QUALITY DINING INC, 424B4, 1996-07-26

QUALITY DINING INC
424B4, 1996-07-26
EATING PLACES

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<PAGE>
Filed Pursuant to Rule 424(b)(4)
Registration No. 333-07493

2,277,300 SHARES

QUALITY DINING, INC.

COMMON STOCK
(WITHOUT PAR VALUE)
LOGO

Of the 2,277,300 shares of Common Stock offered hereby, 2,200,000 shares are
being issued and sold by the Company and 77,300 shares are being sold by the
Selling Shareholders. The Company will not receive any of the proceeds from
the sale of the shares of Common Stock by the Selling Shareholders. See
"Principal and Selling Shareholders."

The Common Stock is traded on the Nasdaq National Market System under the
symbol "QDIN." On July 25, 1996, the last reported sale price of the Common
Stock on the Nasdaq National Market System was $24.875 per share. See "Recent
Stock Prices."

SEE "RISK FACTORS" ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD
BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.

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

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................. $25.00 $1.28 $23.72 $23.72
- --------------------------------------------------------------------------------
Total(3)................... $56,932,500 $2,914,944 $52,184,000 $1,833,556
</TABLE>
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(1) See "Underwriting" for indemnification arrangements.
(2) Before deducting estimated expenses of $400,000 payable by the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 341,595 shares of Common Stock at the Price to Public,
less the Underwriting Discounts and Commissions shown above, solely to
cover over-allotments, if any. If this option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $65,472,375, $3,352,186, and $60,286,633, respectively.
See "Underwriting."

The Shares of Common Stock offered hereby are being offered by the several
Underwriters named herein, subject to prior sale and acceptance by the
Underwriters and subject to their right to reject any order in whole or in
part. It is expected that the Common Stock will be available for delivery on
or about July 31, 1996 at the offices of Schroder Wertheim & Co. Incorporated,
New York, New York.

SCHRODER WERTHEIM & CO.

GOLDMAN, SACHS & CO.

WESSELS, ARNOLD & HENDERSON

MORGAN KEEGAN & COMPANY, INC.

July 26, 1996
<PAGE>

[Photographs depicting the interior of a Bruegger's bakery and a
selection of bagels, together with logos for the Company's various
restaurant concepts]

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

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMPANY'S COMMON STOCK ON NASDAQ IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

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<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements contained elsewhere in this Prospectus.
References herein to the "Company" include the Company and its subsidiaries and
their respective predecessors, unless the context otherwise requires. Unless
otherwise indicated, all information in this Prospectus assumes that the over-
allotment option granted to the Underwriters has not been exercised. The
Company's fiscal year is the 52 or 53-week period ending on the last Sunday in
October of each year. Fiscal 1991, 1992, 1994 and 1995 each consisted of 52
weeks, and fiscal 1993 consisted of 53 weeks. This Prospectus contains forward-
looking statements. Forward-looking statements are made based upon management's
expectations and beliefs concerning future events impacting the Company. All
forward-looking statements involve risk and uncertainty. Actual results may be
materially affected by a number of factors, some of which may be beyond the
control of the Company. See "Risk Factors."

THE COMPANY

Quality Dining, Inc. (the "Company") is the owner, operator and franchisor of
Bruegger's Bagel Bakery ("Bruegger's"), the largest and, management believes,
the fastest growing chain of fresh bagel bakeries in the United States. The
Company also operates four other distinct restaurant concepts. It owns the
Grady's American Grill and Spageddies Italian Kitchen ("Spageddies") concepts
and develops and operates Burger King restaurants and Chili's Grill & Bar
("Chili's") as a franchisee of Burger King Corporation and Brinker
International, Inc. ("Brinker"), respectively. As of June 30, 1996, the Company
operated and franchised 469 restaurants, including 339 Bruegger's (76 Company-
owned and 263 franchised), 42 Grady's American Grills, five Spageddies, 63
Burger King restaurants and 20 Chili's.

The Company's fundamental business strategy is to combine the significant
growth potential of Bruegger's with the Company's proven operating skills and
the strong cash flow of its other restaurant operations.

The Company intends to develop the Bruegger's brand through the aggressive
expansion of its system of Company-owned and franchised Bruegger's bakeries.
Prior to the acquisition of Bruegger's Corporation on June 7, 1996, the Company
developed and operated Bruegger's bakeries as a franchisee, and Daniel B.
Fitzpatrick, the Company's President and Chief Executive Officer, served as a
director of Bruegger's Corporation. The Company's objectives are to establish
the Bruegger's brand as the leading, most recognized brand in the bagel
industry, to enhance Bruegger's existing position as the largest chain of fresh
bagel bakeries in the United States and to be the leader in the markets it
enters. The Company's goal is to have 2,000 Bruegger's systemwide by the end of
fiscal 2000. By the end of fiscal 1996, the Company plans to have 445 to 475
Bruegger's systemwide (90 to 100 Company-owned and 355 to 375 franchised). By
the end of fiscal 1997, the Company plans to have 675 to 750 Bruegger's
systemwide (175 to 200 Company-owned and 500 to 550 franchised). The Company's
franchisees have entered into development agreements providing for the opening
of a minimum of 653 additional franchised bakeries by the end of 2001,
approximately half of which are required under the agreements to be open within
the next three years.

The Company's rapid expansion plan for Bruegger's is driven by the concept's
demonstrated consumer appeal and attractive unit economics. As of June 30,
1996, Bruegger's operated in 52 metropolitan markets in 32 states. Since it was
founded in 1983, Bruegger's has experienced 11 consecutive years of systemwide
comparable store sales growth. Bruegger's generated systemwide

3
<PAGE>

net sales of over $150 million, and mature Bruegger's bakeries (open two or
more years) generated on average approximately $801,000 in net sales for the 12
months ended May 12, 1996. Based on the Company's historical experience, a
typical Bruegger's bakery costs approximately $350,000 to develop.

Bruegger's offers freshly baked bagels, its branded premium "Javahh!" coffee,
Bruegger's branded cream cheese, bagel-based sandwiches, soups and other food
and beverage items. Bruegger's differentiates itself from its competitors by
providing customers with bagels baked in small batches on site throughout the
day using fresh, not frozen, dough. In order to provide its customers with a
consistently high-quality product and to minimize transportation and production
costs, Bruegger's is vertically integrated. Bruegger's units are served by over
30 strategically located Company or franchisee-owned commissaries that produce
fresh dough and distribute other products to Bruegger's bakeries on a daily
basis.

The Company intends to supplement the growth of its Bruegger's concept with
continued expansion of the Company's other restaurant concepts. In addition to
Bruegger's, by the end of fiscal year 1996, the Company expects to have
approximately 42 Grady's American Grills, six to seven Spageddies, 63 to 65
Burger King restaurants and 21 to 23 Chili's. During fiscal year 1997, the
Company plans to add an additional one to two Grady's American Grills, one to
two Spageddies, four to six Burger King restaurants and three to five Chili's.

Management believes that the Company has the operating and development
expertise required to fully develop the Bruegger's brand and execute its
aggressive expansion plans. Since its founding in 1981, the Company has grown
from a two-unit Burger King franchisee to a leading multi-concept restaurant
operator with 469 owned and franchised units at June 30, 1996. The Company has
achieved this growth while remaining consistently profitable in each year of
its operation. Management attributes the Company's growth and financial success
to its operation of well-positioned, value-based concepts, focus on total
customer satisfaction and hands-on management style. Management believes that
as a result of these factors, the Company's restaurants appeal to a broad range
of customers and generate a high level of repeat business and customer loyalty.

The Company will consider selective acquisitions which would accelerate the
development of the Company's existing concepts.

THE OFFERING

Common Stock offered by the Company..... 2,200,000 shares

Common Stock offered by the Selling 77,300 shares
Shareholders............................

Common Stock to be outstanding after 16,495,427 shares(1)
the Offering............................

Use of Proceeds......................... To repay borrowings under the
Company's revolving credit facility

Nasdaq National Market System Symbol.... QDIN
- --------
(1) Excludes outstanding options to purchase an aggregate of 665,244 shares
granted under the Company's 1993 Stock Option and Incentive Plan (the "1993
Stock Option Plan") and the Company's Outside Directors Stock Option Plan
(the "Outside Directors Plan").

4
<PAGE>

SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND RESTAURANT DATA)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED 28 WEEKS ENDED
---------------------------------------------- --------------------
OCTOBER 29, 1995 MAY 12, 1996
OCTOBER 31, OCTOBER 30, -------------------- --------------------
1993 1994 ACTUAL PRO FORMA(1) ACTUAL PRO FORMA(1)
----------- ----------- ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Restaurant sales:
Grady's American
Grill................. $ -- $ -- $ -- $100,858 $41,679 $56,810
Burger King............ 49,032 49,716 57,013 64,832 35,588 35,588
Chili's................ 9,963 14,286 38,267 38,267 21,086 21,086
Spageddies............. -- 174 4,741 4,741 4,373 4,373
Bruegger's............. -- 191 5,270 20,888 6,321 18,053
------- ------- ------- -------- ------- -------
Total restaurant sales.. 58,995 64,367 105,291 229,586 109,047 135,910
Franchise revenues...... -- -- -- 4,051 -- 2,833
------- ------- ------- -------- ------- -------
Total revenues....... 58,995 64,367 105,291 233,637 109,047 138,743
------- ------- ------- -------- ------- -------
Income from restaurant
operations(2).......... 10,259 11,623 17,728 33,366 14,828 19,198
General, administrative
and other expenses..... 4,143 4,065 5,706 14,991 5,088 10,686
Amortization of goodwill
and trademarks......... 8 8 539 4,417 419 2,379
Restructuring,
integration and special
charges................ -- -- -- -- 1,938 7,896
------- ------- ------- -------- ------- -------
Operating income
(loss)................ 6,108 7,550 11,483 13,958 7,383 (1,763)
------- ------- ------- -------- ------- -------
Income (loss) before
income taxes........... 4,527 6,260 9,129 5,019 4,370 (6,240)
Income taxes (benefit).. -- 2,332 3,240 3,018 1,595 (1,545)
------- ------- ------- -------- ------- -------
Net income (loss)...... $ 4,527(3) $ 3,928(3) $ 5,889 $ 2,001 $ 2,775 $(4,695)
======= ======= ======= ======== ======= =======
Net income (loss) per
share................. (3) (3) $ 0.85 $ 0.16 $ 0.31 $ (0.34)
======= ======== ======= =======
Weighted average
shares outstanding.... (3) (3) 6,925 12,302 8,838 13,965
======= ======== ======= =======
RESTAURANT DATA:
Units open at end of
period:
Bruegger's:
Owned.................. -- 3 12 45(4) 21 65(4)
Franchised............. -- -- -- 163(4) -- 246(4)
------- ------- ------- -------- ------- -------
Total systemwide
Bruegger's............ -- 3 12 208 21 311
------- ------- ------- -------- ------- -------
Other concepts:
Grady's American
Grill................. -- -- -- 42(4) 42 42
Burger King............ 44 48 59 59 63 63
Chili's................ 4 8 18 18 19 19
Spageddies............. -- 1 5 5 5 5
------- ------- ------- -------- ------- -------
Total other concepts... 48 57 82 124 129 129
------- ------- ------- -------- ------- -------
</TABLE>

<TABLE>
<CAPTION>
AT MAY 12, 1996
----------------------------------
PRO PRO FORMA
ACTUAL FORMA(1) AS ADJUSTED(5)
-------- -------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital deficiency................. $ (3,038) $(15,463) $(15,463)
Total assets............................... 185,776 347,880 347,880
Long-term debt and capitalized lease and
non-competition obligations............... 95,710 111,718 59,934
Total stockholders' equity................. 74,224 197,275 249,059
</TABLE>
- -------
(1) Pro forma income statement data for fiscal 1995 gives effect to the
acquisitions of Bruegger's Corporation, Grady's American Grill and the
SHONCO Companies as if such transactions had occurred on October 31, 1994.
Pro forma income statement data for the 28 weeks ended May 12, 1996 gives
effect to the acquisitions of Bruegger's Corporation and Grady's American
Grill as if such transactions had occurred on October 30, 1995. Pro forma
balance sheet data at May 12, 1996 gives effect to the acquisition of
Bruegger's Corporation as if it had occurred on that date.
(2) Income from restaurant operations has been adjusted to include franchise
revenues and exclude amortization of goodwill and trademarks.
(3) For fiscal 1993 and 1994, net income, net income per share and weighted
average shares outstanding were reported on a pro forma basis. See Notes 7
and 8 to Selected Financial Data.
(4) Pro forma restaurant data for fiscal 1995 and the 28 weeks ended May 12,
1996 includes, as Company-owned restaurants, the Bruegger's bakeries
operated by Bruegger's Corporation at the end of the respective periods.
Pro forma restaurant data for fiscal 1995 includes, as Company-owned
restaurants, 42 Grady's American Grill restaurants acquired on December 21,
1995.
(5) As adjusted to reflect the issuance and sale of 2,200,000 shares of Common
Stock by the Company at the public offering price of $25.00 per share and
the application of the estimated net proceeds therefrom. See "Use of
Proceeds."

The foregoing should be read in conjunction with the Selected Financial Data
and the Pro Forma Condensed Consolidated Financial Statements and the notes
thereto appearing elsewhere herein.

5
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RISK FACTORS

In addition to the other information contained in this Prospectus, investors
should carefully consider the following factors in evaluating the Company and
its business before purchasing shares of Common Stock offered hereby.

AGGRESSIVE GROWTH STRATEGY

The Company has grown significantly during the past two years, both
internally and through strategic acquisitions. The Company intends to continue
to pursue an aggressive growth strategy. The Company's expansion plans
emphasize the rapid growth of the Bruegger's concept. The Company's goal is to
have 2,000 Bruegger's systemwide by the end of fiscal 2000. The Company plans
to have 445 to 475 Bruegger's systemwide (90 to 100 Company-owned and 355 to
375 franchised) by the end of fiscal 1996. By the end of fiscal 1997, the
Company plans to have 675 to 750 Bruegger's systemwide (175 to 200 Company-
owned and 500 to 550 franchised). The Company's decision to emphasize
Bruegger's reflects management's judgment concerning, among other things, the
size of the potential market for bagel-based restaurant concepts, the
continuing appeal of the Bruegger's concept to consumers and the Company's
ability to successfully manage rapid systemwide growth. In addition, the
success of the Company's expansion efforts depends on a number of other
factors, including the availability and cost of suitable locations, the
availability of adequate financing for the Company and its franchisees, the
hiring, training and retention of skilled management and other restaurant
personnel, the ability to obtain the necessary governmental permits and
approvals and third party consents, including the consents of its franchisors,
the competitive environment and other factors, some of which are beyond the
Company's control. As a result of the foregoing factors, there can be no
assurance that the Company's expansion plans can be achieved, that each of the
new restaurants will be operated profitably or that such expansion will not
result in reduced sales at existing Company restaurants located near newly
opened restaurants. Mature Bruegger's units (those open two or more years)
typically realize higher sales volumes than new units. Management believes
that the Company's plan to accelerate the expansion of Bruegger's will cause
the average maturity of Bruegger's units to decline, which may have an adverse
effect on average per unit sales.

RECENT ACQUISITIONS REQUIRE ASSIMILATION AND INTEGRATION

The Company has acquired ownership of three of its concepts in the last 10
months: Spageddies in October 1995, Grady's American Grill in December 1995,
and Bruegger's in June 1996. As a result, the Company has grown significantly
in size and broadened the geographic area in which it operates. Any
acquisition involves inherent uncertainties, such as the effect on the
acquired businesses of integration into a larger organization and the
availability of management resources to oversee the operations of the acquired
business. The Company's ability to integrate the operations of acquired
concepts is essential to its future success. There can be no assurance as to
the Company's ability to integrate new businesses nor as to its success in
managing the significantly larger operations resulting therefrom.

In addition, the Company has recorded significant intangible assets in
connection with the Grady's American Grill and Bruegger's acquisitions.
Applicable accounting standards require the Company to review long-lived
assets (such as goodwill and other intangible assets) for impairment whenever
events or changes in circumstances indicate that the carrying values of those
assets may not be recoverable. In the event that the Company determines that
the carrying value of such intangible assets is impaired, it would write-down
such carrying value, which would result in a charge to earnings. Any such
charge could have a material adverse effect on the Company's financial
results.

PROPRIETARY CONCEPTS REQUIRE GREATER MANAGEMENT ATTENTION

The Company's ability to manage the significantly larger and more diverse
operations resulting from its recent and anticipated growth will be essential
to its success. The Company's business historically has focused primarily on
the development and operation of Burger King and Chili's

6
<PAGE>

restaurants. Burger King Corporation and Brinker are well established
franchisors and Burger King and Chili's restaurants have an established record
as viable concepts. Burger King Corporation historically has made considerable
advertising and promotional expenditures intended to heighten the goodwill
associated with its trademarks and has developed sophisticated cooperative
purchasing and other arrangements to assist its franchisees. Brinker has also
provided its Chili's franchisees with considerable advertising and promotional
support.

Since October 1995, the Company has acquired ownership of the Bruegger's,
Grady's American Grill and Spageddies concepts. These concepts have varying
degrees of name recognition. The retail bagel segment represents an emerging
quick-service restaurant concept, the long-term appeal and development
potential of which have not yet been fully established. Although the Company
opened its first Spageddies in 1994, it is not yet a proven concept and is
still in the developmental stage. In addition, the Company's acquisition of
the Bruegger's, Grady's American Grill and Spageddies concepts has caused it
to assume many functions performed by the previous owners, requiring increased
staffing and expenditures in the areas of advertising and marketing,
purchasing, management information systems and others. Moreover, the Company
is now a franchisor of the Bruegger's concept, which is a new role for the
Company. Accordingly, the Company's development and operation of these
restaurant concepts are subject to a wider range of risks than those
associated with the development and operation of its Burger King and Chili's
restaurants.

As a result of the foregoing factors, there can be no assurance that the
Company's expansion plans can be achieved, that the perceived benefits of the
acquisitions will be realized or that each of the new restaurant concepts will
be operated profitably.

BRUEGGER'S HISTORY OF LOSSES AND POSSIBLE FUTURE LOSSES

There can be no assurance that the perceived benefits of the Company's
recent acquisition of Bruegger's Corporation will be realized. Bruegger's
Corporation experienced net losses since March 3, 1992, including net losses
for the fiscal years ended December 27, 1994 and December 26, 1995 of $1.8
million and $5.5 million, respectively. For the quarter ended March 19, 1996,
Bruegger's Corporation had a net loss of $1.7 million and an accumulated
deficit of $10.1 million as of such date. Since March 3, 1992, the strategy of
Bruegger's Corporation has been to aggressively grow its base of owned and
franchised bakeries. As a result, Bruegger's Corporation incurred significant
start up costs associated with owning bakeries and establishing infrastructure
necessary to manage the development of owned bakeries, to institutionalize
procedures and systems, and to organize and implement an active franchising
program. The Company expects that these costs will continue to be significant
as the Company continues to implement its rapid expansion plans for
Bruegger's. There can be no assurance when or if revenues from the Bruegger's
concept will be sufficient to offset these costs or achieve profitability for
the Company's Bruegger's operations.

BRUEGGER'S FRANCHISE OPERATIONS ARE DEPENDENT ON FRANCHISEES

As of June 30, 1996, the Company had 36 Bruegger's franchisees and 263
franchised Bruegger's. The Company's expansion plans for Bruegger's are based
in part on the commitments of the current franchisees to open new bakeries in
their exclusive territories. Messrs. Nordahl L. Brue and Michael J. Dressell
and/or Richard Brue, the brother of Mr. Brue, are the principal shareholders
of certain franchisees (the "Original Franchisees") that operated Bruegger's
bakeries prior to the incorporation of Bruegger's Corporation and the
establishment of the Bruegger's franchise system. The Original Franchisees
have been awarded exclusive territories (Minnesota, Upstate New York, the
greater Hartford, Connecticut area and the greater Pittsburgh, Pennsylvania
area and portions of Iowa, Massachusetts (including the greater Boston area)
and North Carolina), but are not obligated to develop a minimum number of
bakeries. The Company does not intend to enter into franchising arrangements
with a significant number of new Bruegger's franchisees. Accordingly,
expansion plans for the Bruegger's concept are dependent in part upon the
ability of the Company's existing Bruegger's

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franchisees to develop additional bakeries. Moreover, the Company will realize
a portion of its revenues from continuing royalty payments from its Bruegger's
franchisees and such revenues will be dependent upon the ability of its
franchisees to operate and develop their Bruegger's and to promote and deliver
the Bruegger's concept and its reputation for quality and value.

Although the Bruegger's franchisees have been selected utilizing established
criteria, there can be no assurance that such franchisees will have the
business ability or access to financial resources necessary to successfully
develop or operate Bruegger's in their franchise areas in a manner consistent
with the Bruegger's concept and standards. Should its franchisees encounter
business or operational difficulties, the Company's revenues would be affected
and it could negatively impact the Bruegger's brand and the ability to sell
new franchises if the Company desires to do so.

RISKS AND REQUIREMENTS OF FRANCHISEE STATUS

The Company currently franchises its Burger King and Chili's restaurants
from Burger King Corporation and Brinker, respectively. Due to the nature of
franchising and the Company's agreements with its franchisors, the success of
the Company's franchised concepts is, in large part, dependent upon the
overall success of its franchisors, including the financial condition,
management and marketing success of its franchisors and the successful
operation of restaurants opened by other franchisees. Certain matters with
respect to the Company's franchise concepts must be coordinated with, and
approved by, the Company's franchisors. In particular, certain franchisors
must approve the opening by the Company of any new franchised restaurant,
including franchises opened within the Company's existing franchised
territories, and the closing of any of the Company's existing franchised
restaurants. The Company's franchisors also maintain discretion over the menu
items that may be offered in the Company's franchised restaurants. By virtue
of franchise and other agreements, the Company is required to pay to its
franchisors certain fees upon the opening of new franchised restaurants,
monthly royalty fees and national advertising fees. These agreements also
provide for the termination of the Company as a franchisee upon the failure of
the Company to comply with certain restrictions and obligations imposed on it.

In addition, the Company's development agreements with Burger King
Corporation and Brinker commit the Company to develop at least 55 new
restaurants within certain territories by various dates through 2001, of which
the Company had opened 31 as of June 30, 1996. Should the Company fail to
comply with the development agreements, the franchisors could, among other
remedies, terminate the exclusive nature of the Company's development rights
in these areas.

GOVERNMENT REGULATIONS AFFECT RESTAURANT BUSINESS

The restaurant business is subject to extensive laws and regulations
relating to the development and operation of restaurants, including
regulations relating to the sale of alcoholic beverages, zoning, the
preparation and sale of food and employer/employee relationships. The loss of
a liquor license for a particular Grady's American Grill, Spageddies or
Chili's restaurant would most likely result in the closing of the restaurant.
Any substantial increases in the minimum wage or mandatory health care
coverage could also adversely affect the Company. In addition, because of its
franchise operations for Bruegger's, the Company is subject to the Trade
Regulation Rule of the Federal Trade Commission titled "Disclosure
Requirements and Prohibitions Concerning Franchising and Business Opportunity
Ventures" and state and local laws and regulations that govern the offer, sale
and termination of franchises and the refusal to renew franchises. Continued
compliance with this broad federal, state and local regulatory network is
essential and costly and the failure to comply with such regulations may have
an adverse effect on the Company and its franchisees. Violations of
franchising laws and/or state laws and regulations regulating substantive
aspects of doing business in a particular state could limit the Company's
ability to sell franchises or subject the Company and its affiliates to
rescission offers, monetary damages, penalties, imprisonment and/or injunctive
proceedings. In addition, under court decisions in certain states absolute
vicarious liability may be imposed upon franchisors based upon

8
<PAGE>

claims made against franchisees. While the Company believes that it maintains
adequate insurance coverage for such claims, there can be no assurance that
such insurance will be sufficient to cover potential claims against the
Company.

COMPETITION IS INTENSE

The restaurant industry is intensely competitive with respect to price,
service, location and food quality. The industry is mature and competition can
be expected to increase. There are many well-established competitors with
substantially greater financial and other resources than the Company, some of
which have been in existence for a substantially longer period than the
Company and may have substantially more units in the markets where the
Company's restaurants are or may be located. The Company's Bruegger's concept
competes against local and regional bagel shops, regional and national deli
and lunch restaurants, supermarkets and convenience stores. The Company also
faces competition from regional and national bagel chains, including Manhattan
Bagel Company, Inc., Chesapeake Bagels, New York Bagel Enterprises, Inc. and
Einstein/Noah Bagel Corp. The principal competitors to the Company's Burger
King restaurants are McDonald's, Wendy's, Hardee's and "double drive-thru"
restaurants. The competitors to the Company's Chili's and Spageddies
restaurants are other casual dining concepts such as T.G.I. Friday's,
Applebee's, Bennigan's, Olive Garden, Red Lobster and Chi-Chi's restaurants.
The primary competitors to Grady's American Grill are Houston's, J.
Alexander's, Cooker Bar & Grille, and O'Charley's Restaurant & Lounge, as well
as a large number of locally-owned, non-chain restaurants. The Company
believes that competition is likely to become even more intense in the future.

RISKS ASSOCIATED WITH THE FOOD SERVICE INDUSTRY

The Company and the restaurant industry generally are significantly affected
by factors such as changes in local, regional or national economic conditions,
changes in consumer tastes, weather conditions and various other consumer
concerns. In addition, factors such as increases in food, labor and energy
costs, the availability and cost of suitable restaurant sites, fluctuating
insurance rates, state and local regulations and the availability of an
adequate number of hourly-paid employees can also adversely affect the
restaurant industry.

DEPENDENCE ON KEY PERSONNEL

The success of the Company's business will continue to be dependent upon the
services of Daniel B. Fitzpatrick, President and Chief Executive Officer of
the Company. The Company maintains key man life insurance on the life of Mr.
Fitzpatrick in the principal amount of $3.0 million. The loss of the services
of Mr. Fitzpatrick would have a material adverse effect upon the Company.

RELATED PARTY TRANSACTIONS

The Company historically has engaged in related party transactions with
entities controlled by its founding shareholders. It is anticipated that the
Company will continue to engage in certain of these transactions. Related
party transactions are subject to the review and approval of the Company's
Audit Committee, which is composed exclusively of the Company's disinterested
Directors, and such transactions have been on terms no less favorable to the
Company than those that could be obtained from unaffiliated third parties.

In addition, Messrs. Nordahl L. Brue and Michael J. Dressell and their
affiliates are parties to a number of arrangements with Bruegger's
Corporation, including franchise agreements with more favorable terms than
other franchisees; certain exclusive supply arrangements with respect to the
cream cheese sold to Bruegger's units by Franklin County Cheese Corporation,
an entity affiliated with Messrs. Brue and Dressell; arrangements for
purchases of bagel dough and other products from the Company-owned
commissaries; arrangements with respect to the sale of bakery equipment to
Bruegger's units; the lease for Bruegger's headquarters in Burlington,
Vermont; and guaranties by Bruegger's Corporation of certain leases. Messrs.
Brue and Dressell, the co-founders of Bruegger's, have served on the Company's
Board of Directors since June 7, 1996.

9
<PAGE>

CONTROL BY INSIDERS

As of June 30, 1996, the executive officers and directors of the Company
beneficially owned approximately 57.0% of the shares of the Company's Common
Stock and will continue to own 49.5% after the Offering. Accordingly, senior
management of the Company has sufficient voting power to effectively control
the outcome of any matter submitted to the shareholders for approval, and to
block certain amendments to the Company's Restated Articles of Incorporation
and certain transactions that require a supermajority vote.

CERTAIN ANTI-TAKEOVER PROVISIONS

The division of the Company's Board of Directors into classes, the ability
of the Board of Directors to issue shares of preferred stock in one or more
series and to determine the designation, voting and other rights, preferences,
privileges and restrictions applicable to such shares, together with the
heightened shareholder approval requirements associated with certain business
combination transactions involving a Related Person (as defined) and
applicable provisions of Indiana law, may have the effect of discouraging a
merger, tender offer, proxy contest or other transaction involving a change in
control of the Company that has not received the prior approval of a majority
of the Company's Board of Directors. In addition, the Company's franchise
agreements with Burger King Corporation and Brinker require the Company to
obtain the prior consent of those franchisors for any new members of the Board
of Directors of the Company.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,200,000 shares of
Common Stock being offered by the Company are estimated to be $51.8 million
($59.9 million if the Underwriters' over-allotment option is exercised in
full). The Company intends to use substantially all of the net proceeds to
repay borrowings outstanding under its existing $150 million unsecured
revolving credit facility which expires on April 26, 1999. Borrowings under
the credit facility bear interest at the adjusted LIBOR rate plus 1.5%. At
June 30, 1996, the outstanding borrowings under the revolving credit facility
were $110.6 million. Of such balance, $74.4 million was incurred in connection
with the acquisition of Grady's American Grill in December 1995 and $16.1
million was incurred to repay certain short-term debt assumed in connection
with the acquisition of Bruegger's Corporation on June 7, 1996. A portion of
the net proceeds, estimated to be less than $15.0 million, may be used to
purchase Bruegger's units from certain franchisees. The Company expects to
enter into a definitive agreement with one franchisee to acquire five
Bruegger's units for an aggregate purchase price of $2.0 million. The Company
anticipates this acquisition will close on or about August 2, 1996. Although
the Company is having discussions with certain other franchisees regarding the
purchase of a limited number of units, there are currently no definitive
agreements or understandings with respect to any such proposed acquisition,
and there can be no assurance that any acquisitions of Bruegger's units will
be completed.

The Company will not receive any proceeds from the sale of shares by the
Selling Shareholders.

10
<PAGE>

RECENT STOCK PRICES

The Company's Common Stock commenced trading on the Nasdaq National Market
on March 2, 1994 under the symbol "QDIN". Prior thereto, there was no public
market for the Common Stock. The following table sets forth, for the calendar
periods indicated, the high and low sale prices per share for the Company's
Common Stock, as reported on the Nasdaq National Market:

<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1994
First Quarter (from March 2, 1994)..................... $12.875 $11.625
Second Quarter......................................... 11.750 10.750
Third Quarter.......................................... 13.125 10.750
Fourth Quarter......................................... 13.625 12.000
1995
First Quarter.......................................... 12.625 11.625
Second Quarter......................................... 16.375 12.188
Third Quarter.......................................... 21.500 15.750
Fourth Quarter......................................... 26.875 18.875
1996
First Quarter.......................................... 31.250 19.750
Second Quarter......................................... 39.500 26.500
Third Quarter (through July 25, 1996).................. 33.500 24.563
</TABLE>

On July 25, 1996, the last sale price of the Company's Common Stock as
reported on the Nasdaq National Market was $24.875 per share.

As of June 30, 1996, there were approximately 240 holders of record of
Common Stock.

11
<PAGE>

CAPITALIZATION

The following table sets forth the short-term debt and capitalization of the
Company: (i) at May 12, 1996; (ii) pro forma to reflect the acquisition of
Bruegger's Corporation; and (iii) as adjusted to reflect the issuance and sale
of 2,200,000 shares of Common Stock by the Company, at the public offering
price of $25.00 per share, and the application of the estimated net proceeds
therefrom as described under "Use of Proceeds." The table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Financial Statements incorporated
by reference in this Registration Statement.

<TABLE>
<CAPTION>
MAY 12, 1996
------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE
DATA)
<S> <C> <C> <C>
Short-term debt:
Current portion of capitalized lease and non-
competition obligations...................... $ 360 $ 360 $ 360
======== ======== ========
Long-term debt:
Revolving line of credit...................... $ 88,904 $104,912 $ 53,128
Capitalized lease and non-competition
obligations.................................. 6,806 6,806 6,806
-------- -------- --------
Total long-term debt........................ 95,710 111,718 59,934
-------- -------- --------
Redeemable Preferred Stock, $100 stated value;
Series A, cumulative, convertible; 141,450
shares authorized; 84,000 shares issued, pro
forma and no shares issued, as adjusted(1)..... -- 8,400 --
-------- -------- --------
Stockholders' equity(1):
Preferred Stock, without par value; 4,858,550
shares authorized; none issued............... -- -- --
Common Stock, without par value; 50,000,000
shares authorized; 8,861,920 shares issued;
13,989,041 shares issued, pro forma;
16,474,572 shares issued, as adjusted........ 28 28 28
Additional paid-in capital.................... 63,238 186,289 248,188
Retained earnings............................. 11,208 11,208 11,208
-------- -------- --------
74,474 197,525 259,424
Less treasury stock, 20,000 shares............ 250 250 250
-------- -------- --------
Total stockholders' equity.................. 74,224 197,275 259,174
-------- -------- --------
Total capitalization...................... $169,934 $317,393 $319,108
======== ======== ========
</TABLE>
- --------
(1) In addition to giving effect to the issuance and sale of 2,200,000 shares
of Common Stock contemplated hereby, amounts reported under the As
Adjusted column give effect to the issuance of 117,800 shares of the
Company's Series A preferred stock to the former holders of Bruegger's
Corporation redeemable preferred stock, the redemption of 16,650 shares
of Series A preferred stock and the conversion of 101,150 shares of
Series A preferred stock into an aggregate of approximately 285,531
shares of the Company's Common Stock.

12
<PAGE>

BUSINESS

GENERAL

The Company is the owner, operator and franchisor of Bruegger's, the largest
and, management believes, the fastest growing chain of fresh bagel bakeries in
the United States. The Company also operates four other distinct restaurant
concepts. It owns the Grady's American Grill and Spageddies concepts and
develops and operates Burger King restaurants and Chili's as a franchisee of
Burger King Corporation and Brinker, respectively. As of June 30, 1996, the
Company operated and franchised 469 restaurants, including 339 Bruegger's (76
Company-owned and 263 franchised), 42 Grady's American Grills, five
Spageddies, 63 Burger King restaurants and 20 Chili's.

EXPANSION

The Company intends to develop the Bruegger's brand through the aggressive
expansion of its system of Company-owned and franchised Bruegger's bakeries.
The Company acquired Bruegger's Corporation on June 7, 1996. The Company's
objectives are to establish the Bruegger's brand as the leading, most
recognized brand in the bagel industry, to enhance Bruegger's existing
position as the largest chain of fresh bagel bakeries in the United States and
to be the leader in the markets it enters. The Company's goal is to have 2,000
Bruegger's systemwide by the end of fiscal 2000. By the end of fiscal 1996,
the Company plans to have 445 to 475 Bruegger's systemwide (90 to 100 Company-
owned and 355 to 375 franchised). By the end of fiscal 1997, the Company plans
to have 675 to 750 Bruegger's systemwide (175 to 200 Company-owned and 500 to
550 franchised). The Company's franchisees have entered into development
agreements providing for the opening of a minimum of 653 additional franchised
bakeries by the end of 2001, approximately half of which are required under
the agreements to be open within the next three years.

OPERATING PHILOSOPHY

Management believes that the Company has the expertise required to fully
develop the Bruegger's brand and execute its aggressive expansion plan. Since
its founding in 1981, the Company has grown from a two-unit Burger King
franchisee to a leading multi-concept restaurant operator with 469 owned and
franchised units at June 30, 1996. The Company has achieved this growth while
remaining consistently profitable in each year of its operation. Management
attributes the Company's growth and financial success to its operating
philosophy, which is shared by all of the Company's concepts and is comprised
of the following four key elements:

Value-Based Concepts

Value-based restaurant concepts are important to the Company's business
strategy. Accordingly, in each of its restaurants, the Company seeks to
provide customers with value, which is a product of high-quality menu
selections, reasonably priced food, prompt, courteous service and a pleasant
dining atmosphere.

13
<PAGE>

Focus on Customer Satisfaction

Through its comprehensive management training programs and experienced
management team, the Company seeks to ensure that its employees provide
customers with an enjoyable dining experience on a consistent basis.

Hands-On Management Style

Members of the Company's senior management are actively involved in the
operations of each of the Company's restaurant concepts. This active
management approach is a key factor in the Company's efforts to control costs
and maximize operating income.

Quality Franchise Partners

The Company has historically sought franchisors and franchisees with
established reputations for leadership in their various segments of the
restaurant industry, who have proven integrity and share the Company's focus
on value, customer service and quality.

RECENT EVENTS

On June 7, 1996, the Company acquired Bruegger's Corporation, the nation's
largest chain of fresh bagel bakeries. Pursuant to the terms of a merger
agreement, Bruegger's Corporation became a wholly owned subsidiary of Quality
Dining, Inc. In connection with the merger, the Company will take a special
pre-tax charge ranging from $6.0 to $8.0 million associated with restructuring
and integration costs related to the merger. This charge will be taken during
the Company's third fiscal quarter ending August 4, 1996 and is not reflected
in the pro forma financial information included in this Prospectus. In
addition, the Company will recognize a purchase price adjustment of $6.0 to
$7.0 million, which will be added to goodwill and amortized over a 40-year
period.

On July 15, 1996, the Company acquired three bagel bakeries from an
unaffiliated third party for a purchase price of $3.5 million in cash.

BRUEGGER'S BAGEL BAKERIES

General

Bruegger's is the largest chain of fresh bagel bakeries in the United
States. Bruegger's offers freshly baked bagels, its branded premium "Javahh!"
coffee, Bruegger's branded cream cheese, bagel-based sandwiches, soups and
other food and beverage items. Bruegger's differentiates itself from its
competitors by providing customers with bagels baked in small batches on site
throughout the day using fresh, not frozen, dough. In order to provide its
customers with a consistently high-quality product and to minimize
transportation and production costs, Bruegger's is vertically integrated.
Bruegger's units are served by over 30 strategically located Company or
franchisee-owned commissaries that produce fresh dough and distribute other
products to Bruegger's bakeries on a daily basis.

The Brand

The Company's objective is to establish Bruegger's as the leading brand in
the bagel industry. In order to achieve this objective, the Company seeks to:
(i) rapidly expand the points of distribution for Bruegger's products through
the addition of new Bruegger's units; (ii) prominently feature the Bruegger's
brand name and logo in its units and in the packaging and display of its
products; and (iii) encourage repeat business and customer loyalty by
maintaining high standards of quality and consistency. Management believes
that penetrating each of its target markets with a large number of
strategically placed Bruegger's units will facilitate the development of the
Bruegger's brand, increase trial of the Company's products and lead to a high
level of brand awareness. In each of its retail locations, the Company
emphasizes easily identifiable and visible signage and logos to reinforce
brand identity. Local operators of Bruegger's units further brand awareness
through involvement with local community events, activities and promotions. In
addition, the Company has a significant marketing budget for advertising and
product promotions, which management expects to increase as Bruegger's
systemwide sales grow.

14
<PAGE>

Retail Locations

As of June 30, 1996, there were 76 Company-owned and 263 franchised bakeries
operating in 52 metropolitan markets in 32 states. The following table sets
forth the states in which Bruegger's bakeries were located on such date:

<TABLE>
<CAPTION>
STATE COMPANY FRANCHISED TOTAL
----- ------- ---------- -----
<S> <C> <C> <C>
Arizona.......................................... 2 2
California....................................... 10 10
Colorado......................................... 8 8
Connecticut...................................... 8 8
Florida.......................................... 6 6
Georgia.......................................... 2 2
Idaho............................................ 3 3
Illinois......................................... 14 2 16
Indiana.......................................... 4 4
Iowa............................................. 16 16
Kentucky......................................... 3 3
Maryland......................................... 15 15
Massachusetts.................................... 7 28 35
Michigan......................................... 10 10
Minnesota........................................ 27 27
Missouri......................................... 2 2
Nebraska......................................... 7 7
Nevada........................................... 2 2
New Hampshire.................................... 2 2
New Jersey....................................... 1 1
New York......................................... 35 35
North Carolina................................... 23 23
Ohio............................................. 35 35
Pennsylvania..................................... 2 20 22
South Carolina................................... 1 1
Tennessee........................................ 2 2
Texas............................................ 11 11
Utah............................................. 3 3
Vermont.......................................... 1 1 2
Virginia......................................... 7 7
Washington....................................... 12 12
Wisconsin........................................ 7 7
--- --- ---
32 States.................................... 76 263 339
=== === ===
</TABLE>

The Retail Concept

The Bruegger's chain of freshly-baked bagel bakeries is based on the concept
of combining the superior quality of a traditional bagel bakery with the high
volume and convenience of a quick-service restaurant. This concept, which has
been developed and refined since 1983, has enabled Bruegger's Corporation to
open Bruegger's units on a national basis, while maintaining its high
standards for freshness and quality. This concept has also enabled Bruegger's
to develop a distinctive brand image.

Products. As part of its operational strategy, the Bruegger's menu is
focused on a limited number of items including bagels, sandwiches, cream
cheeses, coffee, soups, desserts and other beverages. The Company believes
that this menu provides it with a marketing focus and facilitates the
maintenance of its high standards for product quality and freshness at all of
its bakeries.

Bagels. Bruegger's makes its bagels using a traditional production
process. Bruegger's bagels are kettle-boiled and then hearth-baked to give
the bagels a crispy exterior and a chewy texture inside. The Company
believes that this process distinguishes it from many of its

15
<PAGE>

competitors who use frozen dough or who make their bagels using the
"steamed" method which produces bagels with a softer crust. In addition,
this process permits Bruegger's bagels to be baked in each bakery in small
batches throughout the day by a trained baker, so that each bakery can
continually offer fresh, hot bagels.

Cream Cheese. Cream cheese is an important part of the Bruegger's menu.
The Company sells a proprietary brand of specialty cream cheeses under the
Bruegger's label on bagel sandwiches and in separate containers for take-
out. A large variety of spreads are available, including flavors such as
vegetable, smoked salmon and honey walnut, along with "light" cream cheeses
in plain and additional flavors. Each flavor starts with the same high-
quality cream cheese, to which fresh ingredients are added to create an
array of choices for the customer.

Sandwiches. All sandwiches sold by Bruegger's are made to order and are
served on a bagel using high-quality meats and other ingredients.
Bruegger's sells both traditional deli sandwiches and specialty sandwiches
such as the Leonardo da Veggie and the Chicken Fajita. The Company believes
that the quality and variety of Bruegger's lunch menu contributes to the
high proportion of lunch sales.

Coffee. Bruegger's sells its branded "Javahh!" coffee, a blend of freshly
roasted arabica beans from Costa Rica and Colombia which are ground in the
bakery and brewed fresh throughout the day. A variety of coffees, including
a limited number of flavored coffees, is also available. In addition,
Bruegger's is in the process of testing Javahhccino!, a sweet, frozen,
coffee-based beverage. Bruegger's supports its Javahh! brand through in-
store merchandising and the sale of Javahh! travel mugs to promote repeat
business.

Soups. As an integral component of its lunch menu, Bruegger's offers
soups made in accordance with Bruegger's proprietary recipes. Each bakery
selects the soups it serves from a list of 12 to 15 soups, including
several vegetarian soups, and offers up to four soups each day. Customers
often choose to have Bruegger's soup as a light lunch or as a side with a
bagel sandwich.

Customer Service. Bruegger's goal is to provide quick, friendly and
attentive service to its customers. Bruegger's depends on a high rate of
repeat business and views customer service as a critical factor to repeat
business. Through its emphasis on training, personnel development and
compensation incentives, the Company believes that it attracts and retains
well-qualified, highly-motivated Bruegger's employees who are committed to
providing high levels of customer service.

Bakery Design. The Company designs its Bruegger's units to convey an image
of fresh products and fast service and to provide customers with a casual,
warm and comfortable environment. Since Bruegger's offers both take-out and
eat-in service, most bakeries are configured to accommodate a high volume of
traffic and provide seating for between 50 and 60 people. The current bakery
interior emphasizes Bruegger's traditional bagel-baking process by prominently
displaying the oven, which customers may view through a "theater baking"
window. In addition, artwork and decor items reinforce Bruegger's commitment
to authenticity and freshness in all of its products, from the oversized cream
cheese lids and the bagel-baking story to the narrative describing Bruegger's
coffee, Javahh! Bruegger's units generally range in size from 1,900 to 2,700
square feet, with an average size of approximately 2,300 square feet.

Management Structure

The Company has in place an experienced management team, composed of
franchising, financial, marketing, real estate and development professionals
with extensive prior experience, as well as a strong and well-organized
operating system for its Bruegger's concept.

The Company has determined to consolidate Bruegger's executive offices with
those of the Company at its Mishawaka, Indiana headquarters. The operations of
the Company's Bruegger's bakeries will be managed through six regional
offices. The Company plans to complete its

16
<PAGE>

implementation of this regional office structure by the end of the first
quarter of fiscal 1997. The Company anticipates that each regional office will
be headed by a regional vice president, and staffed with other management
personnel with responsibilities for regional operations, marketing, training,
quality assurance, real estate and franchise support. Each regional office
will report to Nelson Marchioli, Bruegger's newly hired Chief Operating
Officer.

Bruegger's Operations

In an effort to achieve the quality of a traditional bagel bakery with the
high volume and convenience of a quick-service restaurant, the Company has
instituted and developed standardized operating procedures and management
information systems which are designed to enable it to maintain quality and
consistency in its operation of bakeries.

Commissaries. The Company produces its bagel dough for Company-owned
Bruegger's units at six commissaries. Franchisees typically build their own
commissaries to service the Bruegger's units in their markets. There are
currently over 30 Company-owned and franchisee-owned commissaries systemwide.
In addition to producing and distributing fresh bagel dough on a daily basis,
the commissaries function as distributors of other products to the bakeries,
including cream cheese, smoked salmon, sandwich meats and paper products.

The commissary system enables Bruegger's to control and monitor the quality
and consistency of its primary product line. In addition, the commissary
system enables Bruegger's to achieve cost efficiencies as compared to
producing bagel dough in each bakery from (i) lower equipment costs because
duplicate equipment is not required, (ii) lower occupancy costs because
warehouse space, not retail space, is used for production and (iii) the larger
production runs facilitated by the commissary system. Finally, the commissary
system facilitates the delivery of fresh bagel dough on a timely basis instead
of using frozen dough as some competitors do.

The average development cost of the Company's commissaries is approximately
$590,000, excluding an in-unit commissary in Burlington, Vermont. The Company
has an additional commissary under development in Philadelphia, Pennsylvania
to service that market and anticipates incurring similar costs in its
development.

Purchasing. The Company sets quality standards for all products used or sold
in Bruegger's units. In order to maintain product consistency and food safety
standards and to take advantage of volume discounts, franchised bakeries are
required to participate in selected national purchasing programs relating to
cream cheese, coffee, fountain soda, soup, meats, cheese, fish and some
condiments and to purchase such products from suppliers designated by
Bruegger's.

Franchise Program

As of June 30, 1996, the Company was a party to franchise and development
agreements with 36 franchisees, who were operating 263 franchised bakeries.
Each franchisee has been awarded an exclusive territory in which to operate.
As of June 30, 1996, the Company's franchisees, other than the Original
Franchisees, had committed to open an additional 653 bakeries. The Original
Franchisees are not obligated to build additional bakeries, but have advised
the Company that they intend to do so. The Company believes that its
franchising program is substantially complete and does not intend to add a
large number of new franchisees. The Company believes that its strategy of
working with a limited number of capable franchisees is the best strategy to
permit rapid expansion and a high degree of system responsiveness to market
developments and Bruegger's-related developments.

Approval. The Company has traditionally evaluated potential Bruegger's
franchisees on the basis of, among other things, their business background,
restaurant operating experience and financial resources. In particular, the
Company has focused on whether the franchisee has experience in multi-unit
operations, has proven ability to execute an aggressive growth plan while
maintaining the highest standards of quality and has the capital resources to
develop additional bakeries.

17
<PAGE>

Development Agreements. The Company enters into development agreements with
each of its franchisees pursuant to which it grants each franchisee the
exclusive right to develop a minimum number of bakeries within a specified
territory. Under the current development agreement, each franchisee pays a
development fee upon the execution of the development agreement in an amount
negotiated by the Company and the franchisee (which the Company expects to be
about $75,000 for an average size market). Each franchisee also pays an
initial franchise fee ($25,000 for each of the first three bakeries; $20,000
for each additional bakery) upon the execution of each franchise agreement for
each bakery opened. Prior to the adoption of the current form of development
agreement, each franchisee paid a development fee based on the number of
bakeries such franchisee committed to develop during the 15-month initial term
($25,000 for each of the first three bakeries; $20,000 for each additional
bakery). In the event that during the 15-month initial term the franchisee
developed more bakeries than it had committed to develop, the franchisee was
not required to pay any development or initial franchise fees with respect to
such additional bakeries. Following the 15-month initial term (and assuming
that at least three bakeries were opened during the initial term), the
franchisee was required to pay an initial franchise fee of $20,000 upon the
execution of each franchise agreement for each bakery opened. Originally,
franchisees paid an initial franchise and development fee of $1,000 for each
bakery and purchased shares of Bruegger's Corporation's preferred stock upon
the execution of the development agreement and subscribed to purchase
additional shares over the next four years.

Franchise Agreements. The Company's standard Bruegger's franchise agreement
generally provides for a term of 20 years and payment of a royalty fee of 5%
of gross sales. In addition, the Company generally requires the franchisee to
spend 4% of gross sales on advertising, one half of which must be contributed
to a general advertising fund that is used to promote the Bruegger's concept
on a local and regional level, although during a franchise's first year, a
franchisee need only contribute 1% of gross sales to the general advertising
fund, with 2% required spending on local store marketing.

The Company has the right to terminate any franchise agreement for a variety
of reasons, including a franchisee's failure to make payments when due or
failure to adhere to Bruegger's policies and standards. Many state franchise
laws limit the ability of a franchisor to terminate or refuse to renew a
franchise.

Franchise Sites. The Company furnishes each franchisee with assistance in
selecting sites and developing bakeries. Each franchisee is responsible for
selecting the location of its bakeries but must obtain the Company's approval
of each location based on the accessibility and visibility of the site and
targeted demographic factors, including population, density, income, age and
traffic.

Original Franchisees. As of June 30, 1996, the Original Franchisees owned
and operated 148 franchised bakeries in New England, Iowa, Minnesota, New
York, North Carolina and Pennsylvania. Until Bruegger's Corporation commenced
operations in 1993, all Bruegger's units were operated by the Original
Franchisees. Portions of the Original Franchisee territories include the
original development territories of Bruegger's.

The Original Franchisees have been awarded exclusive territories, but are
not obligated to develop a minimum number of bakeries. The franchise
agreements with the Original Franchisees differ from the standard Bruegger's
franchise agreements in that the Original Franchisees are not required to pay
initial franchise or development fees and pay franchise royalties of 4% of
gross sales.

Franchise Operations. All franchisees are required to operate their bakeries
in compliance with Bruegger's policies, standards and specifications,
including matters such as menu items, ingredients, materials, supplies,
services, fixtures, furnishings, decor and signs. Each franchisee must serve
items from an approved menu, but has full discretion to determine the prices
to be charged to its customers.

Trademarks and Service Marks

The Company owns a number of trademarks and service marks that have been
registered with the United States Patent and Trademark Office, including
Bruegger's(R), Bruegger's Fresh Bagel

18
<PAGE>

Bakery(R) and the logo for Bruegger's Fresh Bagel Bakery, Bruegger's Bagel
Bakery Fresh Bagels(R) and the logo for Bruegger's Bagel Bakery Fresh Bagels,
Brueggeroons(R), Bruegger's Last Night's Bagels(R) and the logo for Bruegger's
Last Night's Bagels, and The Best Thing Round(R). In addition, Bruegger's has
trademark applications pending for a number of additional marks, including
Javahh!(TM), We Bake Them in Small Batches All Day Long Because People Come in
Small Batches All Day Long(TM), Totally Completely Obsessed with
Freshness(TM), Javahhccino!(TM) and the logo for Bruegger's Bagels/Baked
Fresh.

GRADY'S AMERICAN GRILL

General

Grady's American Grill restaurants feature high-quality food in a classic
American style, served in a warm and inviting setting. Prior to the Company's
acquisition of the concept from Brinker on December 21, 1995, Brinker owned
and operated all of the 42 Grady's American Grill restaurants now owned and
operated by the Company. Grady's American Grill menu features signature prime
rib, high-quality steaks, daily servings of fresh seafood, inviting salads,
sandwiches, soups and legendary desserts. Entrees emphasize on-premise scratch
preparation in a classic American style.

Location

The Company's 42 Grady's American Grill restaurants are located in 16
states, primarily in the South and Southwest.

SPAGEDDIES ITALIAN KITCHEN

General

Spageddies, a concept developed by Brinker and now owned by the Company, are
Italian casual dining restaurants which offer high-quality food, generous
portions and value-driven prices, all enjoyed in a festive and energized
atmosphere. The concept is being refined to incorporate an upscale menu,
enhanced decor and service and a name change.

Spageddies restaurants are casual, modestly-priced Italian restaurants
featuring pasta, pizzas, soups, salads, sandwiches, breads and traditional
Italian entrees, as well as a full-service bar. The meals are served in an
open, family-friendly environment, complete with festive lighting, various
pepper and cheese displays and an open kitchen with a wood-burning pizza oven.

Location

The Company currently operates five Spageddies restaurants, including two in
Indiana, two in Ohio and one in Michigan.

BURGER KING RESTAURANTS

General

Headquartered in Miami, Florida, Burger King Corporation is an indirect
wholly-owned subsidiary of Grand Metropolitan PLC, London, England. Burger
King Corporation has been franchising Burger King restaurants since 1954 and
has since expanded to locations in 50 states, the District of Columbia, and 56
foreign countries and international territories. As of May 31, 1996, there
were 8,405 Burger King restaurants in operation worldwide comprised of 829
company-owned restaurants and 7,576 franchised restaurants. Each Burger King
restaurant offers a diverse menu containing a variety of traditional and
innovative food items, featuring the Whopper(R) sandwich and other flame-
broiled hamburgers and sandwiches which are prepared to order with the
customer's choice of condiments.

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<PAGE>

Location

The Company operates its Burger King restaurants in four metropolitan area
markets: South Bend, Indiana (20 restaurants); Fort Wayne, Indiana (13
restaurants); Detroit, Michigan (16 restaurants); and Southwestern Michigan
(14 restaurants).

CHILI'S GRILL & BAR

General

The Chili's restaurant concept is owned by Brinker, a publicly-held
corporation headquartered in Dallas, Texas. As of June 28, 1996, there were
490 Chili's restaurants system-wide, comprised of 352 company-owned and 138
joint ventured or franchised restaurants. Chili's restaurants are full-service
restaurants, featuring a casual atmosphere and quick, efficient and friendly
table service designed to minimize customer waiting time and facilitate table
turnover. Service personnel are dressed casually in jeans or slacks, knit
shirts and aprons to reinforce the casual, informal environment. Chili's
restaurants provide a limited menu of broadly appealing items, including a
variety of hamburgers, fajitas, chicken and seafood entrees and sandwiches,
barbecued ribs, salads, appetizers and desserts, all of which are prepared
fresh daily according to recipes specified by Chili's.

Location

The Company currently operates 20 Chili's restaurants, nine of which are
located in the Midwest and 11 of which are located in the Philadelphia market.

SUPPORT SERVICES

From its headquarters in Mishawaka, Indiana, the Company provides
accounting, information technology, human resources, finance, marketing, and
site selection and development support services for each of its operating
subsidiaries, except Bruegger's Corporation. Bruegger's Corporation currently
provides these services from its headquarters located in Burlington, Vermont;
however, the Company plans to relocate Bruegger's Corporation's headquarters
to the Company's corporate office in Mishawaka by March 1, 1997.

Management

During the past two fiscal years, the Company has added significant
management resources to coordinate and direct the Company's strategic growth.
The Company believes that these additions to its management team have enhanced
its ability to manage the larger and more diverse operations resulting from
its current and planned growth.

Each of the Company's restaurant concepts is managed by an experienced
management team. The Company's Bruegger's business is managed by the
Bruegger's Corporation Chief Executive Officer through a regional management
structure. Each geographic region is managed by an Operating Partner, with an
operations team located within each specific market. The Company's Burger King
business is also managed by geographic region, with a Director of Operations
located in each specific market. Each Director of Operations reports to the
Chief Operating Officer of the Company's Burger King division. The Company's
full service concepts are each managed by a Director of Operations who reports
to the Vice President--Full Service Dining Division. For the Company's Grady's
American Grill concept, two regional Directors report to the Vice President--
Grady's American Grill Division.

Site Selection

Site selection for new restaurants is made by the Company's senior
management under the direction of the Company's Chief Development Officer,
subject in the case of the Company's franchised restaurants to the approval of
its franchisors. Within a potential market area, the Company evaluates high-
traffic locations to determine profitable trading areas. Site-specific factors
considered by the Company include traffic generators, points of distinction,
visibility, ease of ingress and egress, proximity to direct competition,
access to utilities, local zoning regulations and various other factors. In
addition, in evaluating potential Chili's, Spageddies and Grady's American
Grill sites, the Company

20
<PAGE>

considers applicable laws regulating the sale of alcoholic beverages. The
Company regularly reviews potential sites for expansion. Once a potential site
is selected, the Company utilizes demographic and psychographic data provided
by consultants retained by the Company, Burger King Corporation or Brinker, as
the case may be, to assist in final site selection.

Quality Control

The Company's senior management and restaurant management staff are
principally responsible for assuring compliance with the Company's and its
franchisors' operating procedures. The Company and its franchisors have
uniform operating standards and specifications relating to the quality,
preparation and selection of menu items, maintenance and cleanliness of the
premises and employee conduct. Compliance with these standards and
specifications is monitored by frequent on-site visits and inspections by the
Company's senior management.

Management Information Systems

Financial controls are maintained through a centralized, computerized,
accounting system which allows the Company to track sales, labor costs and
product mix on an ongoing basis. Currently, the Company's Bruegger's
Corporation subsidiary maintains its own centralized, computerized, accounting
system at its headquarters in Burlington, Vermont, which system will be
integrated with the Company's system following Bruegger's Corporation's
headquarters move to Mishawaka. The Company has stand alone point-of-sale
registers installed in each of its restaurants. This system allows each unit
to track sales by product and customer counts. This information enables the
Company to analyze customer purchasing habits, operating trends and
promotional results. The computer system also enables the Company to audit
franchisee royalty payments more easily.

The Company's Chili's, Spageddies and Grady's American Grill restaurants use
fully automated reporting systems incorporating software provided by Brinker
and generate detailed financial information which is provided to the Company's
executive offices on a daily basis. The Company currently is in the process of
upgrading the financial reporting systems at its Burger King restaurants and
other components of its centralized computer system to allow the use of fully
automated financial reporting for all of the Company's restaurant concepts,
including Bruegger's, in a single, central location.

As a result of upgrades completed in fiscal 1995 and the acquisition of the
Grady's American Grill concept, the Company has undergone a significant
modification of its financial reporting systems. The Company anticipates that
additional modifications and upgrades will be required during fiscal 1996 and
fiscal 1997, primarily as a result of the merger with Bruegger's Corporation,
to centralize and consolidate the Company's management information systems.

Training

The Company maintains comprehensive training programs for all of its
restaurant management personnel. Special emphasis is placed on quality food
preparation, service standards and total customer satisfaction.

The Company requires that certain Bruegger's managers, franchise operators
and bakers, as well as commissary managers, participate in the Bruegger's
training program (although the Company permits certain of its franchisees to
operate their own training program). The training program consists of five
days of operational basics and two weeks of supervised on-the-job training and
focuses on Bruegger's philosophies, policies and operating procedures. The
Company offers the training program on an as-needed basis and requires that
such training be provided before a manager, operator or

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<PAGE>

baker assumes such position. In addition, each Bruegger's unit requires its
bakers to complete a specialized training program focused on ensuring the
consistent execution of the baking process.

The training program for the Company's Burger King restaurant managers
features an intensive four-week hands-on training period followed by two weeks
of classroom instruction and simulated restaurant management activities. Upon
certification, new managers work closely with experienced managers to solidify
their skills and expertise. The Company's existing restaurant managers
regularly participate in the Company's ongoing training efforts, including
classroom programs, off-site training at Burger King Corporation's regional
and national training centers and other training/development programs which
the Company's senior management designs from time to time. The Company
generally seeks to promote from within to fill Burger King restaurant
management positions.

The Company requires all general and restaurant managers of its Chili's
restaurants to participate in Chili's system-wide comprehensive 13-week
training program. The program teaches management trainees Chili's detailed
food preparation standards and procedures. The Company also participates in
regional and national training and development programs sponsored by Brinker.
Managers of the Company's Spageddies and Grady's American Grill restaurants
participate in similar training programs conducted by the Company.

Purchasing

Purchasing decisions from an approved list of suppliers are made by each of
the Company's restaurant managers based on his or her assessment of the
provisioning needs of the particular location. Purchase orders and invoices
are reviewed by restaurant general managers and by senior management.

The purchasing needs of the Company's Bruegger's units are primarily
satisfied by Company-owned commissaries. Each commissary produces fresh bagel
dough daily and delivers it, along with Bruegger's branded cream cheese and
coffee and certain paper products, to the bakeries. Other items required in
the operation of Bruegger's units are purchased by the bakery manager pursuant
to system-wide specifications.

The Company participates in system-wide purchasing and distribution programs
with respect to its Chili's and Burger King restaurants which have been
effective in reducing store level expenditures on food and paper packaging
commodities. The Company is fully responsible for the purchasing needs of its
other owned concepts, Spageddies and Grady's American Grill. The Company's
centralized food and beverage department contracts with full-service
distributors. In order to meet the future needs of its owned concepts, the
Company has expanded the food and beverage department to include an executive
chef and other functions for each of these concepts.

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<PAGE>

MANAGEMENT

The following table sets forth certain information with respect to the
executive officers and Directors of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Daniel B. Fitzpatrick........... 39 President and Chief Executive Officer,
Director
Stephen A. Finn................. 49 President and Chief Executive Officer of
Bruegger's Corporation, Director
Michael G. Sosinski............. 41 Chief Financial Officer and Treasurer,
Director
James K. Fitzpatrick............ 41 Senior Vice President and Chief Development
Officer, Director
William R. Schonsheck........... 46 Senior Vice President, Chief Operating
Officer of Burger King Division, Director
Gerald O. Fitzpatrick........... 36 Senior Vice President (South Bend, IN
Burger King operations)
John C. Firth................... 38 Senior Vice President, General Counsel and
Secretary
Arthur J. DeAngelis............. 42 Vice President--Grady's American Grill
Division
Scott C. Smith.................. 41 Vice President--Full Service Dining
Division
Bruce A. Phillips............... 41 Vice President--Bagel Division
David M. Findlay................ 34 Vice President--Planning and Shareholder
Relations
Michael J. Wargo................ 36 Vice President--Director of Human Resources
Nordahl L. Brue................. 52 Director, Co-Founder of Bruegger's
Corporation
Arthur J. Decio................. 65 Director
Michael J. Dressell............. 46 Director, Co-Founder of Bruegger's
Corporation
Ezra H. Friedlander............. 54 Director
Steven M. Lewis................. 46 Director
Christopher J. Murphy III....... 50 Director
</TABLE>

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<PAGE>

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of June 30, 1996,
including beneficial ownership by each person (or group of affiliated persons)
who is known by the Company to own beneficially more than 5% of the Common
Stock, by each of the Company's directors, by the Company's Chief Executive
Officer and each of the Company's four other most highly compensated executive
officers, and by all current Directors and executive officers as a group.
Except as otherwise noted, the Company believes that the persons named in the
table have sole voting and sole investment power with respect to all shares of
Common Stock shown as beneficially owned by them.

<TABLE>
<CAPTION>
BENEFICIAL
BENEFICIAL OWNERSHIP
OWNERSHIP AFTER
PRIOR TO OFFERING SHARES OFFERING (1)
---------------------------- BEING ----------------------------
NAME SHARES PERCENT OFFERED SHARES PERCENT
---- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Daniel B.
Fitzpatrick(2)......... 2,265,609(3)(4) 15.8% 0 2,265,609(3)(4) 13.7%
Ezra H. Friedlander..... 377,931(3)(5)(6) 2.6% 0 377,931(3)(5)(6) 2.3%
James K. Fitzpatrick.... 321,788(3)(7) 2.2% 0 321,788(3)(7) 1.9%
Gerald O. Fitzpatrick... 208,862(3)(8) 1.5% 0 208,862(3)(8) 1.3%
Michael G. Sosinski..... 52,262(3)(9)(10) * 0 52,262(3)(9)(10) *
Christopher J. Murphy
III.................... 19,292(3)(11)(12) * 0 19,292(3)(11)(12) *
Arthur J. Decio......... 7,000(3)(11) * 0 7,000(3)(11) *
Steven M. Lewis......... 7,250(3)(11)(13) * 0 7,250(3)(11)(13) *
William R. Schonsheck... 334,284(3)(14) 2.3% 0 334,284(3)(14) 2.0%
Scott C. Smith.......... 5,505(3)(15)(16) * 0 5,505(3)(15)(16) *
Nordahl L. Brue(2)...... 2,152,211(17) 15.1% 0 2,152,211(17) 13.0%
Michael J. Dressell(2).. 2,163,701 15.1% 0 2,163,701 13.1%
Stephen A. Finn......... 267,620 1.9% 0 267,620 1.6%
T. Garrick Steele....... 82,901 * 75,000 7,901 *
Anita L. Wood........... 2,861 * 2,300 561 *
All executive officers
and Directors as a
group
(18 persons)........... 8,204,052(3)(18) 57.0% 0 8,204,052(3)(18) 49.5%
</TABLE>
- --------
* Less than 1%
(1) Does not give effect to the exercise of the Underwriters' over-allotment
option. If the over-allotment option is exercised in full, the Company
will issue and sell to the Underwriters an additional 341,595 shares of
Common Stock.
(2) The address of this shareholder is 3820 Edison Lakes Parkway, Mishawaka,
Indiana 46545.
(3) Does not include shares subject to stock options which are not
exercisable within 60 days.
(4) Includes presently exercisable stock options to purchase 11,600 shares,
granted under the Company's 1993 Stock Option Plan.
(5) Includes 15,000 shares held in a trust of which Mr. Friedlander is the
trustee with investment control and the income beneficiary.
(6) Includes presently exercisable stock options to purchase 2,000 shares,
granted under the Company's Outside Directors Plan.
(7) Includes presently exercisable stock options to purchase 11,300 shares,
granted under the 1993 Stock Option Plan.
(8) Includes presently exercisable stock options to purchase 11,215 shares,
granted under the 1993 Stock Option Plan.
(9) Includes presently exercisable stock options to purchase 15,235 shares,
granted under the 1993 Stock Option Plan.

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<PAGE>

(10) Includes 100 shares owned by Mr. Sosinski's minor children.
(11) Includes presently exercisable stock options to purchase 4,000 shares,
granted under the Outside Directors Plan.
(12) Includes 2,940 shares held by Mr. Murphy's minor children and 1,000
shares held by certain retirement plans in which Mr. Murphy is a
participant.
(13) Includes 500 shares held in a trust for the benefit of Mr. Lewis' minor
children.
(14) Includes presently exercisable stock options to purchase 15,000 shares,
granted under the 1993 Stock Option Plan.
(15) Includes presently exercisable stock options to purchase 2,905 shares,
granted under the 1993 Stock Option Plan.
(16) Includes 50 shares owned by Mr. Smith's minor child.
(17) Includes 2,586 shares held by one of Mr. Brue's minor children and 2,586
shares held by Mr. Brue as custodian for another minor child.
(18) Includes presently exercisable stock options to purchase 79,410 shares,
granted under the 1993 Stock Option Plan, and 14,000 shares, granted
under the Outside Directors Plan.

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<PAGE>

UNDERWRITING

The Underwriters named below have severally agreed, subject to certain
conditions, to purchase from the Company and the Selling Shareholders the
aggregate number of shares of Common Stock set forth opposite their respective
names.

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
------------ ----------------
<S> <C>
Schroder Wertheim & Co. Incorporated..................... 378,300
Goldman, Sachs & Co...................................... 378,000
Wessels, Arnold & Henderson L.L.C........................ 378,000
Morgan Keegan & Company, Inc............................. 378,000
Alex. Brown & Sons Incorporated.......................... 75,000
A.G. Edwards & Sons, Inc................................. 75,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated....... 75,000
Montgomery Securities.................................... 75,000
Morgan Stanley & Co. Incorporated........................ 75,000
Robertson, Stephens & Company L.L.C...................... 75,000
Smith Barney Inc......................................... 75,000
Arnhold and S. Bleichroeder, Inc......................... 40,000
Robert W. Baird & Co. Incorporated....................... 40,000
William Blair & Company, L.L.C........................... 40,000
EVEREN Securities, Inc................................... 40,000
Piper Jaffray Inc........................................ 40,000
Roney & Co............................................... 40,000
---------
Total................................................ 2,277,300
=========
</TABLE>

The Underwriting Agreement provides that the Underwriters are obligated to
purchase all the 2,277,300 shares of Common Stock offered hereby, if any are
purchased. Schroder Wertheim & Co. Incorporated, Goldman, Sachs & Co.,
Wessels, Arnold & Henderson L.L.C. and Morgan Keegan & Company, Inc., as
representatives (the "Representatives") of the several Underwriters, have
advised the Company and the Selling Shareholders that the Underwriters propose
to offer the shares to the public initially at the offering price set forth on
the cover page of this Prospectus; that the Underwriters propose initially to
allow a concession not in excess of $0.75 per share to certain dealers,
including the Underwriters; that the Underwriters and such dealers may
initially allow a discount not in excess of $0.10 per share to other dealers;
and that the public offering price and the concession and discount to dealers
may be changed by the Representatives after the public offering.

The Company has granted to the Underwriters an option, expiring at the close
of business on the 30th day after the date of the Underwriting Agreement, to
purchase up to an additional 341,595 shares of Common Stock, at the public
offering price less underwriting discounts and commissions, all as set forth
on the cover page of this Prospectus. The Underwriters may exercise the option
only to cover over-allotments, if any, in the sale of shares of Common Stock
in the Offering. To the extent that the Underwriters exercise this option,
each Underwriter will be committed, subject to certain conditions, to purchase
a number of the additional shares proportionate to such Underwriter's initial
commitment.

In connection with the Offering, certain underwriters may engage in passive
market making transactions in the Company's Common Stock on the Nasdaq
National Market System immediately prior to the commencement of sales in the
Offering, in accordance with Rule 10b-6A under the Securities Exchange Act of
1934. Passive market making consists of displaying bids on Nasdaq limited by
the bid prices of independent market makers and purchases limited by such
prices and effected in response to order flow. Net purchases by a passive
market maker on each day are limited to a specified percentage of the passive
market maker's average daily trading volume in the Common Stock during a
specified prior period and must be discontinued when such limit is reached.
Passive market making may stabilize the market price of the Common Stock at a
level above that which might otherwise prevail and, if commenced, may be
discontinued at any time.

Schroder Wertheim & Co. Incorporated and Morgan Keegan & Company, Inc. have
provided certain investment banking services to the Company and its
subsidiaries, for which they have received

26
<PAGE>

customary compensation. Schroder Wertheim & Co. Incorporated served as the
lead managing underwriter of the Company's 1995 public offering of Common
Stock, and provided financial advisory services to Bruegger's Corporation in
connection with its acquisition by the Company. Morgan Keegan & Company, Inc.
served as the lead managing underwriter of the Company's 1994 initial public
offering and as a co-manager of its 1995 public offering. In addition, Morgan
Keegan & Company, Inc. rendered a fairness opinion to the Company's Board of
Directors in connection with the Company's acquisition of Bruegger's
Corporation.

The Company, the Selling Shareholders, and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.

The Company, its executive officers and Directors and the Selling
Shareholders have agreed not to sell or otherwise dispose of any shares of
Common Stock for a period of 180 days after the date of this Prospectus
without the prior written consent of Schroder Wertheim & Co. Incorporated.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Baker & Daniels, Indianapolis, Indiana. Certain legal matters will
be passed upon for the Underwriters by Calfee, Halter & Griswold, Cleveland,
Ohio, who will rely on the opinion of Baker & Daniels as to matters of Indiana
law.

EXPERTS

The consolidated financial statements of the Company as of October 30, 1994
and October 29, 1995, and for each of the three fiscal years in the period
ended October 29, 1995, incorporated by reference in its Annual Report on Form
10-K for the fiscal year ended October 29, 1995 and in this Prospectus, have
been audited by Coopers & Lybrand L.L.P., independent accountants, as stated
in their report with respect thereto, and have been incorporated by reference
herein in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.

The financial statements of Grayling Corporation as of December 20, 1992 and
December 19, 1993, and for each of the three years ended December 19, 1993,
incorporated by reference in this Prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
with respect thereto and are incorporated by reference herein in reliance upon
the authority of said firm as experts in giving said reports.

The combined financial statements of SHONCO, Inc., SHONCO II, Inc., SHONCO
III, Inc., SHONCO IV, Inc., SHONCO V, Inc. and SHONCO Seven Management, Inc.
(collectively, "SHONCO, Inc., et al.") as of December 31, 1994, and for the
year then ended, incorporated by reference in this Prospectus, have been
audited by Plante & Moran, LLP, independent accountants, as stated in their
report with respect thereto, and have been incorporated by reference herein in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

The combined financial statements of the Grady's Purchased Restaurants as of
June 29, 1994, and June 28, 1995, and for each of the years in the three-year
period ended June 28, 1995, incorporated by reference in this Prospectus, have
been incorporated by reference herein in reliance on the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.

The consolidated financial statements of Bruegger's Corporation as of
December 27, 1994 and December 28, 1993, and for each of the fifty-two week
periods in the two-year period ended

27
<PAGE>

December 27, 1994, incorporated by reference in this Prospectus, have been
incorporated by reference herein in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.

The consolidated financial statements of Bruegger's Corporation for the
fiscal year ended December 26, 1995, incorporated by reference in this
Prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto and are
incorporated by reference herein in reliance upon the authority of said firm
as experts in giving said reports.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents previously filed with the Commission by the Company
(File No. 0-23420) are incorporated herein by reference:

1. The Company's Annual Report on Form 10-K for the fiscal year ended
October 29, 1995;

2. The Company's Current Report on Form 8-K, dated January 5, 1996, as
amended by Form 8-K/A, dated February 27, 1996;

3. The Company's Quarterly Report on Form 10-Q for the quarter ended
February 18, 1996;

4. The Company's Current Report on Form 8-K, dated May 1, 1996;

5. The Company's Current Report on Form 8-K, dated May 31, 1996;

6. The Company's Current Report on Form 8-K, dated June 13, 1996;

7. The Company's Quarterly Report on Form 10-Q for the quarter ended May
12, 1996;

8. Financial statements of Grayling Corporation as of December 20, 1992
and December 19, 1993, and for each of the three years ended December 19,
1993, contained in pages 3 through 20 of the Company's Amendment No. 1 on
Form 8-K/A, dated December 22, 1994, to the Company's Current Report on
Form 8-K, dated November 23, 1994;

9. Combined financial statements of SHONCO, Inc., SHONCO II, Inc., SHONCO
III, Inc., SHONCO IV, Inc., SHONCO V, Inc. and SHONCO Seven Management,
Inc. as of December 31, 1994, and for the year then ended, contained in
pages 22 through 31 of the Company's Current Report on Form 8-K, dated
August 28, 1995;

10. Combined financial statements of Bruegger's Corporation, North Shore
Bagels, Inc., Erie Bagels, Inc., Odyssey Bagels, Inc., B F Holding, Inc.
and Bruegger's Franchise Corporation as of December 28, 1993, December 27,
1994 and December 26, 1995, and for each of the three years then ended,
contained in pages F-1 through F-27 of the Company's Registration Statement
on Form S-4 (Registration No. 333-2050); and

11. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed with the Commission on
February 18, 1994, including any amendments or reports filed for the
purpose of updating any such description.

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Registration
Statement and prior to the termination of the offering of securities made
hereby shall be deemed to be incorporated by reference into this Registration
Statement and to be a part hereof from the dates of filing of such documents.

Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Registration
Statement to the extent that a statement contained in this Registration
Statement, or in any other subsequently filed document which is also

28
<PAGE>

incorporated herein by reference, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Registration Statement.

The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all
such documents that have been or may be incorporated by reference herein
(other than exhibits to such documents which are not specifically incorporated
by reference into such documents). Requests for such documents should be
directed to David Findlay, 3820 Edison Lakes Parkway, Mishawaka, Indiana
46545, telephone (219) 271-4600.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission").
Reports and other information filed by the Company with the Commission may be
inspected and copied at the offices of the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and the Commission's Regional Offices at
7 World Trade Center, Suite 1300, New York, New York 10048-1102 and Suite
1400, Citicorp Center, 500 West Madison St., Chicago, Illinois 60661-2511.
Copies of such materials may also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Commission also maintains a Web site at
http://www.sec.gov. which contains reports, proxy statments and other
infomation regarding registrants that file electronically with the Commission.

The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules filed therewith. For
further information with respect to the Company and the Common Stock offered
hereby, reference is hereby made to such Registration Statement and to the
financial statements, exhibits and schedules filed therewith. Statements
contained in this Prospectus regarding the contents of any contract or other
documents referred to are not necessarily complete and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement. The Registration Statement, including
the exhibits thereto, may be inspected without charge at the principal office
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of all or part thereof may be obtained from such office upon the
payment of the prescribed fees.

Statements contained in this Prospectus as to the contents of any contract
or other document referred to are not necessarily complete and in each
instance where such contract or other document has been filed as an exhibit to
the Registration Statement, reference is made to the exhibit as filed, each
such statement being qualified in all respects by such reference.

NEITHER BRINKER INTERNATIONAL, INC., NOR BURGER KING CORPORATION
(COLLECTIVELY, THE "FRANCHISORS") OR ANY OF THEIR SUBSIDIARIES, AFFILIATES,
OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, ACCOUNTANTS OR ATTORNEYS ARE IN ANY
WAY PARTICIPATING IN, APPROVING OR ENDORSING THIS OFFERING OF SECURITIES, ANY
OF THE UNDERWRITING OR ACCOUNTING PROCEDURES USED IN THE OFFERING, OR ANY
REPRESENTATIONS MADE IN CONNECTION WITH THE OFFERING. THE GRANT BY THE
FRANCHISORS OF ANY FRANCHISE OR OTHER RIGHTS TO THE OFFEROR IS NOT INTENDED
AS, AND SHOULD NOT BE INTERPRETED AS, AN EXPRESS OR IMPLIED APPROVAL,
ENDORSEMENT OR ADOPTION OF ANY STATEMENT REGARDING FINANCIAL OR OTHER
PERFORMANCE WHICH MAY BE CONTAINED IN THE OFFEROR'S OFFERING MATERIALS.

29
<PAGE>

ANY REVIEW BY THE FRANCHISORS OF THE OFFERING MATERIALS OR THE INFORMATION
INCLUDED THEREIN HAS BEEN CONDUCTED SOLELY FOR THE BENEFIT OF THE FRANCHISORS
TO DETERMINE CONFORMANCE WITH THE FRANCHISOR'S INTERNAL POLICIES, AND NOT TO
BENEFIT OR PROTECT ANY OTHER PERSON. NO INVESTOR SHOULD INTERPRET SUCH REVIEW
BY THE FRANCHISOR OR THE USE AND DISPLAY OF ANY FRANCHISOR LOGOS, TRADEMARKS
OR SERVICEMARKS HEREIN AS APPROVAL, ENDORSEMENT, ACCEPTANCE OR ADOPTION OF ANY
REPRESENTATION, WARRANTY OR COVENANT CONTAINED IN THE MATERIALS REVIEWED.

THE ENFORCEMENT OR WAIVER OF ANY OBLIGATION OF THE OFFEROR UNDER ANY
AGREEMENT BETWEEN THE OFFEROR AND THE FRANCHISORS OR FRANCHISORS' AFFILIATES
IS A MATTER OF THE FRANCHISORS' OR THE FRANCHISORS' AFFILIATES' SOLE
DISCRETION. NO INVESTOR SHOULD RELY ON ANY REPRESENTATION, ASSUMPTION OR
BELIEF THAT THE FRANCHISORS OR FRANCHISORS' AFFILIATES WILL ENFORCE OR WAIVE
PARTICULAR OBLIGATIONS OF THE OFFEROR UNDER SUCH AGREEMENTS.

BURGER KING CORPORATION IS THE EXCLUSIVE LICENSEE OF THE BUN HALVES LOGO, A
FEDERALLY REGISTERED TRADEMARK.

30
<PAGE>

QUALITY DINING, INC.

INDEX TO FINANCIAL INFORMATION

<TABLE>
<S> <C>
Selected Financial Data................................................. F-2
Pro Forma Condensed Consolidated Balance Sheet as of May 12, 1996....... F-5
Pro Forma Condensed Consolidated Statement of Income for the 52 weeks
ended October 29, 1995................................................. F-7
Pro Forma Condensed Consolidated Statement of Income for the 28 weeks
ended May 12, 1996..................................................... F-8
</TABLE>

F-1
<PAGE>

QUALITY DINING, INC.
SELECTED FINANCIAL DATA

Balance sheet data as of October 25, 1992, October 31, 1993, October 30,
1994 and October 29, 1995 and income statement data for the fiscal years ended
October 27, 1991, October 25, 1992, October 31, 1993, October 30, 1994 and
October 29, 1995 have been derived from financial statements audited by
Coopers & Lybrand L.L.P., independent accountants. Balance sheet data as of
October 27, 1991 have been derived from the audited financial statements of
the affiliated companies, which have been consolidated for purposes of
presentation and have been adjusted to present information on a basis
consistent with subsequent periods. The selected pro forma financial
information set forth below for the fiscal year ended October 29, 1995
reflects the Company's acquisition of 42 Grady's American Grill restaurants on
December 21, 1995 and acquisition of the SHONCO Companies on August 14, 1995.
The selected pro forma financial information set forth below for the 28 weeks
ended May 12, 1996 reflects the Company's acquisition of 42 Grady's American
Grill restaurants on December 21, 1995. Such pro forma information is for
informational purposes only and may not necessarily be indicative of the
results of operations and financial position of the Company as they may be in
the future or what the results of operations of the Company would have been
had the transactions described in the notes been consummated at the assumed
dates. The selected financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and the Company's Financial Statements, including
the notes thereto, incorporated by reference in this Registration Statement.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1)
---------------------------------------------------------------------------
OCTOBER 29, 1995
OCTOBER 27, OCTOBER 25, OCTOBER 31, OCTOBER 30, -----------------------
1991 1992 1993 1994 ACTUAL PRO FORMA(2)
----------- ----------- ----------- ----------- --------- ------------
(IN THOUSANDS, EXCEPT UNIT, SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Restaurant sales:
Grady's American
Grill................. $ -- $ -- $ -- $ -- $ -- $ 100,858
Burger King............ 41,372 43,762 49,032 49,716 57,013 64,832
Chili's................ 1,265 4,625 9,963 14,286 38,267 38,267
Spageddies............. -- -- -- 174 4,741 4,741
Bruegger's............. -- -- -- 191 5,270 5,270
------- ------- --------- --------- --------- ---------
Total restaurant
sales............... 42,637 48,387 58,995 64,367 105,291 213,968
------- ------- --------- --------- --------- ---------
Restaurant operating
expenses:
Food and beverage...... 12,145 13,168 16,465 18,576 31,176 66,293
Payroll and benefits... 10,662 12,193 14,830 16,190 27,191 55,740
Depreciation and
amortization.......... 1,906 2,044 2,384 2,635 5,678 9,990
Other operating
expenses.............. 11,612 12,516 15,065 15,351 24,057 54,276
------- ------- --------- --------- --------- ---------
Total restaurant
operating expenses.. 36,325 39,921 48,744 52,752 88,102 186,299
------- ------- --------- --------- --------- ---------
Income from restaurant
operations............. 6,312 8,466 10,251 11,615 17,189 27,669
General and
administrative
expenses............... 2,629 3,087 3,543 3,852 5,744 8,994
Consulting fee.......... -- -- 600 -- --
Compensation expense
(income)--stock
options................ -- -- -- 213 (38) (38)
------- ------- --------- --------- --------- ---------
Operating income..... 3,683 5,379 6,108(4) 7,550(5) 11,483 18,713
------- ------- --------- --------- --------- ---------
Other income (expense):
Interest expense....... (1,391) (1,226) (1,673) (1,314) (2,699) (8,650)
Gain (loss) on sale of
property and
equipment............. -- -- 2 (59) 343 343
Interest income........ 413 169 165 155 127 118
Other expense, net..... -- -- (75) (72) (125) (85)
------- ------- --------- --------- --------- ---------
Total other expense.. (978) (1,057) (1,581) (1,290) (2,354) (8,274)
------- ------- --------- --------- --------- ---------
Income before income
taxes.................. 2,705 4,322 4,527 6,260 9,129 10,439
Income taxes............ -- -- -- 2,332 3,240 3,680
------- ------- --------- --------- --------- ---------
Net income........... $ 2,705 $ 4,322 $ 4,527(4) $ 3,928(5) $ 5,889 $ 6,759
======= ======= ========= ========= ========= =========
Net income per share. $ .85 $ .94
========= =========
Weighted average
shares outstanding.. 6,925,310 7,175,120
========= =========
Pro forma income data:
Net income as
reported.............. $ 2,705 $ 4,322 $ 4,527 $ 3,928
Pro forma provision
for income taxes(7)... 1,001 1,599 1,675 512
------- ------- --------- ---------
Pro forma net
income(7)........... $ 1,704 $ 2,723 $ 2,852(4) $ 3,416(5)
======= ======= ========= =========
Pro forma net income
per share........... $ .64(4) $ .59(5)
========= =========
Pro forma weighted
average number of
common and common
equivalent shares
outstanding......... 4,437,552(8) 5,800,800(8)
========= =========
RESTAURANT DATA:
Units open at end of
period:
Burger King............ 40 44 44 48 59
Chili's................ 1 2 4 8 18
Spageddies............. -- -- -- 1 5
Bruegger's............. -- -- -- 3 12
BALANCE SHEET DATA:
Working capital
deficiency............. $(1,668) $ (751) $ (888) $ (1,894) $ (1,827)
Total assets............ 17,249 22,671 24,946 43,273 99,247
Long-term debt and
capitalized lease and
non-competition
obligations. 10,700 15,666 16,621 7,492 14,298
Total stockholders'
equity................. 2,719 3,014 3,761 26,582 71,401
</TABLE>

F-2
<PAGE>

<TABLE>
<CAPTION>
28 WEEKS ENDED
------------------------------------
MAY 12, 1996
MAY 14, -------------------------
1995 ACTUAL PRO FORMA(3)
--------- --------- ------------
(IN THOUSANDS, EXCEPT UNIT,
SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Restaurant sales:
Grady's American Grill................... $ -- $ 41,679 $ 56,810
Burger King.............................. 27,961 35,588 35,588
Chili's.................................. 20,229 21,086 21,086
Spageddies............................... 1,920 4,373 4,373
Bruegger's............................... 2,144 6,321 6,321
--------- --------- ---------
Total restaurant sales................. 52,254 109,047 124,178
--------- --------- ---------
Restaurant operating expenses:
Food and beverage........................ 15,543 34,256 39,180
Payroll and benefits..................... 13,552 30,650 34,637
Depreciation and amortization............ 2,694 5,342 5,893
Other operating expenses................. 12,188 24,390 28,595
--------- --------- ---------
Total restaurant operating expenses.... 43,977 94,638 108,305
--------- --------- ---------
Income from restaurant operations......... 8,277 14,409 15,873
General and administrative expenses....... 3,282 5,088 5,576
Restructuring and integration costs....... -- 1,938 1,938
--------- --------- ---------
Operating income....................... 4,995 7,383(6) 8,359
--------- --------- ---------
Other income (expense):
Interest expense......................... (1,369) (3,125) (3,968)
Gain (loss) on sale of property and
equipment............................... (4) 3 3
Interest income.......................... 58 111 111
Other expense, net....................... (60) (2) (2)
--------- --------- ---------
Total other expense.................... (1,375) (3,013) (3,856)
--------- --------- ---------
Income before income taxes................ 3,620 4,370 4,503
Income taxes.............................. 1,340 1,595 1,635
--------- --------- ---------
Net income............................. $ 2,280 $ 2,775(6) $ 2,868
========= ========= =========
Net income per share................... $ .34 $ .31(6) $ .32
========= ========= =========
Weighted average shares outstanding.... 6,744,123 8,837,540 8,837,540
RESTAURANT DATA:
Units open at end of period:
Grady's American Grill................... -- 42
Burger King.............................. 50 63
Chili's.................................. 17 19
Spageddies............................... 3 5
Bruegger's............................... 7 21
BALANCE SHEET DATA:
Working capital deficiency................ $ (3,710) $ (3,038)
Total assets.............................. 71,952 185,776
Long-term debt and capitalized lease and
non-competition obligations.............. 31,110 95,710
Total stockholders' equity................ 32,213 74,224
</TABLE>
- --------
(1) The fiscal year ended October 31, 1993 consisted of 53 weeks. All other
fiscal years presented consisted of 52 weeks.
(2) The pro forma income statement data of the Company for the 52 weeks ended
October 29, 1995 reflects how the Company's statement of income might have
appeared if the Company's acquisition of 42 Grady's American Grill
restaurants, which was finalized on December 21, 1995, and acquisition of
the SHONCO Companies, which was finalized on August 14, 1995, had both
occurred on October 31, 1994. The Company's acquisition of 42 Grady's
American Grill restaurants was detailed in a Form 8-K, dated January 5,
1996, as amended by Form 8-K/A, dated February 27, 1996.

F-3
<PAGE>

(3) The pro forma income statement data of the Company for the 28 weeks ended
May 12, 1996 reflects how the Company's statement of income might have
appeared if the Company's acquisition of 42 Grady's American Grill
restaurants had occurred on October 30, 1995.
(4) Operating income and net income for fiscal 1993 includes a non-recurring
pre-tax charge in the amount of $600,000 associated with a consulting
agreement. This charge reduced fiscal 1993 pro forma net income and pro
forma net income per share by $378,000 and $.09, respectively.
(5) Operating income for fiscal 1994 includes a non-recurring pre-tax charge
of $213,000 associated with the granting of nonqualified stock options to
certain non-executive employees of the Company and net income for fiscal
1994 includes a non-recurring, non-cash charge of $680,000 associated with
the after tax effect of the above charge and a $546,000 charge to record
deferred income taxes upon termination of the Company's S Corporation
status. These charges reduced pro forma net income and pro forma net
income per share for fiscal 1994 by $680,000 and $.12, respectively.
(6) Operating income for the 28 weeks ended May 12, 1996 includes a special
pre-tax charge of $1,938,000 associated with restructuring and integration
costs related to the acquisitions of 42 Grady's American Grill restaurants
and the rights to the Spageddies restaurant concept in the United States.
This charge reduced net income and net income per share for the 28 weeks
ended May 12, 1996 by $1,230,000 and $.14, respectively.
(7) Reflects federal and state income taxes (assuming a 37% effective tax
rate) as if the Company had been taxed as a C Corporation rather than an S
Corporation during all periods ending prior to March 1, 1994, the date of
termination of its S Corporation status.
(8) For the 52 weeks ended October 30, 1994, includes 4,437,552 shares of the
Company's Common Stock and Common Stock equivalents outstanding, as
described below, from November 1, 1993 to March 1, 1994 and 6,471,250
shares of the Company's Common Stock outstanding from that date through
October 30, 1994. For the 53 weeks ended October 31, 1993, includes
4,000,000 shares of the Company's Common Stock outstanding and 437,552
shares of the Company's Common Stock and Common Stock equivalents assumed
to be outstanding. The 437,552 shares of the Company's Common Stock and
Common Stock equivalents assumed to be outstanding are equivalent to the
number of shares of the Company's Common Stock at the initial public
offering price of $11.50 per share and the application of the estimated
proceeds therefrom necessary to fund that portion of distributions in
excess of fiscal 1993 undistributed earnings in the aggregate amount of
$4.4 million at October 31, 1993 and 26,359 Common Stock equivalents
assumed outstanding resulting from the granting of nonqualified stock
options to certain non-executive employees of the Company to purchase an
aggregate of 26,590 shares of the Company's Common Stock.

F-4
<PAGE>

QUALITY DINING, INC.

PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF MAY 12, 1996
(UNAUDITED)

The following unaudited pro forma condensed consolidated balance sheet
reflects the acquisition by the Company of Bruegger's Corporation as if it had
occurred on May 12, 1996. Such pro forma information is based upon the
historical balance sheet of the Company as of May 12, 1996 and the historical
balance sheet of Bruegger's Corporation as of May 14, 1996, giving effect to
the Merger and the pro forma adjustments set forth in the accompanying notes
to pro forma condensed consolidated balance sheet. This pro forma condensed
consolidated balance sheet should be read in conjunction with the pro forma
condensed consolidated statements of income of the Company and the historical
financial statements and notes thereto of the Company and Bruegger's
Corporation incorporated by reference in this Registration Statement.

This unaudited pro forma condensed consolidated balance sheet is not
necessarily indicative of what the actual consolidated financial position of
the Company would have been at May 12, 1996, nor does it purport to represent
the future consolidated financial position of the Company.
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA
------------ ----------- ---------------------------
QUALITY BRUEGGER'S
DINING, INC. CORPORATION
------------ -----------
MAY 14,
ASSETS MAY 12, 1996 1996 ADJUSTMENTS CONSOLIDATED
------ ------------ ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents.............. $ 3,403 $ 926 $ (750)(1) $ 3,579
Accounts receivable....... 2,787 1,281 (37)(2) 4,031
Inventories............... 1,880 593 -- 2,473
Other current assets...... 1,677 893 (61)(2) 2,509
Deferred income taxes..... 23 -- -- 23
-------- -------- -------- --------
Total current assets.... 9,770 3,693 (848) 12,615
-------- -------- -------- --------
Property and equipment,
net....................... 134,802 19,915 -- 154,717
-------- -------- -------- --------
Other assets:
Franchise fees and
development costs, net... 10,592 -- (24)(2) 10,568
Goodwill, net............. 9,950 -- 141,845 (1) 151,795
Trademark................. 13,260 -- -- 13,260
Preopening costs and non-
competition agreements,
net...................... 1,867 -- -- 1,867
Liquor licenses........... 2,312 -- -- 2,312
Investment in redeemable
preferred stock.......... 2,625 -- (2,625)(3) --
Other..................... 598 148 -- 746
-------- -------- -------- --------
Total other assets...... 41,204 148 139,196 180,548
-------- -------- -------- --------
Total assets............ $185,776 $ 23,756 $138,348 $347,880
======== ======== ======== ========
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
<S> <C> <C> <C> <C>
Current liabilities:
Current portion of
capitalized lease, non-
competition obligations
and long-term debt....... $ 360 $ 16,008 $(16,008)(4) $ 360
Current portion of
redeemable preferred
stock subscription
payable.................. 375 -- (375)(3) --
Accounts payable.......... 3,579 2,890 (98)(2) 6,371
Accounts payable, related
parties.................. 41 -- 41
7,000 (1)
Accrued liabilities....... 8,453 5,857 (4)(2) 21,306
-------- -------- -------- --------
Total current
liabilities............ 12,808 24,755 (9,485) 28,078
Long-term debt............. 88,904 -- 16,008 (4) 104,912
Capitalized lease and non-
competition obligations,
principally to related
parties, less current
portion................... 6,806 -- -- 6,806
Redeemable preferred stock
subscription payable, less
current portion........... 625 -- (625)(3) --
Deferred income taxes...... 2,409 -- -- 2,409
-------- -------- -------- --------
Total liabilities....... 111,552 24,755 5,898 142,205
-------- -------- -------- --------
Redeemable preferred stock. -- 10,025 (1,625)(3) 8,400
-------- -------- -------- --------
Stockholders' equity
(deficiency):
Common stock.............. 28 4 (4)(1) 28
(1,977)(1)
Additional paid-in
capital.................. 63,238 1,977 123,051 (1) 186,289
Retained earnings
(deficit)................ 11,208 (13,005) 13,005 (1) 11,208
-------- -------- -------- --------
74,474 (11,024) 134,075 197,525
Less treasury stock....... (250) -- -- (250)
-------- -------- -------- --------
Total stockholders'
equity (deficiency).... 74,224 (11,024) 134,075 197,275
-------- -------- -------- --------
Total liabilities and
stockholders' equity... $185,776 $ 23,756 $138,348 $347,880
======== ======== ======== ========
</TABLE>

See accompanying notes to pro forma condensed consolidated balance sheet.

F-5
<PAGE>

QUALITY DINING, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(1) To reflect the acquisition of Bruegger's Corporation by the Company and
record the excess of the purchase price over the acquired tangible net
assets ("goodwill"). A summary of the acquisition of Bruegger's
Corporation by the Company and the related pro forma adjustments reflected
in the accompanying pro forma condensed consolidated balance sheet are as
follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
PURCHASE PRICE:
<S> <C>
Fair value of 5,127,121 shares of the Company's Common
Stock issued in exchange for all of the outstanding
Bruegger's Corporation Common Stock valued at $24 per
share................................................ $123,051
Estimated acquisition and post-merger integration
costs................................................ 7,750
--------
$130,801
========

NET ASSETS ACQUIRED:

Stockholders' deficiency of Bruegger's Corporation as
of May 14, 1996...................................... $(11,024)
Elimination of capitalized Bruegger's Corporation
franchise fees on the balance sheet of the Company... (20)
Excess of purchase price over acquired tangible net
assets ("goodwill").................................. 141,845
--------
$130,801
========
</TABLE>

The fair value per share of the Company's Common Stock was determined by an
average of the actual quoted closing market prices of the Company's Common
Stock a few days before and after the February 22, 1996 public announcement
of the Bruegger's Corporation acquisition.

(2) Elimination of certain transactions between the Company and Bruegger's
Corporation, including accounts payable from the Company to Bruegger's
Corporation for food purchases ($23), franchise fees paid by the Company
to Bruegger's Corporation ($14), development costs paid by the Company to
Bruegger's Corporation ($4) and advertising rebates due to the Company by
Bruegger's Corporation ($61).

(3) Elimination of the Company's investment in Bruegger's Corporation
Preferred Stock and the related stock subscription payable to Bruegger's
Corporation. Upon consummation of the Merger, all of the shares of
Bruegger's Corporation Preferred Stock held by the Company were cancelled
and the remaining outstanding shares of Bruegger's Corporation Preferred
Stock were converted into an equal number of shares of the Company's
Preferred Stock. The shares of the Company's Preferred Stock may be
converted, at the option of the holder thereof, at any time within 90 days
after the Merger into the number of shares of the Company's Common Stock
determined by dividing the $100 per share stated value of the Company's
Preferred Stock by the average quoted closing price per share of the
Company's Common Stock for the five trading days immediately preceding the
Merger ($35.425).

(4) To reflect repayment of current maturities of Bruegger's Corporation long-
term debt at the time of consummation of the Merger using proceeds from
borrowings under the Company's long-term revolving credit agreement.

F-6
<PAGE>

QUALITY DINING, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE 52 WEEKS ENDED OCTOBER 29, 1995
(UNAUDITED)

The following unaudited pro forma condensed consolidated statement of income
reflects the acquisition by the Company of Bruegger's Corporation as if it had
occurred on October 31, 1994. Such pro forma information is based upon the pro
forma results of operations of the Company for the 52 weeks ended October 29,
1995, giving effect to the acquisition of 42 Grady's American Grill
restaurants, which was finalized on December 21, 1995, and the acquisition of
the SHONCO Companies, which was finalized on August 14, 1995, and the
historical results of operations of Bruegger's Corporation for the 52 weeks
ended October 31, 1995, giving effect to the Merger and the pro forma
adjustments set forth in the accompanying notes to pro forma condensed
consolidated statements of income. This pro forma condensed consolidated
statement of income should be read in conjunction with the pro forma condensed
consolidated balance sheet of the Company and the historical financial
statements and notes thereto of the Company and Bruegger's Corporation
incorporated by reference in this Registration Statement.

This unaudited pro forma condensed consolidated statement of income is not
necessarily indicative of what the actual consolidated results of operations
of the Company would have been assuming the Merger had been completed as set
forth above, nor does it purport to represent the consolidated results of
operations of the Company for future periods.

<TABLE>
<CAPTION>
PRO FORMA HISTORICAL PRO FORMA
------------------- ---------------- ---------------------------
QUALITY BRUEGGER'S
DINING, INC. CORPORATION
------------------- ----------------
52 WEEKS ENDED 52 WEEKS ENDED
OCTOBER 29, 1995(1) OCTOBER 31, 1995 ADJUSTMENTS CONSOLIDATED
------------------- ---------------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Restaurant sales:
Grady's American
Grill................. $100,858 $ -- $ -- $100,858
Burger King............ 64,832 -- -- 64,832
Chili's................ 38,267 -- -- 38,267
Spageddies............. 4,741 -- -- 4,741
Bruegger's............. 5,270 15,618 -- 20,888
-------- ------- ------- --------
Total restaurant
sales............... 213,968 15,618 -- 229,586
-------- ------- ------- --------
Restaurant operating
expenses:
Food and beverage...... 66,293 5,605 -- 71,898
Payroll and benefits... 55,740 4,728 -- 60,468
Depreciation and
amortization.......... 9,990 1,094 3,546 (3) 14,630
(263)(4)
Other operating
expenses.............. 54,276 3,733 (54)(5) 57,692
-------- ------- ------- --------
Total restaurant
operating expenses.. 186,299 15,160 3,229 204,688
-------- ------- ------- --------
Income from restaurant
operations............. 27,669 458 (3,229) 24,898
(11)(6)
(263)(4)
Franchise revenues...... -- 4,379 (54)(5) 4,051
Bruegger's commissary
revenue................ -- 4,222 (434)(7) 3,788
Bruegger's commissary
expenses............... -- (4,229) 434 (7) (3,795)
General and
administrative
expenses............... (8,994) (6,028) -- (15,022)
Compensation income--
stock options.......... 38 -- -- 38
-------- ------- ------- --------
Operating income (loss). 18,713 (1,198) (3,557) 13,958
-------- ------- ------- --------
Other income (expense):
Interest expense....... (8,650) (614) -- (9,264)
Gain on sale of
property.............. 343 -- -- 343
Interest income........ 118 24 -- 142
Other expense, net..... (85) (75) -- (160)
-------- ------- ------- --------
Total other expense.. (8,274) (665) -- (8,939)
-------- ------- ------- --------
Income (loss) before
income taxes........... 10,439 (1,863) (3,557) 5,019
Income taxes (benefit).. 3,680 20 (682)(9) 3,018
-------- ------- ------- --------
Net income (loss)....... $ 6,759 $(1,883) $(2,875) $ 2,001
======== ======= ======= ========
Net income per share.... $ 0.94 $ 0.16
======== ========
Weighted average number
of shares of common
stock outstanding...... 7,175 5,127 (10) 12,302
======== ======= ========
</TABLE>

See accompanying notes to pro forma condensed consolidated statements of
income.

F-7
<PAGE>

QUALITY DINING, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE 28 WEEKS ENDED MAY 12, 1996

(UNAUDITED)

The following unaudited pro forma condensed consolidated statement of income
reflects the acquisition by the Company of Bruegger's Corporation as if it had
occurred on October 30, 1995. Such pro forma information is based upon the pro
forma results of operations of the Company for the 28 weeks ended May 12,
1996, giving effect to the acquisition of 42 Grady's American Grill
restaurants, which was finalized on December 21, 1995, and the historical
results of operations of Bruegger's Corporation for the 28 weeks ended May 14,
1996, giving effect to the Merger and the pro forma adjustments set forth in
the accompanying notes to pro forma condensed consolidated statements of
income. This pro forma condensed consolidated statement of income should be
read in conjunction with the pro forma condensed consolidated balance sheet of
the Company and the historical financial statements and notes thereto of the
Company and Bruegger's Corporation incorporated by reference in this
Registration Statement.

<TABLE>
<CAPTION>
PRO FORMA HISTORICAL PRO FORMA
--------------- -------------- ---------------------------
QUALITY DINING, BRUEGGER'S
INC. CORPORATION
--------------- --------------
28 WEEKS ENDED 28 WEEKS ENDED
MAY 12, 1996(2) MAY 14, 1996 ADJUSTMENTS CONSOLIDATED
--------------- -------------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Restaurant sales:
Grady's American
Grill................. $ 56,810 $ -- $ -- $ 56,810
Burger King............ 35,588 -- -- 35,588
Chili's................ 21,086 -- -- 21,086
Spageddies............. 4,373 -- -- 4,373
Bruegger's............. 6,321 11,732 -- 18,053
-------- ------- ------- --------
Total restaurant
sales............... 124,178 11,732 -- 135,910
-------- ------- ------- --------
Restaurant operating
expenses:
Food and beverage...... 39,180 4,025 -- 43,205
Payroll and benefits... 34,637 4,171 -- 38,808
1,909 (3)
Depreciation and
amortization.......... 5,765 1,004 128 (8) 8,806
(316)(4)
Other operating
expenses.............. 28,595 2,912 (86)(5) 31,105
-------- ------- ------- --------
Total restaurant
operating expenses.. 108,177 12,112 1,635 121,924
-------- ------- ------- --------
Income (loss) from
restaurant operations.. 16,001 (380) (1,635) 13,986
(6)(6)
(316)(4)
Franchise revenues...... -- 3,241 (86)(5) 2,833
Bruegger's commissary
revenue................ -- 2,983 (262)(7) 2,721
Bruegger's commissary
expenses............... -- (2,838) 262 (7) (2,576)
General and
administrative
expenses............... (5,576) (5,255) -- (10,831)
Restructuring,
integration and special
charges................ (1,938) (5,958) -- (7,896)
-------- ------- ------- --------
Operating income (loss). 8,487 (8,207) (2,043) (1,763)
-------- ------- ------- --------
Other income (expense):
Interest expense....... (3,968) (646) -- (4,614)
Gain on sale of
property.............. 3 -- -- 3
Interest income........ 111 33 -- 144
Other expense, net..... (130) (8) 128 (8) (10)
-------- ------- ------- --------
Total other expense.. (3,984) (621) 128 (4,477)
-------- ------- ------- --------
Income (loss) before
income taxes........... 4,503 (8,828) (1,915) (6,240)
Income taxes (benefit).. 1,635 -- (3,180)(9) (1,545)
-------- ------- ------- --------
Net income (loss)....... $ 2,868 $(8,828) $ 1,265 $ (4,695)
======== ======= ======= ========
Net income (loss) per
share.................. $ 0.32 $ (0.34)
======== ========
Weighted average number
of shares of common
stock outstanding...... 8,838 5,127 (10) 13,965
======== ======= ========
</TABLE>

See accompanying notes to pro forma condensed consolidated statements of
income.

F-8
<PAGE>

QUALITY DINING, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(1) The pro forma condensed consolidated statement of income of the Company
for the 52 weeks ended October 29, 1995 reflects how the Company's
statement of income might have appeared if the acquisition of 42 Grady's
American Grill restaurants on December 21, 1995 and the acquisition of the
SHONCO Companies on August 14, 1995 had both occurred on October 31, 1994.
Presented below is summarized condensed income statement data reflecting
the historical results of operations of the Company and the pro forma
effects of the acquisitions of 42 Grady's American Grill restaurants and
the SHONCO Companies for the 52 weeks ended October 29, 1995 as was
detailed in the Company's Form 8-K, dated January 5, 1996, as amended by
Form 8-K/A, dated February 27, 1996. The pro forma effects consist of the
historical results of operations of the 42 Grady's American Grill
restaurants and the SHONCO Companies giving effect to certain adjustments,
including interest expense, depreciation of property and equipment and
amortization of acquired intangible assets.

<TABLE>
<CAPTION>
PRO FORMA EFFECT OF
QUALITY --------------------- QUALITY DINING
DINING GRADY'S PRO FORMA
HISTORICAL AMERICAN GRILL SHONCO COMBINED
---------- -------------- ------ --------------
<S> <C> <C> <C> <C>
Restaurant sales........ $105,291 $100,858 $7,819 $213,968
Income from restaurant
operations............. 17,189 9,761 719 27,669
Operating income........ 11,483 6,511 719 18,713
Income before income
taxes.................. 9,129 890 420 10,439
Net income.............. 5,889 622 248 6,759
Net income per share.... .85 .94
</TABLE>

(2) The pro forma condensed consolidated statement of income of the Company
for the 28 weeks ended May 12, 1996 reflects how the Company's statement
of income might have appeared if the acquisition of 42 Grady's American
Grill restaurants on December 21, 1995 had occurred on October 30, 1995.
Presented below is summarized condensed income statement data reflecting
the historical results of operations of the Company and the pro forma
effect of the acquisition of 42 Grady's American Grill restaurants for the
28 weeks ended May 12, 1996. The pro forma effect consists of the
historical results of operations of the 42 Grady's American Grill
restaurants giving effect to certain adjustments, including interest
expense, depreciation of property and equipment and amortization of
acquired intangible assets.

<TABLE>
<CAPTION>
PRO FORMA
QUALITY EFFECT OF QUALITY DINING
DINING GRADY'S PRO FORMA
HISTORICAL AMERICAN GRILL COMBINED
---------- -------------- --------------
<S> <C> <C> <C>
Restaurant sales.............. $109,047 $15,131 $124,178
Income from restaurant
operations................... 14,537 1,464 16,001
Operating income.............. 7,511 976 8,487
Income before income taxes.... 4,370 133 4,503
Net income.................... 2,775 93 2,868
Net income per share.......... .31 .32
</TABLE>

(3) Amortization over a 40-year period of $141,845 of goodwill associated with
the acquisition of Bruegger's Corporation by the Company.

(4) Elimination of royalties paid by the Company to Bruegger's Corporation.

(5) Elimination of advertising fees paid by the Company to Bruegger's
Corporation.

(6) Elimination of franchise fees paid and capitalized by the Company and
recognized by Bruegger's Corporation as income.

F-9
<PAGE>

(7) Elimination of commissary revenue and expenses for sales by Bruegger's
Corporation to the Company.

(8) Reclassification of trademark amortization.

(9) Income tax benefit of the net loss of Bruegger's Corporation and
adjustment (6) above at the Company's effective tax rate of 36%.

(10) Reflects the issuance of 5,127,121 shares of the Company's Common Stock
in connection with the acquisition of Bruegger's Corporation. For
purposes of the computation of the weighted average number of shares of
Common Stock outstanding, no effect has been given to the number of
shares of the Company's Common Stock issuable upon the conversion of the
Company's Preferred Stock since the amount is not material.

F-10
<PAGE>

INSIDE BACK COVER PAGE

[Photo of Bruegger's Cream Cheese and other products]
<PAGE>

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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA-
TION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTI-
TUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY
OTHER THAN THE SECURITIES COVERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE
AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH AN OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLI-
CATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE
DATES AS OF WHICH INFORMATION IS FURNISHED OR THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................... 3
Risk Factors............................................................... 6
Use of Proceeds............................................................ 10
Recent Stock Prices........................................................ 11
Capitalization............................................................. 12
Business................................................................... 13
Management................................................................. 23
Principal and Selling Shareholders......................................... 24
Underwriting............................................................... 26
Legal Matters.............................................................. 27
Experts.................................................................... 27
Incorporation of Certain Documents by Reference............................ 28
Available Information...................................................... 29
Index to Financial Information............................................. F-1
</TABLE>

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2,277,300 SHARES

LOGO

QUALITY DINING, INC.

COMMON STOCK
(WITHOUT PAR VALUE)

SCHRODER WERTHEIM & CO.

GOLDMAN, SACHS & CO.

WESSELS, ARNOLD & HENDERSON

MORGAN KEEGAN & COMPANY, INC.

JULY 26, 1996

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