, Captain D's
also offers a variety of non-seafood items. The menu includes fried,
broiled and baked fish, a variety of chicken and shrimp dishes, fried clams,
stuffed crab, seafood and tossed salads, baked potatoes, french fries, hush
puppies, green beans, cole slaw, fried okra and a selection of desserts.
Captain D's is constantly striving to develop appealing new menu items and
improve the quality of existing items.

Through an aggressive worldwide purchasing operation conducted by the
Company, Captain D's has reduced its dependence on cod fish (for which price
and supply have been uncertain in recent years) by the introduction and use
of other high quality whitefish that have a more predictable supply and
price. The Company's commissary operation purchases bulk quantities of fish
and seafood for distribution to company-owned units and to Captain D's
franchisees who elect to purchase their food from the Company. This
combined buying power permits the Company to obtain favorable pricing and
sources of supply for fish and seafood, which are limited in worldwide
supply.

The Company's operational strategy for Captain D's is to increase
comparable store sales through the continued introduction and promotion of
distinctive, high quality menu items, emphasis on fast and reliable service,
and maintaining a strong commitment to high food quality.

History. Captain D's began operation in 1969 when the Company opened
the first unit in Nashville, Tennessee. There are 608 Captain D's
restaurants in 23 states, including 310 Company-owned and 298 franchised
units as of October 29, 1995. Management believes that Captain D's has the
highest average sales volume ($767,500) of any major quick-service seafood
chain.

The Captain D's concept accounted for 23% of the Company's revenues in
fiscal 1995. Sales at company-owned units for fiscal year 1995 were
$246,479,000 compared to $244,535,000 for fiscal year 1994. Earnings before
interest and taxes for fiscal year 1995 were $19,459,000 compared with
$20,384,000 in 1994. Comparable store sales for fiscal 1995 increased 0.7%,
including a 0.5% menu price increase.

Captain D's performance in fiscal 1995 continued the very strong
financial performances of fiscal 1993 and 1994. This performance is based
on a successful operating strategy initiated late in fiscal 1992. This
plan, based on extensive customer research, was designed to increase market
share and increase

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same store sales. It includes advertising, store remodeling, introduction
of new products and seasonal promotions of a variety of products.

During 1995, Captain D's remodeled 36 Company-owned units. Remodeled
units include more windows, enhanced interior and exterior lighting,
brighter colors, neon signs, self-serve drinks and improved menu boards.
Additional landscaping and new, more visible signage have improved the
exterior appearance and street appeal of the stores. In addition, Captain
D's is installing new drive-through menu boards featuring greater use of
photos of featured items with less use of text descriptions. The new menu
boards are effective in speeding customer selection and are intended to
shorten waiting times and increase drive-through sales.

Casual Dining Concepts

In January 1995, the Company announced a reorganization which included
a plan to divest certain non-core businesses, including Mike Rose Foods,
Inc. and Lee's Famous Recipe, Pargo's and Fifth Quarter restaurants.
The Company began actively marketing these businesses in late February 1995
with the assistance of its investment banker. In July 1995, the Company
announced that it had decided to retain the Pargo's and Fifth Quarter
restaurant concepts and to combine them with the Company's Barbwire's
Steakhouses to form a 32-unit casual dining group. The concepts will share
common administrative and support functions to achieve additional
efficiencies in management and operations. Management believes that the
1995 results of operations of Pargo's and Fifth Quarter restaurants were
negatively affected by the uncertainties created by initial plans for the
divestiture of the concepts. The casual dining group has now been formed
under the leadership of John Alderson as division president. Alderson has
over twenty years experience in the restaurant industry and previously
served as President of Chart House Restaurants and as President of
Metromedia Steakhouses.

Pargo's

Concept. Pargo's are mid-scale, casual dining restaurants that serve
fresh, made-from-scratch entrees designed to cater to a diverse range of
customer tastes. Pargo's goal is to become the "favorite neighborhood
restaurant" in each of its markets. Management training and development
efforts are focused on achieving a "customer centered" operational approach
at each unit.

Pargo's menu includes a variety of appetizers, beef, seafood and chicken
entrees, specialty burgers and sandwich platters, pasta dishes, daily
homemade soups, garden fresh salads, and fresh breads. The menu also
features a number of "Heart Healthy" offerings to better serve our customers
who are interested in lower fat, lower cholesterol entrees. Pargo's
provides a warm environment for families by offering balloons, coloring
books and crayons for children, a special children's menu with value
pricing, and a "kids eat free" program featured at least one day each week.
Pargo's menu includes daily specials, a daily "fresh catch" entree, and
periodic food promotional events.

History. Pargo's was founded in 1983 and acquired by the Company in
March 1986. There are 19 Pargo's in 7 states, including two franchised
units. Four new units opened in 1995 in York, Pennsylvania; Raleigh, North
Carolina; Columbus, Georgia; and Winchester, Virginia. The management of
Pargo's has reviewed the operational strategy for the concept during the
last two years to prepare for additional growth. Nine of the seventeen
Company-owned units ( 53%) have been opened in the last five

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years. Also, the Company presently plans to acquire the two franchised
Pargo's restaurants during fiscal 1996.

Pargo's sales for fiscal year 1995 increased 21.4% to $36,386,000
compared to $29,984,000 in fiscal year 1994. Earnings before interest and
taxes for fiscal year 1995 declined 27.6% to $1,832,000 compared to
$2,530,000 in 1994. Comparable store sales for fiscal 1995 declined 3.2%,
including a menu price increase of 0.7%. The average sales volume of
company-owned units in 1995 was $2,345,000.

Steakhouses

Concept. Steakhouses include eight Fifth Quarter and six BarbWire's
restaurants. Fifth Quarters are special occasion steakhouses and BarbWire's
are country & western themed steakhouses. BarbWire's was introduced in 1993
as a vehicle to convert selected, under-performing Shoney's restaurants to
a new casual dining concept. Both steakhouse concepts are open 12 hours
daily, seven days a week and serve lunch and dinner.

BarbWire's offers a variety of mesquite grilled USDA choice steaks which
are cut and aged at the Company's meat processing facility. In addition,
BarbWire's offers mesquite grilled chicken, seafood and burgers, soup,
salads, baked potatoes, homestyle french fries and homemade desserts.
Children have a special menu (which folds into a cowboy hat) with a beverage
and ice cream included with each entree.

The Fifth Quarter's menu includes a wide range of USDA choice steaks and
chops, a variety of chicken and seafood entrees, and its signature slow-
cooked prime rib. Fifth Quarter's also offer burgers, sandwiches, soups,
a host of appetizers and side items, an extensive salad bar, and a full
selection of desserts.

History. BarbWire's was founded in 1993 when the first unit opened in
Nashville, Tennessee as a conversion from an existing Shoney's Restaurant.
Five of the six BarbWire's units are conversions of company-owned Shoney's
Restaurants and one unit was a conversion of another restaurant purchased
by the Company. The BarbWire's conversions initially have generally doubled
the sales volumes of the converted Shoney's Restaurants with an average
incremental remodeling investment of approximately $800,000. Additionally,
since the units converted were in existing Shoney's markets, sales of nearby
Shoney's restaurants also increased after the conversions. The average 1995
sales volume of the three Barbwire's restaurants open the entire year was
$2,030,000. Six additional BarbWire's are planned for fiscal 1996 with
expected capital expenditures of $4,800,000.

The Fifth Quarter restaurants began operation in 1973 and currently
operate eight units, primarily in the Southeast. During the fourth quarter,
the Company decided to close two under-performing Fifth Quarter restaurants
(one closed on the last day of the year and one closed one week later). The
units are generally stucco exteriors with tudor-style architectural
elements. Interiors are stucco and brick and generally include memorabilia
and photos relevant to each restaurant's marketplace.

Fifth Quarter restaurants are converting to hickory smoked grills to
produce more flavorful steaks, chicken and grilled fish items. Sales of
grilled steaks have increased at the five units where the new grills have
been installed. No new units have been built since November 1991 and the
Company

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currently has no plans to build additional Fifth Quarter units. The average
sales volume of the eight Fifth Quarters was $2,340,000 in 1995.

Sales for fiscal year 1995 of Fifth Quarter and BarbWire's were
$21,392,000 and $9,903,000, respectively. Overall sales for the Steakhouses
in 1995 were $31,295,000 compared to $25,327,000 for fiscal year 1994.
Earnings before interest and taxes for the Fifth Quarter restaurants in
fiscal 1995 were $1,694,000 compared with $2,182,000 in 1994. BarbWire's
earnings before interest and taxes for fiscal 1995 were $188,000, compared
to breakeven results for 1994. BarbWire's earnings in both 1995
and 1994 were negatively affected by start-up costs and other costs incurred
to prepare for future concept expansion. Comparable store sales for the
Fifth Quarter concept in fiscal 1995 decreased 3.2%, including a menu price
increase of 0.3%.

Manufacturing and Commissary Operations

Operations and Strategy. The Manufacturing and Commissary Operations
include five distribution facilities and two manufacturing plants. The
manufacturing operations includes a meat processing facility and a facility
that manufactures cole slaw and certain bakery products. The objective of
the Manufacturing and Commissary Operations is to provide company-owned and
franchised restaurants with a reliable source of quality food products at
the lowest practical cost. The Company utilizes central purchasing of all
major food, supply and equipment items for its restaurants to achieve
consistent quality and control costs.

The Company's ability to maintain consistent quality throughout its
restaurant systems depends in part upon the ability to acquire food products
and related items from reliable sources. When the supply of certain
products is uncertain or prices are expected to rise significantly, the
Company may enter into purchase contracts or purchase bulk quantities for
future use. There were no material long-term contracts for any food products
and adequate alternative sources are believed to be available for most
products. Certain items, however, are purchased under agreements with
vendors based on the Company's annual expected usage. Such agreements
generally include a pricing schedule for the period covered by the
agreement(s).

History. During 1994, the Company made significant investments in its
Manufacturing and Commissary Operations. A new distribution facility in
Wichita, Kansas replaced the Dallas, Texas distribution facility. The
meat processing facility was expanded to 60 million pounds of throughput
capacity and quick freezing equipment was upgraded. The new processing and
freezing equipment at this facility has permitted the Manufacturing and
Commissary Operations to add new products such as soups and vegetables.

Total revenues for Manufacturing and Commissary Operations, including
intercompany sales, were $505,085,000 for fiscal year 1995 compared to sales
of $524,407,000 for fiscal year 1994. Revenues for Manufacturing and
Commissary Operations excluding intercompany sales were $163,687,000 in
fiscal 1995 and $187,894,000 in fiscal 1994. Earnings before interest and
taxes for the Commissary and Manufacturing Operations were $11,939,000 in
fiscal 1995 compared with $13,089,000 in fiscal 1994. Since 1989, the
number of franchised restaurants that are serviced by the Company's
distribution centers has expanded from 349 to 525.

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(b) Financial information about industry segments. Note 1 of the
Notes to Consolidated Financial Statements at pages 30-32 of Item 8 of this
Annual Report on Form 10-K is incorporated herein by reference.

(i)-(ii) See (a) above

(iii) Essential supplies and raw materials are available
from several sources and the Company is not dependent
upon any single source of supplies or raw materials.

(iv) The Company considers the Shoney's, Shoney's Inn,
Captain D's, Fifth Quarter, Pargo's and BarbWire's names
and designs to be of substantial economic benefit to its
business. It accordingly deems very significant to its
business the right that it holds to operate and license
restaurant and/or motel operations under these names.

(v) Minor seasonal variations are not significant to the
Company's business.

(vi) The practice of the Company and the industry with
regard to working capital items is not significant
to the Company's business.

(vii) No material part of the Company's business is
dependent upon a single customer or a few customers.

(viii) Backlog of orders is not significant to the Company's
business.

(ix) No material portion of the Company's business is subject
to renegotiation of profits or termination of contracts
or subcontracts at the election of the government.

(x) The Company's business is highly competitive (usually by
means of price, product quality and service) and the
Company competes with a number of national and regional
restaurant chains as well as locally owned restaurants
that specialize in the sale of seafood, sandwiches, and
other prepared foods. The Company is unable to determine
its relative competitive position in the industry.

(xi) No material amount has been spent in any of the last
three (3) fiscal years on Company-sponsored research and
development activities or on customer sponsored research
activities relating to the development of new products,
services or techniques or the improvement of existing
products, services or techniques.

(xii) No material amounts were or will be required to be spent
to comply with environmental protection regulations.

(xiii) As of October 29, 1995, the Company employed
approximately 29,500 persons.

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ITEM 2. PROPERTIES.

The following table sets forth certain information regarding
the Company's restaurant and other properties, <F2> including those
under construction, as of October 29, 1995:
<TABLE>
<CAPTION>
Number of Properties <F3>

Use Total Owned Leased
--- ----- ----- ------
<S> <C> <C> <C>
Office and Commissaries <F4> 10 8 2
Shoney's Restaurants 356 237 119
Captain D's Restaurants 310 215 95
Pargo's Restaurants 17 9 8
Fifth Quarter Restaurants 9 5 4
BarbWire's Restaurants 6 5 1
Restaurants Under Construction 6 6 0
--- --- ---
714 485 229
=== === ===

</TABLE>

LEASES

Most of the leases of the Company's restaurant properties are for
periods of approximately 15 years, usually with renewal options ranging from
5 to 15 years. They provide for minimum rentals, totalling approximately
$9,501,000 in fiscal year 1995, net of sublease rentals, plus an amount
equal to a percentage of sales, generally 3% to 6% in excess of an agreed
sales volume. The Company is also required to pay property taxes and
insurance under most of the leases. Ninety-eight of the leases (43%) expire
prior to October 31, 2000; however, 86 of these leases (87% of the 98)
provide for renewal options. In fiscal 1995, aggregate rental expense for
the restaurant properties not capitalized was approximately $4,561,000, net
of sublease rentals. Notes 7 and 10 of the Notes to Consolidated Financial
Statements on pages 38-41 and 44-45, respectively, of Item 8 in this Annual
Report on Form 10-K are incorporated herein by reference.

ITEM 3. LEGAL PROCEEDINGS.

J&J Seafood, Inc. v. Shoney's, Inc. - Item 3 of Amendment No. 1 to the
Company's Annual Report on Form 10-K, filed with the Commission on February
27, 1995, is incorporated herein by this reference. The plaintiff in this
case filed a motion to certify the case as a class action on August 7,

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<F2> The Company's 698 restaurant properties in operation as of
October 29, 1995 were located in 34 states.

<F3> In addition, the Company owns or leases 71 properties that
are in turn leased to others and 74 parcels of land.

<F4> The Company's principal offices and commissary at Nashville,
Tennessee comprise four buildings of approximately 171,000 square feet
on twenty acres of land owned by the Company. The Company also operates
commissaries in Ripley, West Virginia; Macon, Georgia; Atlanta, Georgia
and Wichita, Kansas. Mike Rose Foods, Inc., which was sold by the
Company on November 17, 1995, occupied a facility of approximately
151,000 square feet on 8 acres of owned land in Nashville, Tennessee.

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1995. Discovery on that motion is proceeding and the motion is set to be
argued in April 1996.

Ronald Cook and Stephen C. Sanders v. Shoney's, Inc. - Item 3 of
Amendment No. 1 to the Company's Annual Report on Form 10-K, filed with
the Commission on February 27, 1995, is incorporated herein by this
reference. This case was settled and dismissed with prejudice on November
29, 1995.

Belcher, et. al v. Shoney's, Inc. - See paragraphs 3 and 4 of Note 13
to the Notes to Consolidated Financial Statements at pages 47-48 of this
Annual Report on Form 10-K, which are incorporated herein by this
reference.

Other Litigation - The Company is a party to other legal proceedings
incidental to its business. In the opinion of management, the ultimate
liability with respect to these actions will not materially affect the
operating results or the financial position of the Company.

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

During the fourth quarter of the fiscal year covered by this Annual
Report on Form 10-K, no matter was submitted to a vote of security holders,
through the solicitation of proxies or otherwise.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.

The Company, in accordance with General Instruction G(3) to
Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K, 17
C.F.R. Section 229.401, furnishes the following information with regard
to its executive officers as an additional item in Part I of this
Annual Report on Form 10-K. The following officers are those that
the Company currently deems to be "executive officers", as defined
by the Securities and Exchange Commission.

Name Office Age
- ----- ------- ---
<S> <C> <C>
C. Stephen Lynn Chairman of the Board, President and
Chief Executive Officer 48
W. Craig Barber Senior Executive Vice President and
Chief Financial Officer 40
Deborah D. Hollis Executive Vice President - Human Resources 43
Robert M. Langford Executive Vice President, General Counsel and
Secretary 44
John W. Alderson Division President - Casual Dining 47
Robert A. Speck Division President - Shoney's Restaurants 41
Daniel E. Staudt Executive Vice President - Manufacturing and
Distribution 46
Ronald E. Walker Executive Vice President - Captain D's 45
Gregory A. Hayes Vice President and Controller 39
F.E. McDaniel, Jr. Vice President and Treasurer 40
</TABLE>

There is no family relationship among the above or any of the
directors of the Company. Although all executive officers are employees at
will of the Company, each executive officer of the Company generally is
elected each year for a term of one year.

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Mr. Lynn served as Chief Executive Officer and as a Director of Sonic
Corp. from November 1983 through April 1995. He also served as Chairman of
the Board of Sonic Corp. from April 1986 to April 1995. On April 11, 1995,
Mr. Lynn was elected as a member of the Board and as the Chairman of the
Board and Chief Executive Officer of the Company. He was elected to the
additional position of President on January 31, 1996.

Mr. Barber joined the Company and was elected Assistant Treasurer in
July 1983. He was elected Treasurer in August 1988 and served in that
position until December 1992, when he was elected Vice President - Finance
and Chief Financial Officer. He was elected Senior Executive Vice President
and Chief Financial Officer in January 1995.

Ms. Hollis joined the Company in August 1995 at which time the Board
elected her to the position of Executive Vice President - Human Resources.
Prior to joining the Company, Ms. Hollis was employed by Hardee's Food
Systems, Inc., where she most recently served as Executive Vice President -
Human Resources, a position she held since July 1995. Ms. Hollis had
previously held various management positions in Hardee's Human Resources
Department since 1987.

Mr. Langford joined the Company in November 1995 at which time the
Board elected him to the positions of Executive Vice President, General
Counsel and Secretary. Prior to joining the Company, Mr. Langford had
operated six franchised Shoney's restaurants since 1985 and previously had
served as the Company's outside counsel for governmental affairs. Since
1991, Mr. Langford has served as Chairman of the Board and as a Director of
Restaurant Management Services, Inc. and its parent RMS Holdings, Inc.
("RMS"), a franchisee of Shoney's and Captain D's restaurants. Mr. Langford
resigned as Chairman of RMS effective February 1996.

Mr. Alderson joined the Company in November 1995 and was elected
Division President - Casual Dining at that time. Prior to joining the
Company, Mr. Alderson was President of Metromedia Steakhouses Company, a
position he held since 1994. From 1991 to 1994, Mr. Alderson had served as
the President of Chart House, Inc., a publicly held national restaurant
chain.

Mr. Speck joined the Company in December 1995 and was elected Division
President - Shoney's Restaurants at that time. Prior to joining the
Company, Mr. Speck had served as Chief Operating Officer of Grandy's, Inc.
since 1989.

Mr. Staudt joined the Company in 1971. He served as Director of the
Nashville commissary from 1983 until November 1988, when he was elected Vice
President. He was elected Executive Vice President of the Company and
President of Commissary Operations, Inc. in December 1991 and became
Division President - Manufacturing and Distribution in May 1994. Currently,
Mr. Staudt serves as Executive Vice President - Manufacturing &
Distribution.

Mr. Walker has held various positions since joining the Company in
1980, becoming Director of Franchise Operations for the Captain D's Division
in December 1984. He was elected Vice President of Franchise Operations in
December 1986 and promoted to his present position in January 1995.

Mr. Hayes joined the Company as Director of Financial Analysis in June
1993 and was elected Vice President and Controller of the Company in August
1995. Previously, Mr. Hayes was an audit senior manager with the accounting
firm of Ernst & Young, LLP, where he had been employed in the audit and
accounting practices of the Nashville, Tennessee; New York, New York; and
Cincinnati, Ohio offices from 1978 until he joined the Company.

-10-
<PAGE>

Mr. McDaniel has served in various accounting and financial positions
since joining the Company in 1981. He was elected Assistant Secretary in
December 1984 and Secretary in August 1988. He was elected to the
additional position of Treasurer in December 1992. He was elected a Vice
President of the Company in March 1994 and currently serves as Vice
President and Treasurer.

-11-
<PAGE>
PART II

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

(a) MARKET INFORMATION. The Company's common stock is traded
on the New York Stock Exchange under the symbol "SHN." The
following table sets forth the high and low trading prices of the
Company's common stock as reported by the New York Stock Exchange
during each of the fiscal quarters of the prior two fiscal years:

Stock Stock
No. of Market Market
Weeks High Low
----- ------ ------
<S> <C> <C> <C>
1995
First Quarter 16 15 3/8 11 1/4
Second Quarter 12 12 1/2 9 1/8
Third Quarter 12 13 1/8 10 1/8
Fourth Quarter 12 12 1/2 8 7/8
--
52
==

1994
First Quarter 16 25 5/8 19 3/4
Second Quarter 12 24 5/8 17 1/8
Third Quarter 12 18 1/8 13 1/2
Fourth Quarter 12 15 7/8 13 3/8
--
52
==

</TABLE>

(b) Holders. There were 7,727 shareholders of record as of January
22, 1996.

(c) Dividends. The Company has not paid a dividend on its common
shares since the Company's 1988 recapitalization, at which time, the Company
paid a $19.97 per share special distribution. The Company currently intends
to retain all earnings to support the development and growth of the
Company's restaurant concepts and to retire its outstanding debt
obligations. The Company's senior debt issues: (1) require satisfaction of
certain financial ratios and tests (which become more restrictive each
year); (2) impose limitations on capital expenditures; (3) limit the ability
to incur additional debt, leasehold obligations and contingent liabilities;
(4) prohibit dividends and distributions on common stock; (5) prohibit
mergers, consolidations or similar transactions; and (6) include other
affirmative and negative covenants.

-12-
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
FIVE YEAR FINANCIAL SUMMARY
(in thousands except per share data)

Fiscal year ended October 1995 1994 1993(a) 1992 1991
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $1,053,332 $1,072,459 $1,051,747 $985,201 $917,572
Costs and expenses
Cost of sales 922,545 895,893 877,582 818,782 758,100
General and administrative 63,905 55,397 54,440 53,622 51,495
Interest expense 39,816 41,237 44,466 51,900 63,907
Litigation settlement (1,700) 124,500
Restructuring expense 7,991
- -----------------------------------------------------------------------------------------------------------
1,034,257 990,827 976,488 1,048,804 873,502
Income (loss) from continuing
operations before income taxes,
extraordinary charge, and
cumulative effect of change
in accounting principle 19,075 81,632 75,259 (63,603) 44,070
Income taxes 7,873 29,314 28,456 (26,268) 15,563
- -----------------------------------------------------------------------------------------------------------
Income (loss) from continuing
operations before extraordinary
charge, and cumulative effect of
change in accounting principle 11,202 52,318 46,803 (37,335) 28,507
Discontinued operations, net of
income taxes 8,137 10,277 11,207 10,758 9,520
Gain on sale of discontinued
operations, net of income taxes 5,533
Extraordinary charge on early
extinguishment of debt (1,038)
Cumulative effect of change in
accounting for income taxes 4,468
- -----------------------------------------------------------------------------------------------------------
Net income (loss) $ 24,872 66,025 $ 58,010 $ (26,577)(b) $ 38,027
===========================================================================================================
Weighted average shares
outstanding (fully diluted) 41,519 46,520 45,644 41,049 46,112

Per share data--fully diluted
Income from continuing operations $ .27 $ 1.21 $ 1.11 $ (.91) $ .70
Net income (loss) $ .60 $ 1.51(c) $ 1.35 $ (.65)(b) $ .90
Dividends -- -- -- -- --

Total assets $ 535,016 $ 554,978 $ 525,520 $ 467,421 $ 427,668
Long-term debt and obligations under
capital leases $ 406,032 $ 414,026 $ 389,898 $ 460,546 $ 542,359
Shareholders' equity (deficit) $(108,307) $(136,764) $(209,988) $(290,497) $(265,075)

Number of restaurants at year-end (d)
Company-owned 698 719 708 695 688
Franchised 826 874 875 824 741
- -----------------------------------------------------------------------------------------------------------
Total restaurants 1,524 1,593 1,583 1,519 1,429
===========================================================================================================

Notes: (a) - 53 week year.
(b) - Net income before special charge for settlement of lawsuit was $50,663 or $1.14
per share (See Note 12 to the consolidated financial statements).
(c) - Income before extraordinary charge and cumulative effect of change in accounting
principle was $1.43 per share.
(d) - Continuing operations.
</TABLE>

-13-
<PAGE>

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

The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's consolidated results of operations and financial condition.
Unless otherwise noted, this discussion addresses the Company's continuing
operations. The discussion should be read in conjunction with the
consolidated financial statements and notes thereto. All references are to
fiscal year unless otherwise noted.

Reorganization - On January 16, 1995, the Company's Board of
Directors announced a reorganization designed to improve the performance and
growth of the Shoney's Restaurant concept. The reorganization included
divestiture of certain non-core lines of business including Lee's Famous
Recipe, a chain of over 200 quick-service restaurants specializing in
chicken, and Mike Rose Foods, Inc., a manufacturer of dressings, sauces,
condiments and various dry-blend products for the foodservice industry. The
divestiture process now is completed, with the sale of Lee's Famous Recipe
closing on September 29, 1995 and the sale of Mike Rose Foods, Inc. closing
on November 17, 1995.

Results of Operations

Revenues
The components of the change in revenues from continuing operations during
1995 and 1994 are summarized as follows:
1995 1994
Amount Amount
(Millions) (Millions)
---------- ----------
Sales from restaurants opened or acquired $ 22.2 $ 19.6
Higher sales price 3.7 14.0
Sales at prior year prices (6.4) (2.8)
Restaurant sales for 53rd week --- (15.0)
Equipment and other sales (1.8) (1.6)
Manufacturing and commissary sales (24.2) (0.8)
Franchise revenues (1.9) (0.1)
Other income (10.7) 7.4
----- ----
Total $ (19.1) $ 20.7
===== ====
-14-
<PAGE>

Comparable store sales of the Company's restaurants declined 2.1%
before considering menu price increases of 0.4%, resulting in a real decline
in comparable store sales for 1995 of 2.5%. For 1994 and 1993, comparable
store sales of the Company's restaurants increased 0.5% and 0.1%,
respectively, resulting in a real decline of 1.2% for 1994 and 1.1% for 1993
after adjusting for menu price increases. The Company's Shoney's
Restaurants have experienced declining comparable store sales since 1993.
Management believes that the declines in comparable store sales at its
Shoney's Restaurants are the result of numerous factors including a more
competitive environment, a decline in operational performance, and the
cumulative negative effects of the Company's delay in remodeling it's
Shoney's Restaurants. During the fourth quarter of fiscal 1995, one of the
company's Shoney's Restaurants was included, along with restaurants of
several other national restaurant chains, in a national television "news
magazine" program on restaurant industry cleanliness and food handling
practices. Following the airing of this program, the Company's Shoney's
Restaurants experienced significant declines in comparable store sales.
Comparable store sales declines in fiscal 1996 (through 12 weeks) are now
less than the declines experienced in the fourth quarter of 1995 or the 1995
fiscal year.

The Company has implemented a number of programs since 1993 to
improve operational performance, regain market share and improve comparable
store sales. A major remodeling program was begun in late 1993 through
which 183 Company-owned Shoney's Restaurants had been remodeled by the end
of 1995. During 1996, an additional 100 Company-owned Shoney's Restaurants
will be remodeled. Management believes that the store remodeling program is
one element in its overall improvement program necessary to protect market
share and encourage retrial by former customers.

In 1994, management determined that the overall quality of Shoney's
Restaurant management needed to be significantly strengthened to achieve
desired customer service levels. During 1995, the Company implemented a
targeted operational improvement program focused on the Company's markets
most in need of improvement. This program included a thorough evaluation
of restaurant management personnel, a thorough review of the physical
condition of each restaurant, and an intensive training program which
focused on restoring operational excellence in food preparation along with
a significant emphasis on hospitality and customer satisfaction. The
results of these programs generally have been positive in that performance
at targeted restaurants has outpaced the performance of similarly situated
units that were not a part of the improvement program. Although management
believes that the improvement program addresses the important operational
performance issues, it currently appears that achievement of significant
positive comparable store sales will take longer than originally
anticipated.

Significant changes in restaurant management have continued during
1995; however, the pace of change was hampered by a very competitive labor
market. Compensation, benefits, and performance-based reward systems have
been redesigned to better align management's incentive compensation with
Company objectives for achieving customer satisfaction and operational
excellence. New incentive programs reward unit level managers for improved
comparable store sales and cash flow. The Company's historical bonus plans
have been largely oriented toward cost controls, which can sometimes result
in management decisions that are counter productive to achieving high levels
of customer satisfaction. Management believes that the new incentive
programs achieve a better balance between increasing revenue through
customer satisfaction and profitability.

In October 1995, the Company announced a 48 store test of an
"owner/manager" program for Shoney's Restaurant general managers. In this
program, general managers make an "investment" in their restaurant and, in
return, are eligible to earn incentive compensation based on a percentage of
the increase in cash flow of their restaurant. The test program includes the
elimination of one layer of supervisory management, places greater operational
control and responsibility in the restaurant general manager, and

-15-
<PAGE>

places regional supervisors in a business partner/consultant role to the
general managers. Management believes that the new owner/manager program
balances the need to achieve customer satisfaction and thereby increase
sales with the need to control costs and operate efficiently. The test
began in December 1995, therefore, no meaningful results are available.
However, management believes that the success of similar manager
compensation programs at other restaurant companies (including Sonic,
Outback Steakhouses, Harmon International, and Chick-Fil-A) indicates that
this type program has a high probability for success.

During 1995, the Company retained the firm of Bernstein-Rein
of Kansas City as the new advertising agency for its Shoney's Restaurants.
In the fall of 1995, the Company announced that Andy Griffith would serve
as the celebrity spokesperson for Shoney's Restaurants in a series of
radio and television commercials along with related point-of-sale
marketing materials. Customer response to the Andy Griffith commercials,
which began in November 1995, has been very positive and management
believes this campaign will be an important element in its overall
marketing strategy. The Company continues to focus its marketing
efforts on building upon the strong Shoney's Restaurants brand and to
position Shoney's Restaurants as the place for families to enjoy "Classic
American Food."

The following table summarizes the change in number of restaurants
operated by the Company and its franchisees during the most recent three
fiscal years.

1995 1994 1993
---- ---- ----
Company-owned units opened 25 28 30
Company-owned units closed (46) (17) (17)
Franchised units opened 17 52 82
Franchised units closed (65) (53) (31)
---- ---- ----
Net increase (decrease) in restaurants (69) 10 64

During the fourth quarter of 1995, the Company implemented
a restructuring plan which included the closure of 41 under-performing
restaurants, consisting of 17 Shoney's Restaurants, 22 Captain D's,
and 2 Fifth Quarter restaurants. With the exception of one Fifth
Quarter restaurant closed in the first week of November 1995, all these
restaurants were closed at the end of the fiscal year. In addition to these
restaurants, five Shoney's Restaurants and one Captain D's had been closed
earlier in 1995 resulting in 46 restaurant closures for the year.

With respect to the 41 units closed, the Company recorded a
restructuring expense of $6.2 million in the fourth quarter of 1995,
principally to provide for the write-down of assets to their net realizable
value and the accrual of future lease costs in excess of estimated sub-lease
rental income. Approximately $1.7 million of other restructuring expenses,
consisting principally of severance for three executives displaced by the
reorganization and restructuring, had been included in the restructuring
expense in the first three quarters of fiscal 1995, resulting in a total
restructuring expense of $7.9 million. The 1995 revenues and loss before
interest and taxes related to the 41 units closed were $24.2 million and
$2.1 million, respectively.

Manufacturing and commissary sales declined by approximately $24
million in 1995. The decrease in commissary and manufacturing sales was a
result of the following factors: 1) a 9% decline in the number of franchised
restaurants which purchased food and supplies from the commissary, 2) a
decline in annual average purchases made by such franchisees, resulting
principally from an 8.6% decline in the comparable store sales of the
Company's franchised Shoney's Restaurants coupled with increased

-16-
<PAGE>

competition from alternative wholesale food distributors, and 3)
a decrease in sales by the Company's meat processing facility of $3.7
million, principally due to the loss of business from the Company's largest
franchisee, TPI Enterprises ("TPI").

The Company has formed a commissary advisory board with six
franchisees elected by their peers to provide input as to how the Company
can better meet the needs of its franchise customers. The Company's goal
is to be a low cost provider of the high quality food and supplies for each
of our restaurant concepts. The Company is installing a computerized order
entry system to permit customers to place weekly food and supply orders
through restaurant level computers linked with the commissary central
computer system. The system will save time for restaurant managers and
increase time available for customer service at the restaurants. Management
believes this system will enhance efficiency at the Commissary and permit
savings to be shared through lower costs of food and supplies. Ultimately,
improvements in commissary sales will be linked to improvements in average
unit volumes of franchised restaurants as well as expansion of commissary
sales to franchisees who are not customers.

The Company is pursuing customers outside its franchised system for
its meat processing facility. In addition, the Company is negotiating with
TPI to purchase its Shoney's and Captain D's restaurants. If that
transaction is completed, the meat supply business for those restaurants
would be shifted back to the Company's meat processing facility. If the
meat processing facility's sales to TPI are not replaced, the efficiency of
the Company's meat processing operation will be negatively impacted;
however, such amounts are not expected to have a material adverse effect on
the Company.

Other income declined in 1995 as a result of a fourth quarter
decline in market value of the Company's investment in ShoLodge, Inc.
(ShoLodge) common stock and warrants resulting in an unrealized loss of $3.9
million coupled with a reduction in revenue from asset sales of $1.5 million
as compared to 1994. In 1994, the Company had an unrealized gain of $2.4
million related to its investment in ShoLodge. The fluctuation in market
value between 1995 and 1994 created a $6.3 million decrease in other income
in 1995. Fiscal 1994 included a $1.7 million gain on the sale of the
Company's minority interest in certain Shoney's Inns, with no comparable
item in 1995.

Other income increased $7.4 million in 1994 as compared with 1993
as the result of a $1.7 million gain on the sale of certain minority
interests in certain motels, a $.9 million gain from the settlement of
certain litigation and gains of $1.6 million from real estate transactions.

Costs and Expenses

Cost of sales includes food and supplies, restaurant labor and
operating expenses. A summary of cost of sales as a percentage of total
revenues for the last three fiscal years is shown below:

1995 1994 1993

Food and supplies 40.9% 41.8% 42.0%
Restaurant labor 23.8 21.8 21.8
Operating expenses 22.8 19.9 19.6
87.5% 83.5% 83.4%

-17-
<PAGE>

Manufacturing and commissary revenues declined by $24 million
during 1995 and increased $2.2 million and $27.9 million during 1994 and
1993, respectively. When compared to restaurant revenues, these revenues
have a higher percentage of food costs and a lower percentage of operating
expenses. There is no restaurant labor associated with these revenues.
Food costs as a percentage of revenues declined by 0.9% in 1995, principally
as a result of the significant decline in commissary revenues. Food costs
as a percentage of revenues was down very slightly in 1994 when compared to
1993 as higher food costs at the restaurant level (primarily as the result
of a new menu in the Shoney's Restaurants) were offset by lower food costs
associated with manufacturing and commissary revenues. During 1993, the
Company experienced higher costs for meat products and lower margins in its
manufacturing division which contributed to the higher food costs.

Restaurant labor increased 2.0% as a percentage of revenues in 1995
due to increased labor hours incurred in connection with the Shoney's
Restaurant improvement program, a decrease in commissary and manufacturing
revenue (which have no associated restaurant labor), and higher salaries
being offered to attract and retain quality restaurant personnel. Wage
rates for non-tipped hourly restaurant employees have risen approximately
6% and pay rates for restaurant management personnel have risen an average
of 8.7% during 1995. Labor costs as a percentage of revenues have also
increased because the Company has not instituted sufficient menu price
increases to recoup these costs as the Company was striving to build
customer traffic and regain market share. The Company anticipates it
will implement greater menu price increases in 1996 and 1997 more in line
with historical norms.

Operating expenses, as a percentage of revenues, increased 2.9%
during 1995 as a result of a $19.1 million decline in total revenues coupled
with a variety of costs incurred in conjunction with the Company's
restructuring and the operational improvement program for Shoney's
Restaurants. As part of the Shoney's Restaurant improvement program,
repairs, maintenance, and replacements costs increased $3.6 million; $1.3
million of fixed assets were written off as unusable; $400,000 of expenses
were charged to operations for performance improvement teams; $400,000 of
relocation costs were incurred; and $3.2 million of asset write-downs for
surplus property and certain equipment were recorded. Operating expense
also was negatively affected by $2.8 million of additional depreciation
costs stemming from restaurant additions and remodeling. Advertising
expenses were $2.8 million higher during 1995 as the Company abandoned
an unsuccessful ad campaign, changed its advertising agency, and
incurred additional costs related to the production of a new advertising
program. An analysis of accrued property taxes completed during 1995
resulted in an increase in operating expense of $3.0 million. During
the fourth quarter, the Company completed a review of its self-insured
worker's compensation reserves, which included additional analyses
focusing on the trend in development of prior years' incurred claims.
The analyses indicated that the Company's recorded reserve was below the
expected range of possible future losses. Management determined that it
was appropriate to strengthen the worker's compensation reserves to
better reflect the likely outcome of its liability within the possible range
of loss. Accordingly, at the end of the fourth quarter, the Company
increased its worker's compensation reserves by approximately $3.8 million.
In addition, operating expenses had been favorably affected in 1994 by a
$2.0 million settlement of litigation against a former worker's compensation
insurance carrier. Accordingly, worker's compensation expenses increased
by $5.8 million in 1995 compared to 1994, as a result of these two matters.

Operating expenses as a percentage of revenues increased in 1994
due to higher depreciation and other costs associated with the Company's
remodeling program of its Shoney's Restaurants, which were partially offset
by the settlement of a lawsuit for $2.0 million against a former worker's
compensation insurance carrier which reduced insurance expense. The Company
anticipates continued pressure on

-18-
<PAGE>

restaurant operating margins in 1996, until improvements in comparable
store sales are achieved. Management intends to closely monitor and
manage these costs to the maximum extent practical.

A summary of general and administrative expenses and interest expense as a
percentage of revenues for the last three fiscal years is shown below:

1995 1994 1993
- ----------------------------------------------------------------------
General and administrative 6.1% 5.2% 5.2%
Interest expense 3.8% 3.8% 4.2%

General and administrative expenses as a percentage of revenues
increased 0.9% during 1995. The increased level of general and
administrative costs was principally caused by the significant restructuring
of the Company's management group, which included increased salary costs
related to hiring new management employees as well as severance costs for
certain employees displaced in the management reorganization. Salary and
bonus costs increased approximately $4.0 million, relocation costs increased
$400,000, and executive search fees increased by $600,000. Consulting fees
associated with the Shoney's Restaurant improvement program and related
costs during 1995 were $2.4 million and contributed to the increase in
general and administrative expenses.

General and administrative costs as a percentage of revenues were
unchanged in 1994 compared to 1993. In addition, during the first quarter
of 1993, the Company received $3 million from certain of its insurance
carriers for recovery of legal fees paid in prior years related to a
discrimination lawsuit, which reduced general and administrative expenses.
However, this recovery was offset by certain severance expenses associated
with the resignation or termination of certain employees during the first
quarter of 1993 which totaled $3.2 million.

Interest expense as a percentage of revenues was unchanged in 1995
and 1994, but declined in 1994 in comparison to 1993 primarily due to the
refinancing during 1994 of $145.7 million of subordinated debentures.

On January 25, 1993, the Company received final approval of the
settlement in a class action race discrimination lawsuit. Under the
settlement, the Company agreed to pay $105 million in claims, $25.5
million for litigation costs and class counsel's expenses, as well as
an estimated $2.3 million for administrative costs and payroll taxes.
The Company is required to pay substantially all of the remaining litigation
settlement liability over the next 2 1/2 years in quarterly installments.

The effective income tax rates were 41.3% in 1995, 35.9% in 1994,
and 37.8% in 1993. Note 6 to the consolidated financial statements
reconciles the difference between total income tax expense and the amount
computed by applying the statutory federal income tax rate to income before
income taxes.

Liquidity and Capital Resources

The Company's primary source of liquidity is cash provided by
operating activities which totaled $100.4 million in 1995, a decrease of
$22.2 million compared to 1994. The decrease in operating cash flow in 1995
was principally a result of a $25 million decline in the operating earnings
of the Company's Shoney's Restaurants as the Company implemented a
restructuring and performance improvement

-19-
<PAGE>

program. In addition, operating earnings of the Company's commissary
operations were negatively affected by lower sales volumes and relatively
fixed overhead costs.

Cash provided by continuing operating activities was $122.7 million
in 1994, an increase of $28.2 million as compared with 1993. This increase
was primarily attributable to a decrease in food inventory (principally
fish), and an increase in cash flow from accounts receivable and deferred
income taxes, which were partially offset by a decrease in accrued expenses.
Cash provided by operating activities in 1993 decreased $6.0 million when
compared to 1992 and was primarily attributable to an increase in food
inventory (principally fish), which was partially offset by increased
operating income.

Cash used by investing activities in 1995 was $37.7 million, a
decrease of $52.4 million as compared to 1994. This decrease was primarily
a result of a $32 million decrease in 1995 over 1994 capital expenditures
for new restaurant construction and restaurant remodeling, including a $2.1
million decrease in these expenditures related to the Company's discontinued
operations. This decrease was offset by a $4.5 million increase in capital
expenditures for acquisition of franchised restaurants. Capital
expenditures related to commissary operations declined approximately $7
million in 1995 as compared to 1994 due to the construction of a new
Wichita, Kansas commissary facility during 1994. The Company generated an
additional $19.4 million of cash from investing activities in 1995 stemming
from the divestiture of its Lee's Famous Recipe division.

Cash used in investing activities increased in 1994 over 1993,
principally due to an $11.9 million increase in capital expenditures for
restaurant remodeling and construction of a new commissary facility.

The Company is highly leveraged and therefore seeks to minimize its
interest costs by constantly evaluating alternative financing arrangements.
In July 1993, the Company entered into a $125 million reducing revolving
credit facility expiring October 1997, with reductions in the aggregate
credit facility beginning in 1995. This facility was secured by all
material assets of the Company not otherwise pledged. The Company borrowed
$25 million and repaid $10 million under this facility during 1993. The
interest rate for the facility is a floating rate of 2% over the London
Interbank Offered Rate ("LIBOR") and was 5.2% at October 31, 1993.

During 1994, the Company's $125 million reducing revolving credit
facility was amended to allow redemption of the Company's outstanding 12%
subordinated debentures. The credit facility was increased to a
maximum of $270 million, and its term was extended to 1999. In July 1994,
the Company's $145.7 million of 12% debentures were redeemed at
par. The reducing revolving credit facility bears interest at a floating
rate (2% over LIBOR) and was 8% at October 29, 1995 and 7% at October 30,
1994, respectively. Based on an 8% interest rate, refinancing of the 12%
subordinated debt resulted in annual interest savings of approximately $5.8
million. The Company had $223 million and $240 million outstanding under
this facility at October 29, 1995 and October 30, 1994, respectively.

The Company maintains an interest rate risk management program to
limit its exposure to rising short-term interest rates on its variable rate
debt. At October 29, 1995 and October 30, 1994, the Company held 7% LIBOR
interest rate cap agreements expiring in 1996 for $50 million (notional
amount). These agreements limit the Company's maximum LIBOR interest rate
to 7% on $50 million of its variable rate debt until October 1996. During
1996, the Company plans to reevaluate its interest rate risk management
program with its lenders to determine the most cost effective strategy for
reducing the Company's risk to rising short-term interest rates. Management
is considering replacing a portion of the Company's floating rate debt with
fixed rate intermediate term debt as part of an overall plan to

-20-
<PAGE>

reduce exposure to interest rate risks and to more closely match its
assets and liabilities.

On December 5, 1995, the Company and TPI Enterprises, Inc. ("TPI")
announced that they had executed a letter of intent providing for the
acquisition by the Company of TPI Restaurants, Inc. and two other TPI
subsidiaries, which represent substantially all of the assets of TPI.
TPI is the Company's largest franchisee and operates 188 Shoney's
restaurants and 68 Captain D's Seafood restaurants. For the twelve
months ended October 1, 1995, TPI had restaurant revenues of $278
million.

If the acquisition is consummated, the transaction presently
provides for the TPI subsidiaries to be acquired in exchange for
6,456,223 shares of the Company's $1.00 par value common stock plus
the assumption of certain obligations of TPI, including approximately
$95 million in debt as of October 29, 1995. No definitive agreement
has been executed. Management can give no assurances that a definitive
agreement with TPI will be executed or that the proposed acquisition
will be consummated.

During the fourth quarter of 1995, the Company completed the
sale of Lee's Famous Recipe for $28.5 million ($24.5 million cash and a $4
million note) resulting in an after tax gain of $5.5 million. The Company
had previously negotiated modifications to its credit agreements to permit
the sale of Lee's Famous Recipe and Mike Rose Foods, Inc. The modifications
required that a portion of the proceeds from the sale of discontinued
operations (net of taxes and selling costs) be treated as a permanent
reduction of the amounts otherwise available under the reducing revolving
credit facility. The Company utilized substantially all of the cash
proceeds to reduce debt under its reducing revolving credit facility.
A permanent reduction of the amount available under the reducing revolving
credit facility of $7.5 million resulted from the sale of Lee's Famous
Recipe.

In November 1995, the Company completed the sale of Mike Rose
Foods, Inc. for $55 million (all cash) resulting in an estimated after tax
gain of approximately $22 million. The sale will be reflected in the
Company's first quarter of fiscal 1996. Approximately $50 million was
utilized to reduce debt under the reducing revolving credit facility. A
permanent reduction of the amount available under the credit facility of
$12.9 million resulted from the sale of Mike Rose Foods. The Company
anticipates that it will draw on the credit facility to pay estimated tax
payments related to gains on sales of discontinued operations as they become
due.

During 1995, the Company retired $60 million of its senior fixed
rate debt and reduced the amount outstanding under its reducing revolving
credit facility by approximately $17 million as of October 29, 1995. These
debt repayments were funded with operating cash flows, cash provided by the
sale of discontinued operations (Lee's), and from $28 million of new senior
variable rate debt due in October 1999. The $60 million of senior fixed
rate debt retired in 1995 had an effective interest rate of 6.3%.
Therefore, the Company's interest rate on debt outstanding (which is
principally at variable rates) is expected to increase in 1996. This
increase in rates is expected to be offset by reduced amounts of debt
outstanding. Accordingly, assuming a stable interest rate environment, the
Company's overall interest expense is expected to decrease in 1996 as
compared to 1995.

During 1994, the Company made scheduled payments of $100 million on
its senior debt-fixed rate loan, principally from increased borrowing under
the reducing revolving credit facility and from operating cash flows.
During 1993, the Company made the remaining scheduled payments of $45 million
on the original $585 million of bank borrowings related to the Company's
1988 recapitalization. Principal payments made on indebtedness during 1992
were $89.4 million, which included scheduled payments of $30 million and
prepayments of $55 million on the Company's original $585 million of

-21-<PAGE>

recapitalization bank debt.

The Company's lending agreements contain covenants that impose
limitations on capital expenditures and require satisfaction of certain
financial ratios and tests (such ratios and tests become more restrictive
each year). The Company is currently prohibited from paying dividends by
its lending agreements. The covenants also prohibit the Company from
incurring additional indebtedness, except under two existing unsecured lines
of credit totaling $30 million ($21 million available at October 29, 1995),
or from mortgage financing arrangements. The Company had borrowed $85.5
million at October 29, 1995 and $61.3 million at October 29, 1994 under
mortgage financing arrangements with effective interest rates of 8% and 6.9%
at October 29, 1995 and October 30, 1994, respectively.

Proceeds from employee stock options decreased $1.6 million in 1995
compared to 1994 and decreased $10.6 million in 1994 as compared with 1993
principally because the exercise prices of many of the options outstanding
during 1995 and a significant portion of 1994 were in excess of the market
price of the Company's stock. Proceeds from employee stock options
increased $5.2 million during 1993 principally as a result of the exercise
of options granted during the recapitalization in July 1988, which were to
expire in 1993. Litigation settlement payments of $23.4 million, $24.9
million, and $22.4 million were made during 1995, 1994, and 1993,
respectively, as required by the consent decree approved in January 1993
(See Note 12 to the Consolidated Financial Statements).

The Company expects to meet its needs for debt service, capital
expenditures (excluding those for land and buildings which are expected to
be met through mortgage financing), the litigation settlement and other
general corporate purposes through cash generated by the Company's
operations, the Company's reducing credit facility, and its other available
lines of credit.

Impact of Accounting Changes

There are no pending accounting pronouncements that when adopted
are expected to have a material effect on the Company's results of
operations or its financial position.

-22-

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The consolidated financial statements of the registrant and its
subsidiaries, together with all notes thereto, are set forth immediately
following this page as pages 24 through 49 of this Annual Report on
Form 10-K.

REPORT OF ERNST & YOUNG LLP
Independent Auditors

Shareholders and Board of Directors
Shoney's, Inc.
Nashville, Tennessee

We have audited the accompanying consolidated balance sheets of
Shoney's, Inc. and subsidiaries as of October 29, 1995 and October 30,
1994, and the related consolidated statements of income, shareholders'
equity (deficit) and cash flows for each of the three fiscal years in the
period ended October 29, 1995. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and schedule 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 consolidated financial
position of Shoney's, Inc. and subsidiaries at October 29, 1995 and
October 30, 1994, and the consolidated results of their operations and
their cash flows for each of the three fiscal years in the period ended
October 29, 1995 in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the information
set forth therein.

As discussed in Note 3 to the consolidated financial statements, the
Company changed its method of accounting for income taxes and
certain investments in debt and equity securities in the year ended
October 30, 1994.

Nashville, Tennessee
December 14, 1995, except for
paragraphs 3 and 4 of
Note 13, as to which the date is /S/ ERNST & YOUNG LLP
January 2, 1996

-23-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
Shoney's, Inc. and Subsidiaries

October 29 October 30
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 7,513,588 $ 4,229,784
Notes and accounts receivable, less allowance for doubtful
accounts of $1,645,000 in 1995 and $1,193,000 in 1994 13,013,821 16,936,307
Inventories 33,483,964 37,787,689
Deferred income taxes 24,549,337 17,821,945
Prepaid expenses and other current assets 6,167,548 10,074,988
Net current assets of discontinued operations 14,495,812 5,220,127
----------- -----------
Total current assets 99,224,070 92,070,840

Property, plant and equipment, at cost
Land 117,104,203 113,397,369
Buildings 227,124,559 214,481,119
Buildings under capital leases 18,122,394 20,383,129
Restaurant and other equipment 256,936,595 257,610,547
Leasehold improvements 57,330,822 54,736,348
Rental properties 24,136,182 22,917,082
Construction in progress (estimated cost to complete:
$6,382,000 in 1995 and $7,789,000 in 1994) 9,789,522 13,606,268
----------- -----------
710,544,277 697,131,862
Less accumulated depreciation and amortization (291,057,795) (278,529,473)
----------- -----------
Net property, plant and equipment 419,486,482 418,602,389

Other assets
Net non-current assets of discontinued operations 31,916,261
Deferred charges and other intangible assets 7,085,784 6,650,229
Other 9,219,658 5,738,592
----------- -----------
Total other assets 16,305,442 44,305,082
----------- -----------

$ 535,015,994 $ 554,978,311
=========== ===========
</TABLE>

See notes to consolidated financial statements

-24-
<PAGE>
<TABLE>
<CAPTION>

CONSOLIDATED BALANCE SHEET
Shoney's, Inc. and Subsidiaries

October 29 October 30
1995 1994
----------- -----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities
Accounts payable $ 33,099,813 $ 39,194,883
Federal and state income taxes 7,486,210 3,764,329
Taxes other than income taxes 9,565,333 7,855,368
Employee compensation and related items 45,425,547 36,306,635
Accrued interest expense 2,186,731 2,079,655
Other accrued liabilities 17,135,041 14,564,210
Reserve for litigation settlement due within one year 23,372,889 23,803,836
Debt and capital lease obligations due within one year 34,448,154 66,692,163
----------- -----------
Total current liabilities 172,719,718 194,261,079

Long-term debt 393,517,286 402,306,073

Obligations under capital leases 12,515,160 11,719,705

Reserve for litigation settlement 38,727,434 61,673,834

Deferred credits
Income taxes 19,223,797 15,477,405
Income and other liabilities 6,619,234 6,304,456
----------- -----------
Total deferred credits 25,843,031 21,781,861

Commitments and contingencies

Shareholders' equity (deficit)
Common stock, $1 par value: authorized 100,000,000 shares;
issued 41,510,659 in 1995 and 41,185,290 in 1994 41,510,659 41,185,290
Additional paid-in capital 60,770,176 57,509,644
Retained earnings (deficit) (210,587,470) (235,459,175)
----------- -----------
Total shareholders' equity (deficit) (108,306,635) (136,764,241)
----------- -----------
$ 535,015,994 $ 554,978,311
=========== ===========

</TABLE>

See notes to consolidated financial statements

-25-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME
Shoney's, Inc. and Subsidiaries

Years Ended
----------------------------------------------
October 29 October 30 October 31
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Revenues
Net sales $1,029,314,432 $1,035,832,226 $1,022,413,791
Franchise fees 23,886,704 25,793,886 25,872,439
Other income 131,284 10,833,006 3,460,506
------------- ------------- -------------
Total revenues 1,053,332,420 1,072,459,118 1,051,746,736

Costs and expenses
Cost of sales
Food and supplies 430,990,408 447,959,750 442,045,520
Restaurant labor 251,196,828 234,547,471 229,860,922
Operating expenses 240,357,620 213,385,949 205,674,912
------------- ------------- -------------
922,544,856 895,893,170 877,581,354

General and administrative expenses 63,904,769 55,397,496 54,440,288
Interest expense 39,815,887 41,236,895 44,465,636
Litigation settlement (1,700,000)
Restructuring expense 7,991,539
------------- ------------- -------------
Total costs and expenses 1,034,257,051 990,827,561 976,487,278
------------- ------------- -------------

Income from continuing operations before income
taxes, extraordinary charge and cumulative
effect of change in accounting principle 19,075,369 81,631,557 75,259,458

Provision for income taxes
Current 9,087,000 19,940,000 22,720,000
Deferred (1,214,000) 9,374,000 5,736,000
------------- ------------- -------------
Total income taxes 7,873,000 29,314,000 28,456,000

Income from continuing operations before
extraordinary charge and cumulative effect
of change in accounting principle 11,202,369 52,317,557 46,803,458
Discontinued operations, net of income taxes 8,136,588 10,276,649 11,206,520
Gain on sale of discontinued operations, net of
income taxes 5,532,748
Extraordinary charge on early extinguishment
of debt, net of income tax benefit (1,037,808)
Cumulative effect of change in accounting for
income taxes 4,468,386
------------- ------------- -------------
Net income $ 24,871,705 $ 66,024,784 $ 58,009,978
============= ============= =============
</TABLE>

See notes to consolidated financial statements

-26-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME
Shoney's, Inc. and Subsidiaries

Years Ended
----------------------------------------------
October 29 October 30 October 31
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Earnings per common share

Primary:
Income from continuing operations before extra-
ordinary charge and cumulative effect of change in
accounting principle $0.27 $1.27 $1.16
Discontinued operations, net of income taxes 0.20 0.25 0.28
Gain on sale of discontinued operations, net of
income taxes 0.13
Extraordinary charge on early extinguishment of debt (0.03)
Cumulative effect of change in accounting for
income taxes 0.11
------------- ------------- -------------
Net income $0.60 $1.60 $1.44
============= ============= =============

Fully diluted:
Income from continuing operations before extra-
ordinary charge and cumulative effect of change in
accounting principle $0.27 $1.21 $1.11
Discontinued operations, net of income taxes 0.20 0.22 0.25
Gain on sale of discontinued operations, net of
income taxes 0.13
Extraordinary charge on early extinguishment of debt (0.02)
Cumulative effect of change in accounting for
income taxes 0.10
------------- ------------- -------------
Net income $0.60 $1.51 $1.35
============= ============= =============

Weighted average shares outstanding
Primary 41,519,116 41,299,061 40,397,906
Fully diluted 41,519,116 46,519,998 45,644,452

</TABLE>

See notes to consolidated financial statements

-27-
<PAGE>
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
Shoney's, Inc. and Subsidiaries

Total
Additional Retained Shareholders'
Common Paid-in Escrow Earnings Equity
Stock Capital Shares (Deficit) (Deficit)
---------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balances at October 25, 1992 $ 41,539,529 $ 75,957,397 $ (48,499,992) $ (359,493,937) $ (290,497,003)
Net income 58,009,978 58,009,978
Tax benefits related to
compensation plans 9,545,177 9,545,177
Distributions pursuant to
employee stock option and
stock benefit plans 1,878,396 14,002,324 15,880,720
Conversions of subordinated
convertible debentures 1,055 13,095 14,150
Retirement of escrow shares,
net of income taxes (2,694,444) (48,746,388) 48,499,992 (2,940,840)
---------- ----------- ----------- ----------- ------------
Balances at October 31, 1993 40,724,536 50,771,605 0 (301,483,959) (209,987,818)

Net income 66,024,784 66,024,784
Tax benefits related to
compensation plans 1,602,987 1,602,987
Distributions pursuant to
employee stock option and
stock benefit plans 447,708 4,881,018 5,328,726
Conversions of subordinated
convertible debentures 13,046 254,034 267,080
---------- ----------- ----------- ----------- ------------
Balances at October 30, 1994 41,185,290 57,509,644 0 (235,459,175) (136,764,241)

Net income 24,871,705 24,871,705
Tax benefits related to
compensation plans 271,293 271,293
Distributions pursuant to
employee stock option and
stock benefit plans 325,369 2,796,773 3,122,142
Compensation related to grant
of restricted shares
of common stock 192,466 192,466
---------- ----------- ----------- ------------ ------------
Balances at October 29, 1995 $ 41,510,659 $ 60,770,176 $ 0 $(210,587,470) $(108,306,635)
=========== =========== =========== ============ ============

</TABLE>

See notes to consolidated financial statements

-28-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
Shoney's, Inc. and Subsidiaries
Years Ended
----------------------------------------------
October 29 October 30 October 31
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Operating activities
Net income $ 24,871,705 $ 66,024,784 $ 58,009,978
Adjustments to reconcile net income to net cash
provided by operating activities:
Income from discontinued operations, net of taxes (8,136,588) (10,276,649) (11,206,520)
Gain on sale of discontinued operations, net of taxes (5,532,748)
Depreciation and amortization 42,798,547 39,647,337 36,346,380
Interest expense on subordinated zero coupon
convertible debt and other non-cash charges 13,133,931 12,155,814 10,138,945
Deferred income taxes (2,981,000) 9,276,000 5,563,000
Equity in earnings of affiliates (73,020) (255,185) (422,225)
Loss on disposal of property, plant and equipment 2,111,756 74,605 1,618,028
Litigation settlement (1,700,000)
Realized and unrealized (gains) losses on
marketable equity securities and other assets 3,886,905 (4,117,512) (591,503)
Restructuring expense, non-cash portion 7,120,236
Cumulative effect of change in accounting for
income taxes (4,468,386)
Changes in operating assets and liabilities:
Notes and accounts receivable 3,857,523 4,976,221 2,151,313
Inventories 4,303,725 11,111,728 (18,768,413)
Prepaid expenses 20,535 (385,570) (803,695)
Accounts payable (1,998,856) 4,623,664 2,741,021
Accrued expenses 12,730,523 (6,248,379) 5,064,921
Federal and state income taxes 3,993,174 3,063,784 3,971,537
Deferred income and other liabilities 314,778 (837,392) 620,919
----------- ----------- -----------
Net cash provided by continuing operating activities 100,421,126 122,664,864 94,433,686
Net cash provided by discontinued operating activities 13,373,104 15,403,309 13,352,853
----------- ----------- -----------
Net cash provided by operating activities 113,794,230 138,068,173 107,786,539

Investing activities
Purchases of property, plant and equipment (58,254,507) (90,394,632) (70,472,483)
Purchases of assets held for sale (2,403,362) (4,581,577) (5,565,962)
Proceeds from disposal of discontinued operations 19,424,015
Proceeds from disposal of property, plant and equipment 4,327,995 4,766,842 2,416,703
(Increase) decrease in other assets (763,647) 116,148 4,073,060
----------- ----------- -----------
Net cash used in investing activities (37,669,506) (90,093,219) (69,548,682)

Financing activities
Proceeds of long-term debt 78,000,000 245,681,800 35,000,000
Payments on long-term debt and capital lease obligations (132,259,604) (269,772,824) (58,693,802)
Proceeds from line of credit and short-term debt 162,338,000 114,011,000 186,875,000
Payments on line of credit and short-term debt (157,129,000) (118,171,000) (185,960,000)
Exercise of employee stock options 1,797,973 3,403,776 14,027,541
Payments on litigation settlement (23,377,347) (24,949,091) (22,373,239)
Payments for debt issue costs (2,210,942) (1,790,257) (3,589,584)
----------- ----------- -----------
Net cash used by financing activities (72,840,920) (51,586,596) (34,714,084)
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents 3,283,804 (3,611,642) 3,523,773
Cash and cash equivalents at beginning of year 4,229,784 7,841,426 4,317,653
----------- ----------- -----------
Cash and cash equivalents at end of year $ 7,513,588 $ 4,229,784 $ 7,841,426
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements
-29-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Shoney's, Inc. and Subsidiaries
October 29, 1995, October 30, 1994 and October 31, 1993

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain
reclassifications have been made in the consolidated financial statements
to conform to the 1995 basis of presentation.

Property, Plant and Equipment

Depreciation and amortization are provided principally on the
straight-line method over the following estimated useful lives:
restaurant buildings--20 years; certain office buildings and warehouses--
20 to 40 years; rental properties--over the term of the lease, generally
15 to 20 years; restaurant and other equipment--3 to 10 years; and
capital leases and leasehold improvements--lesser of life of assets or
terms of lease.

Cash Equivalents

The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.

Franchise Fees

Initial franchise fees and market development fees are recorded
as income when the restaurants begin operations and the cash payment has
been received. Franchise fees based on sales of franchisees are accrued
as earned.

Inventories

Inventories, consisting of food items, beverages and supplies,
are stated at the lower of weighted average cost (which approximates
first-in, first-out) or market.

Start-up Costs

Start-up costs include only direct incremental costs relating to
opening new restaurants, such as training costs for new employees and
related travel expenses incurred before a new restaurant opens. These
costs are capitalized and then amortized from the opening date over a
period not to exceed one year.

-30-
<PAGE>

Advertising Costs

The Company charges the costs of production and distribution of
advertising to expense at the time the costs are incurred. Advertising
expense was $39.5 million, $39.4 million and $39.8 million in fiscal
years 1995, 1994 and 1993, respectively.

Fiscal Year

The Company's fiscal year ends on the last Sunday in October.
Fiscal years 1995 and 1994 were comprised of 52 weeks as compared to
fiscal year 1993 which had 53 weeks.

Business Segments

For the years 1995, 1994, and 1993, restaurant operations
constituted a dominant segment in accordance with FASB Statement No. 14,
"Financial Reporting for Segments of a Business Enterprise."

Stock Based Compensation

The Company generally grants stock options for a fixed number of
shares to employees with an exercise price equal to the fair value of the
shares at the date of grant. The Company accounts for stock option
grants in accordance with APB Opinion No. 25, Accounting for Stock Issued
to Employees, and, accordingly, recognizes no compensation expense for
the stock option grants. (See Note 9).

Earnings per Share

Primary net income per share for 1995, 1994 and 1993 has been
computed using the weighted average number of shares of common stock and
common stock equivalents outstanding during each period presented. Common
stock equivalents include all dilutive outstanding stock options. In
April 1989, the Company issued zero coupon subordinated convertible
debentures which are not considered common stock equivalents. Fully
diluted net income per share for 1994 and 1993 includes the assumed
conversion of these debentures and the adjustment of earnings for
interest that would not be paid if the debentures were converted. The
1995 fully diluted computation excludes the effect of the assumed
conversion of the debentures because it had an anti-dilutive effect.
Earnings per share for 1993 accounted for the 2,694,444 shares held in
escrow at October 25, 1992 as retired, effective with the provisional
court approval on November 3, 1992 (See Notes 8 and 12).

Fair Values of Financial Instruments

The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:

Cash and cash equivalents: The carrying amount reported in the
balance sheet for cash and cash equivalents approximates fair value.

Long-term debt: The carrying amounts of the Company's borrowings
under its senior debt-reducing revolving credit facility, senior debt-
taxable variable rate notes, and other senior debt with

-31-
<PAGE>

variable interest rates approximate their fair value. The fair values of
the Company's subordinated zero coupon convertible debentures were
determined based on quoted market prices. The fair value of other long-
term debt, industrial revenue bonds and notes payable were estimated
using discounted cash flow analyses utilizing the Company's incremental
borrowing rates for similar types of borrowing arrangements.

Interest rate cap agreements: The fair values for the Company's
interest rate cap agreements were based on estimates of the contracts'
values obtained from commercial banks that are counter parties to those
agreements.

Stock purchase warrants of ShoLodge, Inc.: The fair value of the
Company's warrants to purchase common stock of ShoLodge, Inc. was
estimated based on the difference in the quoted market price of ShoLodge,
Inc. common stock and the exercise price of the related warrants.

Reserve for litigation settlement: The fair value of the reserve
for litigation settlement was estimated using discounted cash flow
analyses utilizing an interest rate appropriate for an unsecured loan of
a similar term.

Adoption of New Accounting Rules

In March 1995, the FASB issued Statement No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," which requires impairment losses to be recorded on long-
lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying amount. Statement 121 also addresses
the accounting for long-lived assets that are expected to be disposed of.
The Company will adopt Statement 121 in the first quarter of fiscal 1997
and, based on current circumstances, does not believe the effect of
adoption will be material.

Use of Estimates in Financial Statements

Judgment and estimation is exercised by management in certain
areas of the preparation of financial statements. Some of the more
significant areas include reserves for self insurance of worker's
compensation, general liability, and medical benefits; the allowance for
doubtful accounts; reserves for litigation; and the estimate of
restructuring expenses. Management believes that such estimates have
been based on reasonable assumptions and that such estimates are
adequate.

NOTE 2 - DISCONTINUED OPERATIONS AND RESTRUCTURING

On January 16, 1995, the Company's Board of Directors announced a
reorganization designed to improve the performance and growth of the
Shoney's Restaurant concept. The reorganization included the divestiture
of certain non-core lines of business including Lee's Famous Recipe,
Pargo's and Fifth Quarter restaurants, as well as Mike Rose Foods, Inc.
("MRF"), a private label manufacturer of food products.

In July 1995, the Company announced a change in its divestiture
plans whereby the Company will retain its Fifth Quarter and Pargo's
restaurants. These two restaurant concepts have been combined with the
Company's BarbWire's Steakhouses to form a thirty-two unit casual dining
group

-32-
<PAGE>

with shared management and administrative support services intended to
improve operating efficiencies.

Effective October 1, 1995, the Company sold its Lee's Famous
Recipe division to RTM Restaurant Group for $24.5 million cash and a $4
million promissory note. The promissory note is due in monthly
installments over five years and bears interest at the prime rate. The
transaction was effected through a sale of all of the assets of Lee's
Famous Recipe, and its sale removes the Company from the fast food
chicken line of business. The promissory note is guaranteed by RTM,
Inc., and is further secured by perfected security interests in the Lee's
Famous Recipe trademarks and in the franchise license agreements of Lee's
Famous Recipe.

On August 3, 1995, the Company and Levmark Capital Corporation
announced that they had entered into a definitive stock purchase
agreement whereby Levmark would acquire Mike Rose Foods, Inc. This
transaction was closed subsequent to the fiscal year end (See Note 15).

For financial reporting purposes, the results of operations of
the lines of business divested have been treated as discontinued
operations in the accompanying financial statements and are presented net
of any related income tax expense. Prior year financial statements have
been reclassified to conform to this method of presentation. These
discontinued lines of business had net property, plant and equipment of
$10.6 million at October 29, 1995 and $32.0 million at October 30, 1994,
had annual revenues of $86.7 million and $93.7 million for the 1995 and
1994 fiscal years, respectively, and had earnings before interest and
taxes of $13.1 million and $16.5 million for the 1995 and 1994 fiscal
years, respectively. In fiscal 1995, these discontinued lines of
business represented approximately 2.5% of net property, plant and
equipment, 7.6% of consolidated revenues and 18.2% of consolidated
earnings before interest and taxes. The discontinued lines of business
were disposed of for amounts in excess of their carrying values. Certain
one-time charges associated with the reorganization and divestitures were
accrued as they were incurred. The sale of Lee's Famous Recipe resulted
in a gain of approximately $5.5 million, net of tax. The sale of Mike
Rose Foods, Inc., which will be reflected in the Company's first quarter
1996 results of operations, will result in a gain of approximately $22.0
million, net of tax.

During the fourth quarter of 1995, the Company implemented that
part of its restructuring which included the planned closure of 41 under-
performing restaurants (17 Shoney's Restaurants, 22 Captain D's and 2
Fifth Quarters). The Company accrued approximately $6.6 million of
restructuring expenses related to those planned closures, principally
consisting of the write-down of assets to their net realizable value and
the accrual of leases and other costs associated with closure in excess
of anticipated sublease income. In addition, during 1995, the Company
had accrued severance costs of certain executives and store personnel
displaced by the restructuring of approximately $1.4 million.

NOTE 3 - CHANGES IN ACCOUNTING PRINCIPLES

Effective November 1, 1993, the Company adopted FASB Statement
No. 109, "Accounting for Income Taxes". Statement No. 109 changed the
Company's method of accounting for income taxes from the deferred method
to the liability method. The liability method requires the recognition
of deferred income tax liabilities and assets for the expected future tax
consequences of temporary differences between the tax bases and financial
reporting bases of assets and liabilities (See Note 6).

-33-
<PAGE>

Effective November 1, 1993, the Company also adopted FASB
Statement No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". Statement No. 115 requires that debt and equity securities
be carried at fair value unless the Company has the positive intent and
ability to hold debt securities to maturity. Debt and equity securities
must be classified into one of three categories: 1) held-to-maturity, 2)
available-for-sale or 3) trading securities. Each category has a
different accounting treatment for the change in fair values. There was
no cumulative effect from the adoption of Statement No. 115 because, at
the time of adoption, the Company held no investments in debt or equity
securities.

NOTE 4 - SALE OF SHONEY'S LODGING, INC. AND RELATED INVESTMENTS

During fiscal 1991, the Company sold its lodging division
(operating under the name Shoney's Inns) to ShoLodge, Inc. ("ShoLodge").
The Company will receive a portion of royalties generated by both
existing and future Shoney's Inns licensed by ShoLodge through October
2001. Two executive officers of the Company serve on the Board of
Directors of ShoLodge. During 1992, ShoLodge completed an initial public
offering of stock in which the Company purchased $555,555 of common stock
in ShoLodge pursuant to its obligation under the stock purchase agreement
for the sale of the lodging division. In addition, as part of the
purchase agreement, the Company received warrants to purchase up to 5% of
the outstanding common stock of ShoLodge. During July 1993, the Company
sold its ShoLodge shares for $1,147,067.

Effective February 16, 1994, the Company sold its minority
ownership interest in four Shoney's Inns to ShoLodge in exchange for
121,212 shares of common stock of ShoLodge. The shares received were
recorded at their fair value of approximately $2.4 million resulting in a
gain of $1.7 million. The ShoLodge common stock was classified as a
trading security under FASB Statement No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (See Note 3). Changes in fair
value of the ShoLodge stock subsequent to the transaction are reflected
in the results of operations.

The Company owns certain warrants to acquire ShoLodge common
stock that were obtained in the 1992 sale of the Company's lodging
division to ShoLodge. In connection with the sale of the Company's
minority motel interest described in the preceding paragraph, the Company
was granted future registration rights for the ShoLodge shares that may
be acquired upon exercise of the warrants. Under the provisions of FASB
Statement No. 115, the Company has classified warrants for which it has
stock registration rights exercisable within one year as trading
securities. These warrants are recorded at their fair value (the
difference in the warrant exercise price and the market price of ShoLodge
common stock) at the time they are classified as trading securities and
the resulting gain is included in the results of operations. Once
classified as a trading security, these warrants are carried at fair
value with changes in fair value also reflected in the results of
operations.

The Company recorded gains from such ShoLodge warrants of $1.5
million in 1994 and $1.25 million in 1995 at the time the warrants were
classified as trading securities. The Company recorded an unrealized
gain of $0.9 million during 1994 and an unrealized loss of $3.6 million
in 1995 (after being classified as trading securities) due to the change
in fair value of such warrants.

At October 29, 1995, the Company held warrants to purchase
324,000 shares of ShoLodge common stock and owned 121,212 shares of
ShoLodge common stock all of which were classified as

-34-
<PAGE>

trading securities. In addition, the Company holds warrants (for which
it does not currently have registration rights exercisable within one
year) to purchase an additional 98,749 shares of ShoLodge common stock at
prices ranging from $8.40 to $13.35 per share. During the fourth quarter
of 1995, the market value of ShoLodge common stock declined
significantly, and at October 29, 1995, the 121,212 shares of ShoLodge
had a fair value and a carrying value of $954,545 and the ShoLodge
warrants had a fair value and a carrying value of $0.

Under the terms of supplemental guidance on Implementation of
FASB Statement No. 115 issued in November 1995, the Company elected to
classify its investment in ShoLodge common stock and warrants for which
it has registration rights within one year as "held for sale".
Accordingly, future changes in the fair market value of ShoLodge common
stock and warrants will be reflected as an unrealized gain or loss and
included as a component of shareholders' equity rather than as a
component of income.

NOTE 5 - DEBT ISSUE COSTS

Debt issue costs are capitalized and amortized using the
effective interest method over the term of the related debt issues. Issue
costs of $2,211,000, $1,790,000 and $3,590,000 relating to various
financings during 1995, 1994 and 1993, respectively, have been paid and
deferred. Amortization of debt issue costs during 1995, 1994 and 1993
was $2,215,000, $2,576,000 and $2,062,000, respectively.

During 1994, the Company called $145.7 million par value of 12%
subordinated debentures. Unamortized debt issue costs associated with
these debentures of $1.7 million ($1.0 million, net of tax) were charged
to expense as an extraordinary charge.

NOTE 6 - INCOME TAXES

Effective November 1, 1993 the Company adopted FASB Statement No.
109, "Accounting for Income Taxes" (See Note 3). As permitted under the
provisions of Statement No. 109, the Company elected not to restate prior
years' financial statements for the effects of this change. The
cumulative effect of adopting Statement No. 109 was an increase to net
income of $4,468,000 or $0.10 per share (fully diluted) in the year ended
October 30, 1994.

-35-
<PAGE>

The components of the Company's deferred tax assets and
liabilities as of October 29, 1995 and October 30, 1994 are as follows:

1995 1994
Deferred tax assets:
Reserve for lawsuit settlement $23,753,374 $31,420,209
Reserve for self insurance 13,221,079 9,449,874
Other - net 5,621,092 4,287,636
Deferred tax assets 42,595,545 45,157,719

Deferred tax liabilities:
Tax over book depreciation 14,715,011 19,244,064
Capital contribution 22,501,840 22,501,840
Other - net 53,154 1,067,275
Deferred tax liabilities 37,270,005 42,813,179
Net deferred tax asset $ 5,325,540 $ 2,344,540

The balance sheet classification of the net deferred tax asset is as
follows:

1995 1994

Current deferred tax asset $ 24,549,337 $ 17,821,945
Noncurrent deferred tax liability (19,223,797) (15,477,405)
Net deferred tax asset $ 5,325,540 $ 2,344,540

No valuation allowance is considered necessary as all
deductible temporary differences will be utilized primarily by carry
back to prior years' taxable income or as charges against reversals of
future taxable temporary differences.

The components of the provision for income taxes are as follows:
<TABLE>
Liability Deferred
Method Method
------------------------------ -----------
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
Currently payable
Federal $ 16,972,900 $ 22,315,300 $ 26,037,600
State 2,315,100 3,374,700 3,762,400
----------- ---------- ----------
19,288,000 25,690,000 29,800,000
----------- ---------- ----------
Deferred
Federal (2,767,100) 8,174,700 4,829,000
State (213,900) 1,101,300 734,000
----------- ---------- ----------
(2,981,000) 9,276,000 5,563,000
----------- ---------- ----------
Total expense $ 16,307,000 $ 34,966,000 $ 35,363,000
========== ========== ===========
</TABLE>

-36-
<PAGE>

The income statement classification of the provision for income taxes
is as follows:
<TABLE>
<CAPTION>
Liability Deferred
Method Method
----------------------------- -----------
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
Income tax expense attributable to
continuing operations $ 7,873,000 $ 29,314,000 $ 28,456,000
Discontinued operations 4,993,000 6,275,000 6,907,000
Gain on sale of discontinued operations 3,441,000
Extraordinary item (623,000)
----------- ---------- ----------
Total expense $ 16,307,000 $ 34,966,000 $ 35,363,000
=========== ========== ==========
</TABLE>

The components of the provision for deferred income taxes for the
year ended October 31, 1993 are as follows:
1993
------------
Reserve for lawsuit settlement $ 7,250,091
Tax over book depreciation 441,858
Reserves for self insurance (1,613,960)
Amortization of intangibles (259,179)
Other (255,810)
----------
Total $ 5,563,000
==========

A reconciliation of the difference between total income tax expense
and the amount computed using the statutory federal income tax rate
is as follows:
<TABLE>
<CAPTION>
Liability Deferred
Method Method
----------------------------- -----------
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
Statutory federal income tax rate 35% 35% 34.8%
Federal income taxes based on the
statutory tax rate $ 14,412,547 $ 33,782,839 $ 32,511,910
State and local income taxes, net
of federal tax benefit 1,365,780 2,909,400 2,930,756
Targeted jobs and FICA tax credits (1,427,424) (1,574,412) (267,104)
Other 1,956,097 (151,827) 187,438
---------- ---------- ----------
$ 16,307,000 $ 34,966,000 $ 35,363,000
========== ========== ==========
</TABLE>

The Company made income tax payments of approximately $15,238,000,
$22,483,000 and $25,784,000 during fiscal years 1995, 1994 and 1993,
respectively.

-37-
<PAGE>

NOTE 7 - DEBT AND OBLIGATIONS UNDER CAPITAL LEASES

Debt and obligations under capital leases at October 29, 1995 and
October 30, 1994 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
-------------- -------------
<S> <C> <C>
Senior debt-reducing revolving credit facility, due in
installments to October 1999 $ 223,000,000 $ 240,000,000
Senior debt-fixed rate, due in April 1995 60,000,000
Senior debt-taxable variable rate notes, due in
varying installments to September 1998 29,550,000 31,500,000
Senior debt-due in installments to April 1998 7,104,580 9,000,000
Senior debt-due in September 1997 20,800,000 20,800,000
Senior debt-due in installments to October 1999 28,000,000
Subordinated zero coupon convertible debentures,
due April 2004 87,780,529 80,790,563
Industrial Revenue Bonds, due in varying annual
installments to May 2006 collateralized by land,
buildings, equipment and restricted cash 13,947,500 14,113,750
Notes payable to others, 8.0% to 10.25%, maturing
at varying dates to 2009 ($7,676,784 of these
notes are secured by land, buildings and equipment) 16,717,784 11,824,970
----------- -----------
426,900,393 468,029,283
Obligations under capital leases 13,580,207 12,688,658
----------- -----------
440,480,600 480,717,941
Less amount due within one year 34,448,154 66,692,163
----------- -----------
Amount due after one year $ 406,032,446 $ 414,025,778
=========== ===========
</TABLE>

Senior Debt

In July 1993, the Company entered into a $125 million
reducing revolving credit facility with a syndicate of financial
institutions. The facility had a four-year, three-month term expiring
October 22, 1997, with reductions in the aggregate credit facility
beginning in 1995. The interest rate for the facility was at floating
rates (the London Interbank Offered Rate ("LIBOR") plus 2% or the
announced Alternate Base Rate of the agent bank plus 1%).

During the third quarter of fiscal 1994, the Company and the
financial institutions amended this credit facility to allow the
Company to redeem its 12% subordinated debentures issued in the
Company's 1988 recapitalization. The credit facility was increased
to a maximum of $270 million, the interest rate remained at LIBOR
plus 2% and the maturity was extended to October 1999. The
Company redeemed $145.7 million of 12% subordinated debentures
at par on July 2, 1994. At October 29, 1995, the Company had
$223 million outstanding under this facility and the interest rate was
8.0%.

Under the terms of the reducing revolving credit facility, the
Company agreed to effect an interest rate risk management program to limit
the Company's exposure to rising short-term interest rates. As of October
29, 1995, the Company had interest rate cap agreements for $50 million

-38-
<PAGE>

(notional amount), which have a 7% LIBOR interest rate cap for a
remaining one year period. Under the terms of the cap agreements,
the Company's maximum LIBOR interest rate on $50 million of its
outstanding variable rate debt is effectively capped at 7% until
October 1996. The Company is exposed to loss if one or more
counterparties to the cap agreements defaults; however, the
Company does not anticipate nonperformance by the counterparties.
The contract or notional amount of interest rate cap agreements do
not represent an exposure to credit loss.

During the third quarter of fiscal 1995, the Company
received a modification of its lending agreements to facilitate the
divestiture of Mike Rose Foods, Inc. and Lee's Famous Recipe.
The modification requires that 35% of the net after tax proceeds
from the divestiture of these businesses be used to permanently
reduce the availability under the reducing revolving credit facility.
Subsequent to the sale of Lee's Famous Recipe and Mike Rose
Foods, the Company permanently reduced the amount available
under its reducing revolving credit facility by $7.5 million and $12.9
million, respectively. Approximately $51 million of restaurant
properties that previously served as collateral for the Company's
Tranche C debt were substituted for collateral to be released upon
the sale of Mike Rose Foods, Inc. and Lee's Famous Recipe. The
lenders also agreed to release a negative pledge they held on
approximately $104 million of collateral previously used to secure
the Company's Tranche C debt which was repaid during 1995, and
to permit alternative uses of this collateral by the Company.

Until its repayment in 1995, the senior debt-fixed rate loan
carried interest at 9.78%. The Company had a combination of
interest rate swap agreements for $60 million which expired in April
1995, that effectively converted the interest rate to 6.3%.

The senior debt issues described in the preceding paragraphs
are collateralized by first liens on all land, buildings and
improvements owned by the Company and its subsidiaries and not
otherwise pledged and the reducing revolving credit facility is also
secured by first liens on all other material assets of the Company and
its subsidiaries other than inventory (as to which there is a negative
pledge), all stock of all of the Company's subsidiaries (including all
common shares of a wholly-owned real estate company that owns
183 of the Company's restaurant properties), all accounts receivable,
machinery and equipment, franchise agreements, intangible property
rights and all other material tangible and intangible property of the
Company and its subsidiaries.

The senior debt-taxable variable rate notes are sold to
investors through an investment banking corporation. The notes are
secured by standby letters of credit of $33.5 million which includes
the face amount of the notes plus interest for 145 days. The letters of
credit are secured by a reimbursement agreement and standby note
which are collateralized by a fully perfected first lien on certain land
and buildings. A letter of credit securing $9.4 million of this
indebtedness will expire on October 1, 1996; however, the Company
intends to extend the letter of credit for a period of at least one year.
The effective interest rate at October 29, 1995 was 8.17%.

The senior debt of $7.1 million bears interest at LIBOR plus
1.25%. The loan is collateralized by a first lien on certain land and
buildings. The effective interest rate at October 29, 1995 was
7.13%.

The senior debt of $20.8 million bears interest at LIBOR plus
1.5%. The loan is collateralized by a first lien on certain land and
buildings. The effective interest rate at October 29, 1995 was 7.38%.

-39-
<PAGE>

The senior debt of $28.0 million bears interest at LIBOR plus
1.25%. The loan is collateralized by a first lien on certain land and
buildings. The effective interest rate at October 29, 1995 was
7.13%.

These senior debt issues also (1) require satisfaction of
certain financial ratios and tests (which become more restrictive each
year); (2) impose limitations on capital expenditures; (3) limit the
ability to incur additional debt, leasehold obligations and contingent
liabilities; (4) prohibit dividends and distributions on common stock;
(5) prohibit mergers, consolidations or similar transactions; and (6)
include other affirmative and negative covenants.

Subordinated Zero Coupon Convertible Debentures, Due April 2004

The subordinated zero coupon convertible debentures were
issued in April 1989 at $286.89 per $1,000 note (aggregate amount
$57.736 million). There are no periodic payments of interest. The
issue price represents a yield to maturity of 8.5% based on a
semiannual bond equivalent basis. Each note is convertible into
29.349 shares of the Company's common stock at the option of the
holder. The Company has reserved 5,205,632 shares for future
issuance pursuant to these debentures.

Subordinated Debentures 12%, Due July 2000

The Company issued 12% subordinated debentures in July
1988 with a par value of $145.7 million that were callable on or
after July 1, 1994. The debentures were redeemed at par on July 2,
1994. Debt issue costs associated with these debentures were
included in other assets and were being amortized using the effective
interest method over the life of the debentures. As a result of the
redemption, the unamortized portion of the original issue discount
and debt issue costs of $1,661,000 was charged to expense during
the third quarter of fiscal 1994. This charge is reflected in the
Income Statement as an extraordinary charge of $1,038,000, net of
income tax benefits of $623,000.

Other Debt Information

The Company has an unsecured line of credit for
$20,000,000 with interest payable monthly at the lending bank's
index rate (8.75% at October 29, 1995). There were borrowings of
$7,561,000 under the line at October 29, 1995. The line is available
through October 31, 1996 with a three month extension each quarter
at the option of the bank. The Company also has an unsecured
revolving credit facility for $10,000,000 with interest payable
quarterly at rates based on the prime lending rate (8.75% at October
29, 1995). Borrowings under this facility, which expires June 25,
1996, if not terminated earlier, are due on thirty days notice. As of
October 29, 1995, the balance outstanding under this facility was
$1,480,000. The weighted average interest rates for these two
unsecured credit facilities were 8.0%, 6.2% and 5.9% for fiscal
years 1995, 1994 and 1993, respectively.

The industrial revenue bonds include $11,797,500 at fixed
interest rates ranging from 7.5% to 11.5% and $2,150,000 at a
floating interest rate subject to a floor of 7.5% and a ceiling of 15%.

-40-
<PAGE>

Debt and obligations under capital leases maturing in each of the
next five fiscal years are as follows:

1996 1997 1998 1999 2000
----------- ----------- ---------- ---------- -----------
$34,448,000 $87,592,000 $85,160,000 $92,574,000 $2,816,000

Net interest costs of approximately $813,000, $866,000, and
$450,000 were capitalized as a part of building costs during 1995,
1994 and 1993 respectively. Interest paid during 1995, 1994 and
1993 was approximately $31,276,000, $38,202,000 and
$35,975,000 respectively.

The Company has standby letters of credit outstanding of
$16.0 million at October 29, 1995 in addition to the letters of credit
supporting the taxable variable rate notes previously described.

The carrying value and estimated fair value of the Company's long-
term debt and other financial instruments are summarized in the
following table:
<TABLE>
<CAPTION>
October 29, 1995
------------------------------------
Estimated
Carrying Value Fair Value
<S> <C> <C>
Senior debt-reducing revolving credit facility $ 223,000,000 $ 223,000,000
Subordinated zero coupon convertible debentures 87,780,529 70,061,000
Senior debt - various 85,454,580 85,455,000
Industrial revenue bonds 13,947,500 14,955,000
Notes payable 7,676,784 7,685,000
Lines of credit 9,041,000 9,041,000
----------- -----------
Total Debt $ 426,900,393 $ 410,197,000
=========== ===========
$50 million (notional amount) interest rate cap
agreements $ 0 $ 7,975

Reserve for litigation settlement $ 62,100,323 $ 55,453,000

ShoLodge Warrants (See Note 4) $ 0 $ 0

ShoLodge Common Stock (See Note 4) $ 954,545 $ 954,545
</TABLE>

See Note 1 - Summary of Significant Accounting Policies for a further
discussion of the basis for management's estimates of the fair value of
financial instruments.

NOTE 8 - SHAREHOLDERS' EQUITY (DEFICIT)

During the 1992 fiscal year, the Company and a board member
entered into a capital contribution agreement whereby, upon court
approval of a settlement regarding certain litigation (See Note 12),
the Company received a capital contribution of 2,694,444 shares of its
common stock. The agreement with the board member was approved by the
Board of Directors without that board member's participation.

-41-
<PAGE>

At October 25, 1992, the Company recorded the effect of the
shares held in escrow in shareholders' equity pending distribution to
the Company. During 1993, the court approved the settlement
agreement, and the shares which had been held in escrow at October
25, 1992 were distributed to the Company and retired.
Shareholders' equity (deficit) was charged with an estimate of
income taxes payable based upon the market price of the contributed
shares at October 25, 1992. This income tax effect was
subsequently adjusted through shareholders' equity (deficit) in
February 1993, based on the current market value of the shares at
the time they were distributed from escrow.

NOTE 9 - STOCK OPTIONS AND STOCK BENEFIT PLANS

The stock option plan adopted by the Company in 1969, and
as subsequently amended, covered 123,346 and 198,184 shares of
the common stock of the Company as of October 29, 1995 and
October 30, 1994, respectively. During 1989, the right to grant
options under the 1969 plan expired. A second stock option plan
adopted by the Company in 1981, and as subsequently amended,
covered 7,531,425 and 7,728,047 shares of the common stock of the
Company as of October 29, 1995 and October 30, 1994,
respectively. The 1981 Plan was amended in December 1993 (with
subsequent approval by the shareholders in March 1994) to extend
the date of termination of the 1981 Plan from September 2, 1996 to
September 2, 2001, increase the number of shares authorized for
issuance by the Stock Option Plan by 5,000,000 and limit the
number of shares any one employee may be granted in a given year
to 250,000.

Option prices are not less than the market price on the date
of grant. Both plans, prior to 1988, provided for the issuance of
options having terms of up to 10 years which were exercisable 10%
per year after one year and in full after five years. An amendment in
1988 modified the vesting period for new options under both plans,
which allowed options to be exercisable at the rate of 20% per year
for four years and in full after four years and eight months.
Subsequent to 1988, the 1981 plan was amended further to provide
that all options would be exercisable at rates to be determined by the
Company's compensation committee of the Board of Directors, not
to exceed 33 1/3% per year and that options vest upon death or
disability.

The Company has a stock option plan for directors under
which options to purchase 200,000 shares of common stock may be
granted to non-employee directors. Each non-employee director
receives an option to purchase 5,000 shares upon their initial election
to the Board and every five years thereafter receives an option to
purchase 5,000 shares. The option price is the market price of the
Company's common stock on the date that the option is granted.
Each option has a term not to exceed ten years and is exercisable at
the rate of 20% per year and in full in the event of death or
disability.

-42-
<PAGE>

Options available for future grant under the 1981 plan and the
director's plan at the end of 1995 and 1994 totaled 5,033,666 and 5,828,677
shares, respectively. A summary of activity under the plans is as follows:
<TABLE>
<CAPTION>
Range of
Options Shares Option Prices
- ---------------------------------- ------------- -------------------
<S> <C> <C>
Outstanding at October 31, 1993 2,423,380 $ 5.04 $ 25.75
Issued 509,825 13.88 23.63
Exercised (346,184) 5.04 19.13
Expired or cancelled (294,467) 5.04 25.75
--------- ------ -----
Outstanding at October 30, 1994 2,292,554 5.04 25.75
Issued 1,453,000 9.63 12.00
Exercised (271,460) 5.04 13.25
Expired or cancelled (657,989) 7.26 25.75
--------- ------ -----
Outstanding at October 29, 1995 2,816,105 $ 5.04 $ 25.75
========= ====== =====
</TABLE>

During fiscal year 1993, options were exercised for
1,759,948 shares at prices ranging from $4.01 to $20.25. At
October 29, 1995 and October 30, 1994, options for 677,324 and
871,750 shares, respectively, were exercisable.

The Company also has an Employee Stock Purchase Plan
under which 1,890,561 shares of the Company's common stock may
be issued at October 29, 1995. Under the terms of this plan,
employees may purchase the Company's common stock through
payroll deductions. The purchase price is 85% of the lower of (i) the
average of the closing market prices on the first trading day of each
calendar month or (ii) the closing market price on the last trading
day of each calendar year. The exercise date under this plan is the
last trading day of each calendar year and distributions to employees
of 122,184, 100,124 and 96,873 shares were made in fiscal years
1995, 1994 and 1993, respectively. There have been no charges to
income in connection with the plan other than incidental expenses in
the administration of the plan.

The Company has an Employee Stock Bonus Plan under
which 611,373 shares of the Company's stock may be issued at
October 29, 1995. The awards under this plan consist of both a
stock and a cash bonus. The stock bonuses vest 10% per year after
one year and in full after five years and are distributed upon vesting.
On each vesting date, a cash bonus also will be distributed that is
equal to 25% of the market value of the shares being distributed. A
maximum of 1,000 shares may be awarded to any employee each
year. As of October 29, 1995, grants of bonuses under this plan of
37,750 shares were outstanding.

The shares distributed and cash bonuses paid pursuant to this plan
during the past three fiscal years were as follows:

Shares Cash Bonuses
------ -------------
1993 41,575 $ 241,655
1994 1,400 $ 8,094
1995 4,675 $ 14,065

-43-
<PAGE>

On April 11, 1995, the Company's Board of Directors
granted an award of 50,000 restricted shares of Shoney's, Inc.
common stock to the Company's Chairman and CEO. These
restricted shares vest on April 11, 1996 (16,500 shares) ; April 11,
1997 (16,500 shares); and April 11, 1998 (17,000 shares) and are
reflected in compensation expense based on the vesting schedule. In
addition, a cash bonus equal to the estimated tax due on the
distribution of such restricted shares will be paid at vesting.

On April 11, 1995, the Company's Board approved the
employment contract of the Chairman and CEO, the terms of which
require that certain stock options be granted. All of the options
granted have a ten year term and vest 20% each year following the
date of grant. The stock option grants and their terms are
summarized in the following table:

Option Price
Date of Grant Shares Per Share
- ---------------- ------- ------------
April 11, 1995 250,000 $ 10.75
November 1, 1995 250,000 15.25
November 1, 1996 125,000 (1)
November 1, 1996 75,000 16.75
November 1, 1996 50,000 18.50

(1) This portion of the November 1, 1996 grant is to be at the fair
market value of the Company's common stock on that date as
indicated by the closing price on the New York Stock Exchange.

NOTE 10 - LEASES

The Company has noncancellable lease agreements for
certain restaurant land and buildings. Substantially all lease
agreements may be renewed for periods ranging from five to fifteen
years, and provide for contingent rentals based on percentages of net
sales (generally 3% to 6%) against which minimum rentals are
applied.

During 1995, the Company acquired five Shoney's
Restaurants from a franchisee. The Company acquired leasehold
interest in land and buildings in exchange for the assumption of
capital lease obligations of approximately $2,276,000 and paid
$600,000 for furniture, fixtures, equipment, and the business
operations of the franchisee.

Buildings under capital leases of $18,122,394 at October 29,
1995 and $20,631,961 at October 30, 1994 and accumulated
amortization of $7,517,259 and $10,854,382 at October 29, 1995
and October 30, 1994, respectively, relate to the building portion of
capital leases involving land and buildings. Amortization of buildings
under capital leases is included in depreciation expense.

-44-
<PAGE>

At October 29, 1995, minimum rental commitments under
capital leases and operating leases having an initial or remaining
noncancellable term of one year or more are shown in the following
table:
<TABLE>
<CAPTION>
Capital Operating Sublease
Leases Leases Amounts Total

- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 $ 2,476,573 $ 6,701,206 $ (583,802) $ 8,593,977
1997 2,408,068 6,314,321 (518,750) 8,203,639
1998 2,253,986 5,813,948 (438,421) 7,629,513
1999 2,168,094 5,321,701 (426,287) 7,063,508
2000 1,999,415 4,879,105 (392,639) 6,485,881
Thereafter 10,177,308 28,808,550 (3,161,714) 35,824,144
- ---------------------------------------------------------------------------------------------------------------
Total minimum rentals 21,483,444 $ 57,838,831 $(5,521,613) $ 73,800,662
=========== ========== ==========
Amount representing interest (7,903,237)
----------
Present value of net minimum rentals $ 13,580,207
==========
</TABLE>

Contingent rental expense relating to the land and building portion of
capital leases was $1,273,462, $1,448,937 and $1,463,183 in 1995,
1994 and 1993, respectively.

Total rental expense for all operating leases not capitalized is as
follows:
1995 1994 1993
------------ ------------ -------------
Minimum rentals $7,605,845 $7,088,510 $6,676,136
Contingent rentals 559,513 434,524 434,487
--------- --------- ---------
Subtotal 8,165,358 7,523,034 7,110,623
Sublease rentals (560,433) (683,964) (630,118)
--------- --------- ---------
Total $7,604,925 $6,839,070 $6,480,505
========= ========= =========

NOTE 11 - COMMITMENTS AND CONTINGENCIES

On September 5, 1995 the Company and TPI Enterprises,
Inc. ("TPI") announced they had signed a letter of intent to merge
TPI with a subsidiary of the Company. TPI is the largest franchisee
of the Company operating 188 Shoney's and 68 Captain D's Seafood
restaurants. For the twelve months ended October 1, 1995, TPI
reported restaurant revenues of approximately $278 million.
Subsequent to signing this letter of intent, TPI's Board of Directors
appointed a Special Committee of the Board to negotiate the
definitive merger agreement and work with outside advisors to obtain
a fairness opinion from TPI's investment banker.

Subsequently, on December 5, 1995, the Company and TPI
announced that they had signed a revised letter of intent calling for
the acquisition of TPI Restaurants, Inc. and two other TPI
subsidiaries, which represent substantially all of the assets of TPI,
by a subsidiary of the Company. The TPI subsidiaries will be acquired
in exchange for 6,456,223 shares of Shoney's, Inc. stock as well as
the assumption of certain obligations of TPI, including approximately
$95 million in debt at October 29, 1995. TPI will distribute the
Shoney's stock it receives to its shareholders. Based on the

-45-
<PAGE>

TPI shares issued and outstanding at the time of the announcement,
TPI shareholders will receive 0.315 shares of Shoney's, Inc. common
stock for each TPI share.

The transaction is subject to the approval of the Board of
Directors, shareholders and lenders of both companies. The
Company's existing credit facilities contain covenants which will
require lender approval of the transaction as well as the terms of any
proposed refinancing of the outstanding TPI debt.

On October 1, 1992, the Company and Thompson
Hospitality, L.P. ("THL") entered into an agreement to purchase
nine and thirty-one restaurants, respectively, from Marriott
Corporation and Marriott Family Restaurants, Inc. ("Marriott"). All
of the restaurants purchased by the Company and most of the
restaurants purchased by THL will be converted to Shoney's
Restaurants. As part of the transaction, the Company agreed to a
contingent purchase of fifteen restaurants purchased by THL if there
is a default by THL on or before October 2, 1995 in its obligations
to Marriott. The purchase price for these fifteen restaurants was pre-
determined and the Company's maximum obligation under this
arrangement was $8.7 million. During 1994 and 1995, the
Company, THL and Marriott agreed to a modification of this
contingent purchase agreement whereby the Company ultimately
agreed to extend its purchase obligation to July 2, 1997. In
addition, the Company's maximum obligation was reduced to eight
restaurants and $5.1 million. In the event of a default by THL, the
Company is obligated to purchase the pre-selected restaurants by
paying Marriott the pre-determined price and taking title to the
properties from THL and Marriott. Accordingly, the fair value of
Shoney's, Inc.'s guarantee of THL would be the difference (if any)
between the value of the restaurant properties acquired and the
agreed upon payments under the guarantee. The Company did not
deem it practical to appraise the underlying value of the restaurant
properties in order to estimate the fair value of this guarantee.

In connection with the sale of MRF, the Company has
committed to certain minimum purchase obligations with respect to
food products supplied by MRF (See Note 15). The Company guarantees
certain twenty-year leases of franchisees for an annual fee of
approximately $45,000 and is required to offer to purchase the
properties for an amount equal to the investor's unpaid mortgage
($431,240) at its maturity in 1999. The Company has also guaranteed
certain loans made to ShoLodge totaling $5,464,158.

NOTE 12 - SETTLEMENT OF DISCRIMINATION LAWSUIT

On January 25, 1993, the court gave approval to a consent
decree settling litigation against the Company and its former chairman.
The litigation was certified a class under Title VII of the Civil
Rights Act of 1964 consisting of black restaurant employees to represent
claims of alleged discriminatory failure to hire, harassment, failure to
promote, discharge and retaliation. This class consisted only of
employees from the Company's "Shoney's" and "Captain D's" restaurant
concepts and the class period was from February 4, 1988 through April
19, 1991. Under the consent decree, the Company will pay $105 million
to settle these claims. The settlement covered all of the Company's
restaurant concepts and the corporate offices from February 4, 1985
through November 3, 1992. In addition, the Company agreed to pay
$25.5 million in plaintiffs' attorneys fees and an estimated $4 million
in payroll taxes and administrative costs. The settlement resulted in a
charge to earnings of $77.2 million, net of insurance recoveries and
applicable taxes, in the fourth quarter of 1992. During 1994, the
Company obtained an IRS private letter ruling which clarified that certain

-46-
<PAGE>

portions of the settlement payments were not subject to federal payroll
taxes that had been previously accrued by the Company. The reserve for
litigation settlement was reduced by $1.7 million to adjust for this
change in estimate for accrued payroll taxes due on the settlement.

Under the terms of the consent decree, payments are made
on a quarterly basis, without interest, on March 1, June 1,
September 1 and December 1. Expected payment obligations (net of
insurance recoveries) under the consent decree in each of the next
five fiscal years are as follows:

1996 1997 1998 1999 2000
------------ ------------ ------------ ------------ ------------
$ 23,373,000 $ 22,658,000 $ 15,774,000 $ 68,000 $ 68,000

NOTE 13 - LITIGATION

The Company is a defendant in a federal court suit filed on
December 19, 1994 by one of its Captain D's franchisees who
claims that the Company imposes a "tying" arrangement by
requiring franchisees to purchase food products from the Company's
commissary. The complaint seeks damages for an alleged class of
similarly situated plaintiffs in an amount not to exceed $500 million
and treble damages. The same plaintiff has also filed a state court
suit making essentially the same claims; however, in that suit, the
plaintiff did not make a class action claim. On December 16, 1994,
counsel for the plaintiff advised the Company that the federal court
case described above would be filed unless the Company settled the
pending state court case by purchasing the plaintiff's franchised
Captain D's restaurant for $1.65 million, plus assumption of certain
equipment leases. The Company rejected the demand and the
federal court lawsuit was filed. On January 23, 1995, the Company
filed a motion to dismiss or stay this federal court case pending the
resolution of the state case. Thereafter, the plaintiff filed an
amended complaint adding a second plaintiff, a former franchisee,
Sunbelt Restaurant Management, Inc. The motion to dismiss was
denied on May 31, 1995. The plaintiff filed a motion to certify the
case as a class action on August 7, 1995. Discovery on that motion
is proceeding and the motion is set to be argued in April 1996.

Management believes it has substantial defenses to the claims
made and intends to vigorously defend the case. In the opinion of
management, the ultimate liability with respect to the case will not
materially affect the operating results or the financial position of the
Company.

On December 1, 1995, a federal court suit was filed against
the Company by five employees who claim the Company engages in
conduct and actions which are designed to circumvent the pay
requirements set forth within the Fair Labor Standards Act. The
plaintiffs purport to act on behalf of a similarly situated class of
plaintiffs and have petitioned the court to send court supervised
notice of their lawsuit to other potential plaintiffs. On January 2,
1996, a second federal court suit was filed by a group of plaintiffs
who purport to be present or former managers or hourly employees
of the Company and claim to bring this action on behalf of
themselves and others similarly situated. The plaintiffs claim that
the Company violated the Fair Labor Standards Act by either not
paying them for all hours worked or that they were improperly paid
for overtime hours worked. In both cases, the plaintiffs claim to be
entitled to recover unpaid wages, liquidated damages, attorneys' fees
and expenses.

-47-
<PAGE>

Management believes it has substantial defenses to the claims
made and intends to vigorously defend the case. However, neither
the likelihood of an unfavorable outcome or the amount of ultimate
liability, if any, with respect to these cases can be determined at this
time. Accordingly, no provision for any potential liability has been
made in the consolidated financial statements.

In addition to the litigation described in the preceding
paragraphs, the Company is a party to other legal proceedings
incidental to its business. In the opinion of management, the
ultimate liability with respect to these actions will not materially
affect the operating results or the financial position of the Company.

NOTE 14 - RELATED PARTY TRANSACTIONS

During November 1995, the Company employed a person
who operated six franchised Shoney's Restaurants to serve as an
executive officer of the Company. In connection with this officer's
employment arrangement, the Company agreed to purchase five of
the officer's franchised Shoney's Restaurants for approximately $3
million. In addition, the Company agreed to assume certain
operating leases and other obligations with respect to these
restaurants. This officer owns one additional Shoney's Restaurant
that is anticipated to be sold to an unrelated third party. However,
until that unit is sold, the Company has agreed that the officer may
continue to operate one franchised restaurant. At October 29, 1995,
the restaurants owned by this officer were indebted to the Company
in the amount of $332,000 arising from the purchase of food and
supplies from the Company's commissary. This receivable was
satisfied in December 1995 upon closing by the Company on the
purchase of these restaurants.

In addition, at October 29, 1995, the officer was Chairman
of Restaurant Management Services, Inc. ("RMS"), a Shoney's and
Captain D's franchisee based in Macon, Georgia. The officer will
receive compensation from RMS under the terms of a consulting and
non-competition agreement until February 1996. The officer resigned
as Chairman of RMS effective February 1996.

NOTE 15 - SUBSEQUENT EVENTS

On November 19, 1995, the Company sold MRF to
Levmark Capital Corporation for $55 million cash. The transaction
was effected through the sale of all issued and outstanding capital
shares of MRF. The transaction resulted in a gain on sale of
discontinued operations of approximately $22 million, net of income
taxes of $16.9 million. Under the terms of the sales agreement,
Shoney's, Inc. entered into a five year supply agreement though
which MRF will continue to be the supplier of salad dressings,
mayonnaise, sauces, condiments, breadings, and a variety of food
products for all company-owned restaurants. The supply agreement
contains minimum purchase commitments generally equal to the
actual quantities of various products the Company purchased from
MRF during fiscal 1994 for Company-owned restaurants.

-48-
<PAGE>
NOTE 16 - QUARTERLY FINANCIAL INFORMATION (Unaudited)
(in thousands except per share data)
<TABLE>
<CAPTION>
Per Share
--------------------------
Income From Income From
Continuing Continuing
Operations Operations
Before Extra- Before Extra-
ordinary Items ordinary Items
and Cumulative and Cumulative
Number Effect of Fully Effect of Stock Stock
of Gross Accounting Net Diluted Accounting Market Market
Weeks Revenues Profit Change Income Earnings Change High Low
----- --------- -------- -------- -------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995
First Quarter 16 $ 310,385 $ 43,839 $ 12,923 $ 10,663 $ .26 $ .19 $15.38 $11.25
Second Quarter 12 253,195 35,537 10,003 8,494 .20 .15 12.50 9.13
Third Quarter 12 253,897 36,733 13,169 10,200 .25 .20 13.13 10.13
Fourth Quarter 12 235,855 14,679 (17,020) (4,485) (.11) (.27) 12.50 8.88
-- --------- ------- ------- ------ ---- ----
52 $1,053,332 $ 130,788 $ 19,075 $ 24,872 $ .60 $ .27
== ========= ======= ======= ====== ==== ====
</TABLE>
<TABLE>
<CAPTION>
1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter 16 $ 312,644 $ 48,523 $ 17,250 $ 18,672(a) $ .43 $ .26 $25.63 $19.75
Second Quarter 12 254,413 45,338 22,287 16,865 .38 .32 24.63 17.13
Third Quarter 12 259,481 45,666 24,019 16,216 .37 .34 18.13 13.50
Fourth Quarter 12 245,921 37,039 18,076 14,272 .33 .29 15.88 13.38
-- --------- ------- ------- ------ ---- ----
52 $1,072,459 $ 176,566 $ 81,632 $ 66,025 $1.51 $1.21
== ========= ======= ======= ====== ==== ====
</TABLE>
(a) The Company's first quarter 1994 net income shown has been
restated to reflect a correction of the cumulative effect of adopting
FASB Statement No. 109, "Accounting for Income Taxes". In the
first quarter, the Company had estimated the cumulative effect of
adopting Statement No. 109 to be an increase in income of $5.4
million or $.12 per share (fully diluted), resulting in originally
reported net income for the quarter of $19.6 million or $.45 per share
(fully diluted). During the fourth quarter, the Company reassessed
the cumulative effect and found that it had been overstated by
approximately $.9 million or $.02 per share. Accordingly, the first
quarter results have been restated to reflect the revised cumulative
effect from the change in accounting for income taxes of $4.5 million
or $.10 per share. Such amounts have been reflected in the first
quarter net income and per share amounts in the preceding table.

(b) During the fourth quarter of fiscal 1995, the Company recorded
several material adjustments, principally related to its reorganization
and restructuring. These adjustments totaling approximately $13.6
million had a material affect on fourth quarter earnings. The
significant fourth quarter adjustments included the following: (1) A
$6.6 million restructuring expense was recorded related to the
planned closure of 41 under-performing restaurants (See Note 2), (2)
A $3.2 million write-down of surplus property and certain restaurant
assets was recorded to reduce these assets to their net realizable
values, and (3) The Company's worker's compensation self-
insurance reserves were increased by $3.8 million to recognize
adverse development trends related to prior year's incurred losses.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
There are no Company disclosures required by Item 304 of
Regulation S-K, 17 C.F.R. Section 229.304.

-49-
<PAGE>

<PAGE> 1
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The names, ages and principal occupation of all persons who are directors
and who have been nominated to serve as directors of the Company are as
follows:

<TABLE>
<S> <C>
DENNIS C. BOTTORFF Age -- 51
Chairman of the Board Director since 1989
and Chief Executive Officer
First American Corporation

Mr. Bottorff served as President, Chief Operating Officer and as a member of the board of
directors of Sovran Financial Corporation in Norfolk, Virginia until Sovran's merger with
Citizens and Southern Corporation in 1990. At that time, he became President and Chief
Operating Officer of C&S/Sovran Corporation. He resigned from C&S/Sovran Corporation in 1991 to
become President and Chief Executive Officer and a member of the board of directors of First
American Corporation and its subsidiary, First American National Bank in Nashville, Tennessee.

CAROLE F. HOOVER Age -- 52
President Director since 1990
Concessions International of Cleveland

Ms. Hoover, since 1984, has served as President of Concessions International of Cleveland, an
airport food and beverage concessionaire. She also serves as President and Chief Executive
Officer of the Greater Cleveland Growth Association.

C. STEPHEN LYNN Age -- 48
Chairman of the Board and Director since 1995
Chief Executive Officer
Shoney's, Inc.

Mr. Lynn served as Chief Executive Officer and as a director of Sonic Corp. from November 1983
through April 1995. He also served as Chairman of the Board of Sonic Corp. from April 1986 to
April 1995. On April 11, 1995, Mr. Lynn was elected as a member of the Board and as the
Chairman of the Board and Chief Executive Officer of Shoney's, Inc.

VICTORIA B. JACKSON Age -- 41
President Director since 1989
and Chief Executive Officer
DSS/ProDiesel, Inc.

Ms. Jackson, since 1979, has served as President and Chief Executive Officer of DSS/ProDiesel,
Inc. (formerly Diesel Sales & Service Co., Inc.), a remanufacturer of fuel injection
components for the diesel industry, based in Nashville, Tennessee. Ms. Jackson also serves as a
member of the board of directors of Whitman Corporation.

ALEX SCHOENBAUM Age -- 80
Retired Senior Chairman of the Board Director since 1971
Shoney's, Inc.

Mr. Schoenbaum served as Senior Chairman of the Board of the Company from 1976 until his
retirement from that position in March 1985. Mr. Schoenbaum has indicated that he will not
stand for reelection at the 1996 annual meeting of shareholders.

</TABLE>

-50-

<PAGE> 2

<TABLE>
<S> <C>
ROBERT T. SHIRCLIFF Age -- 67
Chairman of the Board Director since 1974
The Shircliff Group

Mr. Shircliff served as President of The Shircliff Group (business consultants), Jacksonville,
Florida, from December 1973 until 1987, when he became Chairman of the Board. Mr. Shircliff has
indicated that he will not stand for reelection at the 1996 annual meeting of shareholders.

B. FRANKLIN SKINNER Age -- 64
Retired Chairman of the Board Director since 1993
BellSouth Telecommunications, Inc.

Mr. Skinner served as a member of the board of directors and as Chairman of the Board and Chief
Executive Officer of Southern Bell Telephone and Telegraph Co. from 1988 until 1991, after
which time he became a member of the board of directors and Chairman of the Board and Chief
Executive Officer of BellSouth Telecommunications, Inc., which was formed in 1991 through the
consolidation of South Central Bell, Southern Bell, and BellSouth Services. He retired from
those positions in 1992.

JAMES R. THOMAS Age -- 70
Retired Chairman of the Board Director since 1974
Carbon Industries, Inc.

Mr. Thomas served as President of Carbon Industries, Inc. Charleston, West Virginia, from
November 1974 until February 1982, at which time he was elected Chairman of the Board. He retired
from that position in November 1983. He also serves as member of the boards of directors of One
Valley Bank, N.A. of Charleston, and The Columbia Gas System, Inc. Mr. Thomas has indicated that
he will not stand for reelection at the 1996 annual meeting of shareholders.

CAL TURNER, JR. Age -- 56
Chairman of the Board, President Director since 1993
and Chief Executive Officer
Dollar General Corporation

Mr. Turner serves as a member of the board of directors and as Chairman of the Board, President
and Chief Executive Officer of Dollar General Corporation (discount retail chain), a position
that he has held since 1988. He also serves as a member of the boards of directors of First
American Corporation and Thomas Nelson, Inc.
</TABLE>

All persons listed above currently are serving as members of the Company's
Board of Directors (the "Board"). See also Item 4A, "Executive Officers of the
Registrant" in Part I of this Annual Report on Form 10-K.

REPORTS OF BENEFICIAL OWNERSHIP

Under the securities laws of the United States, the Company's directors,
executive officers and any persons holding more than ten percent of the
Company's common stock (the "Shares") are required to report their ownership of
the Shares and any changes in that ownership to the Securities and Exchange
Commission (the "SEC") and the New York Stock Exchange (the "NYSE"). These
persons also are required by SEC regulations to furnish the Company with copies
of these reports. Specific due dates for these reports have been established and
the Company is required to report in this Annual Report on Form 10-K any
failure to file by these dates during the 1995 fiscal year. Based solely on a
review of the reports furnished to the Company or written representations from
the Company's directors and executive officers, the Company believes that all
of these filing requirements were satisfied by the Company's directors,
executive officers and ten percent holders during the 1995 fiscal year.

-51-

<PAGE> 3

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table summarizes the compensation paid or accrued by the
Company during the three fiscal years ended October 29, 1995 to those persons
who: (i) served as the Company's Chief Executive Officer ("CEO") during the 1995
Fiscal Year; (ii) were the Company's four most highly compensated executive
officers (other than the CEO) serving as of the end of the 1995 Fiscal Year; and
(iii) would have been included under item (ii) but for the fact that they were
not serving as executive officers at the end of the 1995 Fiscal Year.

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
NAME -------------------------------------- -----------------------------
AND OTHER RESTRICTED SECURITIES
PRINCIPAL ANNUAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS(2) OPTIONS COMPENSATION
- ------------------------- ---- --------- -------- --------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
C. Stephen Lynn
Chairman and Chief
Executive Officer(3)... 1995 $226,122 $300,000 -- -- 250,000 Shares $ 14,139(3)

1995 $279,460 $100,000 319(4) -- 175,000 Shares $ 33,389(5)(6)(7)(8)
Charles E. Porter 1994 $202,725 $ 60,128 -- 1,000 Shares 25,000 Shares $ 23,735
President.............. 1993 $185,863 $ 60,128 -- -- 10,500 Shares $ 20,198

W. Craig Barber
Senior Executive Vice 1995 $239,061 $ 90,000 -- -- 150,000 Shares $ 11,147(5)(6)(7)
President and Chief 1994 $185,661 $ 50,000 -- -- -- $ 3,964(3)
Financial Officer...... 1993 $169,165 $ 76,275 -- -- 22,500 Shares $ 3,251

Daniel E. Staudt
Executive Vice
President 1995 $159,292 $ 29,155 319(4) -- 25,000 Shares $ 11,545(5)
Manufacturing and 1994 $144,154 $ 22,475 -- 1,000 Shares 25,000 Shares $ 11,893
Distribution........... 1993 $131,983 $ 21,515 -- -- 9,000 Shares $ 9,752

Charles P. Vaughn, Jr.
Vice President - 1995 $154,154 $ 34,125 319(4) -- 15,000 Shares $ 5,000(7)
Franchising and 1994 $136,646 $ 21,750 -- 1,000 Shares 4,000 Shares --
Development............ 1993 $100,323 $ 17,355 -- -- 6,500 Shares --

Taylor H. Henry(3)(9) 1995 $200,385 $ -- -- -- -- $300,126(9)
Chairman and Chief 1994 $372,624 $100,000 -- -- -- $ 25,814(3)
Executive Officer...... 1993 $293,462 $190,688 -- -- 90,000 Shares $ 28,082
</TABLE>

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

(1) As to "Other Annual Compensation", although executive officers receive
perquisites and other personal benefits (e.g., Company furnished
automobiles), the aggregate amount of such perquisites or other personal
benefits does not exceed the lesser of: (a) $50,000; or (b) 10% of the
annual salary and bonus for any of the persons listed in the Summary
Compensation Table (the "Named Executive Officers").
(2) Awards made under the stock bonus plan vest and are distributed at the rate
of 10% per year for four years and in full after five years. An employee
receives no dividends and has no other rights as a shareholder with respect
to Shares awarded under the stock bonus plan until the Shares vest and are
distributed to the employee. At the time Shares are distributed, the
employee also receives a cash award equal to 25% of the value of the Shares
then being distributed to reimburse the employee for certain taxes. In
December 1993, Messrs. Porter Staudt and Vaughn each received an award under
the stock bonus plan of 1,000 Shares valued, as of that date, at $23,125.
During the 1995 Fiscal Year, 100 Shares were distributed to each of Messrs.
Porter, Staudt and Vaughn. At the time of the distribution during the 1995
Fiscal Year, the distributions were valued at $1,275 each, which resulted in
each of them receiving a tax equalization bonus of $319 that is reflected in
the Column labeled "Other Annual Compensation."
(3) Mr. Lynn was elected the Company's CEO on April 11, 1995. At that time,
Taylor H. Henry, who had served as the Company's CEO retired. Mr. Lynn's
employment agreement is described below under "Employment Agreements." The
amount set forth in "All Other Compensation" represents certain expenses
incurred by Mr. Lynn as a result of his relocation that were paid by the
Company.
(4) Includes tax equalization bonus paid with respect to the receipt of Shares
under the Company's stock bonus plan. See footnote 2.
(5) Includes amounts paid pursuant to the Company's restaurant group ownership
plans established in prior years, in which partnerships composed of
employees have acquired up to a 30% interest in groups of restaurants.
During the 1995 Fiscal Year, the amounts paid to the Named Executive
Officers, respectively, were as follows: Mr. Henry ($21,280), Mr. Porter
($16,644); Mr. Barber ($4,755); and Mr. Staudt ($11,545).

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<PAGE> 4

(6) Includes amounts accrued, but not paid, to provide for possible future
payments under a salary continuation plan that covers certain present and
former employees of the Company. The plan provides for payments of up to
$37,500 per year for ten years following death, disability or retirement at
age 55. During the 1995 Fiscal Year, the amount accrued for any of the Named
Executive Officers was as follows: Mr. Porter ($6,745); Mr. Barber ($4,392).
(7) Includes matching contributions by the Company under the Company's
Supplemental Executive Retirement Plan as follows: Mr. Porter ($10,000); Mr.
Barber ($2,000); and Mr. Vaughn ($5,000).
(8) Mr. Porter has indicated his intention to retire effective May 1, 1996 and,
accordingly has resigned from the office of President of the Company.
(9) Mr. Henry resigned as CEO and as a member of the Board on April 11, 1995.
Mr. Henry's contract provides that he is to serve as a consultant to the
Company through December 31, 1996. His contract provides for him to receive
approximately $42,000 per month. All payments are less deductions for income
tax withholding, FICA and any other legal requirements. These payments also
are conditioned upon Mr. Henry's compliance with certain non-competition and
non-disclosure obligations.

OPTION GRANTS IN LAST FISCAL YEAR

Shown below is information concerning stock option grants to any Named
Executive Officer who was granted a stock option during the 1995 Fiscal Year:

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------ POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION -----------------------
NAME GRANTED(1) YEAR ($/SHARE) DATE 5% ($) 10% ($)
- ------------------- -------------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mr. Lynn........... 250,000 Shares 17.57% $10.75 4-11-2005 $742,507 $1,640,746
Mr. Porter......... 175,000 Shares 12.30% $10.63 6-8-2005 $513,711 $1,135,167
Mr. Barber......... 150,000 Shares 10.54% $10.63 6-8-2005 $440,324 $ 973,000
Mr. Staudt......... 25,000 Shares 1.76% $10.63 6-8-2005 $ 73,387 $ 162,167
Mr. Vaughn......... 15,000 Shares 1.05% $10.63 6-8-2005 $ 44,032 $ 97,300
</TABLE>

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

(1) The exercise price of the options granted is equal to the market value of
the Shares on the date of grant. These options vest (become exercisable) at
a cumulative rate of 20% per year and in full after five years.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

Shown below is information with respect to exercises by any Named Executive
Officer during the 1995 Fiscal Year of options to purchase Shares pursuant to
the Company's stock option plans and information with respect to unexercised
options to purchase Shares held by such officers as of the end of the 1995
Fiscal Year:

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS HELD AT THE-MONEY OPTIONS AT
OCTOBER 29, 1995 OCTOBER 29, 1995
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Lynn........................ 0 $ 0 0 250,000 $ 0 $ 0
Mr. Porter...................... 3,000 $ 9,375 11,200 202,300 $ 0 $ 0
Mr. Barber...................... 20,000 $ 48,125 25,850 165,400 $ 41,248 $ 0
Mr. Staudt...................... 5,000 $ 7,500 18,800 51,200 $ 18,998 0
Mr. Vaughn...................... 650 $ 406 11,450 22,800 $ 20,249 0
</TABLE>

The Company has not awarded stock appreciation rights to any employee and
has had no long term incentive plans, as that term is defined in SEC
regulations. Also, the Company has had no defined benefit or actuarial plans
covering any employees of the Company.

-53-

<PAGE> 5

COMPENSATION OF DIRECTORS

Each director who is also an officer of the Company receives no additional
compensation for service on the Board. Directors who are not also officers of
the Company receive a quarterly retainer of $4,000 in addition to $1,000 plus
expenses for each meeting of the Board they attend. Members of Board committees
receive $1,000 plus expenses for each committee meeting they attend.

Also, each non-employee Director participates in the Shoney's, Inc.
Directors' Stock Option Plan (the "Directors' Plan"), which was approved by the
shareholders of the Company on March 19, 1991. Each non-employee Director
received an option for 5,000 shares as of June 7, 1990, the date the Board
adopted the Directors' Plan. Non-employee Directors initially elected to the
Board subsequent to the adoption of the Directors' Plan receive an option for
5,000 Shares upon their election to the Board. Non-employee Directors, upon the
fifth anniversary of the grant of their most recent option under the Directors'
Plan, will also be awarded an additional option for 5,000 Shares. As of the end
of the 1995 Fiscal Year, there were six participants under the Directors' Plan
who held options covering 30,000 Shares at an exercise price of $10.375 per
Share and two participants under the Directors' Plan who held options covering
10,000 Shares at an exercise price of $23.375 per Share. During 1995, there were
no exercises of options for Shares granted under the Directors' Plan.

EMPLOYMENT CONTRACTS

The Company has employment agreements with Messrs. Lynn, Porter and Barber.
Mr. Lynn's employment agreement provides for a term from May 1, 1995 through
April 30, 1998. The employment agreements with Messrs. Porter and Barber
presently provide for initial terms terminating on January 16, 1997. In
addition, if a "Change in Control" (as defined in the employment agreements
generally to mean acquisition of 20% (50% in the case of Mr. Lynn) or more of
the Company's outstanding voting securities by any person or the occurrence of
certain changes in the composition of the Board) occurs with respect to the
Company, the employment terms contained in the employment agreements are
automatically extended for an additional one year term (two years in the case of
Mr. Lynn).

Under the employment agreements, Messrs. Porter and Barber presently are
entitled to base salaries in the amounts of $300,000 and $250,000, respectively,
with increases to be in the sole discretion of the Board. Mr. Lynn is entitled
to a base salary of $450,000 through April 30, 1996; $500,000 from May 1, 1996
through April 30, 1997; and $550,000 from May 1, 1997 through April 30, 1998. In
addition, the employment agreements provide that Messrs. Lynn, Porter and Barber
are entitled to annual bonuses. During 1995 (or, in the case of Mr. Lynn, the
first year of his contract), these bonuses were to be determined by the HRC
Committee but could not be less than $300,000 with respect to Mr. Lynn, $100,000
with respect to Mr. Porter, and $50,000 with respect to Mr. Barber. Thereafter,
the bonuses will be based upon a formula to be agreed upon by the employee and
the Company, however, provisions have been made whereby the annual bonus shall
not be less than $25,000 with respect to Mr. Barber. Mr. Porter has stated his
intention to retire effective May 1, 1996. Pursuant to an agreement with the
Company, he will receive one year's pay beginning May 1, 1996.

Under Messrs. Lynn's, Porter's and Barber's employment agreements,
termination of the employee without cause will result in the employee's right to
receive the greater of (i) the salary and bonus paid or accrued on the
employee's behalf for the fiscal year of the Company immediately prior to the
fiscal year in which the termination took place or (ii) the amount due the
employee for salary and bonuses during the balance of the then current
employment term. In addition, termination without cause results in immediate
vesting of all stock options held by Mr. Lynn and entitles Messrs. Porter and
Barber to be paid a cash amount equal to the unrealized gain that they have in
any unvested stock options. In the event of the termination for

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<PAGE> 6

cause or the employee's resignation, the employee is entitled to no severance
payments under his employment agreement and all stock options that are not
vested prior to the effective date of the termination shall lapse and be void.
Cause for termination includes personal dishonesty, willful misconduct, breach
of fiduciary duty involving personal profit, conviction of any felony or crime
involving moral turpitude, material intentional breach of any provision of the
employment agreement, or unsatisfactory performance by the employee of his
duties as a result of alcohol or drug abuse.

Mr. Lynn's agreement also provides that if his employment is terminated
without cause, certain benefits (insurance, medical and automobile) continue
until expiration of the term of the agreement or his earlier coverage through
other employment. Also, in the event of a Change in Control (as defined above)
Mr. Lynn, at his option, may terminate his agreement within 90 days after such
Change in Control in which case he will receive the greater of: (i) two times
the base salary and bonus paid during the fiscal year immediately prior to that
in which the termination took place; or (ii) the amount due as base salary
during the then remaining employment term. Participation in other benefits is
treated the same as if Mr. Lynn's employment had been terminated without cause.

Mr. Lynn's agreement also provides that he will receive 50,000 shares of
restricted stock as follows: 16,500 Shares on April 11, 1996; 16,500 Shares on
April 11, 1997 and 17,000 Shares on April 11, 1998. On these dates, Mr. Lynn
also will receive a tax equalization bonus determined by the value of the
Shares. Mr. Lynn's agreement further provides that he will receive future
options under the Company's stock option plan on November 1, 1996 as follows:
125,000 Shares at an exercise price equal to the market price on that date;
75,000 Shares at an exercise price of $16.75 per Share; and 50,000 Shares at an
exercise price of $18.50 per Share.

Mr. Lynn's contract provided for the Company to pay him certain relocation
expenses resulting from his accepting his position with the Company and for the
Company to acquire his former residences in Oklahoma City. Each of these
residences has been sold or resold to third parties with the Company [incurring
no loss in connection with the transaction other than transaction expenses].

Each employment agreement terminates upon the death or disability of the
employee and the employee is entitled to certain benefits in the event of a
termination resulting from disability. Each employment agreement also contains a
covenant by the employee not to disclose any confidential information and trade
secrets of the Company. Each employment agreement also provides that, in the
event of a termination of the employee's employment for cause or the employee's
resignation, the employee may not compete with the Company for one year within
the United States.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The HRC Committee is composed of Hoover (Chairperson), Jackson, Shircliff
and Turner. None of these persons has at any time been an officer or employee of
the Company or any of its subsidiaries. In addition, there are no relationships
among the Company's executive officers, members of the HRC Committee or entities
whose executives serve on the Board or the HRC Committee that require disclosure
under applicable SEC regulations.

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<PAGE> 7

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information concerning persons,
other than officers or directors, who, as of February 1, 1996, are the
beneficial owners of more than 5% of the Shares. The Company has no other class
of equity securities outstanding.

<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PERCENT
OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
------------------------------------------------------- ------------------ --------
<S> <C> <C>
R.L. Danner............................................ 4,249,302(1) 10.21%
2 International Drive, Suite 510
Nashville, TN 37217

First Union Corporation................................ 4,168,500(2) 10.04%
One First Union Center
Charlotte, NC 28288-0137

GeoCapital Corporation................................. 2,185,266(3) 5.27%
787 Fifth Avenue
New York, NY 10153

Union Bank of Switzerland.............................. 4,931,159(4) 11.00%
Bahnhofstrasse 45, 8021
Zurich, Switzerland
</TABLE>

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

(1) Includes 83,068 Shares owned by Mrs. Danner and 7,101 Shares held in trust
for Mr. Danner's son, over which Mrs. Danner has sole voting and
investment power. The information regarding Shares beneficially owned is
based upon the latest Schedule 13D filed by Mr. Danner.
(2) Includes 4,168,500 Shares over which First Union Corporation ("First Union")
has sole voting power. First Union has sole power to dispose or to direct
the disposition of 4,167,750 Shares and shared power to dispose or to
direct to the disposition of the remaining 750 Shares. The information
regarding Shares beneficially owned is based upon the latest Schedule 13G
provided to the Company by First Union.
(3) Includes 2,185,266 Shares over which GeoCapital has sole power to dispose or
to direct the disposition thereof. The information regarding Shares
beneficially owned is based upon the latest Schedule 13G provided to the
Company by GeoCapital.
(4) Includes 542,559 Shares over which Union Bank of Switzerland ("UBS") has
sole voting power. UBS has shared power to dispose or to direct the
disposition of 4,382,000 Shares. The information regarding Shares
beneficially owned is based upon the latest Schedule 13G provided to the
Company by UBS.

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<PAGE> 8

The following table sets forth the number of Shares held beneficially,
directly or indirectly, as of the February 1, 1996, by all directors and
nominees for director, by the Company's Chief Executive Officer and the
Company's four most highly compensated executive officers other than the Chief
Executive Officer and by all directors and executive officers as a group,
together with the percentage of the outstanding Shares which such ownership
represents.

<TABLE>
<CAPTION>
PERCENT
OF CLASS
NAME OF SHARES (* DENOTES LESS
BENEFICIAL OWNER BENEFICIALLY OWNED(1) THAN 1%)
--------------------------------------------- --------------------- ---------------
<S> <C> <C>
W. Craig Barber......................... 38,909 *
Dennis C. Bottorff...................... 8,000 *
Carole F. Hoover........................ 400 *
Victoria B. Jackson..................... 2,094 *
C. Stephen Lynn......................... 100,000 *
Charles E. Porter....................... 42,300 *
Alex Schoenbaum......................... 3,349,535(2)(3) 8.05%
Robert T. Shircliff..................... 51,590(3) *
B. Franklin Skinner..................... 2,500 *
James R. Thomas, II..................... 3,946(3) *
Cal Turner, Jr.......................... 17,000 *
Daniel E. Staudt........................ 38,690 *
Charles P. Vaughn, Jr................... 16,464 *
All Directors, Nominees for Director and
Executive Officers as a Group......... 3,734,848 8.97%
</TABLE>

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

(1) Includes Shares subject to existing stock options that are currently
exercisable and convertible securities.
(2) Includes 395,342 Shares owned by Mrs. Schoenbaum, 15,055 Shares held by her
as custodian for one of their children, 35,750 Shares owned by the
Schoenbaum Family Foundation and 2,903,388 Shares held in trust by two
banks for Mr. Schoenbaum. With respect to the Shares owned by Mrs.
Schoenbaum and the Shares held by her as custodian, she has sole voting and
investment power. Mr. Schoenbaum has voting and investment power with
respect to 2,703,388 Shares held by one bank but has no voting and
investment power as to 200,000 Shares held by the second bank as trustee.
He does have a 10-year income interest in the trust holding the 200,000
Shares and the governing trust instrument presently gives Mr. Schoenbaum
the ability to require the resignation of the trustee.
(3) Messrs. Schoenbaum, Shircliff and Thomas are not standing for re-election at
the 1996 annual meeting of shareholders.

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<PAGE> 9

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Board and management attempt to minimize "related party" transactions.
During the 1995 Fiscal Year, except as disclosed above under EXECUTIVE
COMPENSATION and as set forth below, the Company's executive officers, directors
and nominees for director did not have significant business relations with the
Company and no such transactions are anticipated during 1996.

During November 1995, the Company employed Robert M. Langford as its
Executive Vice President, General Counsel and Secretary. Prior to his employment
with the Company, Mr. Langford operated six franchised Shoney's Restaurants. In
connection with this officer's employment arrangement, the Company agreed to
acquire the operations of five of Mr. Langford's franchised Shoney's Restaurants
for approximately $3 million. In addition, the Company agreed to assume certain
operating leases and other obligations with respect to these restaurants. Mr.
Langford owns one additional Shoney's Restaurant that is anticipated to be sold
to an unrelated third party. However, until that unit is sold, the Company has
agreed that Mr. Langford may continue to operate one franchised restaurant. The
franchise agreement with respect to this restaurant is the Company's standard
agreement, which requires royalties of 3% of gross sales to be paid to the
Company.

At October 29, 1995, Mr. Langford was indebted to the Company in the amount
of $332,000 arising primarily from the purchase of food and supplies from the
Company's commissary. This receivable was satisfied in December 1995 upon the
Company's acquisition of the five restaurants mentioned above.

In addition, at October 29, 1995, Mr. Langford was Chairman of Restaurant
Management Services, Inc. ("RMS"), a Shoney's and Captain D's franchisee based
in Macon, Georgia. Mr. Langford will receive compensation from RMS under the
terms of a consulting and non-competition agreement until February 1996. Mr.
Langford resigned as Chairman of RMS effective February 1996.

This transaction was reviewed and approved by the Executive Committee.

PART IV

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

(a) The following documents are filed as a part of this Annual
Report on Form 10-K:

(1) Financial Statements:
Consolidated Balance Sheet - October 29, 1995 and
October 30, 1994.
Consolidated Statement of Income - Years ended October
29, 1995, October 30, 1994 and October 31, 1993.
Consolidated Statements of Shareholders' Equity (deficit)
Years ended October 29, 1995, October 30, 1994 and
October 31, 1993.
Consolidated Statements of Cash Flows - Years ended
October 29, 1995, October 30, 1994 and October 31,
1993.
Notes to Consolidated Financial Statements - Years ended
October 29, 1995, October 30, 1994 and October 31,
1993.

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<PAGE>
(2) Schedule II-Valuation and qualifying accounts, included
as Exhibit 99.1.

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

(3) Those exhibits required to be filed as Exhibits to this
Annual Report on Form 10-K pursuant to Item 601 of Regulation
S-K, 17 C.F.R. Section 229.601, as follows:

3(i), 4.1 Charter of Shoney's, Inc., as amended, filed as Exhibit
4.1 to Post Effective Amendment No. 3 to the
Company's Registration Statement on Form S-8 (File
No. 33-605) filed with the Commission on October 31,
1988, and incorporated herein by this reference.

3(ii), 4.2 Amended and Restated Bylaws of Shoney's, Inc., filed
as Exhibit 3(ii) to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 9, 1995 filed
with the Commission on September 20, 1995, and
incorporated herein by this reference.

4.3 Amended and Restated Rights Agreement, dated as of
May 25, 1994, between Shoney's, Inc. (the
"Company") and Harris Trust and Savings Bank, as
Rights Agent, filed as Exhibit 4 to the Company's
Current Report on Form 8-K filed with the
Commission on June 9, 1994 and incorporated herein
by this reference.

4.4 Amendment No. 1 dated as of April 18, 1995 to
Amended and Restated Rights Agreement, dated as of
May 25, 1994, between Shoney's, Inc. (the
"Company") and Harris Trust and Savings Bank, as
Rights Agent, filed as Exhibit 4 to the Company's
Current Report on Form 8-K filed with the
Commission on May 4, 1995 and incorporated herein
by this reference.

4.5 Indenture dated as of April 1, 1989 between the
Company and Sovran Bank/Central South, as Trustee
relating to $201,250,000 in principal amount of liquid
yield option notes due 2004, filed as Exhibit 4.8 to
Amendment No. 1 to the Company's Registration
Statement on Form S-3 filed with the Commission on
April 3, 1989 (No. 33-27571), and incorporated herein
by this reference.

4.6 Revolving Credit Agreement dated as of July 13, 1988
between the Company and First American National
Bank, filed as Exhibit 4.1 and 19.1 to the Company's
Current Report on Form 8-K filed with the
Commission on December 3, 1991, and incorporated
herein by this reference.

4.7 Modification Agreement No. 1 dated as of March 5,
1991 to Revolving Credit Agreement, dated as of July
13, 1988 between the Company and First American
National Bank, filed as Exhibit 4.2 and 19.2 to the
Company's Current Report on Form 8-K filed with the
Commission on December 3, 1991, and incorporated
herein by this reference.

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<PAGE>

4.8 Alternative Rate Agreement dated as of June 4, 1992
supplementing that certain Revolving Credit Agreement
dated as of July 13, 1988 between the Company and
First American National Bank, filed as Exhibit 4.36
and 10.29 to Post Effective Amendment No. 5 to the
Company's Registration Statement on Form S-8 (File
No. 2-64257) filed with the Commission on January
25, 1993, and incorporated herein by this reference.

4.9 Note Issuance Agreement, dated as of October 1,
1989, among the Company, Sovran Bank, N.A., as
Note Agent and Placement Agent and Sovran Bank /
Central South, as Escrow Agent, filed as Exhibit 19.3
and 28.3 to the Company's Current Report on Form
8-K filed with the Commission on December 3, 1991,
and incorporated herein by this reference.

4.10 Reimbursement Agreement, dated as of October 1,
1989, together with the Standby Note relating thereto,
among the Company, Sovran Bank / Central South,
Long Term Credit Bank of Japan, Limited, New York
Branch, Kredeitbank, N.V., New York Branch and
Sovran Bank / Central South, as Agent, filed as
Exhibit 19.4 and 28.4 to the Company's Current
Report on Form 8-K filed with the Commission on
December 3, 1991, and incorporated herein by this
reference.

4.11 Modification Agreement No. 1 dated as of July 21,
1993 to Reimbursement Agreement, dated as of
October 1, 1989, together with the Standby Note
relating thereto, among the Company, Sovran Bank /
Central South, Long Term Credit Bank of Japan,
Limited, New York Branch, Kredeitbank, N.V., New
York Branch and Sovran Bank / Central South, as
Agent, filed as Exhibit 4.4 to the Company's Quarterly
Report on Form 10-Q for the quarter ended August 1,
1993 filed with the Commission on September 15,
1993, and incorporated herein by this reference.

4.12 Modification Agreement No. 2 dated as of June 8,
1994 to Reimbursement Agreement, dated as of
October 1, 1989, together with the Standby Note
relating thereto, among the Company, NationsBank of
Tennessee, N.A. (formerly Sovran Bank / Central
South), Long Term Credit Bank of Japan, Limited,
New York Branch, Kredeitbank, N.V., New York
Branch and NationsBank of Tennessee, N.A., as
Agent, filed as Exhibit 4.30 to the Company's Annual
Report on Form 10-K for the fiscal year ended October
30, 1994 filed with the Commission on January 30,
1995, and incorporated herein by this reference.

4.13 Note Issuance Agreement, dated as of October 1,
1990, among the Company, Sovran Bank, N.A., as
Note Agent and Placement Agent and Sovran Bank /
Central South, as Escrow Agent, filed as Exhibit 19.5
and 28.5 to the Company's Current Report on Form
8-K filed with the Commission on December 3, 1991,
and incorporated herein by this reference.

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<PAGE>

4.14 Reimbursement Agreement, dated as of October 1,
1990, together with the Standby Note relating thereto,
between the Company and Sovran Bank / Central
South, filed as Exhibit 19.6 and 28.6 to the Company's
Current Report on Form 8-K filed with the
Commission on December 3, 1991, and incorporated
herein by this reference.

4.15 Modification Agreement No. 1 dated as of July 21,
1993 to Reimbursement Agreement, dated as of
October 1, 1990, together with the Standby Note
relating thereto, between the Company and Sovran
Bank / Central South, filed as Exhibit 4.5 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended August 1, 1993 filed with the
Commission on September 15, 1993, and incorporated
herein by this reference.

4.16 Modification Agreement No. 2 dated as of April 1,
1994 to Reimbursement Agreement, dated as of
October 1, 1990, together with the Standby Note
relating thereto, between the Company and
NationsBank of Tennessee, N.A. (formerly Sovran
Bank / Central South), filed as Exhibit 4.34 to the
Company's Annual Report on Form 10-K for the fiscal
year ended October 30, 1994 filed with the
Commission on January 30, 1995, and incorporated
herein by this reference.

4.17 Amended and Restated Note Issuance Agreement,
dated as of November 1, 1993, among the Company,
NationsBank of Virginia, N.A., as Note Agent and
Placement Agent and NationsBank of Tennessee, as
Escrow Agent, filed as Exhibit 4.36 to the Company's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1993 filed with the Commission on
January 31, 1994, and incorporated herein by this
reference.

4.18 Reimbursement Agreement, dated as of October 1,
1991, together with the Standby Note relating thereto,
between the Company and National Bank of Canada,
New York Branch, filed as Exhibit 28.10 to the
Company's Current Report on Form 8-K filed with the
Commission on December 3, 1991, and incorporated
herein by this reference.

4.19 Assignment, Assumption and Modification Agreement
dated as of November 4, 1993 relating to
Reimbursement Agreement, dated as of October 1,
1991, among the Company, NationsBank of Georgia,
N.A. and National Bank of Canada, New York
Branch, filed as Exhibit 4.38 to the Company's Annual
Report on Form 10-K for the fiscal year ended October
31, 1993 filed with the Commission on January 31,
1994, and incorporated herein by this reference.

4.20 Loan Agreement dated as of September 24, 1992
between the Company and CIBC, Inc., filed as Exhibit
4.43 and 10.36 to Post Effective Amendment No. 5 to
the Company's Registration Statement on Form S-8
(File No. 2-64257) filed with the Commission on
January 25, 1993, and incorporated herein by this
reference.

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<PAGE>

4.21 Modification Agreement No. 1 dated as of October 25,
1992 to Loan Agreement dated as of September 24,
1992 between the Company and CIBC, Inc., filed as
Exhibit 4.44 and 10.37 to Post Effective Amendment
No. 5 to the Company's Registration Statement on
Form S-8 (File No. 2-64257) filed with the
Commission on January 25, 1993, and incorporated
herein by this reference.

4.22 Modification Agreement No. 2 dated as of July 21,
1993 to Loan Agreement dated as of September 24,
1992 between the Company and CIBC, Inc., filed as
Exhibit 4.6 to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 1, 1993 filed
with the Commission on September 15, 1993, and
incorporated herein by this reference.

4.23 Loan Agreement dated as of April 21, 1993 between
the Company and NationsBank of Tennessee, N.A.,
filed as Exhibit 4 to the Company's Quarterly Report
on Form 10-Q for the quarter ended May 9, 1993 filed
with the Commission on June 23, 1993, and
incorporated herein by this reference.

4.24 Modification Agreement No. 1 dated as of July 21,
1993 to Loan Agreement dated as of April 21, 1993
between the Company and NationsBank of Tennessee,
N.A., filed as Exhibit 4.7 to the Company's Quarterly
Report on Form 10-Q for the quarter ended August 1,
1993 filed with the Commission on September 15,
1993, and incorporated herein by this reference.

4.25 Loan Agreement dated as of December 1, 1994
between the Company and NationsBank of Tennessee,
N.A., filed as Exhibit 4.43 to the Company's Annual
Report on Form 10-K for the fiscal year ended October
30, 1994 filed with the Commission on January 30,
1995, and incorporated herein by this reference.

4.26 Reducing Revolving Credit Agreement, dated as of
July 21, 1993, among the Company, various financial
institutions now or hereafter parties thereto and
Canadian Imperial Bank of Commerce, New York
Agency, as agent, filed as Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended August 1, 1993 filed with the
Commission on September 15, 1993, and incorporated
herein by this reference.

4.27 Modification Agreement No. 1 dated as of July 21,
1993 to Reducing Revolving Credit Agreement, dated
as of July 21, 1993, among the Company, various
financial institutions now or hereafter parties thereto
and Canadian Imperial Bank of Commerce, New York
Agency, as agent, filed as Exhibit 4.8 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended August 1, 1993 filed with the
Commission on September 15, 1993, and incorporated
herein by this reference.

4.28 Modification Agreement No. 2 dated as of December
21, 1993 to Reducing Revolving Credit Agreement,
dated as of July 21, 1993, among the Company,
various financial institutions now or hereafter parties
thereto and Canadian

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<PAGE>

Imperial Bank of Commerce, New York Agency. Filed as
Exhibit 4.46 to the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 1993, filed with
the Commission on January 31, 1994, and incorporated
herein by this reference.

4.29 Modification Agreement No. 3 dated as of May 3,
1994 to Reducing Revolving Credit Agreement, dated
as of July 21, 1993, among the Company, various
financial institutions now or hereafter parties thereto
and Canadian Imperial Bank of Commerce, New York
Agency, filed as Exhibit 99.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
May 15, 1994 filed with the Commission on June 29,
1994 and incorporated herein by this reference.

4.30 Modification Agreement No. 4 dated as of October 27,
1994 to Reducing Revolving Credit Agreement, dated
as of July 21, 1993, among the Company, various
financial institutions now or hereafter parties thereto
and Canadian Imperial Bank of Commerce, New York
Agency, filed as Exhibit 4.48 to the Company's
Annual Report on Form 10-K for the fiscal year ended
October 30, 1994 filed with the Commission on
January 30, 1995, and incorporated herein by this
reference.

4.31 Modification Agreement No. 5 dated as of January 18,
1995 to Reducing Revolving Credit Agreement, dated
as of July 21, 1993, among the Company, various
financial institutions now or hereafter parties thereto
and Canadian Imperial Bank of Commerce, New York
Agency, filed as Exhibit 4.49 to the Company's
Annual Report on Form 10-K for the fiscal year ended
October 30, 1994 filed with the Commission on
January 30, 1995, and incorporated herein by this
reference.

4.32 Modification Agreement No. 6 dated as of April 1,
1995 to Reducing Revolving Credit Agreement, dated
as of July 21, 1993, among the Company, various
financial institutions now or hereafter parties thereto
and Canadian Imperial Bank of Commerce, New York
Agency, filed as Exhibit 4.32 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
May 14, 1995 filed with the Commission on June 28,
1995, and incorporated herein by this reference.

4.33 Modification Agreement No. 7 dated as of July 28,
1995 to Reducing Revolving Credit Agreement, dated
as of July 21, 1993, among the Company, various
financial institutions now or hereafter parties thereto
and Canadian Imperial Bank of Commerce, New York
Agency, filed as Exhibit 4.33 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
August 9, 1995 filed with the Commission on
September 20, 1995, and incorporated herein by this
reference.

10.1 License Agreement, dated as of October 28, 1991,
between Shoney's Investments, Inc. and Shoney's
Lodging, Inc., filed as Exhibit 28.7 to the Company's
Current Report on Form 8-K filed with the
Commission on

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<PAGE>

December 3, 1991, and incorporated herein by this
reference.

10.2 Amendment No. 1 dated as of September 16, 1992 to
License Agreement, dated as of October 28, 1991,
between Shoney's Investments, Inc. and ShoLodge
Franchise Systems, Inc. (formerly Shoney's Lodging,
Inc.), filed as Exhibit 10.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended October
31, 1993 filed with the Commission on January 31,
1994, and incorporated herein by this reference.

10.3 Amendment No. 2 dated as of March 18, 1994 to
License Agreement, dated as of October 28, 1991,
between Shoney's Investments, Inc. and ShoLodge
Franchise Systems, Inc., filed as Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended May 14, 1995 filed with the Commission
on June 28, 1995, and incorporated herein by this
reference.

10.4 Amendment No. 3 dated as of March 13, 1995 to
License Agreement, dated as of October 28, 1991,
between Shoney's Investments, Inc. and ShoLodge
Franchise Systems, Inc., filed as Exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended May 14, 1995 filed with the Commission
on June 28, 1995, and incorporated herein by this
reference.

10.5 Stock Purchase and Warrant Agreement, dated as of
October 28, 1991, between Shoney's Investments, Inc.
and Gulf Coast Development, Inc., filed as Exhibit
28.8 to the Company's Current Report on Form 8-K
filed with the Commission on December 3, 1991, and
incorporated herein by this reference.

10.6 Agreement dated as of September 8, 1992 between the
Company and Raymond L. Danner, filed as Exhibit
10.41 to Post Effective Amendment No. 5 to the
Company's Registration Statement on Form S-8 (File
No. 2-64257) filed with the Commission on January
25, 1993, and incorporated herein by this reference.

10.7 Consent Decree entered by the United States District
Court for the Northern District of Florida on January
25, 1993 in Haynes, et. al v. Shoney's, Inc., et. al,
filed as Exhibit 28 to the Company's Current Report
on Form 8-K filed with the Commission on February
3, 1993, and incorporated herein by this reference.

10.8 Shoney's, Inc. 1981 Stock Option Plan, filed as Exhibit
4.7 to Post Effective Amendment No. 3 to the
Company's Registration Statement on Form S-8 (File
No. 2-84763) filed with the Commission on January
25, 1993, and incorporated herein by this reference.

10.9 Shoney's, Inc. Stock Option Plan, filed as Exhibit 4.7
to Post Effective Amendment No. 4 to the Company's
Registration Statement on Form S-8 (File No. 2-64257)
filed with the Commission on April 11, 1990, and
incorporated herein by this reference.

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10.10 Shoney's, Inc. Employee Stock Purchase Plan, filed as
Exhibit 4.7 to Post Effective Amendment No. 4 to the
Company's Registration Statement on Form S-8 (File
No. 33-605) filed with the Commission on October 26,
1989, and incorporated herein by this reference.

10.11 Shoney's, Inc. Employee Stock Bonus Plan, filed as
Exhibit 10.9 to the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 1993 filed
with the Commission on January 31, 1994, and
incorporated herein by this reference.

10.12 Shoney's, Inc. Directors' Stock Option Plan, filed as
Exhibit 4.38 to the Company's Registration Statement
on Form S-8 (File No. 33-45076) filed with the
Commission on January 14, 1992, and incorporated
herein by this reference.

10.13 Shoney's Ownership Plan 1977, filed as Exhibit 10.47
to Post Effective Amendment No. 5 to the Company's
Registration Statement on Form S-8 (File No. 2-64257)
filed with the Commission on January 25, 1993, and
incorporated herein by this reference.

10.14 Captain D's Ownership Plan 1976, filed as Exhibit
10.48 to Post Effective Amendment No. 5 to the
Company's Registration Statement on Form S-8 (File
No. 2-64257) filed with the Commission on January
25, 1993, and incorporated herein by this reference.

10.15 Captain D's Ownership Plan 1978-1979, filed as
Exhibit 10.49 to Post Effective Amendment No. 5 to
the Company's Registration Statement on Form S-8
(File No. 2-64257) filed with the Commission on
January 25, 1993, and incorporated herein by this
reference.

10.16 Shoney's, Inc. Supplemental Executive Retirement
Plan, filed as Exhibit 10.16 to the Company's Annual
Report on Form 10-K for the fiscal year ended October
29, 1995 filed with the Commission on January 29, 1996,
and incorporated herein by this reference.

10.17 Employment Agreement dated as of January 13, 1995
between the Company and Taylor H. Henry, filed as
Exhibit 10.15 to the Company's Annual Report on
Form 10-K for the fiscal year ended October 30, 1994
filed with the Commission on January 30, 1995, and
incorporated herein by this reference.

10.18 Employment Agreement dated as of January 17, 1995
between the Company and Charles E. Porter, filed as
Exhibit 10.16 to the Company's Annual Report on
Form 10-K for the fiscal year ended October 30, 1994
filed with the Commission on January 30, 1995, and
incorporated herein by this reference.

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<PAGE>

10.19 Employment Agreement dated as of January 17, 1995,
between the Company and W. Craig Barber, filed as
Exhibit 10.17 to Amendment No. 1 to the Company's
Annual Report on Form 10-K for the fiscal year ended
October 30, 1994 filed with the Commission on
February 27, 1995, and incorporated herein by this
reference.

10.20 Employment Agreement dated as of April 11, 1995,
between the Company and C. Stephen Lynn, filed as
Exhibit 4.32 to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 14, 1995 filed
with the Commission on June 28, 1995, and
incorporated herein by this reference.

10.21 Amendment No. 1 to Employment Agreement dated as
of April 11, 1995, between the Company and C. Stephen
Lynn, filed as Exhibit 10.21 to the Company's Annual
Report on Form 10-K for the fiscal year ended October
29, 1995 filed with the Commission on January 29, 1996,
and incorporated herein by this reference.

10.22 Asset Sale and Purchase Agreement dated as of July 7,
1995, by and among Shoney's, Inc., as Seller and
RTM, Inc., as Buyer relating to the sale of the assets
comprising the Company's "Lee's Famous Recipe"
division filed as Exhibit 10.22 to the Company's Annual
Report on Form 10-K for the fiscal year ended October
29, 1995 filed with the Commission on January 29, 1996,
and incorporated herein by this reference.

10.23 Stock Purchase Agreement dated as of August 3, 1995,
by and between Shoney's, Inc., as Seller, and Levmark
Capital Corporation, as Buyer, relating to the purchase
of all of the issued and outstanding stock of Mike Rose
Foods, Inc. filed as Exhibit 10.23 to the Company's Annual
Report on Form 10-K for the fiscal year ended October
29, 1995 filed with the Commission on January 29, 1996,
and incorporated herein by this reference.

10.24 Amendment No. 1 dated as of November 10, 1995 to
Stock Purchase Agreement dated as of August 3, 1995,
by and between Shoney's, Inc., as Seller, and Levmark
Capital Corporation, as Buyer, relating to the purchase
of all of the issued and outstanding stock of Mike Rose
Foods, Inc. filed as Exhibit 10.24 to the Company's Annual
Report on Form 10-K for the fiscal year ended October
29, 1995 filed with the Commission on January 29, 1996,
and incorporated herein by this reference.

10.25 Supply Agreement dated as of November 17, 1995
between the Company and Mike Rose Foods, Inc. filed as
Exhibit 10.25 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 29, 1995 filed with the
Commission on January 29, 1996, and incorporated herein by
this reference.

11 Statement regarding computation of per share earnings filed
as Exhibit 11 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 29, 1995 filed with the
Commission on January 29, 1996, and incorporated herein by
this reference.

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<PAGE>
21 Subsidiaries of Shoney's, Inc. filed as Exhibit 21 to the
Company's Annual Report on Form 10-K for the fiscal year
ended October 29, 1995 filed with the Commission on January
29, 1996, and incorporated herein by this reference.

23 Consent of Ernst & Young LLP, independent auditors filed as
Exhibit 23 to the Company's Annual Report on Form 10-K for
the fiscal year ended October 29, 1995 filed with the
Commission on January 29, 1996, and incorporated herein by
this reference.

27 Financial Data Schedule filed as Exhibit 27 to the Company's
Annual Report on Form 10-K for the fiscal year ended October
29, 1995 filed with the Commission on January 29, 1996, and
incorporated herein by this reference.

99.1 Schedule II - Valuation and qualifying accounts and
reserves filed as Exhibit 99.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended October
29, 1995 filed with the Commission on January 29, 1996,
and incorporated herein by this reference.

(b) No Current Reports on Form 8-K were filed by the
Company during the last quarter of the period covered by this Annual
Report on Form 10-K.

(c) Exhibits -- the response to this portion of Item 14 is
submitted as a separate section of this Report. See Item 14(a).

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

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<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on this 23rd day of February, 1996.

SHONEY'S, INC.

By: /s/ W. Craig Barber
--------------------------------
W. Craig Barber
Senior Executive Vice President
and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities indicated on this
23rd day of February, 1996.

Signature Title

/s/ C. Stephen Lynn
- ---------------------------- Chairman of the Board, Chief Executive
(C. Stephen Lynn) Officer, President and Director

/s/ W. Craig Barber
- ---------------------------- Senior Executive Vice President
(W. Craig Barber) and Chief Financial Officer

/s/ Robert M. Langford
- ---------------------------- Executive Vice President, General
(Robert M. Langford) Counsel and Secretary

/s/ F.E. McDaniel, Jr.
- ---------------------------- Vice President and Treasurer
(F.E. McDaniel, Jr.)

/s/ Gregory A. Hayes
- ---------------------------- Vice President and Controller
(Gregory A. Hayes)

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<PAGE>

/s/ Dennis C. Bottorff
- ---------------------------- Director
(Dennis C. Bottorff)

/s/ Carole F. Hoover
- ---------------------------- Director
(Carole F. Hoover)

/s/ Victoria B. Jackson
- ---------------------------- Director
(Victoria B. Jackson)

/s/ Alex Schoenbaum
- ---------------------------- Director
(Alex Schoenbaum)

/s/ Robert T. Shircliff
- ---------------------------- Director
(Robert T. Shircliff)

/s/ B. Franklin Skinner
- ---------------------------- Director
(B. Franklin Skinner)

/s/ James R. Thomas, II
- ---------------------------- Director
(James R. Thomas, II)

/s/ Cal Turner, Jr.
- ---------------------------- Director
(Cal Turner, Jr.)

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