INTERNATIONAL FRANCHISE SYSTEMS INC, SB-2/A, 1997-02-11

INTERNATIONAL FRANCHISE SYSTEMS INC
SB-2/A, 1997-02-11
GRAIN MILL PRODUCTS

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As filed with the SEC on February 11, 1997
Reg. No. 333-16251/333-78950

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
POST-EFFECTIVE AMENDMENT NO. 5
TO
FORM SB-2

INTERNATIONAL FRANCHISE SYSTEMS, INC.
(Exact name of Registrant as specified in its Charter)

Delaware 6794 52-1853204
(State of Jurisdiction (Primary Standard (IRS Employer
of Organization or Industrial Identification
Incorporation) Classification Number)
Code Number)

6701 Democracy Boulevard, Suite 300, Bethesda, Maryland 20817
(301) 897-4870
(Address and Telephone Number of Principal Executive
Offices and Principal Place of Business)

H. MICHAEL BUSH, PRESIDENT
6701 Democracy Boulevard, Suite 300, Bethesda, Maryland 20817
(301) 897-4870
(Name, Address and Telephone Number of Agent for Service)

COPY TO:
Michael B. Pollack, Esquire
Reed Smith Shaw & McClay
2500 One Liberty Place
Philadelphia, Pa 19103
(215) 851-8100

Approximate date of Proposed Sale to the Public: From time to time after
this Registration Statement becomes effective.
<PAGE>

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box [X].

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]

If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

Pursuant to Rule 429 under the Securities Act of 1933, as amended, the
Prospectus which forms a part of this Registration Statement No. 333-16251 also
relates to: (i) Common Stock issuable upon the exercise of Redeemable Class A
Common Stock Purchase Warrants (1,077,324 shares) and Redeemable Class B Common
Stock Purchase Warrants (1,077,324 shares) and (ii) Units (107,732) included in
the Underwriter's Stock Purchase Option and the underlying Common Stock (107,732
shares), Class A Common Stock Purchase Warrants (107,732) and Class B Common
(107,732) covered by the Registration Statement on Form SB-2 (Registration
Number 33-78950) which are being carried forward in connection with this
Registration Statement.

<PAGE>

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
Proposed Proposed
Title of each class Maximum Maximum
of securities to be Amount Offering Aggregate Amount registered
to be Price Per Offering Registration
Registered Security Price Fee
(1) (1) (2)
_______________________________________________

<S> <C> <C> <C> <C>
Common Stock, 2,000,000 $.875 $1,750,000 $530.30 (3)
par value $.01 per share
<FN>

(1) The shares of common stock are to be offered from time to time at the then
current market prices or otherwise at prices then obtainable. The proposed
maximum offering price cannot be determined at this time. See footnote (2)
below.

(2) Based on the average of the bid and asked price as of November 12, 1996. As
disclosed above, this Registration Statement also relates to (i) Common Stock
issuable upon the exercise of Redeemable Class A Common Stock Purchase Warrants
(1,077,324 shares) and Redeemable Class B Common Stock Purchase Warrants
(1,077,324 shares) and (ii) Units (107,732) included in the Underwriter's Stock
Purchase Option and the underlying Common Stock (107,732 shares) Class A Common
Stock Purchase Warrants (107,732) and Class B Common (107,732) for which a
registration fee has previously been paid.

(3) Fee has been previously paid.
</FN>
</TABLE>

The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.

iii
<PAGE>

EXPLANATORY NOTES

This Registration Statement contains two forms of prospectus: (1) one to be
used in connection with an offering of (a) up to 1,077,324 shares of Common
Stock, $.01 par value, of International Franchise Systems, Inc. (the "Company")
issuable upon exercise of Redeemable Class A Common Stock Purchase Warrants,
each to purchase one share of Common Stock at an exercise price of $5.00 per
share ("Class A Warrants"), (b) up to 1,077,324 Shares of Common Stock issuable
upon exercise of Redeemable Class B Common Stock Purchase Warrants, each to
purchase one share of Common Stock at an exercise price of $10.00 per share
("Class B Warrants"), (c) 107,732 Units, each consisting of one share of Common
Stock, one Class A Warrant and one Class B Warrant, issuable upon exercise of
the Underwriter's Unit Purchase Option issued in connection with the Company's
initial public offering of Common Stock and Warrants in September 1994 ("IPO"),
(d) up to 107,732 shares of Common Stock included in the Units underlying the
Underwriter's Unit Purchase Option and (e) up to 215,464 shares of Common Stock
issuable upon exercise of the Class A Warrants and Class B Warrants included in
such Units (the "Offering Prospectus"), and (ii) one to be used in connection
with the sale of Common Stock by the Company's majority Stockholder, or by its
pledgees, donees, transferees or other successors in interest (the "Selling
Stockholder Prospectus"). The Offering Prospectus and the Selling Stockholder
Prospectus will be identical in all respects except that the alternate pages for
the Selling Stockholder Prospectus included herein are labeled "Alternate Page
for Selling Stockholder Prospectus."

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC.

CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Registration Statement
Item Number and Heading Location in Prospectus
<S> <C>
1. Front of Registration Statement and Out- side
Front Cover Page of Prospectus........................................Cover Page: Cross Reference
Sheet, Outside Front Cover
Page of Prospectus

2. Inside Front and Outside Back.........................................Cover Pages of Prospectus
Inside Front and Out- side
Cover Pages

3. Summary Information and Risk Factors..................................Prospectus Summary; The
Company; Risk Factors

4. Use of Proceeds.......................................................Use of Proceeds

5. Determination of Offering Price.......................................Cover Page; Risk Factors;
Plan of Distribution

6. Dilution..............................................................Dilution; Risk Factors

7. Selling Security Holders..............................................(1)

8. Plan of Distribution..................................................(2)

9. Legal Proceedings.....................................................Business-- Legal Proceedings

10. Directors, Executive Officers, Promoters, and
Control Persons.......................................................Management

11. Security Ownership of Certain Beneficial Owners
and Management........................................................Principal Shareholders

12. Description of
Securities............................................................Description of Securities

13. Interests of Named Experts and
Counsel...............................................................Legal Matters; Experts

14. Disclosure of Commission position on
Indemnification for Securities Act
Liabilities...........................................................Management; Part II
<PAGE>

15. Organization within Last Five
Years................................................................. Not Applicable

16. Description of Business...............................................The Company; Business; Risk
Factors

17. Management's Discussion and Analysis or Plan of
Operation.............................................................Management's Discussion and
Analysis of Financial
Condition and Results of
Operations

18. Description of Property...............................................Business-- facilities

19. Certain Relationships and Related
Transactions..........................................................Risk Factors; Certain Transactions

20. Market for Common Equity and Related Stockholder
Matters...............................................................Description of Securities;
Shares Eligible for Future
Sale; Plan of Distribution

21. Executive Compensation................................................Management--Executive Compensation

22. Financial Statements..................................................Financial Statements

23. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure...................................Not Applicable
<FN>

(1) In Offering prospectus: Outside Front Cover Page of prospectus; Concurrent
Registration of Common Stock. In Selling Stockholder Prospectus outside Front
and Outside Back Cover Pages of Prospectus; Prospectus Summary; Selling
Stockholder and Plan of Distribution.

(2) In Offering Prospectus: Outside Front and Outside Back Cover Pages of
Prospectus; Prospectus Summary. In Selling Stockholder Prospectus: Outside Front
and Outside Back Cover Pages of prospectus; Prospectus Summary; Selling
Stockholder and Plan of Distribution.
</FN>
</TABLE>

<PAGE>

PROSPECTUS

INTERNATIONAL FRANCHISE SYSTEMS, INC.

2,154,648 shares of Common Stock issuable upon exercise of
1,077,324 Redeemable Class A Common Stock Purchase Warrants
1,077,324 Redeemable Class B Common Stock Purchase Warrants

and

107,732 Units consisting of
107,732 shares of Common Stock,
107,732 Class A Common Stock Purchase Warrants and
107,732 Class B Common Stock Purchase Warrants

This Prospectus relates to the sale of up to (i) 1,077,324 shares of
Common Stock, par value $.01 per share (the "Common Stock") of International
Franchise Systems, Inc. (the "Company"), issuable upon exercise of 1,077,324
Class A Common Stock Purchase Warrants ("Class A Warrants") and (ii) 1,077,324
shares of Common Stock issuable upon exercise of 1,077,324 Class B Common Stock
Purchase Warrants ("Class B Warrants"). An aggregate of 1,077,324 Class A
Warrants and 1,077,324 Class B Warrants were issued in connection with the
Company's initial public offering ("IPO") of Units consummated September 9,
1994. Each Unit consisted of one share of Common Stock, one Class A Warrant and
one Class B Warrant. The Company also issued to Patterson Travis, Inc., the sole
underwriter of the IPO ("Patterson Travis" or the "Underwriter"), an option (the
"Underwriter's Unit Purchase Option") to purchase 107,732 Units for a purchase
price of $8.25 per unit. The Units included in the Underwriter's Unit Purchase
Option and the underlying shares of Common Stock, Class A Warrants and Class B
Warrants, and underlying shares of Common Stock, are also being registered for
sale under the Registration Statement of which this Prospectus constitutes a
part.

Each Class A Warrant entitles the registered holder thereof to
purchase, at any time until June 30, 1997 (the "Class A Warrant Expiration
Date"), one share of Common Stock at a price of $5.00, subject to adjustment.
Each Class B Warrant entitles the registered holder thereof to purchase, at
anytime until December 9, 1999 (the "Class B Warrant Expiration Date"), one
share of Common Stock at a price of $10.00, subject to adjustment.

The Class A Warrants and Class B Warrants (hereinafter, collectively
the "Warrants") are redeemable by the Company for $.01 per Warrant, upon thirty
(30) day's prior written notice, if the average closing price or bid price of
the Common Stock, as reported by the principal exchange on which the Common
Stock is quoted, NASDAQ or the National Quotation Bureau Incorporated, as the
case may be equals or exceeds $10.00 per share for the Class A Warrants and
$15.00 per share for the Class B Warrants, for any ten (10) trading days within
a period of thirty (30) consecutive trading days ending five (5) days prior to
the date of the notice of redemption. Upon thirty (30) days' written notice to
all holders of the effected class of Warrants, the Company shall have the right
to reduce the exercise price and/or extend the term of the Class A Warrants
and/or Class B Warrants. See "Description of Securities."

The Company has agreed to pay a solicitation fee (the "Solicitation
Fee") equal to 8% of the exercise price ($.40 for Class A Warrants and $.80 for
Class B Warrants) in connection with

<PAGE>

the exercise of the Warrants after December 9, 1995. The exercise prices of the
Warrants were determined by negotiation between the Company and Patterson Travis
and are not necessarily related to the Company's assets, book value, or
financial condition, or to any other recognized criteria of value. Any costs
incurred in connection with the exercise of the Warrants, including the
Solicitation Fee, shall be borne by the Company.

<TABLE>
<CAPTION>
Warrant Warrant Proceeds
Exercise Solicitation To
Public Fee(1) Company

Per Class A
Warrant $ 5.00 $.40 $4.60

Per Class B
Warrant $ 10.00 $.80 $9.20

Total(2)(3) $16,159,860 $1,292,789 $14,867,071
<FN>

(1) Pursuant to the terms of an Underwriting Agreement between the Company and
Patterson Travis, the Company shall pay Patterson Travis a fee of 8% of the
aggregate exercise price ("Solicitation Fee") of each Warrant exercised if (i)
the market price of the Company's shares of Common Stock on the date the Warrant
is exercised is greater than the Warrant exercise price; (ii) the exercise of
the Warrant was solicited by a member of the National Association of Securities
Dealers, Inc. ("NASD"); (iii) the Warrant was not held in a discretionary
account; (iv) disclosure of compensation arrangements was made both at the time
of the sale and exercise of the Warrants; (v) soliciting the exercise is not in
violation of Rule 10b-6 under the Securities Exchange Act of 1934 ("Exchange
Act") and (vi) solicitation of the exercise is in compliance with the NASD
Notice to Members 81-38 (September 22, 1981). Such solicitation fee shall be
$.40 for each Class A Warrant and $.80 for each Class B Warrant. Unless granted
an exemption by the Securities and Exchange Commission from its Rule 10b-6,
Patterson Travis will be prohibited from engaging in any market activities with
regard to the Company's securities for the period from nine business days (or
such other applicable period as Rule 10b-6 may provide) prior to any
solicitation of the exercise of Warrants until the latter of the termination of
such solicitation activity or the termination (by waiver or otherwise) of any
right that Patterson Travis may have to receive a fee for the exercise of
Warrants following such solicitation. Patterson Travis may be unable to continue
to provide a market for the Company's securities during certain periods while
the Warrants are exercisable. See "Risk Factors" and "Plan of Distribution."

<PAGE>

(2) Before deducting expenses of the offering payable by the Company estimated
at $19,000, consisting of accounting fees and expenses, legal fees and expenses,
blue sky fees and expenses, printing, Warrant Agent fees and miscellaneous
expense.

(3) Assumes exercise by all holders of Class A Warrants and Class B Warrants.
Does not, however, include the proceeds to be derived by the Company upon
exercise of the Underwriter's Unit Purchase Option. There can be no assurance
that all, or any of the Class A Warrants or Class B Warrants will be exercised.
</FN>
</TABLE>

The Company's Units, Common Stock and Warrants are listed on the NASDAQ
Electronic Bulletin Board, an inter-dealer, over-the-counter market. Quotes for
stock traded on the NASDAQ Electronic Bulletin Board are not listed in
newspapers.

On December 31, 1996 the closing sale price for the Company's Common
Stock was $.625 and the closing sale price for the Company's Units was $.75. See
"Price Range of Common Stock."

Concurrently with this Offering, 2,000,000 shares of Common Stock (the
"Selling Stockholder's Shares") have been registered by the Company under the
Securities Act of 1933, as amended, on behalf of the Company's majority
Stockholder (the "Selling Stockholder"), or its pledgees, donees, transferees or
other successors in interest, pursuant to a prospectus (the "Selling Stockholder
Prospectus") included within the Registration Statement of which this Prospectus
forms a part (the "Concurrent Offering). The Company will not receive any of the
proceeds from the sale of the Selling Stockholder's Shares. See "Concurrent
Registration of Common Stock."

THE SECURITIES OFFERED HEREBY INVOLVE A HIGH
DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL
DILUTION.
IN ADDITION, A SUBSTANTIAL PORTION OF THE
ASSETS OF THE COMPANY ARE LOCATED OUTSIDE THE
UNITED STATES.
SEE "RISK FACTORS" (COMMENCING ON PAGE 10) AND "DILUTION."

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

The date of this Prospectus is February 10, 1997.

<PAGE>

A SIGNIFICANT AMOUNT OF THE UNITS SOLD IN THE COMPANY'S INITIAL PUBLIC OFFERING
WERE SOLD TO CUSTOMERS OF THE UNDERWRITER. THIS MAY AFFECT THE MARKET FOR AND
LIQUIDITY OF THE COMPANY'S SECURITIES IN THE EVENT THAT ADDITIONAL
BROKER-DEALERS DO NOT MAKE A MARKET IN THE COMPANY'S SECURITIES, OF WHICH THERE
CAN BE NO ASSURANCE. IN SUCH EVENT, THE POSSIBILITY EXISTS THAT THE MARKET FOR
THE COMPANY'S SECURITIES COULD BECOME ILLIQUID. THIS COULD AFFECT THE
SHAREHOLDERS' ABILITY TO TRADE THE COMPANY'S SECURITIES.

ALTHOUGH IT HAS NO OBLIGATION TO DO SO, THE UNDERWRITER MAY FROM TIME TO TIME
ACT AS A MARKET MAKER AND OTHERWISE EFFECT TRANSACTIONS IN THE COMPANY'S
SECURITIES. THE UNDERWRITER, IF IT PARTICIPATED IN THE MARKET, MAY BECOME A
DOMINATING INFLUENCE IN THE MARKET FOR THE UNITS OR THE COMMON STOCK AND
WARRANTS CONTAINED THEREIN. HOWEVER, THERE IS NO ASSURANCE THAT THE UNDERWRITER
WILL OR WILL NOT CONTINUE TO BE A DOMINATING INFLUENCE. THE PRICES AND LIQUIDITY
OF THE SECURITIES OFFERED HEREUNDER MAY BE SIGNIFICANTLY AFFECTED BY THE DEGREE
OF THE UNDERWRITER'S PARTICIPATION IN SUCH MARKET. THE UNDERWRITER MAY
DISCONTINUE SUCH ACTIVITIES AT ANY TIME OR FROM TIME TO TIME.

4
<PAGE>

AVAILABLE INFORMATION

The Company has filed with the Commission a Registration Statement (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered by this Prospectus.
This Prospectus, filed as part of such Registration Statement, does not contain
all of the information set forth in, or annexed as exhibits to, the Registration
Statement, certain portions of which have been omitted in accordance with the
rules and regulations of the Commission. For further information with respect to
the Company and this offering, reference is made to the Registration Statement
including the exhibits filed therewith. The Registration Statement may be
inspected and copies may be obtained from the Public Reference Section at the
Commission's principal office, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 205549, and at the new York Regional Office, 7 World Trade
Center, New York, New York 10048, upon payment of the fees prescribed by the
Commission. Statements contained in this prospectus as to the contents of any
contract or other document are not necessarily complete and where the contract
or other document has been filed as an exhibit to the Registration Statement,
each such statement is qualified in all respects by such reference to the
applicable document filed with the Commission.

The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith is required to file reports, proxy statements and other information
with the Securities and Exchange Commission("Commission"). Such reports, proxy
statements and other information can be inspected and copies at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549; at its new York Regional Office, 7 World Trade Center, New York, New
York 10048; and at its Midwest Regional Office, 500 West Madison Street,
Chicago, Illinois 60661-2511, and copies of such material can be obtained from
the Commission's Public Reference Section at prescribed rates. The Company
furnishes its shareholders with annual reports containing audited financial
statements and such other periodic reports as the Company deems appropriate or
as may be required by law.

<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to the
more detailed information and the financial statements, including the notes
thereto, appearing elsewhere in this Prospectus. Each prospective investor is
urged to read this Prospectus in its entirety. Unless otherwise indicated, no
effect is given in this Prospectus to the Underwriter's Unit Purchase Option. As
used herein, the term "Company" includes the Company as well as any other
entities owned or controlled by the Company unless the context indicates
otherwise.

THE COMPANY

International Franchise Systems, Inc. and its subsidiaries
(collectively, the "Company" or "IFS") have the exclusive right to own, operate
and franchise Domino's pizza stores ("Domino's Stores") in the United Kingdom,
Northern Ireland and the Republic of Ireland ("the Territory") pursuant to a
master franchise agreement (the "Master Agreement") with Domino's Pizza
International, Inc., a wholly-owned subsidiary of Domino's Pizza, Inc.
("Domino's). The Company also has the right to operate a Domino's fresh pizza
dough production facility and wholesale supply business (the "Commissary") for
all Domino's Stores in the Territory pursuant to an agreement with Domino's (the
"Commissary Agreement").

In December 1993, International Franchise Systems, Inc. acquired the
United Kingdom subsidiary of the U.S.-based parent company of Domino's Pizza,
Inc., which included existing operations, the rights as subfranchisor to 77
franchise agreements for Domino's pizza stores ("Domino's Stores"), assets
relating to the operation of a fresh pizza dough production facility and
wholesale supply business (the "Commissary") and assets relating to the existing
franchise operation. As of December 31, 1996, there were 127 Domino's Stores in
operation in the United Kingdom (the "Territory"), 116 of which were franchised
and 11 of which were owned by IFS. The Commissary provides food supplies to
virtually all Domino's Stores in the Territory. IFS is the fourth largest
Domino's franchisee outside the United States and the largest Domino's
franchisee in Europe.

Domino's Stores in the Territory sell pizzas which are made primarily
of fresh ingredients. The Commissary supplies Domino's Stores with fresh dough
(not frozen), real mozzarella cheese, a proprietary mix of tomato sauce and
spices and high quality fresh toppings. IFS recently improved its commissary
facility by increasing capacity and adding state-of-the-art food handling
equipment. IFS believes that its commissary will help ensure that its high
standards of quality and freshness are maintained as it expands in the
Territory.

International Franchise Systems, Inc. is a Delaware Corporation,
incorporated on October 22, 1993. In the United States, the Company's executive
offices are located at 6701 Democracy Boulevard, Suite 300, Washington, D.C.
20005-3317. In the Territory, the Company's executive offices are located at
Unit 10, Maryland Road, Tongwell Milton Keynes, England MK15 8HF and its
telephone number is 011-44-908-618222.

6
<PAGE>

THE OFFERING

Securities Offered............. An aggregate of 2,154,648 shares of Common
Stock issuable upon exercise of the Class A
Warrants and Class B Warrants. Each Class A
Warrant entitles the holder to purchase one (1)
share of Common Stock at a price of $5.00 until
June 30, 1997 (the "Class A Warrant Expiration
Date"), subject in certain circumstances to
earlier redemption by the Company. Each Class B
Warrant entitles the holder to purchase one (1)
share of Common Stock at a price of $10.00, at
any time until December 9, 1999 (the "Class B
Warrant Expiration Date") subject in certain
circumstances, to earlier redemption by the
Company.

Terms of Redemption of
Class A Warrants and
Class B Warrants.............. The Class A Warrants are each redeemable by the
Company for $.01 per Warrant, upon thirty (30)
days' prior written notice, if the average
closing price or bid of Common Stock, as
reported by the principal exchange on which the
Common stock is traded, NASDAQ or the National
Quotation Bureau Incorporated, as the case may
be, equals or exceeds $10.00 per share for any
ten (10) trading days within a period of thirty
(30) consecutive trading days ending five (5)
days prior to the date of the notice of
redemption. The Class B Warrants are each
redeemable by the Company for $.01 per Warrant,
upon thirty (30) days' prior written notice, if
the average closing price or bid price of the
Common Stock, as reported by the principal
exchange on which the Common stock is traded,
NASDAQ or the National Quotation Bureau
Incorporated equals or exceeds $15.00 per share
for any ten (10) trading days within a period
of thirty (30) consecutive trading days ending
five (5) days prior to the date of the notice
of redemption. Upon thirty (30) days' written
notice to all holders of the effected class of
Warrants, the Company shall have the right to
reduce the exercise price and/or extend the
term of the Class A Warrants and/or Class B
Warrants. See "Description of Securities."

7
<PAGE>

Shares of Capital Stock Outstanding

Common Stock:
Prior to this Offering
(as of December 31, 1996) 6,727,324 shares

After exercise of all Class A
Warrants and
Class B Warrants(1) 8,881,972 shares(1)

Use of Proceeds................. The net proceeds realized by the Company upon
the exercise of the Warrants, if any, will be
used for working capital and general corporate
purposes. Inasmuch as the Company has received
no firm commitments for the exercise of the
Warrants, there can be no assurances as to the
amount of net proceeds to be realized by the
Company.

Risk Factors.................... Investment in the Common Stock issued upon
exercise of the Class A Warrants and Class B
Warrants is speculative and involves a high
degree of risk and immediate substantial
dilution. See "Risk Factors."

How to Exercise Warrant......... Any holder of Class A Warrants or Class B
Warrants wishing to exercise should either (a)
complete and execute the exercise form on the
back of the applicable warrant certificate, and
forward it along with the proper exercise price
and any other required documents to the Warrant
Agent (as hereinafter defined), or (b) request
a broker to effect the transaction for him or
her. Holders of Class A Warrants or Class B
Warrants registered in the name of a broker,
dealer, bank, trust company or nominee should
instruct such institutions to tender the Class
A Warrants and/or Class B Warrants in
accordance with the above procedure. See "Plan
of Distribution."

Warrant Agent................... Jersey Transfer & Trust Co.

Ticker Symbol (2)............... Units-DOMSU
Common Stock - DOMS
Class A Warrants - DOMSW
Class B Warrants - DOMSZ

8
<PAGE>

(1) Giving effect to the exercise of all of the outstanding Class A and
Class B Warrants, of which there can be no assurance. Does not include
(i) the issuance of 107,724 shares of Common Stock to Patterson Travis
upon exercise of the Underwriters' Unit Purchase Option and 215,448
shares of Common Stock to Patterson Travis upon exercise of the Class A
and Class B Warrants underlying the Units issuable upon exercise of
Underwriters' Unit Purchase Option (ii) 400,000 shares of Common Stock
reserved for issuance upon exercise of stock options granted under the
Company's 1994 Stock Incentive Plan (the "Stock Plan"); and (iii)
100,000 shares of Common Stock reserved for issuance upon exercise of
Stock Options granted under the Company's 1995 Non-Employee Directors
Stock Option Plan (the "Directors Plan"). The Company has been advised
that the Underwriter has not determined if and when it will exercise
the Warrants underlying the Unit Purchase Option.

(2) The Company's securities are listed on the NASD Electronic Bulletin
Board, an inter-dealer, over-the-counter market.

SUMMARY OF FINANCIAL INFORMATION

The summary financial information set forth below has been summarized
from the Company's financial statements included elsewhere in this Prospectus
and should be read in conjunction with the financial statements, including the
notes thereto, appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
Fifty-two weeks For the Thirty-Nine
Ended Weeks Ended
December 31, 1995 January 1, 1995 September 29, 1996 October 1, 1995

<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:

Revenues $ 17,172,389 $ 12,458,809 $ 16,535,409 $ 12,342,571
Cost of Sales 13,378,482 9,406,524 12,151,861 9,184,074
Operating Expenses 3,480,812 2,938,541 4,687,244 2,886,959
Operating Income (loss) 313,095 113,744 (303,696) 271,538
Net Income (loss) 353,379 153,022 (244,482) 323,348
Earnings (loss) per share .06 .03 (.04) .05
Weighted Average Shares
Outstanding 6,165,558 4,708,365 6,727,324 6,000,889
</TABLE>

<PAGE>

BALANCE SHEET DATA:
<TABLE>
<CAPTION>
As of
September 29, 1996 December 31, 1995

<S> <C> <C>
Working Capital...................................................... 2,022,467 2,875,644
Total Assets ........................................................ 12,068,382 12,193,901
Total Liabilities ................................................... 5,195,541 5,093,497
Shareholders Equity ................................................. 6,872,841 7,100,404
</TABLE>

RISK FACTORS

An Investment in the Common Stock offered hereby is speculative and
involves a high degree of risk, including, but not necessarily limited to, the
risk factors described below. Prior to investing in the Common Stock, each
prospective investor should carefully consider the following risk factors
inherent in and affecting the business of the Company before making an
investment decision.

Potential Loss of Exclusive Development Rights. The Company's business
plan is dependent on its exclusive development rights under the Master
Agreement. The Master Agreement requires that the Company have opened and
operating a minimum number of Domino's Stores in accordance with a specified
yearly schedule. In addition, at least 24 of the Domino's Stores to be opened by
December 31, 1997 must be Company-owned. The Company had open 127 stores as of
December 31, 1996, 11 of which were Company-owned. There can be no assurance
that the Company will be successful in opening the number of Domino's Stores
required, or that new Domino's Stores opened by the Company or its franchisees
will be operated profitably. Furthermore, there can be no assurance that the
Company will be able to renew the Master Agreement beyond December 31, 2003. If
the Master Agreement is not renewed, the Company would lose its exclusive
development rights. See "Business - Relationship with Domino's."

The Commissary. Currently, the Commissary supplies substantially all of
the required food and beverage products to Domino's Stores in the Territory.
However, under European Community law and applicable provisions of the standard
Domino's Franchise Agreement used in the Territory, franchisees have the right
to request approval from the Company of alternate suppliers of required products
(other than the Domino's proprietary pizza spice mix). The Company's approval to
such requests may not be unreasonably withheld. There can be no assurance that
the Company will be able to maintain the current pricing of its Commissary
products or to dissuade franchisees from seeking alternate suppliers. Either of
these circumstances could have a material adverse effect on the Company. See
"Business-Purchasing; Commissary Operations."

10
<PAGE>

Company and its franchisees compete with a wide variety of restaurants in the
fast-food industry, including those that offer dine-in, carry-out and delivery
service. These competitors include international, national and regional chains,
franchisees of other restaurant chains as well as locally operated restaurants.
Many competitors have been in existence longer and have a more established
market presence and substantially greater financial, marketing and other
resources than the Company and its franchisees. The Company faces direct
competition for home delivery and carry-out pizza in the Territory from Pizza
Hut and Perfect Pizza, both of which are larger and/or have greater financial
resources than the Company. There is also a large number of small independent
pizza store operators that offer delivery and carry-out services. There can be
no assurance that the Company will be able to compete successfully. The Company
also competes for qualified franchisees with many other business concepts,
including international, national and regional restaurant chains such as
McDonalds, Kentucky Fried Chicken and Burger King. The Territory also has a
broad range of stores, pubs and other food service establishments that offer
more traditional fare.

Liability in Connection with Providing Delivery Service. A risk to the
Company, as with other companies which offer delivery services, is the potential
for claims resulting from traffic accidents involving its delivery personnel.
Domino's Pizza Inc. was held liable in 1993 in connection with a traffic
accident involving one of its franchisee's delivery drivers. Although, that
judgment was rendered by a United States court, there can be no assurance that a
court in the Territory would not find the Company liable for substantial damages
if one of its drivers or one of its franchisee's drivers is involved in an
accident.

Operations in a Foreign Country. The Company is subject to numerous
factors relating to conducting business in a foreign country (including, without
limitation, economic, political and currency risks), any of which could have a
significant impact on the Company's operations. See "Taxation in the United
Kingdom" and "Government Regulation."

Need for Additional Financing. The Company believes that any proceeds
from the exercise of Warrants, together with cash generated from operations,
will be sufficient to open the required number of Domino's Stores under the
Master Agreement through December 1997 and support the Company's anticipated
operations through that time. If the Company's plans change or its assumptions
or estimates prove to be inaccurate, the Company may require additional funds
(by additional equity or debt financing, bank loans or other financing) to
sustain its expansion and growth or, if any such funds are unavailable, the
Company will have to reduce its operations to a level consistent with its
available funding, in which event the Company may not be able to meet its
development quota and may lose it exclusive development rights. See "Potential
Loss of Exclusive Development Rights." Such financing, if obtainable at all, may
be on terms significantly adverse to the Company's present stockholders and
persons who purchase stock in this Offering, in terms of dilution of book value,
dividend preferences, liquidation preferences, or other factors. The Company has
no commitments for any additional financing. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

<PAGE>

Taxation in the United Kingdom. The Company's U.K. operating
subsidiary, ("DP Group"), previously a wholly-owned subsidiary of Tuskpride, is
subject to U.K. corporation tax on its profits. The Company has used and expects
DP Group to be able to continue to use the tax loss carry-forwards previously
held by Tuskpride and carried over to DP Group to offset some of its future tax
payments. However, there can be no guarantee that DP Group will be able to
continue to use the carry-forward tax losses. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

Government Regulation. Currently, the Company's operations are subject
to the laws and regulations of the United Kingdom, Northern Ireland, the
Republic of Ireland and the European Community, including such laws and
regulations relating to antitrust and trade regulation. The failure by the
Company to comply with these laws may cause the Company to be unable to enforce
its franchise agreements with franchisees. The Company and its franchisees are
also subject to U.K. government and local laws and regulations generally. Store
operations are subject to health, sanitation, employment and safety standards
imposed by the European, national and local authorities. These regulations and
any new laws or regulations could have a significant financial impact on the
operation of Company-owned and franchised stores. See "Business - Government
Regulation."

Concentration of Ownership. Approximately 69.86% of the Company's
outstanding Common Stock is owned by Crescent Capital, Inc. ("Crescent"). As of
the date of this Prospectus, the only business of Crescent is holding the
Company's securities. Woodland Limited Partnership ("Woodland"), a partnership
controlled by certain members of Colin Halpern's family, has voting control of
Crescent and therefore has effective control of Crescent and the Company. As a
result, Mr. Halpern's family will be able to elect the Company's entire Board of
Directors, determine the vote on any matter submitted for shareholder approval
(including increasing the Company's authorized capital stock and authorizing any
merger, sale of assets or dissolution of the Company), and generally direct the
affairs of the Company. See "The Company-Structure." Crescent, the Company's
majority stockholder, or its pledgees, donees, transferees or other successors
in interest, is on whose behalf 2,000,000 shares are being registered in the
Concurrent Offering. See "Concurrent Registration of Common Stock." If all the
shares offered in the Concurrent Offering are sold, approximately 40% of the
Company's outstanding stock will be owned by Crescent. If all the shares offered
in the Concurrent Offering are sold and all the Class A Warrants and Class B
Warrants are exercised, approximately 30% of the Company's outstanding stock
will be owned by Crescent.

Conflicts of Interest. Crescent may enter into development agreements
or master franchise agreements with franchisors for the rights to own, operate
and franchise various restaurant concepts, other than pizza stores, in the
Territory and possibly other foreign countries. The Company anticipates that it
will share certain administrative services and associated expenses with
Crescent, and its related companies, in the future. Although the Company intends
that all transactions or arrangements with Crescent, or any related companies,
will be on terms that are no less favorable than could be obtained from
unaffiliated third parties, there can be no assurance that any future
transaction or arrangement between the Company and Crescent, or any company
related to Crescent, will be advantageous to the Company, that conflicts of
interest will not arise with respect to such transactions or arrangements, or
that if such conflicts arise, they will be resolved in a manner favorable to the
Company.

<PAGE>

Arbitrary Exercise Price of the Warrants. The exercise prices and other
terms of the Class A Warrants and Class B Warrants were determined by
negotiations between the Company and the Underwriter and do not necessarily bear
any relationship to the Company's assets, book value or financial condition, or
any other objective criteria of value.

Mr. Judah Wernick, a registered representative associated with the IPO
Underwriter, owns less than 1% of the outstanding stock of Crescent. Until July,
1994, Mr. Wernick was the sole officer and director of Crescent and was
responsible for negotiating the transaction by which Woodland became the
majority shareholder of Crescent. Presently, Mr. Wernick's only affiliation with
Crescent is as a shareholder. Mr. Wernick will receive no compensation in
connection with this Offering other than amount received through his association
with the Underwriter. See "Certain Transactions."

Broad Discretion in Application of Proceeds. The net proceeds realized
by the Company upon the exercise of the Warrants, if any, will be used for
working capital and general corporate purposes. The Company has not received any
firm commitments for the exercise of the Warrants. To the extent the Company
receives any proceeds therefrom, the Company will have broad discretion as to
the application of such proceeds. See "Use of Proceeds."

Immediate Dilution. On September 29, 1996, the Company had a net
tangible book value of $6,753,014 or $1.00 per share. Based on the exercise
prices of the Class A Warrants and the Class B Warrants of $5.00 and $10.00
respectively, assuming the exercise of all of the Class A Warrants and Class B
Warrants, of which there can be no assurance, a holder of a Class A Warrant will
experience immediate and substantial dilution of approximately $2.57 share (51%)
and a holder of a Class B Warrant will experience immediate and substantial
dilution of approximately $7.57 per share (76%), in that the exercise price of
each of the Class A Warrants and Class B Warrants exceeds the net tangible book
value per share of the Company by such amount after giving effect to the
exercise of all of such Warrants. To the extent that fewer than all of the Class
A and Class B Warrants are exercised, such dilution will increase
proportionately. See "Dilution" and "Plan of Distribution."

13
<PAGE>

Company will be successful in its efforts, and that even if the Company is
successful, there can be no assurance that a regular trading market for its
securities will develop or that, if developed, it will be sustained. The
Company's Units, Common Stock and Warrants are listed on the NASD Electronic
Bulletin Board. The NASD Electronic Bulletin Board is an unorganized
inter-dealer, over-the-counter market which provides significantly less
liquidity than the NASDAQ National Market, and quotes for stocks traded on the
NASDAQ Electronic Bulletin Board are not listed in the financial sections of
newspaper as are those for the NASDAQ National Market. Prices for securities
traded solely on the NASDAQ Electronic Bulletin Board may be difficult to
obtain. Accordingly, purchasers of the Common Stock may be unable to resell the
securities herein at or near their offering price or at any price.

Potential Effect of Penny Stock Rules on Liquidity of Shares. If the
Company's securities are not on NASDAQ or certain other national securities
exchanges and the resale price thereof falls below $5.00, then resales of such
securities will be subject to the requirements of the penny stock rules absent
the availability of another exemption. The SEC has adopted rules that regulate
broker-dealer practices in connection with transactions in "penny stocks." Penny
stocks generally are equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the NASDAQ system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system). The penny stock rules require a broker-dealer to deliver a standardized
risk disclosure document prepared by the SEC, to provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, monthly account statements
showing the market value of each penny stock held in the customer's account, to
make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement to
the transaction. These disclosure requirements may have the effect of reducing
the level of trading activity in the secondary market for a stock that becomes
subject to the penny stock rules. If the Company's Common Stock becomes subject
to the penny stock rules, investors in this Offering may find it more difficult
to sell their securities. If the Company's securities were subject to the
existing or proposed regulations on penny stocks, the market liquidity for the
Company's securities could be severely and adversely affected by limiting the
ability of broker/dealers to sell the Company's securities and the ability of
purchasers in this Offering to sell their securities in the secondary market.

Necessity of Current Prospectus; Blue Sky Restrictions on Exercise of
Warrants. The Company will be able to issue shares of its Common Stock upon
exercise of the Warrants only if there is a then current prospectus relating to
the Common Stock issuable upon the exercise of the Warrants under an effective
registration Statement filed with the Commission, and only if such Common Stock
is then qualified for sale or exempt from qualification under applicable state
securities laws of the jurisdictions in which the various holders of Warrants
reside. Although the Company has agreed to use its best efforts to meet such
requirements, there can be no assurance that the Company will be able to do so
and holders of Warrants who reside in states where the Company has failed to
qualify its Common Stock will not be able to exercise their Warrants. Prior to
the effectiveness of this Prospectus, the Company does not have a current
prospectus. Accordingly, the Warrants may be deprived of any value if the
Company is unable to effect a

14
<PAGE>

current prospectus covering the Common Stock issuable upon the exercise of the
Warrants pursuant to an effective registration statement or if such Common Stock
is not qualified or exempt from qualification in the jurisdictions in which the
holders of Warrants reside.

The Company currently has outstanding 1,077,324 Class A Warrants
1,077,324 Class B Warrants. This Prospectus may be utilized by exercising
Warrant holders through , assuming that the Company has filed post-effective
amendments to such Registration Statement describing all substantial changes to
the Company's business, operations and prospectus.

Loss of Warrants through Redemption. The Warrants are redeemable by the
Company for $.01 per Warrant upon 30 days prior written notice, provided that
the average closing price or bid price of the Common Stock for 10 consecutive
business days equals or exceeds $10.00 per share for the Class A Warrants and
$15.00 per share for the Class B Warrants. Redemption of the Warrants by the
Company could force the holders to exercise the Warrants and pay the exercise
price at a time when it may be disadvantageous for the holders to do so. For
example, holders either may have to sell the Warrants at the then current market
price when they might otherwise wish to hold the Warrants, or accept the
redemption price, which is likely to be substantially less than the market value
of the Warrants at the time of redemption. In the event of the exercise of a
substantial number of Warrants offered as part of the Units within a reasonably
short period of time after the right to exercise commences, the resulting
increase in the number of shares of Common Stock in the trading market could
substantially affect the market price of the Common Stock. See "Description of
Securities - Warrants."

Underwriter's Unit Purchase Option. The Company has granted to the
Underwriter, as partial consideration for services rendered in the Company's
initial public offering, options to purchase up to 107,732 Units (the "Option
Units") at an exercise price of $8.25 per Unit. An exercise of the Option Units,
which may be effected at any time, either in whole or in part, through September
9, 1999, may adversely affect the Company's ability to obtain equity capital,
and, if the Common Stock issuable upon the exercise of the Option Units is sold
in the public market, it may adversely affect the market price of the Company's
Common Stock. See "Dilution."

THE COMPANY

General

The Company has the exclusive right to own, operate and franchise
Domino's Stores in the Territory. The Company also has the exclusive right to
open and operate a Domino's Commissary for all Domino's Stores in the Territory.
The Company intends to conduct all of its purchasing, distribution and major
food supply and preparation operations at or from the Commissary. As of December
31, 1996, there were 127 Domino's Stores in operation in the Territory; 116 were
franchised and 11 were Company-owned. The Commissary provides food supplies to
virtually all of the Domino's Stores in the Territory. The Company is the fourth
largest Domino's franchisee outside the United States and the largest Domino's
franchisee in Europe.

IFS's objective is to move forward from being one of the leading pizza
delivery chains in the Territory to becoming the dominant brand in the
marketplace. To accomplish these objectives,

15
<PAGE>

IFS has developed a strategy designed to achieve high levels of customer
satisfaction and repeat business, as well as to enhance recognition of the
Domino's name and concept in the Territory. The key elements of IFS's strategy
include:

High Quality Menu. Domino's Stores offer a menu of high quality pizzas.
Pizzas are prepared using fresh dough, real mozzarella cheese, a propriety mix
of tomato sauce and spices and other high quality ingredients and toppings.
Other menu items include garlic bread, cole slaw, ice cream and soft drinks. IFS
intends to expand its menu in a limited way by offering salads and specialty
pizzas in order to increase market penetration and the average revenue per
order.

Efficient Operating System. IFS believes that its operating and
distribution systems, store layout and designated delivery areas result in lower
operating cost, improved food quality and higher customer service. IFS's
Commissary and distribution system take advantage of volume purchasing of food
and supplies and provides consistency and efficiencies of scale in dough
production. This eliminates the need for each store to order food from third
party vendors and commit substantial labor and other resources to dough
production.

Targeted Marketing. IFS's marketing programs target the delivery area
of each store, making extensive use of coupons, leaflets and direct mail
promotions. IFS also uses radio to advertise its product and name. The local
marketing efforts include more effective involvement with community oriented
activities with sports teams, schools and other organizations. IFS is
implementing an in-store computer system that will better enable it to track
customer preferences and target its marketing based on these preferences. IFS
works closely with franchisees on local marketing efforts.

New Store Locations. IFS believes that the location of a Domino's Store
is an essential element of success. IFS intends to focus its development of the
Territory on store locations which are strategically located in areas that
satisfy IFS's demographic criteria. IFS will in the near term seek locations for
Domino's Stores in larger cities and college towns.

Training and Development. IFS operates a training program for store
personnel and franchisees to improve store operations and the management of each
franchisee's business. IFS is revising the standard Domino's training program to
make it more appropriate and relevant to operations in the Territory.

Franchise System. IFS is committed to developing a strong franchise
system by attracting experienced operators and business people who adhere to
IFS's high standards. To ensure consistent food quality, each franchisee must
purchase all food and supplies from IFS or its approved suppliers. IFS devotes
significant resources to providing its franchisees with assistance in marketing,
site selection, store design and employee training.

16
<PAGE>

Structure

International Franchise Systems, Inc. was incorporated in Delaware on
October 22, 1993. On December 29, 1993, Woodland and Crescent entered into a
Loan and Stock Exchange Agreement pursuant to which Crescent loaned $400,000 to
the Company (which at the time was wholly-owned by Woodland) and Crescent agreed
to exchange 315,000 shares of its Class A Common Stock and 2,000,000 shares of
its Class B Common Stock for equal amounts of the Class A Common Stock and Class
B Common Stock of the Company. On June 30, 1994, the Company became a
wholly-owned subsidiary of Crescent as the result of the completion of the stock
exchange between Crescent and Woodland. Crescent is a public company as the
result of a public offering of 80,000 shares that commenced in November, 1991.
In September, 1995, Crescent issued an additional 87,402 shares of Class A
Common Stock in exchange for 874,024 each of A Warrants and B Warrants and an
additional 38,400 shares upon the exercise of Warrants by certain Warrantholders
of the Company. The remaining Warrants expired on September 25, 1995. Woodland
owns 315,000 shares of the 507,402 outstanding shares of Class A Common Stock of
Crescent ("Class A Stock"). 25,000 shares of the outstanding Class A Stock are
owned by Judah Wernick. See "Risk Factors - Determination of Offering Price,"
"Certain Transactions". Woodland also owns 2,000,000 shares of Class B Common
Stock of Crescent ("Class B Stock"). The Class B Stock is convertible on a one
for one basis for Class A Stock and otherwise has the same rights, including
voting rights, as the Class A Stock. As a result, Woodland controls over 92% of
the voting shares of Crescent. On July 25, 1994, the Company renamed its Class A
Common Stock as "Common Stock" and reclassified each share of Class B Common
Stock into one share of Common Stock of the Company. In addition, the Company
issued 2,385,000 shares of Common Stock to Crescent in exchange for the receipt,
as a capital contribution, of $250,000 of the $400,000 note payable to Crescent
under the Loan and Stock Exchange Agreement.

As a result of the capital structure of the Company and Crescent,
Woodland currently has voting control of the Company and, consequently, is able
to elect the Company's entire Board of Directors, determine the vote on any
matter submitted for shareholder approval (including increasing the Company's
authorized capital stock and authorizing any merger, sale of assets or
dissolution of the Company) and generally direct the affairs of the Company.
2,000,000 of the Shares of Common Stock owned by Crescent are being registered
for sale in the Concurrent Offering. If all of the shares registered in the
Concurrent Offering are sold, Crescent will no longer have voting control of the
Company. See "Concurrent Offering."

The Company operates its business in the Territory primarily through DP
Group. The Company conducts its real estate operations through DP Realty, a
wholly-owned subsidiary of DP Group and conducts its company-owned store
operations through DPGS Limited, another wholly-owned subsidiary of DP Group.
Unless the context indicates otherwise, references herein to the Company include
all of its operating subsidiaries.

In the United States, the Company's executive offices are located at
6701 Democracy Boulevard, Suite 300, Bethesda, Maryland 20817 and its telephone
number is (301) 897-4870. In the Territory, the Company's executive offices are
located at Unit 10, Maryland Road, Tongwell Milton Keynes, MK15 8HF and its
telephone number is 011-44-908-618222.

<PAGE>

USE OF PROCEEDS

Neither holders of the Class A Warrants nor Class B Warrants are
obligated to exercise their Warrants and there can be no assurance that Warrant
holders will choose to exercise all or any of the Warrants. It is unlikely that
the holders of the Class A Warrants or Class B Warrants will exercise the
Warrant unless the market price of the Common Stock exceeds the exercise price
of the Warrants ($5.00 in the case of the Class A Warrants and $10.00 in the
case of Class B Warrants). On December 31, 1996, the closing sale price of the
Company's Common Stock as reported on the NASDAQ Electronic Bulletin Board was
$.625.

In the event that all of the outstanding Class A Warrants are
exercised, the net proceeds to the Company would be approximately $4,936,690
after deducting expenses payable by the Company (not including the proceeds to
be derived by the Company upon exercise of the Underwriter's Unit Purchase
Option).

In the event that all of the outstanding Class B Warrants were
exercised the net proceeds to the Company upon exercise of the Class B Warrants
would be approximately $9,911,381 assuming that all the costs attendant to this
offering have been deducted from the anticipated proceeds to be derived upon
exercise of the Class A Warrants.

There can be no assurance as to what percentage, if any, of the Class A
Warrants or Class B Warrants will be exercised. The Company intends to apply the
net proceeds of $14,848,071 (assuming all of the Class A Warrants and Class B
Warrants are exercised following the completion of this offering) for working
capital and general corporate purposes.

In the event the Underwriters' Unit Purchase Option is exercised in its
entirety, the Company would receive proceeds of $888,789 (107,732 Underwriters'
Units at $8.25 per Unit). The Company intends to allocate any proceeds it may
receive upon exercise of all or any portion of the Underwriters' Unit Purchase
Option to working capital.

18
<PAGE>

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is part of a Unit which includes one share
of Common Stock and one Class A Common Stock Purchase Warrant and one Class B
Common Stock Purchase Warrant. Each Class A Warrant entitles the holder thereof
to purchase one share of Common Stock through December 31, 1996 at $5.00 per
share. Each Class B Warrant entitles the holder thereof to purchase one share of
Common Stock through December 9, 1999 at $10.00 per share. The Company's Units,
Common Stock, and Class A and Class B Warrants are listed on the NASDAQ
Electronic Bulletin Board, an inter-dealer, over-the-counter market under the
symbols DOMSU, DOMS, DOMSW and DOMSZ, respectively.

The high and low bid prices of the Units and Common Stock, as reported
by NASDAQ were as follows:

<TABLE>
<CAPTION>
Units 1995

High Low
<S> <C> <C>
First Quarter
(beginning January 11, 1995) $ 6 1/4 $5 3/4
Second Quarter 6 3/8 5 1/2
Third Quarter 7 5 1/8
Fourth Quarter 6 1/2 7/8

1996
First Quarter $ 1 1/4 $ 1/2
Second Quarter 1 1/8 5/8
Third Quarter 1 7/16 5/8
Fourth Quarter 1 1/4 1/2
</TABLE>

19
<PAGE>

<TABLE>
<CAPTION>
Common Stock 1995

High Low
<S> <C> <C>
Second Quarter
(beginning June 23, 1995) $ 5 $5
Third Quarter 6 1/8 5
Fourth Quarter 6 1/8 3/4

1996

First Quarter $ 1 1/4 $ 1/2
Second Quarter 1 1/4 1/2
Third Quarter 1 7/16 5/8
Fourth Quarter 1 1/4 1/2
</TABLE>

These quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.

There is no available trading information with respect to the Company's
Warrants.

As of December 31, 1996, there were 75 holders of record of the
Company's Common Stock. The Company believes that there are approximately 4,275
beneficial owners of the Company's Common Stock.

DIVIDEND POLICY

The Company has never paid cash or other dividends and does not expect
to pay any cash or other dividends in the foreseeable future with respect to its
Common Stock. Future dividend policy will depend upon the Company's earning,
capital requirements, financial condition and other factors considered relevant
by the Company's Board of Directors. See "Description of Securities" and "Use of
Proceeds."

20
<PAGE>

DILUTION

The difference between the exercise price of the Warrants and the
adjusted net tangible book value per share of Common Stock after this offering,
assuming exercise for cash of all Warrants (including Warrants held by certain
affiliates of the Company), Underwriter's Warrants and Warrants included
therein, constitutes the dilution to investors in this offering. Net tangible
book value per share on any given date is determined by dividing the net
tangible book value (total tangible assets less total liabilities) of the
Company on such date by the number of shares of Common Stock outstanding on such
date.

At September 29, 1996, the Company had a net tangible book value of
$6,753,014 or $1.00 per share, based upon 6,727,324 shares of Common Stock
outstanding, without giving effect to the exercise of any of the Class A
Warrants, Class B Warrants, or the Unit Purchase Option. Net tangible book value
per share represents the amount of the Company's total tangible assets less its
total liabilities, divided by the number of shares of Common Stock outstanding.
After giving effect to the exercise of all of the Class A Warrants and Class B
Warrants (at exercises prices of $5.00 and $10.00, respectively), and assuming
no exercise of the Underwriter's Unit Purchase Option and the underlying Class A
and Class B Warrants, the pro forma net tangible value of the Company at
September 29, 1996 would have been $21,601,085 or $2.43 per share. This
represents an additional increase in such net tangible book value of $1.43 share
to present stockholders and an immediate dilution in net tangible book value of
$2.57 and $7.57 to persons exercising the Class A Warrants and Class B Warrants,
respectively. To the extent that fewer than all of the Class A Warrants and
Class B Warrants are exercised, such dilution will increase proportionately.
Dilution per share represents the difference between the exercise price of a
Warrant and the pro forma net tangible book value of the Company after the
exercise of the Warrants.

The following table illustrates the dilution which exercising Class A
and Class B Warrant holders will incur and the benefit to current stockholders
as result of this offering:

Class A Class B
Warrants Warrants

Exercise price per share $ 5.00 $ 10.00

Net tangible book value
at September 29, 1996 before
exercise of Class A Warrants
or Class B Warrants 1.00 1.00

Increase per share attributable
to the net proceeds
from the exercise of all of
the Class A Warrants and Class
B Warrants(1) 1.43 1.43

21
<PAGE>

Pro Forma net tangible book value
per share after exercise 2.43 2.43
-------- --------

Dilution of net tangible book
value per share $ 2.57 $ 7.57
======== ========

(1) Assumes the exercise of all of the Class A Warrants and Class B Warrants,
and assumes no exercise of the Underwriter's Unit Purchase Option and the
underlying Class A and Class B Warrants.

CAPITALIZATION

The following table sets forth the capitalization of the Company (1) at
September 29, 1996, and (2) as adjusted to give effect to the exercise of the
Class A Warrants and Class B Warrants and the application of the net proceeds
therefrom assuming no exercise of the Underwriter's Unit Purchase Option.

<TABLE>
<CAPTION>
Actual As Adjusted
<S> <C> <C>
Stockholders' Equity
$.01 Par Value,
Common Stock - 19,000,000 Shares
Authorized and 6,727,324 Shares Issued
and Outstanding; and 8,881,972 Shares
Issued and Outstanding, as Adjusted $ 67,273 $ 88,820

Preferred Stock - $.01 Par
Value, 1,000,000 Shares
Authorized and No Shares
Issued and Outstanding -- --

Additional Paid-In Capital 6,489,611 21,316,135

Retained Earnings 267,416 267,416

Foreign Currency Translation
Adjustment 48,541 48,541
----------- -----------

Total Stockholders' Equity $ 6,872,841 $21,720,912
=========== ===========
</TABLE>

<PAGE>

SELECTED FINANCIAL DATA

The selected financial information set forth below has been summarized
from the Company's financial statements included elsewhere in this Prospectus
and should be read in conjunction with the financial statements, including the
notes thereto, appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
Fifty-two weeks For the Thirty-Nine
Ended Weeks Ended
December 31, 1995 January 1, 1995 September 29, 1996 October 1, 1995

INCOME STATEMENT DATA:
<S> <C> <C> <C> <C>
Revenues $ 17,172,389 $ 12,458,809 $ 16,535,409 $ 12,342,571
Cost of Sales 13,378,482 9,406,524 12,151,861 9,184,074
Operating Expenses 3,480,812 2,938,541 4,687,244 2,886,959
Operating Income (loss) 313,095 113,744 (303,696) 271,538
Net Income (loss) 153,022 (244,482) 323,348
Earnings (loss) per share .06 .03 (.04) .05
Weighted Average Shares
Outstanding 6,165,558 4,708,365 6,727,324 6,000,889
</TABLE>

BALANCE SHEET DATA:
As of
September 29, 1996 December 31, 1995
Working Capital ... 2,022,467 2,875,644
Total Assets ...... 12,068,382 12,193,901
Total Liabilities . 5,195,541 5,093,497
Shareholders Equity 6,872,841 7,100,404

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

Company's Purchase of Domino's Operations in the Territory. The Company
was incorporated on October 22, 1993. Tuskpride, a wholly-owned subsidiary of
Domino's, was incorporated in England in March 1985. Tuskpride formed Domino's
Pizza Group Limited ("DP Group") as a wholly-owned subsidiary on December 15,
1993 in connection with a reorganization of companies under Domino's control.

On December 20, 1993, "DP Group" entered into an Asset Purchase
Agreement with Tuskpride pursuant to which DP Group acquired Tuskpride's
existing Domino's operations in the Territory and assumed all of Tuskpride's
disclosed liabilities, other than real estate leases for Domino's Stores. The
assets acquired included the rights as subfranchisor to 77 franchise agreements
for Domino's Stores, assets relating to the operation of the Commissary and
assets relating to the existing franchise operation. DP Group recorded the
acquired assets and liabilities at Tuskpride's basis. As consideration for the
acquisition, DP Group gave Tuskpride a promissory

23
<PAGE>

note in the amount of $550,000. This note was paid on January 17, 1995 upon the
completion of the Company's initial public offering.

On December 29, 1993, DP Group entered into the Master Agreement with
Domino's (the parent corporation of Tuskpride) pursuant to which DP Group
obtained the exclusive right to own, operate and franchise Domino's Stores in
the Territory. The Master Agreement requires DP Group to pay Domino's an initial
franchise fee of $900,000, $250,000 of which was paid upon signing of the Master
Agreement and $300,000 of which was repaid on January 17, 1995 upon completion
of the Company's initial public offering. The balance of $350,000 is payable in
12 quarterly installments commencing in March 1995. Also on December 29, 1993,
DP Group entered in the Commissary Agreement with Domino's which gave DP Group
the right to operate a commissary for Domino's Stores in the Territory.

On December 30, 1993, the Company purchased all of the stock of DP
Group from Tuskpride for (pound)1,000 ($1,500) and DP Realty, a wholly-owned
subsidiary of DP Group, paid Tuskpride $50,000 for the rights to the leases and
subleases for certain Domino's Stores. Neither Domino's nor Tuskpride is an
affiliate of IFS.

The acquisition of the DP Group stock has been accounted for using the
purchase method of accounting. The Company acquired the assets of DP Group
(through the acquisition of DP Group stock) at their fair market value and at
the same time acquired liabilities with a value equal to the value of the
assets. The purchase price of the DP Group stock was determined through
negotiation between the Company and Tuskpride and was set at a nominal value due
to the amount of the liabilities assumed in comparison to the value of the
assets acquired.

DP Group has the exclusive right to own, operate and franchise Domino's
Stores in the Territory. On the date the Company acquired DP Group, its assets
included the exclusive right to own, operate and franchise Domino's Stores in
the Territory, the rights as subfranchisor to 77 franchise agreements for
Domino's Stores, assets relating to the operation of the Commissary and assets
relating to the existing franchise operation. DP Group's $550,000 promissory
note payable to Tuskpride for the acquisition of the assets was assumed by IFS
and paid in full on January 17, 1995. The Company also assumed DP Group's
obligation to pay to Domino's the $650,000 portion of the initial franchise fee
due under the Master Agreement that had not yet been paid.

On June 30, 1994 the Company became a wholly-owned subsidiary of
Crescent Capital, Inc. as the result of a share exchange between Crescent and
Woodland. Woodland owns 92% of the voting stock of Crescent. Upon consummation
of the Company's initial public offering, Crescent owned 81.35% of the Company's
outstanding stock. Currently Crescent owns approximately 70% of the Company's
outstanding stock. See "Concurrent Registration" and "Selling Stockholder."

As of December 31, 1996, the Company has open and operating 127
Domino's Stores in the Territory, 116 of which were franchised and 11 of which
were owned by IFS.

Results of Operations

The following table sets forth selected quarterly financial information
for the first three quarters of fiscal year 1996. This information is derived
from unaudited financial statements of

24
<PAGE>

the Company and includes, in the opinion of management, all normal and recurring
adjustments that management considers necessary for a fair statement of the
results for such periods. The operating results for any quarter are not
necessarily indicative of results for any future period.

First Second Third
Quarter Quarter Quarter

Revenues $ 4,817,461 $ 5,663,046 $ 6,018,267
Cost of Sales 3,280,550 4,095,853 4,352,063
Operating Expenses 2,030,422 1,590,632 1,490,942
Operating Income (loss) (493,511) 14,553 175,262
Net Income (loss) (498,837) 56,685 197,670
Earnings (loss) per share $ (.07) $ .01 $ .03
Weighted Average Shares
Outstanding 6,727,324 6,727,324 6,727,324

Comparison of the thirteen week period July 1, 1996 to September 29, 1996 and
July 3, 1995 to October 1, 1995

The financial information below has been summarized from the Company's
financial statements included elsewhere in this Prospectus and should be read in
conjunction with the financial statements, including the notes thereto,
appearing elsewhere in this Prospectus.

For the Thirteen Weeks
July 1, 1996 July 3, 1995
to to
September 29,1993 October 1, 1995

Revenues $6,018,267 $4,576,462
Cost of Sales 4,352,063 3,407,618
Operating Expenses 1,490,942 1,070,880
Operating Income (loss) 175,262 97,964
Net Income (loss) 197,670 110,951
Earnings (loss) per share $ .03 $ .02
Weighted Average Shares
Outstanding 6,727,324 6,252,324

Income for the 1996 thirteen week period was higher than the same
period of 1995 due to the opening of new stores, a12% increase in existing store
sales and income from the Haagen Dazs ice cream line of business. The Company
opened six new franchise stores in the period. To date, the Company has opened a
net of eleven new stores for the year.

During 1995, the Company purchased three Haagen Dazs ice cream parlors.
This business is seasonal and management believes that cold weather has an
adverse impact on these stores' profitability. In September, the Company sold
one Haagen Dazs parlor back to the Master Franchisor in the UK. The Company is
attempting to divest the two other Haagen Dazs units before the end of the year.
The ice cream business is influenced by cold weather and the Company anticipates
losses from these two units in the fourth quarter.

During the second quarter, the Company suspended operations and the
development of the Pizzazz restaurant concept, a sit-down restaurant concept
developed by Domino's for which the Company had the rights to open up to ten
restaurants during a two year period. The Company opened its Pizzazz restaurant
at the end of December, 1995. The Company had an agreement with

25
<PAGE>

a third party to sub-lease the property and assets. The Company was unsuccessful
in obtaining the landlord's consent to such sub-lease. As a result, the Company
incurred rental and associated expenses on the unit during the third quarter of
$41,245. This loss has been included in the Company's income results. The
Company has entered into negotiations with another potential sub-lessee that it
believes will be acceptable to the landlord. The Company hopes to have the
transaction finalized by the end of the year although there are no assurances
that the sublease will be finalized or that the landlord will approve the
sublease. Therefore, the Company expects to incur similar costs in the fourth
quarter on this property.

Revenue
Total revenue for the 13 week period was $6,018,267, an increase of
$1,441,805 (32%) against the same period of 1995. The main constituents of this
increase arose from sales at Company owned stores which increased by $823,706,
royalty income, which increased by $62,822 and commissary sales, which increased
by $493,350. Rental income also increased by $43,486 and other income decreased
by $94,704.

The increase in comparative sales at Company owned stores resulted
primarily from the three Haagen Dazs units which were operated by the Company
for only one month in the same period last year. The increase in royalty income
and commissary sales resulted almost entirely from the increase in system wide
sales.

Cost and Expenses
The Company's cost of sales as a percentage of total revenue decreased
by 2.1% against the same period of the previous year. However, total cost of
sales expenditures increased by $944,445. The cost of sales as a percentage of
commissary sales declined by 4.1% from the same period of the previous year
because of improved pricing and better margins. The cost of sales as a
percentage of Company owned store sales increased by 2.5% because of higher food
costs and lower margins for the Haagen Dazs units as compared to the
Company-owned Domino's stores. The royalty payable to Domino's increased from
the prior year by 6.7%.

Administrative and corporate increased by 1.6% ($378,817) versus the
same period of the previous year. Expenses increased as a result of Haagen Dazs
($189,075), headcount additions to support the franchisees, and general costs
for franchise development and shareholder support.

Income
An operating profit of $175,262 was attained in the period against
operating profit of $97,964 in the comparable period in 1995. This increase in
profitability resulted from higher gross margins of $497,360 which offset higher
administrative and corporate store costs of $420,062.

Comparison of the thirty-nine week period January 1, 1996 to September
29, 1996 and January 2, 1995 to October 1, 1995

Revenue
Total revenue for the period was $16,535,409, an increase of $4,192,838
(34%) against the same period in 1995. The main constituents of this increase
arose from sales at Company owned stores, which increased by $2,059,631, royalty
income, which increased by $541,356 and commissary sales, which increased by
$1,392,991.

The increase in sales at Company owned stores resulted primarily from the
addition of three Haagen Dazs stores which contributed $1,401,568 and the
increased number of stores in operation during this period against 1996. The
increase in royalty income and commissary sales resulted almost entirely from
the increase in system wide sales.

<PAGE>

Costs and Expenses
The Company's cost of sales as a percentage of total revenue decreased
by .8% against the same period of 1995. The cost of sales as a percentage of
commissary sales declined by 1% from the same period of the previous year. The
cost of sales as a percentage of Company owned store sales decreased by 1.8%.
The royalty percentage payable to Domino's increased from the prior year by
6.7%. The Company believes that these decreases were the result of greater
efficiencies achieved by the Company as a result of increased volume.

Administrative and corporate store expenses as a percentage of total revenue
increased by 2.3% against the same period of the previous year. This increase is
reflective of the growth of the company to support the franchisees increased
costs of corporate stores including Haagen Dazs ($978,644) and personnel and
shareholder support costs at the Corporate headquarters.

Income
An operating profit of $175,262 was attained in the period against
operating profit of $97,964 in the comparable period in 1995. This decrease in
profitability resulted primarily from the operating losses at and closure of the
Pizzazz Restaurant ($442,231) and higher administrative and corporate store
costs which offset higher gross margins.

Exchange Rates
The weighted exchange rate for the thirty-nine week period ended
September 29, 1996 ($1.5383 per British pound sterling) was approximately 3%
lower than the exchange rate during the comparable period in 1995 ($1.5882 per
British pound sterling). This difference has the effect of reducing the
Company's results by approximately 3% when expressed in U.S. dollars.

Liquidity and Capital Resources
At September 29, 1996 the Company's working capital of $2,022,467 has
been reduced by $853,177 from the end of the Company's last fiscal year. The
Company's trade receivable have increased by $616,943 from the end of the year
in addition to an increase in computer loans to franchisees for $116,371. The
Company's receivable from related parties has decreased by $557,199 and
inventories and other receivable have decreased by $461,028. The Company's
current liabilities have increased as a result of increased commissary
purchases. The Company believes that its working capital will be sufficient to
satisfy its obligations over the next twelve months.

Fiscal Year 1995 Compared to Fiscal Year 1994
The Company showed considerable improvement in 1995 versus 1994 as
earnings improved from $153,022 to $353,379. These improvements reflect the
increasing brand recognition and brand acceptance of Domino's products and the
enhanced interest in franchise opportunities.

The operating income for the core business of delivery stores and the
commissary was $793,301, an improvement of $304,590 from 1994. The Company's
Haagen Dazs stores incurred an operating loss of $32,674 for the four months
they were owned by the Company. The Pizzazz restaurant opened on December 19,
1995 and did not recognize operating income.

Income from the Company's Haagen Dazs line of business is seasonal.
Prolonged cold weather resulted lower sales and less coverage of fixed store
costs. As mentioned, the Company experienced losses in the fourth quarter and
anticipates losses in the first quarter. The Company intends to take steps
before the next cold weather season to try to reduce the seasonal impact on
store sale.

<PAGE>

The Pizzazz restaurant was opened at the end of December 1995. Although
the restaurant is a Domino's concept, the Company did not receive assistance
from Domino's regarding store site selection, store design, menu designs,
recipes, training or other items necessary to open the restaurant. The Company
anticipates that it will incur losses in the first quarter of 1996, in part as a
result of the post-holiday season, but also because of the need to define the
concept and establish a menu/price that is favorable to customer draw.

Both lines of business will impact the short term profitability of the
Company and distort quarter to quarter net income comparisons.

Exchange Rate Variance From 1994 to 1995
In preparing the financial information set forth below, it was
necessary to convert results of operations in the Territory from British pounds
to U.S. dollars. The exchange rate used in 1994 was 1.5232. For 1995, the
exchange rate used was 1.5827. Consequently, solely as the result of the
difference in currency exchange rates, the financial information for 1995
expressed in U.S. dollars will be inflated by approximately 3.9% when compared
to the financial information for 1994 expressed U.S. dollars.

US DOLLARS

1995 1994

Royalty Income $ 2,376,305 $ 1,857,405
Franchise Fees 251,649 146,227
Corporate Store Sales 2,970,709 1,588,483
Commissary Sales 9,930,206 7,289,289

Total Revenues $16,761,031 $12,272,529
=========== ===========

Other Income 411,358 186,280
----------- -----------

Total Revenues $17,172,389 $12,458,809
=========== ===========

Interest Income $ 122,839 $ 60,470
=========== ===========

Revenues
As of December 31, 1995, there were 103 Domino's Stores in operation,
93 of which were franchised and 10 of which were company-owned. Sales in U.S.
dollars of all Domino's Stores in the Territory, net of value added tax,
increased approximately 23% to $42.3 million in 1995 from $34.3 million in 1994.
The average weekly sales of all Domino's Stores in the Territory increased by
approximately 10% from average weekly sales in 1994.

The Company's total revenue increased 38% to $17,172,389 in 1995 from
$12,458,809 in 1994.

There are several reasons for this increase in revenue. First, there
was a 28% increase in royalty income, from $1,857,405 in 1994 to $2,376,305 in
1995 as the result of the increase in system-wide sales described above and an
increase in the number of stores operating from 91 at the end of 1994 to 103 at
the end of 1995.

28
<PAGE>

Second, as of the end of 1995, the Company was operating 10 stores
compared to six at the beginning of the year. This increase in the number of
Company-owned stores resulted in an increase in revenues from Company-owned
stores to $2,970,709 in 1995 from $1,588,483 in 1994.

Third, commissary sales increased by 36% in 1995 to $9,930,206 from
$7,289,289 in 1994. This increase resulted from an increase in system-wide
product sales and the improvement in the quality, consistency and
competitiveness of commissary supplies to franchisees.

Fourth, income arising from the sales of Corporate Stores and Franchise
Fees increased 72% from $146,227 in 1994 to $251,649 in 1995. This is attributed
to the incremental increase in new store openings in 1995.

Fifth, the exchange rate variance of approximately 3.9% between 1995
and 1994 enhances the increase in all revenues by the Company because almost all
of this revenue is received by the Company in UK sterling. This exchange rate
variation resulted in an increase of $653,681.

Lastly, the increases in income outlined above were partly offset by a
drop in income from property, by 11% from $1,391,125 in 1994 to $1,232,162 in
1995. This decrease was due to the timing of the acquisition in December 1993.
In 1994, the Company recognized four quarters of property income, plus it
recognized the last quarter of 1993. Consequently, the Company had five quarters
of income in 1994. The true annual-to-annual comparison shows property income
was up by 11%.

Interest income was $122,839 in 1995 and $60,470 in 1994. The most
significant element of this income relates to accrued interest which became due
on delinquent payments from franchisees. Interest on bank deposits formed the
other constituent of the interest income.

Costs and Expenses
The Company's cost of sales incurred in connection with commissary,
equipment, corporate owned stores, rental property and franchise fees increased
from $9,406,524 in 1994 to $13,378,482 in 1995. These numbers include operating
expenses incurred in connection with sales of food, supplies (such as pizza
boxes, napkins and sales slips) and equipment to franchisees.

Administrative expenses were $2,938,541 for 1994 and $3,480,812 in
1995. These expenses include salaries, property rent and taxes and depreciation.

Interest expense was $21,192 in 1994 and $82,555 in 1995. This interest
expense is due almost exclusively to the interest accrued on loans from National
Westminster Bank, the proceeds of which were used to finance the purchase of
Company-owned stores and commissary equipment.

The Company had an operating profit of $313,095 in 1995 as compared to
$113,744 in 1994. With the addition of net interest income, the Company
generated an overall net profit of $353,379 for 1995 against a net profit of
$153,022 for 1994.

<PAGE>

This Page Intentionally Left Blank

30
<PAGE>

Liquidity and Capital Resources
The Company's total current assets were $7,274,990 on December 31, 1995
and $7,701,421 on January 1, 1995, a decrease of $426,431 or 6%. This was mainly
attributable to the purchase of fixed assets and other capital costs of
$2,386,348 and loans to related parties of $1,583,557. The Company experienced
an increase in trade and other receivables of $841,266, increased inventories by
$75,620, and increases in prepaid expenses and accrued income, deposits and
other amounts due rose by $402,616. The increase in trade receivables reflected
both the increased number of stores and average store sales, the establishment
of store development loans and a substantial reduction of the bad debt allowance
of $279,135.

The Company's total current liabilities were $4,399,346 on December 31,
1995 and $5,232,094 on January 1, 1995, a decrease of $892,748 or 17%. This
decrease resulted primarily from the reduction of notes payable of $446,354,
increasing the repayment to Domino's of $850,000, an increase of $627,827 in
trade accounts payable and a $422,129 decrease in accrued expenses.
Additionally, certain assets were acquired under capital leases which gave rise
to a liability of $95,891 at January 1, 1996.

The following chart represents the net funds raised and/or used in
operating, financing and investment activities for both periods since inception:

<TABLE>
<CAPTION>
January 1, 1995 January 2, 1994
to to
December 31, 1995 January 1, 1995

<S> <C> <C>
Net cash used in operating activities $ (466,388) $ 244,074
Cash used in investing activities $(4,196,045) $ (956,013)
Cash provided by financing activities $ 694,623 $ 4,532,473
</TABLE>

During the fiscal year ended December 31, 1995, the Company expended
$466,388 from operating activities. It had net income of $353,379 offset by
increases in trade and other accounts receivable ($841,266), increases in
inventories ($75,620), increases in other assets, prepaid expenses and accrued
income ($126,479). This was offset by increases in trade accounts payable
$627,827 and other payables of $117,191 and a decrease in accrued expenses of
$422,129.

Cash used in investing activities of $4,196,045 is primarily
attributable to the expenses the Company incurred in connection with the opening
of company-owned Domino's Stores, expenses incurred for motor vehicles and
expenses incurred in re-equipping the commissary and for the office computer
system.

Cash provided by financing activities during the fiscal year ended
December 31, 1995 was $694,623, representing the proceeds of a loan to Domino's
Pizza Group from National Westminster Bank and $1,733,569 in proceeds from the
stock offering. Repayments of long term debt totaled $1,446,354.

The Company has a month-to-month lease for its U.S. office. DP Group
has its principal place of business in Milton Keynes, England and leases 77
Domino's store properties. Estimated annual lease payments for each of the next
five years range between approximately $1,611,728 to

31
<PAGE>

$1,788,723, and are approximately $14,000,000 for all of the years combined
subsequent to 2000. These lease payments are offset by subleases of Domino's
store properties to franchisees.

The Company has lease obligations under capital leases as of December
31, 1995 for the next five years ranging from $1,865 to $203,020. The net
present value of the lease payments is $390,764.

The Company's anticipated debt payment through December 31, 1996 will
be approximately $267,693. In the following four years, annual principal
payments are expected to be approximately $268,000, $115,000, $63,000 and
$46,000.

The Company believes that cash flow generated from operations and the
net proceeds of its initial public offering will be sufficient to meet its
current long-term debt obligation of $759,157 as well as additional obligations.
Company is not obligated to open any more Company-owned stores by December, 1996
under the Master Agreement. In addition, the Company believes that anticipated
revenues will be sufficient to meet long-term liquidity needs. However, if the
Company's plans change or its assumptions or estimates prove to be inaccurate,
the Company may require additional funds to achieve increased sales or, if such
funds are unavailable, the Company will have to reduce its operations to a level
consistent with its available funding.

Inflation
The primary inflationary factor affecting the Company's operations is
the cost of food. As the cost of food has increased, the Company has
historically been able to offset these increases through economies of scale and
improved operating procedures, although there is no assurance that such offsets
will continue. To date, inflation has not had a material effect on the Company's
operations.

BUSINESS

Introduction
In December 1993, International Franchise Systems, Inc. acquired the
United Kingdom subsidiary of the U.S.-based parent company of Domino's Pizza,
Inc., which included existing operations, the rights as subfranchisor to 77
franchise agreements for Domino's pizza stores ("Domino's Stores"), assets
relating to the operation of a fresh pizza dough production facility and
wholesale supply business (the "Commissary") and assets relating to the existing
franchise operation. As of December 31, 1996, there were 127 Domino's Stores in
operation in the United Kingdom (the "Territory"), 116 of which were franchised
and 11 of which were owned by IFS.

32
<PAGE>

The Commissary provides food supplies to virtually all Domino's Stores in the
Territory. IFS is the fourth largest Domino's franchisee outside the United
States and the largest Domino's franchisee in Europe.

Domino's Stores in the Territory sell pizzas which are made primarily
of fresh ingredients. The Commissary supplies Domino's Stores with fresh dough
(not frozen), real mozzarella cheese, a proprietary mix of tomato sauce and
spices and high quality fresh toppings. IFS has expanded their existing
commissary facility with additional capacity and state-of-the-art food handling
equipment. IFS plans to establish a new commissary, near its current facility in
Milton Keynes, England, which will have greater capacity and the
state-of-the-art food handling equipment from the existing commissary. IFS
believes that this commissary will help IFS ensure that its high standards of
quality and freshness are maintained as it expands in the Territory.

Business Objectives and Strategy

IFS's objective is to move forward from being one of the leading pizza
delivery chains in the Territory to becoming the dominant brand in the
marketplace. To accomplish these objectives, IFS has developed a strategy
designed to achieve high levels of customer satisfaction and repeat business, as
well as to enhance recognition of the Domino's name and concept in the
Territory. The key elements of IFS's strategy include:

New Store Locations. IFS believes that the location of a Domino's Store
is an essential element of success. IFS intends to focus its development of the
Territory on store locations which

33
<PAGE>

are strategically located in areas that satisfy IFS's demographic criteria. IFS
will in the near term seek locations for Domino's Stores in larger cities and
college towns.

The Domino's Store System

Domino's opened its first store in 1960 and today is the world's leader
in pizza delivery, with over 5200 company-owned and franchised stores as of
December 31, 1995. It had system-wide revenues of approximately $2.6 billion for
its fiscal year ended December 31, 1995.

Domino's has developed a pizza store format and operating system which
includes a recognized design, decor and color scheme for store buildings;
uniforms for store personnel; signage; service format; quality and uniformity of
products and services offered; procedures for inventory and management control;
a delivery system; and Domino's trademarks (collectively, the "Domino's
System"). All Domino's Stores are required to be operated in accordance with the
Domino's System.

Domino's Stores feature carryout services and delivery services to
customers located within a prescribed service area. The service area for each
Domino's Store is established to enable the store to deliver a pizza within 30
minutes of the customer's order. Domino's Stores offer a substantially similar
core menu including various types of pizza and soft drinks. In the Territory,
other menu items include cole slaw, garlic bread and ice cream. Pizza accounts
for the most significant amount of system-wide sales. Prices for Domino's menu
items are determined by the various operators of Domino's Stores and,
accordingly, may vary throughout the Territory.

Relationship With Domino's

Master Franchise Agreement. The ongoing relationship between IFS and
Domino's is governed principally by the Master Agreement. The Master Agreement
requires that during the initial term, IFS shall have opened and operating a
minimum number of Domino's Stores in accordance with the following yearly
schedule:

34
<PAGE>

<TABLE>
<CAPTION>
Year Additional Total Non- Minimum
Ended Delivery Delivery Traditional Total
12/31 Stores Stores Stores(2) Stores
<C> <C> <C> <C> <C>
1997 24 149 27 176
1998 22 171 38 209
1999 24 195 51 246
2000 25 220 66 286
2001 25(1) 245 66 311
2002 25(1) 270 66 336
2003 25(1) 300 66 366

<FN>
(1) These are non-binding target amounts of stores to be built. Actual
growth requirements for these years are to be reviewed in the year 2000
and mutually agreed upon.

(2) These are non-traditional Domino's Pizza Stores, which include stores
that do not provide delivery service. IFS's obligation to satisfy this
schedule is contingent on the cooperation of third parties and the
approval of each non-traditional store by Domino's. To date, IFS has
opened two non-traditional Domino's Stores, each of which is located
inside a Total gas station convenience store.
</FN>
</TABLE>

Ten of the delivery stores opened by December 31, 1996 must be owned by
IFS. A mutual review of the yearly schedule is to take place at the end of 2000.
If IFS does not meet the development schedule, Domino's may terminate IFS's
exclusive right to operate and franchise additional Domino's Stores in the
Territory. As of December 31, 1996, IFS owned 11 stores.

If IFS is in compliance with the Master Agreement at the expiration of
the Initial Term, IFS will have the option to extend its exclusive development
rights for an additional 10-year period, provided IFS and Domino's agree to a
minimum development schedule for the renewal term. If after expiration of the
Initial Term (or any renewal term), IFS fails to exercise its option to renew
its exclusive development rights, or the parties are unable to agree to a
minimum development schedule for the renewal term, then IFS would continue to
have the right to operate its then-existing Company-owned Domino's Stores and to
maintain and continue its rights and obligations, and act as subfranchisor, with
respect to all then existing franchised Domino's Stores. In such event, IFS
would generally have no further right to operate or grant franchises for
additional Domino's Stores and Domino's would have the right to proceed (or the
right to grant a third party the right to proceed) with further development of
the Territory, subject to territorial rights granted under then existing
franchise agreements.

IFS is required to pay Domino's a one-time store opening fee for each
new Domino's Store, whether Company-owned or franchised. IFS has and expects to
pass the cost through to the franchisees in the case of franchised stores. In
addition, IFS must pay to Domino's a monthly royalty fee equal to a certain
percentage of each Domino's Store's gross sales. This royalty fee is payable to
Domino's irrespective of the profitability of IFS or the Domino's Store, and
irrespective

35
<PAGE>

of IFS's ability to collect royalties from franchisees. This royalty fee
escalates each year until it reaches a maximum of 3% in 2003. IFS's payments to
Domino's are to be made in U.S. dollars.

The Master Agreement is not assignable by IFS without Domino's consent.
In addition, the agreement prohibits DP Group and Colin and Gail Halpern (as
indirect controlling shareholders of DP Group) from transferring control of IFS
without Domino's prior written consent. For the term of the Master Franchise
Agreement, DP Group and Colin and Gail Halpern are restricted from having an
interest in, being employed by, advising or assisting another business in the
pizza or pizza store business.

Under certain circumstances of default by IFS under the Master
Agreement, Domino's has the right to terminate the Master Agreement. If the
Master Agreement is terminated, IFS would be subject to a one-year
non-competition covenant in the delivery, carryout or sit-down pizza business
and Domino's would have the right (but not the obligation) to purchase, at the
then-current fair market value, all of IFS's rights and interests as the
subfranchisor of Domino's Stores and all of the assets of each Domino's Store
owned by IFS. The fair market value would be determined by mutual agreement of
IFS and Domino's, or in the absence of such agreement by an appraiser. Under
certain circumstances of default by Domino's under the Master Agreement, IFS has
the right to terminate the agreement and continue as an independent pizza
operation, including the operation of the Commissary.

Commissary Agreement. Pursuant to the agreement with Domino's relating
to the Commissary ("Commissary Agreement"), Domino's has agreed to provide IFS,
on an ongoing basis, all information and materials necessary to make IFS
familiar with the methods used to operate and manage a Domino's Commissary. IFS
must maintain the confidentiality of such information and, subject to limited
exceptions, cannot use it in any other business. The Commissary Agreement has a
term co-extensive with the Master Agreement and termination and default
provisions and restrictions on transfers substantially similar to those
contained in the Master Agreement.

Store Locations

As of December 31, 1996, IFS has opened and is operating 127 Domino's
Stores in the Territory, 36 of which are located in greater London, one in
Northern Ireland and two in the Republic of Ireland, with the remainder of the
stores located throughout the United Kingdom.

Expansion

IFS believes that the location of a Domino's Store is an essential
element of success. Therefore, IFS focuses its development of the Territory on
store locations which are strategically located within targeted areas. The site
selection process involves an evaluation of a variety of factors, including
demographics (such as population density); specific site characteristics (such
as visibility, accessibility and traffic volume); proximity to activity centers
(such as office or retail shopping districts and apartment, hotel and office
complexes); competition in the area; construction or renovation costs, and lease
terms and conditions. IFS will inspect and approve proposed sites for each
Domino's Store prior to the execution of a franchise agreement or lease.

36
<PAGE>

All sites are subject to the approval of Domino's and the store must generally
be approved by the local planning board, which approval can take approximately
six months.

To promote restaurant growth and increase the presence of Domino's in
the Territory, the Company has established a successful Dealer Development
Program whereby experienced and talented franchisees who lack start-up capital
can enter into the Domino's system with financial support from the Company. For
those who qualify, a good faith payment of $7,500 is made by the franchisee
while the Company invests the remaining capital to build and equip the
restaurant. The franchisee then operates the restaurant with full responsibility
for operations, marketing and financial management. The Company will sell the
unit to the franchisee once the remaining capital can be raised.

A highly innovative move was undertaken by the Company in June of 1995
with the opening of the first Domino's franchise within a gas station
convenience store. Signing an exclusive agreement with Total Oil Great Britain,
a subsidiary of the multinational Total Oil, the Company has generated
additional product awareness by providing a phone-in/pick-up service to
customers in areas where delivery is not normally offered. The test marketing
period for the call-in service is concluding and the Company is in the process
of negotiating a development agreement with Total Oil for the opening of
additional units. Currently there are five Domino's franchises with these
service stations. The Company anticipates opening three additional units during
1996.

The Company has also entered into a similar arrangement with Alldays, a
British convenience Store Company, to establish Domino's delivery stores on the
premises of Alldays Stores. The Company currently is test marketing this service
in three Alldays Stores.

Domino's Stores offer a substantially similar core menu including
high-quality pizza, garlic bread and soft drinks. Other menu items include cole
slaw and ice cream. IFS also continuously test-markets pizzas with specialty
toppings and adds those items to the regular menu if they prove popular. Pizza
accounts for approximately 85% of Domino's Stores' sales in the Territory.
Prices for Domino's menu items are determined by franchisees and, accordingly,
may vary throughout the Territory.

Store Design

A typical Domino's Store in the Territory ranges from 800 to 1,200
square feet and is designed to facilitate a smooth flow of food orders through
the store. The layout includes specific areas for order taking and pizza
preparation resulting in simplified operations, increased efficiency, and
improved consistency and quality of food products. The interior of each store
has a red and blue color scheme and includes a bright menu board and carryout
customer area. The exterior typically includes a Domino's sign with the Domino's
logo. The design for a Domino's Store must comply with specified Domino's
standards and specifications which are flexible enough to allow a store to be
configured to fit a wide variety of building shapes and sizes, thereby
increasing the number of suitable locations.

37
<PAGE>

IFS currently estimates that once the site has been made available,
approximately 60-90 days is required to open a Domino's Store. IFS currently
estimates the cost of opening a Domino's Store to be between (pound)90,000
($140,000) and (pound)120,000 ($185,000), including leasehold improvements,
furniture, fixtures, equipment and opening inventories, but excluding lease
payments and the franchise fee. Such estimates vary depending on the size of the
proposed store and the extent of required leasehold improvements.

Delivery Service

On average, approximately 85% of the sales made by stores in the
Territory are delivered. A delivery area is designed for each store to enable
the store to deliver a pizza within approximately 30 minutes of the time an
order is placed, taking into consideration the least favorable driving
conditions and strict compliance with all laws, regulations and rules of the
road and due care and caution in the operation of delivery vehicles. Deliveries
throughout the Territory are generally made on mopeds owned by the franchisee
and driven by store employees. IFS provides training to franchisees on safe
driving and moped safety.

Store Operations

Store Personnel. A typical Domino's Store employs a store manager, an
assistant manager and approximately 14 hourly employees, most of whom work
part-time. The manager is responsible for the day-to-day operation of the store
and for the maintenance of operating standards. IFS and franchisees seek to hire
experienced store managers and staff and motivate and retain them by providing
opportunities for advancement and performance-based financial incentives.

Reporting and Oversight. Franchisees provide IFS with weekly reports
containing certain information including the amount of royalty sales, the number
of pizzas of various sizes sold and the number of pizzas that were late (pizzas
are considered late if removed from the oven more than 21 minutes after an order
is taken).

IFS maintains financial, accounting and management controls for its
Domino's Stores through the use of centralized accounting systems, detailed
budgets and computerized management information systems, including an accounting
system that provides each Domino's Store's daily sales, expenses and cash
position. IFS anticipates that it will utilize the support and assistance of
Domino's in developing and implementing these control systems. IFS has tested
various computer systems to record and report sales and operating information.
It has selected and begun installing such a system in Domino's Stores. The
Company has a computer staff which installs and trains franchisees in the use of
these in-store computers. The Company has also formed a user group of
franchisees to facilitate feedback and to discuss new developments.

38
<PAGE>

Franchise Program

General. IFS believes that the success of the Domino's System, together
with the relatively low initial capital investment per Domino's Store, will
allow IFS to attract franchisees with significant business experience. IFS
considers its franchisees to be a vital part of its continued growth. There can
be no assurance that IFS will be able to attract a sufficient number of
qualified franchisees to meet the development schedule in the Master Agreement.

Approval. Franchisees are approved on the basis of the applicant's
business background, restaurant operating experience and financial resources.

Franchise Agreements. Each franchisee must comply strictly with the
Domino's System and its standards, specifications and procedures. The franchise
agreement sets forth various requirements regarding signage, equipment, menu,
service, hygiene, hours of operation and communications.

Under IFS's current standard franchise agreement, the franchisee is
required to pay, at the time of signing the franchise agreement, a
non-refundable fee of either (pound)8,000 ($12,260) or (pound)18,000 ($27,585),
depending upon whether the franchisee is an existing franchisee or a new
franchisee of Domino's Stores. Generally, a franchise agreement is executed when
a franchisee secures a location. IFS's current standard franchise agreement
provides for a term of 10 years (with one ten-year renewal option) and payment
to IFS of a royalty fee of 5.5% of sales. The franchise agreements give IFS the
right to terminate a franchisee for a variety of reasons, including a
franchisee's failure to make payments when due or failure to adhere to IFS's
policies and standards.

Franchise Store Development. IFS furnishes each franchisee with
assistance in selecting sites and developing stores. IFS provides its
franchisees with the physical specifications for typical stores. IFS will
generally present store locations to franchisees for their approval and
franchisees must obtain Company approval of their store design. Each location is
selected on the basis of accessibility and visibility of the site and targeted
demographic factors, including population, density, income, age and traffic
pattern. IFS assists in the design and planning of each store and assists the
franchisee in acquiring the equipment needed for each location at competitive
prices for the franchisees.

Franchise Training and Support. Every franchisee is required to have a
principal operator approved by IFS who satisfactorily completes IFS's training
program. Each manager of a franchised store is also required to complete IFS's
training program. Multi-unit franchisees are encouraged to hire a full-time
training coordinator to train new employees for their stores. IFS maintains
constant communication with its franchisees, relaying operating and marketing
information and new ideas between IFS and franchisees.

Franchise Operations. All franchisees are required to operate their
Domino's Stores in compliance with IFS's policies, standards and specifications,
including matters such as menu, ingredients, materials, supplies, services,
fixtures, furnishings, decor and signs. Each franchisee has full discretion to
determine the prices to be charged to its customers.

<PAGE>

Franchisee Advisory Group. IFS has instituted a Franchisee Advisory
Group for the purpose of assisting IFS with the development of new ideas. The
Franchisee Advisory Group is composed of up to eight members, all of whom are
required to be franchisees of IFS. The members serve at the discretion of IFS
and advise IFS on matters such as store design and menu, operation, marketing,
safety and competition in local markets.

Purchasing; Commissary Operations

Domino's and IFS set quality standards for all products used in
Domino's Stores in the Territory. IFS provides fresh dough and substantially all
of the other food products and supplies to franchisees through its Commissary.
In order to ensure product quality and consistency, all stores are required to
make all purchases through the Commissary or from suppliers approved by Domino's
and IFS.

IFS operates its dough production and wholesale food commissary in
Milton Keynes. IFS plans to open a new, expanded commissary in the Milton Keynes
vicinity. This facility will replace IFS's existing commissary. IFS operates the
Commissary as a separate profit center. The Commissary negotiates purchase
contracts for virtually all of the ingredients and supplies used in a Domino's
Store. When possible, IFS enters into one year, fixed price contracts for
products purchased for the Commissary. Certain products, such as mushrooms, are
purchased at market prices due to the volatile nature of the prices of those
products. The Commissary accepts bulk shipments of products and assembles the
products in multi-portion containers for delivery to the stores. The Commissary
produces pizza dough which it delivers fresh to the stores.

Virtually every store orders products through the Commissary on a
regular basis and is billed for their purchases. The Commissary also employs an
individual who is responsible for quality control and quality assurance and an
employee who is responsible for distribution. Products are delivered to stores
on a daily basis in refrigerated trucks that are owned or leased by IFS.

All of the equipment, counters and smallwares needed to open and
operate a Domino's Store can be purchased from IFS. IFS also provides layout and
design services and recommends contractors, signage installers and telephone
systems to its franchisees. Although not required to do so, substantially all of
IFS's franchisees purchase most of their equipment from IFS or specified
suppliers.

Advertising and Promotion

The franchise agreement provides that each franchisee must contribute a
monthly advertising and promotion fee of 4% of its royalty sales to a fund
administered by IFS to be used for advertising, sales promotion and public
relations. IFS is responsible for using the proceeds of the advertising fund to
develop and implement advertising and promotional plans, materials and
activities on behalf of the Domino's Stores in the Territory. All advertising,
promotional plans, materials and activities are subject to Domino's approval.

<PAGE>

IFS's principal method of promotion is through leaflets which are
distributed to the homes and places of business within each store's service
area. These leaflets generally announce promotional prices, new menu items or
include special coupons. The leaflets are generally designed by IFS and can be
customized by each store. The customizing is facilitated through the use of a
single print shop which provides printing services to IFS and the franchisees.
IFS also uses local radio and cable television for advertising.

IFS has started to install an in-store computer system in the
franchisee stores. This system provides data which enables IFS to better track
information such as location of customers, the frequency with which each
customer orders and the response to a particular coupon or other promotion. IFS
believes the system will enable IFS to do better target marketing, improve the
effectiveness of its marketing and reduce the cost of its marketing effort.

Trademarks

IFS is authorized to use such trademarks, service marks and such other
marks as Domino's may authorize from time to time for use in connection with
Domino's Stores (collectively, the "Domino's Trademarks"). Domino's has
represented to IFS that to the best of its knowledge, Domino's owns all of the
rights, title and interests to the Domino's Trademarks used by IFS. Any events
or conditions that negatively affect the Domino's Trademarks could have a
material adverse effect on IFS.

Foreign Currency and Exchange

IFS converts United States dollars, as needed, into British Pounds for
use in the Territory. Revenues from operations in the Territory will be
maintained in pound-denominated accounts, although they may be freely converted
into foreign currencies, at then-current official exchange rates, for purposes
of paying for foreign goods, payment of royalties and for repatriation of
profits. IFS anticipates that it will leave a substantial portion of the profits
of its operation, if any, in the Territory for use in its business. There are
presently no limitations on IFS's ability to repatriate profits. The exact
amount of profits, if any, that IFS repatriates at a given time will depend on,
among other factors, IFS's financial condition, results of operations and
capital requirements. IFS will be subject to risks from exchange rate
fluctuations. IFS may seek to limit its exposure to the risk of currency
fluctuations by engaging in hedging or other transactions.

United States and United Kingdom Income Taxes

Pursuant to United States tax laws, if IFS's subsidiaries organized
under the laws of the United Kingdom are not engaged in business in the United
States, such subsidiaries will not be subject to United States taxation. Any
earnings of these United Kingdom subsidiaries, when paid to IFS (or, in certain
cases, deemed paid, even though not distributed, under certain technical
provisions of the Internal Revenue Code), would be included by IFS for United
States Federal income tax purposes. However, IFS would receive a credit against
Federal income tax liability that otherwise would result from any deemed or
actual distributions from its United Kingdom subsidiaries, for any United
Kingdom corporate taxes paid by such United Kingdom subsidiaries on these
distributions, as well as for any United Kingdom dividend and royalty
withholding taxes

41
<PAGE>

imposed directly on IFS. Because the United Kingdom corporation tax rate
(presently 35 percent of taxable income) is the same as the United States
corporate tax rate, IFS does not anticipate being subject to significant United
States Federal income tax on either distributed or undistributed earnings of its
United Kingdom subsidiaries.

Under United Kingdom tax law, when a United Kingdom corporation pays a
dividend to a shareholder, it must also pay an advance corporate tax (referred
to herein as "ACT") with respect to that dividend. The ACT is presently set at
25% of the net amount of the dividends paid (which is equivalent to 20% of the
sum of the dividend plus the ACT). The paying corporation can normally apply the
ACT it pays with respect to dividends paid by it in any accounting period as a
credit against its corporation tax liability for the accounting period. To the
extent that the ACT cannot be fully applied as such a credit, any unapplied
amount may be carried back six years or carried forward indefinitely.

Under the combined effect of current U.K. tax law and the current
U.S.-U.K. Tax Treaty relating to income and capital gains taxes, if IFS's U.K.
subsidiary pays it a dividend, IFS will receive in addition to the dividend a
tax credit equal to one-half of the ACT paid by the subsidiary with respect to
that dividend. Subject to a U.K. withholding tax calculated as a percentage of
the aggregate of the dividend received and such tax credit, which the treaty
limits, in the case of a dividend paid to a U.S. corporation holding not less
than 10% of the subsidiary's voting stock, to no more than 5%.

Pizza Business in the U.K.; Competition

Pizza has proved to be a particular success in the U.K. Although there
are several large pizza operators in the U.K., the market is fragmented with
well over 2,000 small units. The Company believes that the two largest operators
in the Territory are Pizza Hut with approximately 100 stores and Perfect Pizza
with approximately 200 stores dedicated to home delivery. Pizza Hut is jointly
owned by PepsiCo and Whitbread.

IFS also competes for qualified franchisees with many other business
concepts, including international, national and regional restaurant chains such
as McDonalds, Kentucky Fried Chicken and Burger King. There can be no assurance
that IFS will be able to attract a sufficient number of qualified franchisees to
satisfy its obligations under the Master Agreement.

Employees

As of February 7, 1997, IFS employed 172 persons of whom 104 were store
employees, 38 were corporate personnel and 30 were employed in IFS's Commissary
and distribution center. Most store employees work part-time and are paid on an
hourly basis. None of IFS's employees is covered by a collective bargaining
agreement.

<PAGE>

Government Regulation

IFS is subject to various British, European and local laws affecting
its business. Each of IFS's stores is subject to licensing and regulation by a
number of governmental authorities, which include health, safety, sanitation,
building and fire agencies in the municipality in which the store is located.
Difficulties in obtaining or failure to obtain required licenses or approvals
could delay or prevent the opening of a new store in a particular area. The
Commissary and distribution facility are licensed and subject to regulation by
national and local health and fire codes, and the operation of its trucks is
subject to certain regulations. IFS is also subject to environmental
regulations, but these have not had a material effect on IFS's operations.

IFS is subject to British and European Community regulation that
regulate the franchiser-franchisee relationship. These regulations limit, among
other things, the duration and scope of non-competition provisions, exclusive
territories and restrictions on sources of supply.

IFS's store operations are also subject to British, European Community
and local laws governing such matters as wages, working conditions, citizenship
requirements and overtime. Significant numbers of IFS's hourly personnel are
paid at rates related to the minimum wage and, accordingly, further increases in
the minimum wage could increase IFS's labor costs. New European Community
regulations could materially increase IFS's and franchisees' cost of operations.

Properties

In the Territory, IFS maintains its place of business at Unit 10,
Maryland Road, Tongwell, Milton Keynes in the U.K. The leased space is
approximately 20,000 square feet and houses both DP Group's administrative
offices and the Commissary.

DP Realty Limited, a wholly-owned subsidiary of DP Group, has a total
of 88 leases. DP Realty Limited enters the lease on new properties as a service
for the franchisees to achieve longer rent obligations. The Company then
subleases the store space to the franchisee. This practice allows the Company to
ensure the franchisee maintains the image of the brand. DP Realty Limited
obtains a markup on the sublease to cover the administrative costs. The Company
currently subleases 79 of the 88 properties to franchisees. The revenues
generated from the subleases in 1995 were $1,232,162.

The Company and IFS have a one-year lease for their U.S. office that
expires on June 30, 1997 and is renewable on a month-to-month basis thereafter.
The total rent payable by the Company and IFS during the term of the lease is
approximately $7,400.

Legal Proceedings

The Company is not a party to any litigation or governmental
proceedings that management believes would result in judgments or fines that
would have a material adverse effect on the Company.

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<PAGE>

PRINCIPAL STOCKHOLDERS

The table below sets forth certain information, as of the date of this
Prospectus, and as adjusted to reflect the sale of shares of Common Stock
offered by this Prospectus, regarding the beneficial ownership, as defined in
regulations of the Securities and Exchange Commission, of Common Stock of (i)
each person who is known to the Company to be the beneficial owner of more than
5% of the outstanding shares of the Company's Common Stock, (ii) each director
and nominee for director of the Company, and (iii) all directors and executive
officers as a group. On September 29, 1996, there were 6,727,324 shares of the
Company's Common Stock outstanding. Unless otherwise specified, the named
beneficial owner has sole voting and investment power. The information in the
table below was furnished by the persons listed. "Beneficial Ownership" as used
herein has been determined in accordance with the rules and regulations of the
Securities and Exchange Commission and is not to be construed as a
representation that any of such shares are in fact beneficially owned by any
person.

<TABLE>
<CAPTION>
Amount and Nature of Percent Beneficially Percent Beneficially
Names and Addresses of Amount and Nature of Owned Prior to Owned Following the
Beneficial Owner(1) Beneficial Ownership(2) Offering Offering (3)

<S> <C> <C> <C>
Crescent Capital, Inc.(4)(5) 4,700,000 69.86% 52.92%

H. Michael Bush -0- 0% 0%

Gerald Halpern -0- 0% 0%

Colin Halpern -0- 0% 0%

Melvin F. Lazar (6) 10,000* *

Robert P. Flack (6) 10,000* *

Kenneth R. Franklin (6) 0,000* * *

Franklen M. Abelman (6) 10,000* * *

All directors and officers
as a group (6 persons) 40,000* * *
<FN>
- ----------------------

* Less than 1%

44
<PAGE>

(1) The address of Crescent Capital Inc. and Messrs. Bush, Lazar, Flack,
Franklin and Abelman and the Halperns is c/o International Franchise Systems,
Inc., 6701 Democracy Boulevard, Suite 300, Bethesda, MD 20877.

(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within sixty (60) days from the date of this prospectus
statement upon the exercise of options. Each beneficial owner's percentage
ownership is determined by assuming that options that are held by such person
(but not those held by any other person) and that are exercisable within 60 days
from the date of this Prospectus have been exercised.

(3) Does not include (i) the issuance of 107,724 shares of Common Stock to
Patterson Travis upon exercise of the Underwriter's Unit Purchase Option and
215,448 shares of Common Stock to Patterson Travis upon exercise of the class
and Class B Warrants underlying the units issuable upon exercise of
Underwriter's Unit Purchase Option.

(4) Woodland Limited Partnership, a limited partnership of which Woodland Group
is the General Partner, owns approximately 92% of Crescent's issued and
outstanding shares of Common Stock. Woodland Group is owned one-third by Mr. Jay
Halpern, one-third by Ms. Nancy Gillon and one-third by Mrs. Gail Halpern. Gail
Halpern is the wife of Colin Halpern. Jay Halpern and Nancy Gillon are the
children of Gail and Colin Halpern. By reason of their indirect ownership of
approximately 76% of the outstanding stock of Crescent, Mr. Halpern, Ms. Gillon
and Mrs. Halpern may be deemed to have a beneficial interest in the shares owned
by Crescent. However, Mr. Halpern, Ms. Gillon and Mrs. Halpern disclaim
beneficial ownership of such securities. Crescent, or its pledgees, donees,
transferees or other successors in interest, is on whose behalf 2,000,000 shares
are being offered in the Concurrent Offering. If all the shares offered in the
Concurrent Offering are sold, Crescent will own approximately 30.4% of the
Common Stock outstanding. See "Concurrent Registration of Common Stock."

(5) On December 18, 1992, the SEC directed by Order that an investigation be
made into possible violations of certain of the federal securities laws,
including laws dealing with manipulation and false disclosure, by a number of
named individuals and entities, with respect to the securities of seven issuers,
including Crescent, and other unnamed issuers. The investigation of Crescent was
initiated prior to the time current management became affiliated with Crescent.
To date, no actions have been brought against Crescent or, insofar as the
Company is aware, its previous management.

(6) Includes 10,000 Shares of Common Stock issuable upon exercise of options
granted under the Company's Non-Employee Director Stock Option Plan.
</FN>
</TABLE>

45
<PAGE>

CONCURRENT REGISTRATION OF COMMON STOCK

Concurrently with this Offering, 2,000,000 shares of Common Stock (the
"Selling Stockholders' Shares") have been registered by the Company under the
Securities Act of 1933, as amended, on behalf of Crescent, the Company's
majority stockholder, or its pledgees, donees, transferees or other successors
in interest, pursuant to a Selling Stockholder Prospectus included within the
Registration Statement of which this Prospectus forms a part. The Company will
not receive any of the proceeds from the sale of the Selling Stockholder's
Shares. It is anticipated that such shares will be offered and sold from time to
time in the over-the-counter market, or otherwise, at prices and terms then
prevailing or at prices related to the then current market price, or in
negotiated transactions.

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<PAGE>

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47
<PAGE>

MANAGEMENT

Directors and Executive Officers

Officers and Directors are elected on an annual basis. The present
terms for each director will expire at the next meeting of shareholders or at
such time as a successor is duly elected. Officers serve at the discretion of
the Board of Directors. The directors and executive officers of the Company and
their respectful positions are as follows:

Name Position

H. Michael Bush Acting President/Chief Financial
Officer and Secretary

Gerald Halpern Executive Vice President, and
Director

Colin Halpern Chairman of the Board

Melvin F. Lazar Director

Robert Pace Flack Director

Kenneth Ronald Franklin Director

Franklen Myles Abelman Director

H. Michael Bush has served as Chief Financial Officer and Secretary
since joining the Company in November 1995. Since June 1996, Mr. Bush has also
served as Acting President. Prior to joining the Company, Mr. Bush worked at
Mobil Oil Corporation. He served at Mobil in various financial capacities from
1980 through November 1995, including Manager of Financial Analysis, Controls
and Joint Venture Reporting and Senior Tax Planning Advisor. From 1976 through
1980, Mr. Bush worked at Unisys. Mr. Bush is a certified public accountant.

Gerald Halpern, age 63, has served as Executive Vice President and
Director of the Company since December 1993. Since April, 1991, he has served as
Treasurer of Chinese Pompano, Inc., a fast food restaurant and delivery company,
and is responsible for financial planning and development. Mr. Halpern served as
Executive Vice President of Courter & Co., a mechanical contracting firm from
1988 to 1990. Mr. Halpern also served for 11 years as President of DRC
Industries. Gerald Halpern and Colin Halpern are brothers.

48
<PAGE>

Colin Halpern, age 59, has served as Director of the Company since
December 1993. From December 1993 through May 1996, he served as President of
the Company. He also currently serves as President, Secretary, Treasurer and
Director of Crescent Capital, Inc., Executive Vice President and Director of
Lafayette Industries, Inc., a manufacturer of store fixtures, and President,
Chief Executive Officer, and Chairman of the Board of Directors of NPS
Technologies Group, Inc., an inactive company. He has held these positions since
July 1994, January 1992 and August 1983, respectively. Crescent Capital, Inc.,
Lafayette Industries, Inc. and WPS Technologies Group, Inc. are Public
Companies. Mr. Halpern also serves as a Director of Red Hot Concepts, a public
company that operates certain restaurants in the United Kingdom and Australia.
From 1985 to the present, Mr. Halpern has also served as the Chairman of
Universal Service Corp. Mr. Halpern was formerly the President and Chief
Executive Officer of DRC Industries, Inc., a company which, from November, 1975
through October, 1985, had a Budget Rent-A-Car master license agreement for the
New York metropolitan area, including LaGuardia and John F.
Kennedy Airports. Mr. Halpern is the brother of Gerald Halpern.

In June 1991, the SEC sought and received, and NPS Technologies Group,
Inc. ("NPS") consented to the entering of, an order against NPS and its officers
and employees that required NPS to file certain periodic reports with the SEC
that had not been timely filed and permanently restrained and enjoined NPS and
such officers and employees from failing to file in proper form with the SEC
accurate and complete reports required to be filed by NPS pursuant to the rules
and regulations of the SEC. Mr. Halpern is the President and Director of NPS,
which is currently inactive. Since June, 1991, certain of NPS' reports have not
been timely filed by NPS and other reports have not been filed in proper form.
The SEC has taken no further action against NPS or any of its officers and
employees.

Melvin F. Lazar, age 56, has been an outside Director of the Company
since December 1993. Mr. Lazar is the founding partner of Lazar, Levine &
Company, a New York City CPA firm which is in its twenty-sixth year of
operation. Mr. Lazar received a Bachelor of Business Administration degree from
The City College of New York in 1960. He is a member of the American Institute
of Certified Public Accountants, the New York State Society of Certified Public
Accountants and is currently serving on the NYSSCPA Committee on Cooperation
with Stock Exchanges and Investment Bankers as well as the Committee on
Cooperation with Financial Media. Mr. Lazar has been licensed in the State of
New York as a Certified Public Accountant since 1964. Mr. Lazar specializes in
both litigation support services and assisting companies with merger and
acquisition activities. He has assisted companies with funding requirements
including venture, equity and debt financing and has serviced public and
privately owned companies for over thirty years. He is also a director of Red
Hot Concepts, Inc.

Robert Pace Flack, age 58, has served as a director of the Company
since February, 1995. Since December 1995, he has served as Chief Executive
Officer, President and Director of Kona Restaurant Group, Inc., a Company in
which Woodland, the majority stockholder of Crescent, has a 65.54 ownership
interest. He is also currently serving as a management consultant for business
development and for the food service industry as a director of Business
Development Services, a private company. From June 1989 to December 1994, Mr.
Flack has held several positions and most recently served as the President and
Chief Executive Officer of Sonic Industries, a NASDAQ listed, fast service,
drive-in restaurant chain with over 1,300 outlets, 90% of which are franchised.

49
<PAGE>

He has served in senior management positions with several restaurant companies
including El Chico Corporation (NASDAQ), Pizza Inn, Inc. (AMEX) and Village
Kitchen Foods, Inc. Mr. Flack is a member of the National Restaurant Association
and the International Franchise Association. Mr. Flack is also a director of Red
Hot Concepts, Inc. and of Lincoln National Bank, Oklahoma.

Kenneth Ronald Franklin, age 64, has served as a director of the
Company since February 1995. For the past 15 years, Mr. Franklin has served as
President of Franchise Developments, Inc., a consulting firm which assists
start-up and existing franchisors, both public and privately owned, to
structure, design and implement franchise programs. Mr. Franklin sits on the
Board of Advisors of many of the companies for which he provides these services.
Mr. Franklin has conducted seminars nationally and has been a featured speaker
on franchising operations for numerous organizations including the International
Franchise Association, Small Business Administration and Management Centre
Europe. In the past, he has owned various franchised operations and currently is
the owner of an Arby's franchise in St. Louis, Missouri. Mr. Franklin is a
director of Safe Systems, Inc.

Franklen Myles Abelman, age 54, has served as a director of the Company
since February, 1995. Mr. Abelman is currently serving as Regional General
Counsel for British American Tobacco. From 1992 through 1995, Mr. Abelman has
served as an independent consultant in franchising, distribution and business
development to entities involved in international development, particularly with
respect to operations in the Far East, Europe and the Middle East. His clients
include public and privately owned companies and franchise operations such as
Roasters Corporation (for which he served as Vice President - International
Development through 1995), Foodmaker, Carvel, Dairy Queen, Pepsico, Inc.,
Medvest and Brown and Williamson. From 1983 to 1992, Mr. Abelman was employed by
Pepsico, Inc. and served as Vice President and General Counsel of Kentucky Fried
Chicken International where he was responsible for managing the legal department
and franchising operations of the Company's international division in 65
countries. Mr. Abelman is a director of Perfect Delivery, Inc. and of Foodco
International, Ltd., both private companies. Mr. Abelman is also a director of
Red Hot Concepts, Inc.

Director Compensation

Directors who are officers or employees of the Company receive no
additional compensation for service as members of the Board of Directors or
committees thereof. Directors who are not officers or employees of the Company
receive such compensation for their services as the Board of Directors may from
time to time determine. No-Employee directors receive an annual fee of $5,000
and a fee of $1,000 per meeting. The Company reimburses each such Director for
all reasonable expenses incurred by him in attending meetings. In addition,
non-employee directors of the Company are eligible to participate in the
Company's 1995 Non-Employee Stock Option Plan, pursuant to which each
non-employee director is automatically granted, on the first business day
following the day of each annual meeting of stockholders of the Company, an
option to purchase 10,000 shares of Common Stock.

In July, 1995, Messrs. Lazar, Franklin and Abelman were issued options
to purchase 10,000 shares each at an exercise price of $6.50 per share pursuant
to the Company's 1995 Non-Employee Director Stock Option Plan. The options are
exercisable from July, 1996 through July 2005. In July 1996, Messrs. Lazar,
Franklin and Abelman were issued options to purchase 10,000

50
<PAGE>

shares each at an exercise price of $_________ per share pursuant to the
Company's 1995 Non-Employee Director Stock Option Plan. The options are
exerciseable from _____ through ______________.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the aggregate cash compensation to be
paid by the Company on an annualized basis for the fifty-two weeks ended
December 31, 1995 to those executive officers whose salary and bonus exceeded
$100,000 and the Chief Executive Officer.

<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards

Name and Other Annual Restricted Securities All Other
Principal Salary Bonus Compensation(1) Stock Underlying Compensation
Position Year ($) ($) ($) Award(s)($) Options(#) ($)

<S> <C> <C> <C> <C> <C> <C> <C>
Colin Halpern 1996 96,000 0 0 0 0 0
Chairman 1995 96,000 0 56,043(1) 0 0

Gerald Halpern 1996 72,000 0 0 0 0 0
Executive Vice 1995 72,000 0 34,814 0 0 0
President

H. Michael Bush 1996 100,000 20,000 0 0 0 0
Acting President
<FN>

(1) For Colin Halpern, includes $20,691 car allowance and $32,760
housing allowance. For Gerald Halpern, includes $19,214 car allowance and
$15,600 housing allowance. Where no amount is given, the dollar value of
perquisites paid to the named executive officer does not exceed the lesser of
$50,000 or 10% of the total of annual salary and bonus reported for the named
executive officer.

(2) The named executive officer's total annual salary and bonus did not
exceed $100,000.
</FN>
</TABLE>

Stock Option Grants

H. Michael Bush was granted an Incentive Stock Option for 15,000 shares
at $1.25 per share as of March 8, 1996.

<PAGE>

Stock Option and Incentive Plan

In order to attract, retain and motivate employees (including officers)
and directors who perform substantial services for or on behalf of the Company,
the Company adopted the Stock Option and Incentive Plan (the "Stock Plan" or the
"Plan").

Pursuant to the Stock Plan, officers and key employees of the Company
are eligible to receive awards of stock options (with or without limited stock
appreciation rights) and directors are eligible to receive awards of
non-qualified stock options (with or without limited stock appreciation rights).
Options granted under the Stock Plan may be "incentive stock options" ("ISOs"),
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or non-qualified stock options ("NQSOs"). Limited Stock
Appreciation Rights ("LSARs") may be granted simultaneously with the grant of an
option or (in the case of NQSOs) at any time during its term.

The Company has reserved 400,000 shares of the Common Stock for
issuance of awards under the Stock Plan (subject to anti-dilution and similar
adjustments). During the duration of the plan the maximum number of shares as to
which stock options may be granted under the plan to any eligible person is 15%
of the aggregate number of shares which may be issued under the plan. There are
additional limitations as to the number of ISOs granted which become exercisable
for the first time in any one calendar year.

The Stock Plan is administered by a committee (the "Committee"),
established by the Company's Board of Directors, the composition of which will
at all times satisfy the provisions of Rule 16b-3 under the Securities Exchange
Act of 1934, as amended. Subject to the provisions of the Stock Plan, the
Committee determines the type of award, when and to whom awards will be granted,
and the number of shares covered by each award. The Committee also determines
the terms, provisions and kind of consideration payable (if any), with respect
to awards. In addition, the Committee has sole discretionary authority to
interpret the Stock Plan and to adopt rules and regulations related thereto. In
determining the persons to whom awards shall be granted and the number of shares
covered by each award, the Committee shall take into account the contribution to
the management, growth and/or profitability of the business of the Company by
the respective persons and such other factors as the Committee shall deem
relevant.

An option may be granted on such terms and conditions as the Committee
may approve, and generally may be exercised for a period of up to 10 years from
the date of grant. Generally, options will be granted with an exercise price
equal to the "Fair Market Value" (as defined in the Stock Plan) on the date of
grant. In the case of ISOs, certain limitations will apply with respect to the
aggregate value of option shares which can become exercisable for the first time
during any one calendar year, and certain additional limitations will apply to
"Ten Percent Stockholders" (as defined in the Stock Plan). The Committee may
provide for the payment of the option price in cash, by delivery of other Common
Stock having a Fair Market Value equal to such option price or by a combination
thereof.

52
<PAGE>

An option shall be exercisable at such time or times as the Committee,
in its discretion, shall determine, except that no stock option shall be
exercisable after the expiration of ten years (five years in the case of an
incentive stock option granted to a "Ten Percent Employee", as defined in the
Stock Plan) from the date of the grant. The Stock Plan contains special rules
governing the time of exercise in the case of death, disability or other
termination of employment and also provides for acceleration of the
exercisability of options upon certain events involving a change in control of
the Company.

The Company's Board of Directors may at any time and from time to time
suspend, amend, modify or terminate the Plan; provided, however, that, unless
approved by the holders of a majority of the issued and outstanding securities
of the Company entitled to vote, to the extent required by the Securities
Exchange Act of 1934, as amended, no such change may (i) materially increase the
aggregate number of shares as to which options may be granted under the Plan
(except for adjustments provided for in the Plan to reflect stock dividends or
other recapitalizations affecting the number or kind of outstanding shares),
(ii) materially increase the benefits accruing to optionees, or (iii) materially
modify the requirements as to eligibility for participation in the Plan. In
addition, no such change may adversely affect any option previously granted,
except with the written consent of the optionee.

Personal Liability and Indemnification of Directors

The Company's Articles of Incorporation and Bylaws contain provisions
which reduce the potential personal liability of directors for certain monetary
damages and provide for indmenity of directors and other persons. The Company is
unaware of any pending or threatened litigation against the Company or its
directors that would result in any liability for which such director would seek
indemnification or similar protection.

Such indemnification provisions are intended to increase the protection
provided directors and, thus, increase the Company's ability to attract and
retain qualified persons to serve as directors. Because directors liability
insurance is only available at considerable cost and with low dollar limits of
coverage and broad policy exclusions, the Company does not currently maintain a
liability insurance policy for the benefit of its directors although the Company
may attempt to acquire such insurance in the future. The Company believes that
the substantial increase in the number of lawsuits being threatened or filed
against corporations and their directors and the general unavailability of
directors liability insurance to provide protection against the increased risk
of personal liability resulting from such lawsuits have combined to result in a
growing reluctance on the part of capable persons to serve as members of boards
of directors of companies. The Company also believes that the increased risk of
personal liability without adequate insurance or other indemnity protection for
its directors could result in overcautious and less effective direction and
management of the Company. Although no directors have resigned or have
threatened to resign as a result of the Company's failure to provide insurance
or other indemnity protection from liability, it is uncertain whether the
Company's directors would continue to serve in such capacities if improved
protection from liability were not provided.

53
<PAGE>

The provisions affecting personal liability do not abrogate a
director's fiduciary duty to the Company and its shareholders, but eliminate
personal liability for monetary damages for breach of that duty. The provisions
do not, however, eliminate or limit the liability of a director for failing to
act in good faith, for engaging in intentional misconduct or knowingly violating
a law, for authorizing the illegal payment of a dividend or repurchase of stock,
for obtaining an improper personal benefit, for breaching a director's duty of
loyalty, which is generally described as the duty not to engage in any
transaction which involves a conflict between the interest of the Company and
those of the director, or for violation of the federal securities laws.

The provisions regarding indemnification provide, in essence, that the
Company will indemnify its directors against expenses (including attorneys
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with any action, suit or proceeding arising out of the
director's status as a director of the Company, including actions brought by or
behalf of the Company (i.e., shareholder derivative actions). The provisions do
not require a showing of good faith. Moreover, they do not provide
indemnification for liability arising out of willful misconduct, fraud, or
dishonesty, for "short-swing" profits violations under the federal securities
laws, or for the receipt of illegal remuneration. The provisions also do not
provide indemnification for any liability to the extent such liability is
covered by insurance. One purpose of the provisions is to supplement the
coverage provided by such insurance. However, as mentioned above, the Company
does not currently provide such insurance to its directors, and there is no
guarantee that the Company will provide such insurance to its directors in the
near future although the Company may attempt to obtain such insurance.

These provisions diminish the rights of action previously available to
shareholders. They do so by eliminating a theory upon which most claims for
damages against a director of the Company may be maintained by shareholders on
their own behalf and on behalf of the Company and afford indemnification against
most damages and settlement amounts paid by a director of the Company in
connection with any shareholders derivative action. However, the provisions do
not have the effect of limiting the right of a shareholder to enjoin a director
from taking actions in breach of his fiduciary duty, or to cause the Company to
rescind actions already taken, although as a practical matter courts may be
unwilling to grant such equitable remedies in circumstances in which such
actions have already been taken. In addition, the Company does not presently
have directors liability insurance and there is no assurance that the Company
will procure such insurance or that if such insurance is procured it will
provide coverage to the extent directors would be indemnified under the
provisions. Consequently, the Company may be forced to bear a portion or all of
the cost of the director's claims for indemnification under such provisions. If
the Company is forced to bear the costs for indemnification, the value of the
Company's stock may be adversely affected. In the opinion of the Commission,
indemnification for liabilities arising under the Securities Act of 1933, as
amended, is contrary to public policy and, therefore, is unenforceable.

Employment Agreements

Mr. Colin Halpern served as President of the Company pursuant to an
employment agreement which commenced as of August 1, 1994 and ended on January
31, 1996. Mr. Halpern

<PAGE>

continues to receive an annual salary of $96,000 and an annual car and housing
allowance of approximately $21,000 and $33,000 respectively.

Mr. Bush has been Acting President of the Company since June 1996. Mr.
Bush receives an annual salary of $100,000 payable in equal monthly
installments.

The Company has not entered into a Employment Agreement with Mr. Gerald
Halpern effective August 1, 1994. Mr. Halpern receives a base annual salary of
$72,000 payable in equal monthly installments. The employment agreement provides
for salary increases and bonuses as the Board of Directors of the Company shall
determine. The employment agreement also contains a covenant not to compete that
extends for a period of one year after termination. Pursuant to the employment
agreement, Mr. Halpern is required to devote such portion of his business time
as may be reasonably required by the Company's Board of Directors.

CERTAIN TRANSACTIONS

Transactions with Affiliates

The Company has entered into several transactions with affiliates. The
Company believes that the terms of the transactions with affiliates are on terms
at least as favorable as could have been obtained from unaffiliated third
parties. The Company will require that in the future, transactions with
affiliates will continue to be made on terms the Company believes are at least
as favorable as those obtainable from unaffiliated third parties.

Woodland Limited Partnership

Woodland Limited Partnership ("Woodland") is a partnership controlled
by members of Mr. Colin Halpern's family. Woodland owns approximately 92% of the
outstanding voting stock of Crescent, the holder of approximately 70% of the
voting stock of the Company. See "Concurrent Registration of Common Stock." Mr.
Halpern is the President and sole director of Crescent. Through its ownership of
the stock of Crescent, Woodland is able to control the election of directors and
any other matter submitted for shareholder approval.

Advances to Crescent Capital, Inc.

The Company has advanced funds from time to time to Crescent. As of
December 31, 1995 the total amount due to the Company from Crescent for funds
advanced was $1,369,261. The funds were advanced on a short-term basis and are
non-interest bearing. As of September 29, 1996, Crescent owed $1,109,697 to the
Company.

55
<PAGE>

Advances to Red Hot Concepts, Inc.

Red Hot Concepts, Inc. ("Red Hot"), a company controlled by Woodland,
has the right to develop certain restaurant concepts in the United Kingdom. Mr.
Halpern is the President of Red Hot. The Company has advanced funds from time to
time on behalf of Red Hot. As of December 31, 1995 and 1994, the total amount
due to the Company from Red Hot for funds advanced was $183,635 and $60,011
respectively. The funds were advanced on a short-term basis and are non-interest
bearing. As of September 29, 1996, no funds were due to the Company by Red Hot.

Advances to Colin Halpern

The Company has advanced funds from time to time to Mr. Halpern.

DESCRIPTION OF SECURITIES

Common Stock

The Company is authorized to issue 19,000,000 shares of Common Stock,
$.01 par value per share, of which 6,727,324 are issued and outstanding as of
September 29, 1996. The holders of Common stock have no preemptive and other
subscription rights and the Common Stock has no redemption, sinking fund or
conversion provisions. There are presently no plans to pay dividends with
respect to the shares of Common Stock. Upon liquidation, dissolution or
winding-up of the Company, after payment of creditors and the holders of any
senior securities of the Company, if any, the assets of the Company will be
divided pro rata on a per share basis among the holders of the shares of Common
Stock. The Common Stock is not subject to any liability for further assessments.

Holders of shares of Common Stock of the Company are entitled to cast
one vote for each share held at all stockholders' meetings for all purposes,
including the election of directors. The By-laws of the Company require that
only a majority of the issued and outstanding shares of Common Stock of the
Company need be represented to constitute a quorum and to transact business at a
stockholders' meeting. All of the shares of Common Stock currently issued and
outstanding are, and the shares of Common Stock to be issued upon consummation
of this offering, when paid for in accordance with the terms hereof, will be,
fully paid and nonassessable.

Warrants

As of the date of this Prospectus, the Company has 1,077,324 Class A
Warrants and 1,077,324 Class B Warrants outstanding.

<PAGE>

Class A Warrants

Each Class A Warrant entitles the holder to purchase on (1) share of
Common Stock at a price of $5.00 per share until June 30, 1997. Each Class A
Warrant is redeemable by the Company for $.01 per Warrant, at any time, upon
thirty (30) days prior written notice, if the average closing price or bid price
of the Common Stock, as reported by the principal exchange on which the Common
Stock is traded, NASDAQ QTC Bulletin Board or the National Quotation Bureau
Incorporated, as the case may be, equals or exceeds $10.00 per share for any ten
(10) trading days within a period of thirty (30) consecutive trading days ending
within five (5) days prior to the date of the notice of redemption. Upon thirty
(30) days written notice to all holders of Class A Warrants, the Company shall
have the right, subject to compliance with Rule 13e-4 under the Securities
Exchange Act of 1934 and the filing of Schedule 13e-4, along with appropriate
suspension of Warrant exercises, and a post-effective amendment to this
Registration Statement, to reduce the exercise price and/or extend the term of
the Class A Warrants.

Class B Warrants

Each Class B Warrant entitled the holder to purchase one (1) share of
Common Stock at a price of $10.00 per share for a period of five (5) years which
commenced December 9, 1994. Each Class B Warrant is redeemable by the Company
for $.-01 per Warrant, at any time, upon thirty (30) days prior written notice,
if the average closing price or bid price of the Common Stock, as reported by
the principal exchange on which the Common Stock is traded, NASDAQ OTC Bulletin
Board or the National Quotation Bureau Incorporated, as the case may be, equals
or exceeds $15.00 per share for any ten (10) trading days within a period of
thirty (30) consecutive trading days ending within five (5) days prior to the
date of the notice of redemption. Upon thirty (30) days' written notice to all
holder of Class B Warrants, the Company shall have the right, subject to
compliance with Rule 13e-4, along with appropriate suspension of Warrant
exercises, and a post-effective amendment to this Registration Statement under
the Securities Exchange Act of 1934 and the filing of Schedule 13e-4, to reduce
the exercise price and/or extend the term of the Class B Warrants.

SHARES AVAILABLE FOR FUTURE SALE
Rule 144

A significant number of shares of Common Stock currently outstanding
are, and the shares of Common Stock issued upon the exercise of stock options
currently outstanding may be "restricted securities" as that term is defined in
Rule 144 promulgated under the securities Act and may, under certain
circumstances, be sold without registration pursuant to Rule 144.

57
<PAGE>

subject to certain requirements as to the manner of sale, notice and the
availability of current public information about the Company. However, a person
that is not an affiliate and has beneficially owned such shares for at least
three years is entitled to sell such shares without regard to the volume, manner
of sale or notice requirements.

The holder(s) of the Unit Purchase Option has certain demand
registration rights with respect to the securities underlying such option.
Additionally, shares of Common Stock purchased on exercise of the Class A and
Class B Warrants or the Unit Purchase Option may be tradeable without
restriction and qualification requirements. The sale or availability for sale of
substantial amounts of Common Stock and/or Warrants in the public market
subsequent to this Offering pursuant to Rule 144 or otherwise could adversely
affect the market price of the Common Stock and could impair the Company's
ability to raise additional capital through the sale of its equity securities or
debt financing. The availability of Rules 144 to the holders of restricted
securities would be conditioned upon, among other factors, the availability of
certain public information concerning the Company.

No predictions can be made as to the effect, if any, that sales of
shares under Rule 144 or the availability of shares for sale will have on the
market, if any, prevailing from time to time. Sales of substantial amounts of
the Common stock pursuant to Rule 144 may adversely affect the market price of
the Common Stock or the Warrants.

PLAN OF DISTRIBUTION

The securities offered hereby are being offered directly by the Company pursuant
to the terms hereof. No underwriter is being utilized in connection with this
offering.

The Company has agreed to pay to Patterson Travis a fee of eight
percent (8%) upon the exercise of each Warrant provided that (i) the market
price of the Company's shares of Common Stock on the date the Warrant is
exercised is greater than the Warrant exercise price; (ii) the exercised of the
Warrant was solicited by a member of the National Association of Securities
Dealers, Inc. ("NASD"); (iii) the Warrant was not held in a discretionary
account; (iv) disclosure of compensation arrangements was made both at the time
of the sale and exercise of the Warrants; (v) soliciting the exercise is not in
violation of Rule 10-b-6 under the Securities Exchange Act of 1934 ("Exchange
Act") and (vi) solicitation of the exercise is in compliance with the NASD
(Notice to Member 81-389 September 22, 1991)).

58
<PAGE>

Warrant Agent

The Warrant Agent for the offering is Jersey Transfer & Trust Company.
All deliveries and correspondence sent to the Warrant Agent relating to the
offering should be directed to the following address:

Jersey Transfer and Trust Co.
201 Bloomfield Avenue
P.O. Box 36
Verona, NJ 07044

LEGAL MATTERS

The legality of the securities offered and certain legal matters
relating to the Offering hereby will be passed upon for the Company by Reed
Smith Shaw & McClay. Jay L. Halpern, an associate with Reed Smith Shaw & McClay,
is a shareholder of Woodland Group Corporation, the General Partner of Woodland
Limited Partnership. Woodland Limited Partnership owns approximately 92% of the
outstanding stock of Crescent.

EXPERTS

The financial statements of the Company as of January 2, 1994, January
1, 1995 and December 31, 1995 included in this Prospectus have been audited by
Moore Stephens, P.C., independent certified public accountants, whose report has
been included herein in reliance upon the authority of such accounting firm as
experts in accounting and auditing.

59
<PAGE>

INTERNATIONAL FRANCHISE SYSTEM, INC.
INDEX

Independent Auditor's Report.................................................F-1

Consolidated Balance Sheet at December 31, 1995........................F-2..F-3

Consolidated Statements of Operations for the fifty-two weeks ended
December 31, 1995 and January 1, 1995.......................................F-4

Consolidated Statements of Stockholders' Equity for the
period January 2, 1994 to December 31, 1995 ................................F-5

Consolidated Statements of Cash Flows for the fifty-two weeks ended
December 31, 1995 and January 1, 1995 .................................F-6 F-7

Notes to Consolidated Financial Statements ...........................F-8 F-17

Independent Auditor's Report ..............................................F-18

Consolidated Balance Sheet as of January 2, 1994 ....................F-19 F-20

Consolidated Statement of Operations for the period December 30, 1993
to January 2, 1994 ........................................................F-21

Consolidated Statement of Shareholders' Equity s of January 2, 1994 ...... F-22

Consolidated Statement of Cash Flows for the period ended
December 30, 1993 to January 2, 1994 ................................F-23 F-24

Notes to Consolidated Financial Statements ..........................F-25 F-32

Condensed Consolidated Balance Sheet as of September 29, 1996
[Unaudited] .........................................................F-33 F-34

Condensed Consolidated Statements of Operations
for the three month periods July 1, 1996 to September 29, 1996
and July 3, 1995 to October 1, 1995 and for the
nine month periods January 1, 1996 to September 29, 1996 and
January 2, 1995 to October 1, 1995 [Unaudited] ............................F-35

Condensed Consolidated Statement of Stockholders' Equity
for the nine month period January 1, 1996 to
September 29, 1996 [Unaudited] ............................................F-36

60
<PAGE>

Condensed Consolidated Statements of Cash Flows for the
nine month periods January 1, 1996 to September 29, 1996
and January 2, 1995 to October 1, 1995 [Unaudited] ........................F-37

Notes to Condensed Consolidated Financial Statements ......................F-38

<PAGE>
INDEPENDENT AUDITOR'S REPORT

To the Stockholders and Board of Directors of
International Franchise Systems, Inc.

We have audited the accompanying consolidated balance sheet of
International Franchise Systems, Inc. and its subsidiaries as of December 31,
1995, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the two fifty-two week periods ended December
31, 1995 and January 1, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
International Franchise Systems, Inc. and its subsidiaries as of December 31,
1995, and the consolidated results of their operations and their cash flows for
each of the two fifty-two week periods ended December 31, 1995 and January 1,
1995, in conformity with generally accepted accounting principles.

MOORE STEPHENS, P.C.
Certified Public Accountants.

Cranford, New Jersey
March 25, 1996

F-1

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC.
- --------------------------------------------------------------------------------

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1995.
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Assets:
Current Assets:
Cash and Cash Equivalents $ 839,915
Cash - Restricted 200,000
Trade Accounts Receivable [Net of Allowance of $199,183] 1,697,548
Other Receivables 565,708
Franchisee Loans 696,917
Inventories 621,408
Prepaid Expenses and Accrued Income 469,116
Due from Officer 134,151
Due from Related Parties 1,666,896
Deposits 383,331
-----------

Total Current Assets 7,274,990

Property and Equipment:
Equipment, Office Fixtures and Furnishings 1,752,927
Equipment and Motor Vehicles Under Capital Leases 508,869
Leasehold Improvements 861,294
Motor Vehicles 292,646
-----------

Total - At Cost 3,415,736
-----------

Accumulated Depreciation:
Equipment, Office Fixtures and Furnishings 311,514
Equipment and Motor Vehicles Under Capital Leases 75,813
Leasehold Improvements 71,446
Motor Vehicles 223,296
-----------

Total Accumulated Depreciation 682,069

Property and Equipment - Net 2,733,667
-----------

Other Assets:
Master Franchise Agreement - Net 936,000
Consulting Agreements - Net 827,707
Rights to Store Leases - Net 83,359
Store Franchise Agreement - Net 75,273
Store Development Costs - Net 104,419
Start-up Costs - Net 146,916
Goodwill - Net 11,570
-----------

Total Other Assets 2,185,244
-----------

Total Assets $12,193,901
===========
</TABLE>

The Accompanying Notes are an Integral Part of These Consolidated Financial
Statements.

F-2

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC.
- --------------------------------------------------------------------------------

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1995.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S> <C>
Liabilities and Stockholders' Equity:
Current Liabilities:
Trade Accounts Payable $ 3,109,445
Accrued Expenses 574,534
Other Payables and Accrued Interest 259,597
Obligations Under Capital Leases 188,077
Current Portion of Long-Term Debt 267,693
-----------

Total Current Liabilities 4,399,346
-----------

Long-Term Liabilities:
Long-Term Debt 491,464
Obligations Under Capital Leases 202,687
-----------

Total Long-Term Liabilities 694,151
-----------

Commitments and Contingencies --
-----------

Stockholders' Equity:
$.01 Par Value, Preferred Stock, 1,000,000 Shares Authorized,
No Shares Issued and Outstanding --

$.01 Par Value, Common Stock - 19,000,000 Shares
Authorized and 6,727,324 Shares Issued and Outstanding 67,273

Additional Paid-in Capital 6,489,611

Retained Earnings 511,898

Cumulative Foreign Currency Translation Adjustment 31,622
-----------

Total Stockholders' Equity 7,100,404
-----------

Total Liabilities and Stockholders' Equity $12,193,901
===========
</TABLE>

The Accompanying Notes are an Integral Part of These Consolidated Financial
Statements.

F-3

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC.
- --------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fifty-two weeks ended
December 31, January 1,
1 9 9 5 1 9 9 5
<S> <C> <C>
Revenue:
Sales by Company-Owned Stores $ 2,970,709 $ 1,588,483
Commissary Sales 9,930,206 7,289,289
Royalty Sales 2,376,305 1,857,405
Rental Income 1,232,162 1,391,125
Franchise Fees 251,649 146,227
Other Operating Income 411,358 186,280
------------ ------------

Total Revenue 17,172,389 12,458,809
------------ ------------

Cost of Sales:
Company-Owned Stores 1,997,917 1,290,438
Food, Packaging and Distribution 9,517,104 6,584,997
Rental Operations 1,161,510 1,346,559
Other Operating Expenses 701,951 184,530
------------ ------------

Total Cost of Sales 13,378,482 9,406,524
------------ ------------

Gross Margin 3,793,907 3,052,285

Administrative Expenses 3,480,812 2,938,541
------------ ------------

Operating Income 313,095 113,744
------------ ------------

Other Income [Expense]:
Interest Income 122,839 60,470
Interest Expense (82,555) (21,192)
------------ ------------

Total Other Income 40,284 39,278
------------ ------------

Income Before Income Taxes 353,379 153,022

Income Taxes -- --
------------ ------------

Net Income $ 353,379 $ 153,022
============ ============

Earnings Per Share $ .06 $ .03
============ ============

Weighted Average Number of
Shares Outstanding 6,165,558 4,708,365
============ ============
</TABLE>

The Accompanying Notes are an Integral Part of These Consolidated Financial
Statements.

F-4

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC.
- --------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

Cumulative
Foreign
Common Stock Additional Currency Note Total
Number of Paid-in Retained Translation Receivable Stockholders'
Shares Amount Capital Earnings Adjustments For Stock Equity

<S> <C> <C> <C> <C> <C> <C> <C>
Balance - January 2, 1994 2,315,000 $ 1,503,150 $ 6,850 $ 5,497 $ 968 $(1,500,000) $ 16,465

Issuance of Common Stock
to Crescent Capital, Inc. 2,385,000 23,850 226,150 -- -- -- 250,000
Assignment of Note
Receivable for Stock to
Crescent Capital, Inc. and
Renaming and Reclassing
Class A Common Stock
and Class B Common
Stock into Common Stock
Par Value $.01 -- (1,480,000) (20,000) -- -- 1,500,000 --
Sale of Common Stock to
Public [Net of Offering
Costs of $883,673] 1,017,681 10,177 3,609,388 -- -- -- 3,619,565
Foreign Currency
Translation Adjustment -- -- -- -- 49,736 -- 49,736
Net Income for the
fifty-two weeks
ended January 1, 1995 -- -- -- 153,022 -- -- 153,022
----------- ----------- ----------- ----------- ----------- ----------- -----------

Balance - January 1,
1995 5,717,681 57,177 3,822,388 158,519 50,704 -- 4,088,788

Sale of Common Stock to
Public [Net of Offering
Costs of $44,855] 59,643 596 176,554 -- -- -- 177,150
Issuance of Common
Stock 237,500 2,375 347,625 -- -- -- 350,000
Issuance of Common
Stock 237,500 2,375 472,625 -- -- -- 475,000
Issuance of Common
Stock 475,000 4,750 1,895,250 -- -- -- 1,900,000
Additional Offering Costs
in Connection with Sale
of Stock to Public -- -- (224,831) -- -- -- (224,831)
Foreign Currency
Translation Adjustment -- -- -- -- (19,082) -- (19,082)
Net Income for the
fifty-two weeks ended
December 31, 1995 -- -- -- 353,379 -- -- 353,379
----------- ----------- ----------- ----------- ----------- ----------- -----------

Balance - December 31,
1995 6,727,324 $ 67,273 $ 6,489,611 $ 511,898 $ 31,622 $ -- $ 7,100,404
=========== =========== =========== =========== =========== =========== ===========
</TABLE>

Foreign Currency Translation

The functional currency for the Company's foreign operations is the British
pound sterling. The translation from British pound sterling into U.S. dollars is
performed for balance sheet accounts using current exchange rates in effect at
the balance sheet date and for revenue and expense accounts using a weighted
average exchange rate during the period. The gains or losses resulting from such
translation are included in stockholders' equity. Equity transactions
denominated in British pound sterling have been translated into U.S. dollars
using the effective rate of exchange at date of issuance.

The Accompanying Notes are an Integral Part of These Consolidated Financial
Statements.

F-5

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC.
- --------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Fifty-two weeks ended
December 31, January 1,
1 9 9 5 1 9 9 5
<S> <C> <C>
Operating Activities:
Net Income $ 353,379 $ 153,022
Adjustments to Reconcile Net Income to
Net Cash [Used for] Provided by Operating Activities:
Depreciation and Amortization 562,030 292,495
Bad Debts (279,135) (207,050)
[Gain] Loss on Disposal of Property and Equipment (6,049) 25,038

Changes in Assets and Liabilities:
[Increase] Decrease in:
Trade Accounts and Other Receivables (841,266) (793,257)
Inventories (75,620) (280,811)
Prepaid Expenses and Accrued Income (126,479) (812,523)
Other Assets (376,137) (14,034)

Increase [Decrease] in:
Trade Accounts Payable 627,827 1,220,472
Accrued Expenses (422,129) 478,179
Other Payables and Accrued Interest 117,191 182,543
----------- -----------

Net Cash - Operating Activities (466,388) 244,074
----------- -----------

Investing Activities:
Purchase of Property and Equipment and Capitalized Costs (2,386,348) (892,524)
Proceeds on Disposal of Property and Equipment 67,600 39,763
Advances to Officer (93,740) (40,411)
Advances to Related Parties (1,583,557) (62,841)
Increase in Restricted Cash (200,000) --
----------- -----------

Net Cash - Investing Activities (4,196,045) (956,013)
----------- -----------

Financing Activities:
Proceeds in Escrow from Sale of Common Stock -- 4,503,238
Proceeds from Sale of Common Stock 1,733,569 --
Proceeds from Long-Term Debt 503,299 114,241
Repayment of Long-Term Debt (1,446,354) (54,553)
Capital lease Payments (95,891) (30,453)
----------- -----------

Net Cash - Financing Activities 694,623 4,532,473
----------- -----------

Effect of Exchange Rate Changes on Cash (5,499) 34,011
----------- -----------

Net [Decrease] Increase in Cash and Cash Equivalents (3,973,309) 3,854,545

Cash and Cash Equivalents - Beginning of Periods 4,813,224 958,679
----------- -----------

Cash and Cash Equivalents - End of Periods $ 839,915 $ 4,813,224
=========== ===========
</TABLE>

The Accompanying Notes are an Integral Part of These Consolidated Financial
Statements.

F-6

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC.
- --------------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Fifty-two weeks ended
December 31, January 1,
1 9 9 5 1 9 9 5
<S> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash paid during the periods for:
Interest $ 152,755 $ 9,110
Taxes $ -- $ --

Supplemental Disclosures of Non-Cash Investing and Financing:
Assignment of Note Receivable for Common Stock to Crescent $ -- $(1,500,000)
Issuance of 950,000 Shares in Connection Consulting Agreements $ 943,750 $ --
Equipment Under Capital Lease $ 303,236 $ --
</TABLE>

The Accompanying Notes are an Integral Part of These Consolidated Financial
Statements.

F-7

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

[1] Organization and Business

Corporate Structure - International Franchise Systems, Inc. ["IFS"] was
incorporated in Delaware on October 22, 1993. IFS owns 100% of the stock of
Domino's Pizza Group Limited ["DP Group"], a United Kingdom corporation
headquartered in Milton Keynes, England. DP Group owns 100% of the stock of DP
Realty Limited ["DP Realty"], DPGS Limited ["DPGS"] and Livebait Limited
["Livebait"], each a United Kingdom corporation with headquarters at Milton
Keynes, England.

IFS is a subsidiary of Crescent Capital, Inc. ["Crescent"], a publicly-held
corporation.

Description and Nature of Business - The principal purpose of IFS and its
wholly-owned subsidiaries [collectively referred to as the "Company"] is to be a
holding company for the exclusive right to own, operate and franchise Domino's
Pizza Stores in the U.K., Northern Ireland and the Republic of Ireland [the
"Territory"]. The Company's multi-national operations include the ownership and
operation of Domino's Pizza Stores, the sale of commissary food products,
supplies and equipment to franchisees and the development of new franchises.
Additionally, the Company is engaged in the Haagen Dazs ice cream parlor
business and has opened a "Pizzazz" restaurant which sells Domino's pizzas and
pastas in a traditional restaurant. As of December 31, 1995, there were 103
stores operating, 93 of which were franchised and 10 were Company-owned. As of
January 1, 1995, there were 91 stores operating, 85 of which were franchised and
6 were Company-owned.

[2] Summary of Significant Accounting Policies

Prior Year Data - Certain prior year data has been reclassified to conform to
the December 31, 1995 presentation.

Cash and Cash Equivalents - Cash equivalents are comprised of certain highly
liquid investments with a maturity of three months or less when purchased.

Accounts Receivable - Substantially all accounts receivable are due from
franchisees for commissary and equipment purchases and royalties. Credit is
extended based on an evaluation of the franchisee's financial condition. The
Company has a security interest in the franchise stores and their assets as
collateral. The Company considers their accounts receivable to be fully secured.

Inventories - Inventories, which consist primarily of food products and
equipment for resale to franchises, are stated at the lower of cost, determined
by the first-in, first-out basis or market value.

Property and Equipment and Depreciation - Property and equipment are stated at
cost. Depreciation is computed primarily using the straight-line method over the
estimated useful lives of the assets, which range from 3 to 7 years. Leasehold
improvements are amortized using the straight-line method over the lesser of the
term of the related lease or the estimated useful lives of the improvements.

Master Franchise Agreement - The Master Franchise Agreement ["MFA"] is stated at
cost which includes associated professional costs. One-third of the cost of the
MFA has been allocated to the exclusive development rights under the MFA and is
being amortized over a ten-year period. The remaining two-thirds of the cost of
the MFA has been allocated to the right to operate as sub-franchisor in the
Territory and is being amortized over a twenty-year period. Amortization expense
for the fifty-two weeks ended December 31, 1995 and January 1, 1995 is $72,000
and $72,000, respectively [See Note 11A].

F-8

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
- --------------------------------------------------------------------------------

[2] Summary of Significant Accounting Policies [Continued]

Consulting Agreements - The Company has entered into various consulting
agreements which are amortized over the life of the agreements. Amortization
expense for the fifty-two weeks ended December 31, 1995 and January 1, 1995 was
$116,043 and $-0-, respectively.

Rights to Store Leases - The rights to store leases are stated at cost and are
being amortized over a ten-year period [the average length of the remaining term
under the leases] under the straight-line method. Amortization expense for the
fifty-two weeks ended December 31, 1995 and January 1, 1995 is $5,000 and
$5,000, respectively.

Store Franchise Agreement - The Store Franchise Agreement represents the cost of
the franchise fees paid for corporate-owned stores. The cost of the franchise
fees range from $4,650 to $12,400 per store. These costs are amortized over the
term of the franchise agreements, which is ten years. Amortization expense for
the fifty-two weeks ended December 31,1995 and January 1, 1995 is $2,874 and
$-0-, respectively.

Store Development Costs - Store development costs, which represent certain
expenses incurred before a new facility opens, including design and construction
costs, are amortized on a straight-line basis over three years. Amortization
expense for the fifty-two weeks ended December 31, 1995 and January 1, 1995 is
$14,140 and $3,535, respectively.

Start-up Costs - Start-up costs related to the opening of company-owned stores,
which primarily include labor, are capitalized. These costs are amortized over a
two year period. Amortization for the fifty-two weeks ended December 31, 1995
and 1994 was $9,469 and $-0-, respectively.

Goodwill - Goodwill represents the excess of the price paid for a corporate
store over the fair value attributed to the assets acquired, and is being
amortized using the straight-line method over ten years. Amortization expense
for the fifty-two weeks ended December 31, 1995 and January 1, 1995 is $851 and
$-0-, respectively.

Revenue Recognition - Revenue from commissary sales and company-owned store
sales is recognized upon shipment of products. Franchise fees consist of initial
franchise fees which are recognized in income when the Company has substantially
completed its obligations under the franchise agreement. This generally occurs
upon the opening of a franchise location at which time the Company has completed
its obligation to assist with the location and design of the new store and the
training of staff. Royalty income is earned on sales by franchisees and is
recognized as revenue when the related sales are made. Rental income, which
consists of rent paid under subleases [See Note 5] is recognized ratably over
the lease period.

Advertising Expenses - The Company is paid a fee of 4% of royalty sales by
franchisees, which amount must be spent on the franchise's behalf for various
advertising programs. The Company believes that the fees should not be included
in revenue because they are required to expend the fees collected on behalf of
franchisees.

Principles of Consolidation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.

F-9

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3
- --------------------------------------------------------------------------------

[2] Summary of Significant Accounting Policies [Continued]

Concentrations of Credit Risk

[A] Cash - The Company currently has approximately $472,000 on deposit at
National Westminster Bank, Plc, a U.K. bank. The U.K. does not have federal
insurance on balances maintained in banks. The Company also currently maintains
deposits with a financial institution in the United States that are $477,816 in
excess of the maximum amounts insured by the Federal Depository Insurance
Corporation. At December 31, 1995, the Company had pledged $200,000 as
collateral for a letter of credit issued on behalf of a related party. The
Company was released from this pledge in 1996. This cash is reflected as
restricted on the balance sheet.

[B] Receivables - The Company routinely assesses the financial strength of its
customers and, based upon factors surrounding the credit risk of its customers,
establishes an allowance for uncollectible accounts and, as a consequence,
believes that its accounts receivable credit risk exposure beyond such
allowances is limited.

Earnings Per Share - Earnings per share of common stock is based on the weighted
average number of common shares outstanding for the period presented. Common
stock equivalents are included in the computation when their effect is
considered dilutive.

Foreign Currency Translation - Balance sheet amounts denominated in British
pound sterling have been translated into U.S. dollars using the year end rate of
exchange. Operational results denominated in British pound sterling have been
translated into U.S. dollars using the average yearly rate of exchange. Equity
transactions denominated in British pound sterling have been translated into
U.S. dollars using the effective rate of exchange at date of issuance.

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

[3] Other Assets

Other assets, at December 31, 1995, consists of the following:

<TABLE>
<CAPTION>
Accumulated
Amortization
Cost December 31, 1995 Net
<S> <C> <C> <C>
Master Franchise Agreement $ 1,080,000 $ 144,000 $ 936,000
Consulting Agreements $ 943,750 $ 116,043 $ 827,707
Rights to Store Leases $ 93,359 $ 10,000 $ 83,359
Store Franchise Agreement $ 78,147 $ 2,874 $ 75,273
Store Development $ 122,094 $ 17,675 $ 104,419
Start-up Costs $ 156,385 $ 9,469 $ 146,916
Goodwill $ 12,421 $ 851 $ 11,570
</TABLE>

F-10

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4
- --------------------------------------------------------------------------------

[4] Long-Term Debt

Long-term debt consists of the following:
December 31,
1 9 9 5
Note Payable to Domino's Pizza International,
Inc. for the Master Franchise Agreement $233,333
Loans Payable to National Westminster Bank 525,824
--------

Total 759,157
Less: Current Portion 267,693
--------

Long-Term $491,464
========

The note payable to Domino's Pizza International, Inc. for the master franchise
agreement was originally for $650,000 of which $300,000 was paid on January 17,
1995 and $350,000 is payable in installments of approximately $29,000 for twelve
consecutive quarters beginning on January 1, 1995. Interest at the rate of 8%
per annum payable on the installment dates. Installment payments of
approximately $117,000 were made as of December 31, 1995.

The Company has various loans payable to National Westminster Bank ["NatWest"]
of $525,824 at December 31, 1995. The loans are payable over terms of 3 to 5
years in aggregate monthly installments of approximately $12,500. Interest on
one loan is 9.75% per annum while the other loans bear interest at the bank's
base rate plus 3%. The bank's base rate at December 31, 1995 was 6.75%. The
obligations to NatWest are secured by all of the assets of DP Group and DPGS.
Additionally, the President of the Company has personally guaranteed these
obligations to a maximum of approximately $39,000.

The following are maturities of long-term debt for each of the next five years:

December 31,
1996 $ 267,693
1997 267,693
1998 114,795
1999 63,040
2000 45,936
---------------

Total $ 759,157
----- ===============

[5] Leases

The Company is the lessee of motor vehicles and equipment under capital leases
expiring in various years through 2000. The assets and liabilities under capital
leases are recorded at the lower of the present value of the minimum lease
payments or the fair value of the asset. The assets are depreciated over the
shorter of their related lease terms or their estimated productive lives.
Depreciation of assets held under capital leases is included in depreciation
expense.

Following is a summary of property held under capital leases:

1 9 9 5

Equipment and Motor Vehicles $ 508,869
Less: Accumulated Depreciation (75,813)
----------------

Total $ 433,056
================

F-11

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5
- --------------------------------------------------------------------------------

[5] Leases [Continued]

Minimum future lease payments under capital leases as of December 31, 1995 for
each of the next five years and in the aggregate are:

Year Ended
December 31, Amount

1996 $ 203,020
1997 184,512
1998 34,736
1999 3,465
2000 1,865
Subsequent to 2000 --
---------------

Total Minimum Lease Payments 427,598
Less: Amount Representing Interest (36,824)

Present Value of Net Minimum Lease Payment $ 390,764
===============

Interest rates on capitalized leases vary from 3% to 8% and are imputed based on
the lower of the Company's incremental borrowing rate at the inception of each
lease or the lessor's implicit rate of return.

The Company has a one-year operating lease for its U.S. office that expires on
June 30, 1996.

The Company leases land and buildings, office equipment and motor vehicles under
operating leases expiring in various years through 2016.

The Company leases store properties directly, through DP Realty, and then
subleases the properties to franchisees. At December 31, 1995, the Company had
operating leases for approximately 77 stores with periods ranging from 10 to 42
years, of which 74 were also subject to subleases to the franchisees. The
subleases are for an initial ten year period, consistent with the franchise
period, with a subsequent ten year renewal period. Total minimum future rental
income, as shown below, from subleases to be received in the future under
non-cancelable subleases assumes the subleases are for the initial ten year
period only, although the Company believes that the franchises will exercise the
renewal option on substantially all subleases.

Minimum future rental payments and sublease rental income under non-cancelable
operating leases and subleases, respectively, having remaining terms in excess
of one year as of December 31, 1995 for each of the next five years and in the
aggregate are as follows:

Operating
Year ending Leases Subleases
December 31,
1996 $ 1,788,723 $ 1,627,378
1997 1,743,477 1,726,006
1998 1,714,420 1,726,006
1999 1,680,834 1,719,554
2000 1,611,728 1,692,314
Subsequent to 2000 13,843,064 8,081,611
--------------- ----------------

Total Minimum Future Rentals $ 22,382,246 $ 16,572,869
=============== ================

F-12

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6
- --------------------------------------------------------------------------------

[5] Leases [Continued]

Rent expense for the fifty-two weeks ended December 31, 1995 and January 1, 1995
was $1,734,697 and $1,432,242, respectively. The rental income received on
subleases for the fifty-two week ended December 31, 1995 and 1994 was $1,232,162
and $1,391,125, respectively.

[6] Fair Value of Financial Instruments

Effective December 31, 1995, the Company adopted Statement of Financial
Accounting Standards ["SFAS"] No. 107, "Disclosure About Fair Value of Financial
Instruments," which requires disclosing fair value to the extent practicable for
financial instruments which are recognized or unrecognized in the balance sheet.
The fair value of the financial instruments disclosed herein is not necessarily
representative of the amount that could be realized or settled, nor does the
fair value amount consider the tax consequences of realization or settlement.
The following table summarizes financial instruments by individual balance sheet
classifications as of December 31, 1995:

Carrying Fair
Amount Value

Long-Term Debt $ 491,464 $ 491,464
================ ===============

In assessing the fair value of these financial instruments, the Company used a
variety of methods and assumptions, which were based on estimates of market
conditions and risks existing at that time. For certain instruments, including
cash and cash equivalents, trade receivables and trade payables and related
party and officer advances, it was assumed that the carrying amount approximated
fair value for the majority of these instruments because of their short
maturities. The fair value of long-term debt is estimated based on discounting
expected cash flows at current rates at which the Company could borrow funds
with similar remaining maturities.

[7] Related Party Transactions

Woodland Limited Partnership ["Woodland"] is a partnership controlled by members
of Mr. Colin Halpern's family. Mr. Halpern is the Chairman of the Board, Chief
Executive Officer and President of the Company. At December 31, 1995, $114,000
was due from Woodland for funds advanced by the Company. These funds are to be
repaid on a short-term basis and are non-interest bearing.

Woodland was the holder of 315,000 shares of Class A Common Stock of the
Company. In connection with the issuance of 2,000,000 shares of Class B Common
Stock, the Company accepted a note receivable for $1,500,000 from Woodland at 8%
per annum. As a result of the recapitalization of IFS, this note receivable was
transferred to Crescent [See Notes 1 and 9].

Pursuant to the terms of a Loan and Exchange of Stock Agreement [the
"Agreement"], dated as of December 29, 1993, by and among IFS, Crescent and
Woodland, these parties to the agreement were obligated to enter into an
exchange of stock [the "Exchange"] whereby Woodland would exchange all of the
issued and outstanding securities of IFS, consisting of 315,000 shares of Class
A Common Stock and 2,000,000 shares of Class B Common Stock for 315,000 shares
of Crescent's Class A Common Stock and 2,000,000 shares of Crescent's Class B
Convertible Common Stock. The exchange was completed on June 30, 1994.

F-13

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #7
- --------------------------------------------------------------------------------

[7] Related Party Transactions [Continued]

Pursuant to the terms of the Agreement, IFS received $400,000 from Crescent to
be repaid upon the later of (i) ninety [90] days from December 29, 1993, or (ii)
in the event the Exchange did not occur, ninety [90] days after the Exchange was
last scheduled to occur. Interest was to accrue at a rate of 8% per annum;
however, no interest was accrued for the first forty-five [45] days of the loan,
provided the loan was paid in its entirety on or prior to the 45th day following
the stock purchase closing date. The loan was secured by (i) a pledge by IFS of
all of the issued and outstanding stock of DP Group, a wholly-owned subsidiary,
and (ii) a pledge by Woodland of all of the issued and outstanding stock of IFS.
Upon issuance of the shares to Crescent on July 25, 1994, Crescent contributed
$250,000 of its note receivable from the Company as a capital contribution to
the Company [See Note 9].

As of December 31, 1995, Crescent owns 4,700,000 shares, or approximately 70%,
of IFS's outstanding stock. As a result of the capital structures of the Company
and Crescent, Woodland has indirect voting control of the Company and,
consequently, can elect the Company's entire Board of Directors, determine the
vote on any matter submitted for shareholder approval [including increasing the
Company's authorized capital stock and authorizing any merger, sale of assets or
dissolution of the Company], and, generally, direct the affairs of the Company.

The Company has advanced funds to Crescent. These funds are to be paid on a
short-term basis and are non-interest bearing. At December 31, 1995, the total
amount due to the Company from Crescent was $1,369,261. In February 1996,
$850,000 was repaid.

The Company has advanced funds to Red Hot Concepts, Inc. and its subsidiaries
["Red Hot"]. Mr. Halpern is the President of Red Hot. At December 31, 1995, the
total amount due to the Company for funds advanced is $183,635. These funds are
to be repaid on a short-term basis and are non-interest bearing. The Company
charges a management fee to Red Hot for administrative services. For the
fifty-two weeks ended December 31, 1995 and January 1, 1994, this management fee
was $36,000 and $-0-, respectively. The Company has also pledged funds as
collateral for a letter of credit issued on behalf of Red Hot. The Company was
released from this pledge in 1996 [See Notes 2 and 11E].

The Company has advanced funds to Mr. Halpern. At December 31, 1995, the total
amount due to the Company is $134,151. In February, $75,000 was repaid. This
amount is being offset through reimbursements due to Mr. Halpern.

[8] Provision for Income Taxes

Pursuant to United States tax laws, if the Company's subsidiaries organized
under the laws of the United Kingdom are not engaged in business in the United
States, profits of such subsidiaries will not be subject to United States
taxation, until distributed as dividends. However, the Company would receive a
credit against federal income tax liability that would otherwise result from any
distributions from its subsidiaries for any United Kingdom corporate taxes paid
by its United Kingdom subsidiaries on these distributions, as well as for any
United Kingdom dividend and royalty withholding taxes imposed directly on the
Company.

The Company has approximately $1,120,000 of net operating losses, which can be
used to offset future United Kingdom taxable income arising in the same trade.
Under the United Kingdom tax provisions, there is no time limit for the
utilization of net operating losses. No deferred tax asset has been established
as the United Kingdom Inland Revenue have yet to agree to the amount of the
losses carried forward, and realization of any deferred tax asset cannot be
determined at December 31, 1995.

IFS files an unconsolidated United States federal income tax return. There is no
income tax provision due to a net loss carryforward by IFS. At December 31,
1995, IFS had a deferred tax asset, attributable to their United States net
operating loss, of approximately $163,000 which was offset by a valuation
allowance of approximately $163,000, related to this asset.

F-14

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8
- --------------------------------------------------------------------------------

[9] Stock Transactions

On July 25, 1994, the Company renamed its Class A Common Stock, par value $.01
per share to Common Stock, and reclassified each share of the class of Class B
Common Stock, par value $.75, into one share of Common Stock of the Company. In
addition, the Company issued 2,385,000 shares of Common Stock to Crescent and
assigned the note receivable from Woodland in the amount of $1,500,000 to
Crescent in exchange for the receipt, as a capital contribution, of $250,000 of
a $400,000 note payable due Crescent in connection with the Loan and Exchange of
Stock Agreement [See Note 7].

On December 30, 1994, the Company completed the first phase of the initial
public offering [the "Offering"] of its common stock. The Company sold 1,017,681
units, each unit consisting of one share of common stock and two common stock
purchase warrants, at an initial public offering price of $5 per unit. Net
proceeds from the Offering [after deducting the underwriting discounts of
$585,167 and expenses of $883,673] were $3,619,565. On January 17, 1995, the
Company sold an additional 59,643 units. Net proceeds from these additional
units [after deducting the underwriting discounts of $76,210 and expenses of
$44,855] were $177,150. Additional costs relating to the Offering of $224,831
were paid during 1995 reducing paid-in capital.

As of December 31, 1995, there were 1,077,324 Class A warrants and 1,077,324
Class B warrants outstanding. Holders of each Class A warrant are entitled to
purchase one share of common stock at $5.00 per share for a period of eighteen
months commencing September 1994. Holders of each Class B warrant are entitled
to purchase one share of common stock at $10.00 per share for a period of five
years commencing December 1994. No warrants were exercised during the fifty-two
week periods ended December 31, 1995 or January 1, 1995.

On May 12, 1995, the Company issued 237,500 shares of common stock valued at
$350,000 in connection with entering a four year consulting agreement [See Note
11D].

On June 5, 1995, the Company issued 237,500 shares of common stock valued at
$475,000 in connection with entering a five year consulting agreement [See Note
11D].

During October 1995, the Company issued 475,000 shares of common stock valued at
$1,900,000 in connection with entering a five year consulting agreement [See
Note 11D]. The Company received proceeds of $1,781,250 in connection with this
transaction.

[10] Foreign Operations

During the fifty-two week periods ended December 31, 1995 and January 1, 1995,
earnings from the Company's foreign subsidiaries totaled $721,909 and $368,969,
respectively. A summary of financial information for the Company's foreign
operations as of December 31, 1995 is as follows:

Assets $ 8,578,405

Liabilities $ 4,820,922

Company's Investment in Foreign Subsidiaries $ 1,981,016

[11] Commitments and Contingencies

[A] Master Franchise Agreement - The relationship between the Company and
Domino's Pizza International, Inc. ["Domino's"] is governed principally by the
MFA. The MFA requires that during the 10-year period ending December 2003, the
Company shall open and operate a minimum number of Domino's pizza stores in
accordance with a yearly schedule. A mutual review of the yearly development
schedule is to take place at the end of 1999. If the Company does not meet the
development schedule, Domino's may terminate the Company's exclusive right to
operate and franchise additional Domino's stores in the Territory.

F-15

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #9
- --------------------------------------------------------------------------------

[11] Commitments and Contingencies [Continued]

[A] Master Franchise Agreement [Continued] - If the Company is in compliance
with the MFA at the expiration of the initial term, the Company will have the
option to extend its exclusive development rights for an additional 10-year
period, provided the Company and Domino's agree to a minimum development
schedule for the renewal term. If after expiration of the initial term [or any
renewal term], the Company fails to exercise its option to renew its exclusive
development rights, or the parties are unable to agree to a minimum development
schedule for the renewal term, then the Company would continue to have the right
to operate its then existing Company-owned Domino's Stores and to maintain and
continue its rights and obligations, and act as subfranchisor, with respect to
all then existing franchised Domino's Stores. The Company would generally have
no further right to operate or grant franchises for additional Domino's Stores
and Domino's would have the right to proceed [or the right to grant a third
party the right to proceed] with further development of the Territory, subject
to territorial rights granted under then-existing franchise agreements.

The Company is required to pay Domino's a one-time store opening fee for each
new Domino's Store, whether Company-owned or franchised. The Company expects to
pass this cost through to the franchisees in the case of franchised stores. In
addition, the Company must pay to Domino's a monthly royalty fee equal to a
certain percentage of each Domino's Store's gross sales. This royalty fee is
payable to Domino's irrespective of the profitability of the Company or the
Domino's Store, and irrespective of the Company's ability to collect royalties
from franchisees. The Company's payments to Domino's are to be made in United
States dollars.

Under certain circumstances of default by the Company under the MFA, Domino's
has the right to terminate the MFA. If the MFA is terminated, the Company would
be subject to a one-year non-competition covenant in the delivery, carryout or
sit-down pizza business and Domino's would have the right [but not the
obligation] to purchase, at the then-current fair market value, all of the
Company's rights and interests as the subfranchisor of Domino's Stores and all
of the assets of each Domino's Store owned by the Company. The fair market value
would be determined by mutual agreement of the Company and Domino's, or in the
absence of such agreement by an appraiser. Under certain circumstances of
default by Domino's under the MFA, the Company has the right to terminate the
agreement and continue as an independent pizza operation, including the
operation of the fresh pizza dough production facility and wholesale business
[the "Commissary"].

[B] Store Lease Agreement - On December 30, 1993, DP Realty, a wholly-owned
subsidiary of IFS, entered into a Store Lease Agreement with Domino's and
Tuskpride Limited ["Tuskpride"], a predecessor of one of IFS's subsidiaries, and
a Store Lease Trust Agreement with Tuskpride. Pursuant to these two agreements,
DP Realty has the right to require Tuskpride to transfer to DP Realty any or all
of its rights as lessee under leases executed by Tuskpride and various landlords
for substantially all of the Domino's Stores [the "Leases"], and any or all of
its rights as sublessor under subleases executed by Tuskpride and franchisees
for substantially all of the franchised Domino's Stores [the "Subleases"]. DP
Realty paid Tuskpride $50,000 for the rights to the Store Leases and Store
Subleases.

The Store Lease Agreement requires DP Realty to apply all money received under
any of the subleases to the lessee's financial obligation under the
corresponding leases. DP Group has guaranteed DP Realty's obligations under the
Store Lease Agreement and DP Realty and DP Group have agreed to indemnify
Domino's, but not Tuskpride, for any liability and costs it may incur in
connection with these agreements. DP Realty was also obligated to use reasonable
efforts to keep Tuskpride solvent through December 1995.

F-16

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #10
- --------------------------------------------------------------------------------

[11] Commitments and Contingencies [Continued]

[C] Employment Agreement - In August 1994, the Company entered into an
employment agreement with its President for a salary of $96,000 per year. The
initial term of the agreement expired on January 31, 1996. The Company has
entered into an extension of the agreement until December 31, 1997. The salary
may be adjusted at the discretion of the Board's Compensation Committee
depending on the Company's performance. There are no bonus or stock option
awards.

[D] Consulting Agreements - In May, June and October 1995, the Company entered
into three consulting agreements with terms of 4, 5 and 5 years respectively,
issuing 950,000 shares of common stock as compensation for these agreements [See
Note 9]. Consulting expense of $943,750 will be amortized over the terms of
these agreements. The Company will also be responsible for out-of-pocket
expenses incurred and a monthly advisory fee. During the year ended December 31,
1995, the Company recognized $116,043 of consulting expense related to these
agreements.

[E] Pledged Collateral - The Company has pledged $200,000 as collateral for a
letter of credit issued on behalf of a related company. The Company was released
from this pledge in 1996 [See Notes 2 and 7].

[F] Haagen Dazs Agreement - In August 1995, the Company entered into an
agreement with an unrelated entity to purchase all of the assets and operating
rights of three Haagen Dazs Restaurants for approximately $140,000. The purchase
price was paid at the closing.

[12] Economic Dependency

Due to the nature of franchising and the Company's agreements with Domino's, the
success of the Company is in part dependent upon the overall success of
Domino's, including Domino's financial condition, management and marketing
success, and the successful operation of stores opened by other franchisees.

[13] New Authoritative Accounting Pronouncements

The Financial Accounting Standards Board ["FASB"] issued Statement of Financial
Accounting Standards ["SFAS"] No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," in March of
1995. SFAS No. 121 established accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used, and for long-lived assets and certain
identifiable intangibles to be disposed of. SFAS No. 121 is effective for
financial statements issued for fiscal years beginning after December 15, 1995.
Adoption of SFAS No. 121 is not expected to have a material impact on the
Company's financial statements.

The FASB has also issued SFAS No. 123, "Accounting for Stock-Based
Compensation," in October 1995. SFAS No. 123 uses a fair value based method of
accounting for stock options and similar equity instruments as contrasted to the
intrinsic valued based method of accounting prescribed by Accounting Principles
Board ["APB"] Opinion No. 25, "Accounting for Stock Issued to Employees." The
Company has not decided if it will adopt SFAS No. 123 or continue to apply APB
Opinion No. 25 for financial reporting purposes. SFAS No. 123 will have to be
adopted for financial note disclosure purposes in any event. The accounting
requirements of SFAS No. 123 are effective for transactions entered into in
fiscal years that begin after December 15, 1995; the disclosure requirements of
SFAS No. 123 are effective for financial statements for fiscal years beginning
after December 15, 1995.

. . . . . . . . . .

F-17
<PAGE>

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Shareholders of
International Franchise Systems, Inc.

We have audited the accompanying consolidated balance sheet of
International Franchise Systems, Inc. and Subsidiaries as of January 2, 1994,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for the period December 30, 1993 to January 2, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
International Franchise Systems, Inc. and Subsidiaries as of January 2, 1994,
and the results of their operations and their cash flows for the period from
December 30, 1993 to January 2, 1994 in conformity with generally accepted
accounting principles.

MOORE STEPHENS
Certified Public Accountants.

Cranford, New Jersey
April 26, 1994

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET AS OF JANUARY 2, 1994

ASSETS

<TABLE>
<S> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $ 958,679
Trade Accounts Receivable [Net of Allowance
of $719,203] 932,023
Inventories 249,110
Prepaid Expenses and Accrued Income 238,217
-----------
TOTAL CURRENT ASSETS $ 2,378,029
-----------

PROPERTY AND EQUIPMENT:
Motor Vehicles $ 235,616
Equipment, Office Fixtures and Furnishings 397,143
-----------
Totals - At Cost $ 632,759
-----------

Accumulated Depreciation:
Motor Vehicles $ (200,028)
Equipment, Office Fixtures and Furnishings (413,489)
-----------
Total Accumulated Depreciation $ (613,517)
-----------

PROPERTY AND EQUIPMENT - NET $ 19,242
-----------

PREPAID AND DEFERRED OFFERING COSTS $ 30,000
-----------

INTANGIBLE ASSETS:
Master Franchise Agreement [Net of
Amortization of $-0-] $ 720,000
Master Franchise Agreement
[Net of Amortization of $-0-] 360,000
Rights to Store Leases [Net of
Amortization of $-0-] 50,000
-----------

TOTAL INTANGIBLE ASSETS $ 1,130,000
-----------

TOTAL ASSETS $ 3,557,271
===========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

F-19
<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET AS OF JANUARY 2, 1994

LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
<S> <C>
CURRENT LIABILITIES:
Trade Accounts Payable $ 1,191,078
Accrued Expenses 493,909
Other Payables 255,819
Notes Payable - Current 1,050,000
-----------
TOTAL CURRENT LIABILITIES $ 2,990,806
-----------

NOTES PAYABLE - LONG-TERM $ 550,000
-----------

COMMITMENTS AND CONTINGENCIES $ --
-----------

SHAREHOLDERS' EQUITY:
$.01 Par Value, Class A Common Stock,
500,000 Shares Authorized, 315,000 Shares
Issued and Outstanding $ 3,150

$.75 Par Value, Class B Voting, Convertible
Common Stock, 2,000,000 Shares Authorized,
Issued and Outstanding 1,500,000
Additional Paid-in Capital 6,850
Retained Earnings 5,497
Cumulative Foreign Currency Translation
Adjustment 968

Note Receivable for Stock (1,500,000)
-----------

TOTAL SHAREHOLDERS' EQUITY $ 16,465
-----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,557,271
===========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

F-20

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS FOR THE PERIOD
DECEMBER 30, 1993 TO JANUARY 2, 1994

REVENUE:
Commissary, Equipment and Other
Sales to Franchisees $ 55,696
Royalty Sales 17,813
National Advertising Levy 12,405
-----------

TOTAL REVENUE $ 85,914

COST OF SALES - COMMISSARY, EQUIPMENT
AND OTHER SALES TO FRANCHISEES (74,967)
-----------

GROSS MARGIN $ 10,947

DISTRIBUTION AND ADMINISTRATIVE EXPENSES (9,130)
-----------

OPERATING INCOME $ 1,817

INTEREST INCOME 3,680
-----------
NET INCOME $ 5,497
===========

EARNINGS PER SHARE $ --
===========

WEIGHTED AVERAGE NUMBER OF SHARES 4,700,000
===========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

F-21

<PAGE>
INTERNATIONAL FRANCHISE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

Cumulative
Foreign
Additional Currency Note Total
Common Paid-in Retained Translation Receivable Shareholders'
Stock Capital Earnings Adjustments for Stock Equity
<S> <C> <C> <C> <C> <C> <C>

December 22, 1993, Issuance
of 2,000,000 Shares of
Class B Common Stock $1,500,000 $ -- $ -- $ -- ($1,500,000) $ --

December 22, 1993, Issuance
of 315,000 Shares of
Class A Common Stock 3,150 6,850 -- -- -- 10,000

Net Income for the Period
December 30, 1993 to
January 2, 1994 -- -- 5,497 -- -- 5,497

Foreign Currency
Translation Adjustments -- -- -- 968 -- 968
---------- ---------- ---------- ---------- ----------- -------
BALANCE - JANUARY 2, 1994 $1,503,150 $ 6,850 $ 5,497 $968 ($1,500,000) $16,465

Net Income for the Period
January 3, 1994 to
July 3, 1994 -- -- 105,299 -- -- 105,299

Foreign Currency
Translation Adjustments -- -- -- (41,075) -- (41,075)
---------- ---------- ---------- ---------- ----------- -------

BALANCE - JULY 3, 1994
[UNAUDITED] $1,503,150 $ 6,850 $ 110,796 $ (40,107) ($1,500,000) $80,689
========== ========== ========== ========== =========== =======
</TABLE>

Foreign Currency Translation
The functional currency for the Company's foreign operations is the applicable
local British currency. The translation from United Kingdom Sterling's into U.S.
dollars is performed for balance sheet accounts using current exchange rates in
effect at the balance sheet date and for revenue and expense accounts using a
weighted average exchange rate during the period. The gains or losses resulting
from such translation are included in shareholders' equity.

See Accompanying Notes to Consolidated Financial Statements.

F-22

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD
DECEMBER 30, 1993 TO JANUARY 2, 1994

<TABLE>
<CAPTION>
<S> <C>
OPERATING ACTIVITIES:
Net Income $ 5,497
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 7,874
Change in Assets and Liabilities:
[Increase] in Trade Accounts Receivable (97,711)
[Increase] Decrease in Inventories 274,027
[Increase] in Prepaid Expenses and Accrued Income (573,225)
[Decrease] Increase in Trade Accounts Payable 870,401
[Decrease] in Accrued Expenses (22,767)
[Decrease] Increase in Other Payables 363,572
---------

NET CASH - OPERATING ACTIVITIES $ 827,668
---------

INVESTING ACTIVITIES: Investment in DP Group $(381,480)
Investment in Master Franchise Agreement (250,000)
Investment in Rights to Store Leases and Subleases (50,000)
---------

NET CASH - INVESTING ACTIVITIES $(681,480)
---------

FINANCING ACTIVITIES:
Proceeds from Issue of Stock $ 10,000
Proceeds from Loan 400,000
Cash Acquired in Acquisition 402,130
---------

NET CASH - FINANCING ACTIVITIES $ 812,130
---------

EFFECT OF EXCHANGE RATE CHANGES ON CASH $ 361
---------

NET INCREASE IN CASH AND CASH EQUIVALENTS - Forward $ 958,679
</TABLE>

See Accompanying Notes to Consolidated Financial

F-23
<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD

DECEMBER 30, 1993 TO JANUARY 2, 1994.

<TABLE>
<CAPTION>
<S> <C>
NET INCREASE IN CASH AND
CASH EQUIVALENTS - Forwarded $ 958,679

CASH AND CASH EQUIVALENTS - BEGINNING OF
PERIODS --
----------

CASH AND CASH EQUIVALENTS - END OF PERIODS $ 958,679
==========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest Paid $ --
Taxes Paid $ --

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING:
Investment in Master Franchise Agreement
and Related Note $ 900,000
Investment in Asset Purchase Agreement $ 550,000
Note Receivable in Connection with Stock Issuance $1,500,000
Note Payable in Connection with Purchase of Stock
of Subsidiary $ 1,500
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

F-24

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

[1] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Corporate Structure - International Franchise Systems,Inc. ["IFS"] is a
Delaware corporation with its principal offices located in Washington, D.C. IFS
owns 100% of the stock of Domino's Pizza Group Limited ["DP Group"], a United
Kingdom corporation headquartered in Milton Keynes, England. DP Group owns 100%
of the stock of DP Realty Limited ["DP Realty"], and DPGS Limited, each a United
Kingdom corporation with headquarters at Milton Keynes, England.

The principal purpose of IFS is to be a holding company for the exclusive
right to own, operate and franchise Domino's Pizza stores in the U.K., Northern
Ireland and the Republic of Ireland.

Nature of Business - IFS and its wholly-owned subsidiary DP Group
[collectively referred to as the "Company"] were engaged in the activity of
producing and distributing pizzas, commissary supplies to franchisees and the
sale of franchises. A total of 77 franchised stores were operating at January 2,
1994.

Change in Ownership and Reorganization - On December 20,1993, the assets
and all disclosed liabilities of Domino's Pizza International [UK] Limited
["DPUK"] other than leases for Domino's stores, were transferred to DP Group,
which was at that time a wholly-owned subsidiary of DPUK, for $550,000. This
transfer was recorded at the predecessor's [DPUK] historical basis less normal
depreciation, reserves and amortization. This amount is equal to the present
fair value of the note payable of $550,000 which was given in exchange for those
assets. In determining the allocation of the purchase price, which was equal to
the fair value and the carrying value of the net assets, consideration was given
to the estimated remaining useful lives of tangible fixed assets, there
coverability of trade accounts receivable and provisions for future
reorganization costs. These factors had been continuously evaluated by DPUK
which resulted in the fair market value and the carrying value being equal as of
the date of transfer.

On December 29, 1993, a master franchise agreement ["MFA"] was entered into
between DP Group and Domino's Pizza International, Inc. ["Domino's"] for a
minimum of ten years from such date. DP Group acquired the MFA for $900,000, of
which $250,000 was paid by DP Group to Domino's. DP Group borrowed the $250,000
for such payment from IFS. DP Group also incurred costs of $180,000 in acquiring
the MFA. These costs were primarily professional fees. These costs have been
added to the value of the MFA and are being amortized over the life of the MFA.

On December 30, 1993 all of the outstanding shares of DP Group were
acquired by IFS for $1,500. By acquiring the stock of DP Group, IFS acquired all
of the assets of DP Group subject to all of its liabilities, including the notes
payable to DPUK and Domino's. This transaction was accounted for under the
purchase method of accounting. The total cost of the acquired assets was $1,500,
which was equal to the purchase price of the DP Group stock. This approximates
the net value of the assets acquired [$-0-]. The results of operations of the
acquired entity are included in the accompanying financial statements since the
date of acquisition.

F-25

<PAGE>

International Franchise Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Sheet #2

[1] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]

Change in Ownership and Reorganization [Continued] - The following
breakdown represents the approximate amount of the assets received and
liabilities assumed:

Fixed Assets $ 234,000
Inventory 316,000
Accounts Receivable 732,000
Cash 402,000
Master Franchise Agreement 1,080,000
Total Assets $ 2,764,000
-----------
Accounts Payable ($1,134,000)
===========

Accrued Expenses (180,000)
Note Payable to IFS (250,000)
Note Payable to DPUK for Assets (550,000)
Note Payable to Domino's for MFA (650,000)
-----------
Total Liabilities ($2,764,000)
===========

On December 30, 1993, following the acquisition of the DP Group stock by
IFS, DP Realty paid $50,000 in cash to DPUK for the rights to the store leases
and store subleases.

The following summarized pro forma [unaudited] information assumes the
purchase took place on January 3, 1993:

Year ended
January 2, 1994

Revenues $ 8,120,489
Net [Loss] $ 1,682,395

[Loss] Per Share $ (.39)

On January 13, 1994, DP Group formed a wholly-owned subsidiary called DPGS
Limited.

Revenue Recognition - Revenue from Commissary, Equipment and other sales to
franchisees is recognized upon shipment of products. Royalty Sales and National
Advertising Levy revenue is recognized upon receipt of weekly sales reports
indicating sales on which such fees are based. Initial franchise fees are
recognized upon the opening of a new store.

Cash Equivalents - The Company considers all highly liquid instruments
purchased with a maturity of three months or less to be cash equivalents.

Inventories - Inventories which consist primarily of raw materials, work in
process and finished goods are stated at the lower of cost, determined by the
first-in, first-out basis or market value.

Property and Equipment - Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, which range from 3 to 7 years.

F-26

<PAGE>

International Franchise Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Sheet #3

[1] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]

Master Franchise Agreement - The Master Franchise Agreement ["MFA"] is
stated at cost plus all associated professional costs. One-third of the cost of
the MFA has been allocated to the exclusive development rights under the MFA and
is being amortized over a ten year period. The remaining two-thirds of the cost
of the MFA has been allocated to the right to operate as sub-franchisor in the
Territory and is being amortized over a twenty-year period. This allocation is
based on the estimate by the Company of the value of the fees it will receive as
franchisor as the result of being able to open more new stores during the
exclusive development period than it would otherwise be able to open if it had
competition in opening new stores during that period. The Company believes that
this allocation method is reasonable. Regardless of whether the Company has
exclusive development rights under the MFA, it would continue to have
development rights under the MFA, and it would continue to have the right to
operate its then-existing Company-owned Domino's stores and to maintain and
continue its rights and obligations as sub-franchisor for all then-existing
Domino's stores.

Rights to Store Leases - The Rights to Store Leases is stated at cost and
is being amortized over a ten-year period [the average length of the remaining
term under the leases] under the straight-line method.

Prepaid and Deferred Offering Costs - Prepaid and deferred offering costs
consist of costs incurred in relation to an anticipated public offering. If the
offering is not consummated, such costs will be expensed and not recorded as a
reduction of the net proceeds of the offering.

Principles of Consolidation - The consolidated financial statements include
the accounts of the Company and all of its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated.

Earnings [Loss] Per Share - Earnings [loss] per share are computed based on
the weighted average number of shares outstanding during the periods presented.
Common stock equivalents are included in the calculation when they are dilutive.

Concentration of Funds - The Company currently has a substantial amount of
money on deposit at National Westminster Bank, Plc, a UK bank. The UK does not
have federal insurance on balances maintained in banks.

Foreign Currency Translation - Balance sheet amounts denominated in United
Kingdom sterling have been translated into U.S. dollars using the year end rate
of exchange. Operational results denominated in United Kingdom sterling have
been translated into U.S. Dollars using the average annual rate of exchange.

[2] NEW AUTHORITATIVE PRONOUNCEMENTS

The Financial Accounting Standards Board has issued FAS No. 109,
"Accounting for Income Taxes," FAS 107, "Disclosure about Fair Value of
Financial Instruments," FAS No. 106, "Employers Accounting for Postretirement
Benefits Other Than Pensions," FAS112, "Employers Accounting for Postemployment
benefits" and FAS 115 "Accounting for Certain Investments in Debt and Equity
Securities. "Adoption of the new statements are not expected to have a material
impact on the Company's financial position or results of operations. The Company
adopted FAS 109 on inception. Adoption was not material to the financial
statements.

[3] RELATED PARTY TRANSACTIONS

F-27

<PAGE>
International Franchise Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Sheet #4

[3] RELATED PARTY TRANSACTIONS [CONTINUED]

Woodland is the holder of 315,000 shares of Class A Common Stock of the
Company. In connection with the issuance of 2,000,000 shares of Class B Common
Stock, the Company accepted a note receivable for $1,500,000 from Woodland at 8%
per annum. The entire balance of principal plus interest accrued thereon shall
be payable on the date Woodland converts its 2,000,000 shares of Class B Common
Stock into Class A Common Stock of the Company, which date shall not be later
than January 1, 1999. Interest receivable was $2,960 and at January 2, 1994 and
interest income was recognized for $2,960 for the period ended January 2, 1994.

Pursuant to the terms of a Loan and Exchange of Stock Agreement [the
"Agreement"] dated as of December 29, 1993, by and among IFS, Crescent Capital
["Crescent"], a public corporation, and Woodland, IFS received $400,000 from
Crescent to be repaid upon the later of (i) ninety [90] days from December 29,
1993, or (ii) in the event the Exchange does not occur, ninety [90] days after
the Exchange was last scheduled to occur. Interest shall accrue at a rate of 8%
per annum; however, no interest shall accrue for the first forty-five [45] days
of the loan, provided the loan is paid in its entirety on or prior to the 45th
day following the stock purchase closing date. The loan is secured by (i) a
pledge by IFS of all of the issued and outstanding stock of DP Group, its
wholly-owned subsidiary, and (ii) a pledge by Woodland of all of the issued and
outstanding stock of IFS [See Notes 9B and 9D].

The Agreement also obligates IFS, Woodland, and Crescent to enter into an
exchange of stock [the "Exchange"] whereby Woodland will exchange all of the
issued and outstanding securities of IFS, consisting of 315,000 shares of Class
A common stock and 2,000,000 shares of Class B common stock, a class of voting
stock convertible on a 1-1 basis, for 315,000 shares of Crescent's Class A
common stock and 2,000,000 shares of Crescent's Class B convertible common
stock, [a class of stock to be authorized with full voting rights and which will
be convertible into Class A Common Stock on a 1-1 basis]. The transaction
contemplated by the Agreement was completed on June 30, 1994 and Crescent
contributed $250,000 of its note from the Company on July 25, 1994 [See Note
9B].

Upon consummation of the public offering, assuming the maximum number of
units are sold, Crescent will own approximately 70% of the Company's outstanding
stock. As a result of the capital structure of the Company and Crescent,
Woodland will indirectly have voting control of the Company and, consequently,
will be able to elect the Company's entire Board of Directors, determine the
vote on any matter submitted for shareholder approval [including increasing the
Company's authorized capital stock and authorizing any merger, sale of assets or
dissolution of the Company] and generally direct the affairs of the Company.

[4] LONG-TERM DEBT

Long-term debt consists of the following:

January 2,
1 9 9 4
Note Payable to Domino's Pizza
International for the Master
Franchise Agreement $ 650,000
Note Payable to Domino's
Pizza
International [UK] for purchase
of Domino's Pizza Group Limited 550,000
Note Payable to Crescent
Capital, Inc.
per the Loan and Exchange of Stock
Agreement 400,000
----------
Total $1,600,000
Less: Current Portion 1,050,000
----------
LONG-TERM $ 550,000
==========

F-28
<PAGE>

International Franchise Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Sheet #5

[4] LONG-TERM DEBT [CONTINUED]

The following are maturities of long-term debt for each of the next five
years:

January 2,
1995 $1,050,000
1996 200,000
1997 200,000
1998 150,000
1999 --
----------

TOTAL $1,600,000
==========

The note payable to Domino's for the master franchise agreement is
$650,000. Pursuant to the terms of the note, $300,000 is payable on May 15, 1994
and shall not bear interest prior to the due date, and thereafter at the rate of
8% simple interest per annum and $350,000 is payable in installments of
approximately $29,000 for twelve consecutive quarters beginning on January
1,1995, with simple interest at the rate of 8% per annum payable on the
installment dates. Domino's subsequently agreed to defer its right under the MFA
to receive $300,000 on May 15, 1994 until completion of this offering and in
exchange the Company agreed to pay the full balance due under the note for the
MFA upon completion of the offering if the maximum number of units are sold [See
Note 9C].

The note payable to DPUK for the purchase of assets by DP Group is
noninterest bearing and payable in installments of approximately $45,000 for
twelve consecutive quarters beginning January 1, 1995 [See Notes 1 and 9C]. In
exchange for Domino's agreement to defer the $300,000 payment due May 15, 1994
under the note for the MFA, the Company agreed to pay the full $550,000 due
under the note for the purchase of the assets upon completion of the offering.

The note payable to Crescent bears interest at 8% per annum, to be repaid
90 days after the stock exchange between Crescent and IFS. On July 25, 1994,
Crescent contributed $250,000 of the note due from IFS [See Notes 1 and 9D].

[5] COMMITMENTS The relationship between the Company and Domino's is
governed principally by the Master Franchise Agreement [the "MFA"]. The MFA
requires that during the first 10 year period ["Initial Term"], the Company
shall have opened and operating a minimum number of Domino's pizza stores
["Domino's Stores"] in accordance with a yearly schedule.

Ten of the 50 Domino's Stores required to be opened during the first three
years of the MFA must be owned by the Company. A mutual review of the yearly
schedule is to take place at the end of 1999. If the Company does not meet the
development schedule, Domino's may terminate the Company's exclusive right to
operate and franchise additional Domino's Stores in the United Kingdom, Northern
Ireland and the Republic of Ireland [the "Territory"].

F-29
<PAGE>

International Franchise Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Sheet #6

[5] COMMITMENTS [CONTINUED]

If the Company is in compliance with the MFA at the expiration of the
Initial Term, the Company will have the option to extend its exclusive
development rights for an additional 10-year period, provided the Company and
Domino's agree to a minimum development schedule for the renewal term. If after
expiration of the Initial Term [or any renewal term], the Company fails to
exercise its option to renew its exclusive development rights, or the parties
are unable to agree to a minimum development schedule for the renewal term, then
the Company would continue to have the right to operate its then existing
Company-owned Domino's Stores and to maintain and continue its rights and
obligations, and act as subfranchisor, with respect to all then existing
franchised Domino's Stores. In such event, the Company would generally have no
further right to operate or grant franchises for additional Domino's Store and
Domino's would have the right to proceed [or the right to grant a third party
the right to proceed] with further development of the Territory, subject to
territorial rights granted under then-existing franchise agreements.

The Company must obtain Domino's approval of each franchisee who will be
operating a Domino's Store and each store location, whether operated by the
Company or a franchisee. Domino's approval may not be unreasonably withheld or
delayed, except that Domino's may withhold its approval without reason if there
is any uncured default by the Company under the MFA.

The Company is required to pay Domino's a one-time store opening fee for
each new Domino's Store, whether Company-owned or franchised. The Company
expects to pass this cost through to the franchisees in the case of franchised
stores. In addition, the Company must pay to Domino's a monthly royalty fee
equal to a certain percentage of each Domino's Store's gross sales. This royalty
fee is payable to Domino's irrespective of the profitability of the Company or
the Domino's Store, and irrespective of the Company's ability to collect
royalties from franchisees. The Company's payments to Domino's are to be made in
dollars.

Under certain circumstances of default by the Company under the MFA,
Domino's has the right to terminate the MFA. If the MFA is terminated, the
Company would be subject to a one-year non-competition covenant in the delivery,
carryout or sit-down pizza business and Domino's would have the right [but not
the obligation] to purchase, at the then-current fair market value, all of the
Company's rights and interests as the subfranchisor of Domino's Stores and all
of the assets of each Domino's Store owned by the Company. The fair market value
would be determined by mutual agreement of the Company and Domino's, or in the
absence of such agreement by an appraiser. Under certain circumstances of
default by Domino's under the MFA, the Company has the right to terminate the
agreement and continue as an independent pizza operation, including the
operation of the fresh pizza dough production facility and wholesale business
[the "Commissary"].

On December 30, 1993, DP Realty entered into a Store Lease Agreement with
Domino's and DPUK and a Store Lease Trust Agreement with DPUK. Pursuant to these
two agreements, DP Realty has the right to require DPUK to transfer to DP Realty
any or all of its rights as lessee under leases executed by DPUK and various
landlords for substantially all of the Domino's Stores [the "Leases"], and any
or all of its rights as sublessor under subleases executed by DPUK and
franchisees for substantially all of the franchised Domino's Stores [the
"Subleases"]. DP Realty paid DPUK $50,000 for the rights to the Store Leases and
Store Subleases.

The Store Lease Agreement requires DP Realty to apply all money received
under any of the subleases to the lessee's financial obligation under the
corresponding Leases. DP Realty agreed to maintain sufficient funds to meet its
obligations under the Store Lease Agreement [which expires on April 30, 1996]
and to contribute $200,000 on or before April 30, 1994 to satisfy these
obligations. DP Group has guaranteed DP Realty's obligations under the Store
Lease Agreement and DP Realty and DP Group have agreed to indemnify Domino's,
but not DPUK, for any liability and costs it may incur in connection with these
agreements. DP Realty is also obligated to use reasonable efforts to keep DPUK
solvent through December 1996.

F-30
<PAGE>

International Franchise Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Sheet #7

[6] LEASES

The Company has a one year operating lease for its U.S. office that expires
on March 31, 1995.

DP Group has its principal place of business in Milton Keynes, England. The
property is subject to two operating leases with DPUK that expire in 2011 and
2010, respectively.

Minimum future rental payments under non-cancelable operating leases having
remaining terms in excess of one year as of January 2, 1994 are as follows:

January 2,
1995 $ 72,559
1996 72,617
1997 75,577
1998 77,059
1999 77,059
Subsequent to 1999 924,706
----------

TOTAL MINIMUM FUTURE RENTALS $1,299,577
==========

Rent expense for the period December 30, 1993 to January 2, 1994 was
$3,398.

Leases for 52 of the open stores and 13 of stores that have been closed are
currently held by DPUK, a subsidiary of Domino's. DP Realty, the Company's
subsidiary, has the right to act as agent for DPUK in renegotiating these leases
[See also Note 5].Currently, 13 of the leases are for stores which are currently
closed and 2 of the leases are for stores which the Company believes are not
sufficiently profitable to continue operations in the long term. The Company
intends to determine which closed stores can be re-franchised or operated as
Company-owned stores and which should be abandoned. The Company intends to
negotiate a mutual termination with landlords for the stores which have been or
will be abandoned. DP Realty also has the right to require DPUK to transfer any
and all of DPUK's right, title and interest as lessee in any lease DP Realty
designates. A reserve of $200,000 was to be established by DP Group out of the
proceeds to be received from IFS for use in connection with the renegotiation or
termination of certain leases [Note 9E].

Of the franchised stores in the Territory, 52 are subject to subleases from
DP Realty or DPUK by the franchisee that operates the store. The remaining 30
stores are leased directly by the franchisee from the property owner or other
lessee.

The Company currently intends to lease store properties directly, through
DP Realty, and then sublease the properties to franchisees. Allowing franchisees
to lease properties directly would enable the Company to avoid liability for
real estate costs if the franchisee fails to pay rent but by leasing the
properties directly, the Company is able to exercise greater control over the
franchisee and the property.

[7] ECONOMIC DEPENDENCY

Due to the nature of franchising and the Company's agreements with
Domino's, the success of the Company is in part dependent upon the overall
success of Domino's and the Domino's System, including Domino's financial
condition, management and marketing success and the successful operation of
stores opened by other franchisees.

F-31
<PAGE>
International Franchise Systems, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Sheet #8

[8] SUBSEQUENT EVENTS

On January 13, 1994, DPGS, Limited, a wholly-owned subsidiary of DP Group,
was formed for the purpose of conducting its store operations.

[9] SUBSEQUENT EVENTS [UNAUDITED]

[A] Registration Statement - The Company has filed a registration statement
to register 2,000,000 Units, each Unit consisting of one share of the Company's
Common Stock and warrants to purchase two additional shares of Common Stock.

[B] Loan and Exchange of Stock Agreement - On June 30,1994, the Company
became a wholly-owned subsidiary of Crescent as a result of the share exchange
between Crescent and Woodland pursuant to the Loan and Exchange of Stock
Agreement [See Note 3 - Related Party Transactions].

[C] Master Franchise Agreement - Domino's and the Company have reached an
agreement in principal which provides that Domino's will defer its right under
the MFA to receive $300,000 until completion of the offering described herein
and in exchange the Company has agreed to pay the balance due under the MFA upon
completion of the offering if the maximum number of units are sold. In addition,
in exchange for Domino's agreement to defer the payment of $300,000 due May 15,
1994, the Company agreed to pay the full amount of the note payable to DPUK for
the purchase of DP Group upon completion of this offering.

[D] Note Payable to Crescent Capital, Inc. - On July 25,1994, the Company
issued 2,385,000 shares of Common Stock to Crescent in exchange for the receipt
of a capital contribution of$250,000 of the $400,000 note payable due Crescent
per the Loan and Exchange of Stock Agreement. The remaining $150,000 due
Crescent bears interest at the rate of 8% annum. The 2,385,000 shares of Common
Stock are included in the Earnings Per Share calculation.

[E] Store Lease Agreement - The Company has not set aside funds as required
by the Store Lease Agreement to satisfy its obligation under the Store Lease
Agreement. The Company has established a reserve of $200,000 on its books to
reflect its obligation under the Store Lease Agreement. The Company has paid
through July 3, 1994 $155,000 in satisfaction of obligations under this
agreement. The balance of the reserve is reflected of the Company's balance
sheet under "Other Payables." To the extent any additional obligations become
due, the Company will pay such out of working capital.

[F] Stock Transactions - On July 25, 1994, the Company renamed its Class A
Common Stock, par value $.01 per share, Common Stock and reclassified each share
of the class of Class B Common Stock, par value $.75 into one share of Common
Stock of the Company. In addition, the Company issued 2,385,000 shares of Common
Stock to Crescent and assigned the note receivable from Woodland in the amount
of $1,500,000 to Crescent in exchange for the receipt, as a capital
contribution, of $250,000 of the $400,000 note payable due Crescent per the Loan
and Stock Exchange Agreement.

. . . . . . . . . .

F-32

<PAGE>
INTERNATIONAL FRANCHISE SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 29, 1996.
<TABLE>
<CAPTION>
ASSETS:
Current Assets:
September 29, December 31,
1996 1995
<S> <C> <C>
Cash and Cash Equivalents $ 605,231 $ 1,039,915
Trade Accounts Receivable - Net 2,314,491 1,697,548
Franchisee Loans 813,288 696,917
Other Receivables 267,076 565,708
Inventories 459,012 621,408
Prepaid Expenses and Accrued Income 709,132 469,116
Officer Loan Receivable 123,726 134,151
Due from Related Parties [D] 1,109,697 1,666,896
Deposits 292,669 383,331
----------- -----------

Total Current Assets 6,694,322 7,274,990
----------- -----------

Property and Equipment - Net 3,432,261 2,733,667
----------- -----------

Other Assets:
Master Franchise Agreement - Net 882,000 936,000
Rights to Store Leases - Net 90,680 83,359
Goodwill - Net 10,732 11,570
Start-Up Costs - Net 109,095 146,916
Consulting Agreements - Net [C] -- 827,707
Store Franchise Agreement - Net 59,008 75,273
Store Development Costs - Net 14,139 104,419
Investment in Parent Company 776,145 --
----------- -----------

Total Other Assets 1,941,799 2,185,244
----------- -----------

Total Assets $12,068,382 $12,193,901
----------- -----------
</TABLE>

The Accompanying Notes are an Integral Part of these Condensed Consolidated
Financial Statements.

F-33
<PAGE>
INTERNATIONAL FRANCHISE SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 29, 1996
<TABLE>
<CAPTION>

Liabilities and Stockholders' Equity:
Current Liability:
September 29, December 31,
1996 1995
<S> <C> <C>
Trade Accounts Payable $ 2,592,349 $ 3,109,445
Accrued Expenses 826,048 373,034
Other Payables and Accrued Interest 240,700 157,741
Obligations Under Capital Leases 194,699 188,077
Notes Payable - Short-Term 299,107 267,693
Other Taxes Payable 518,952 303,356
----------- -----------
4,671,855 4,399,346
----------- -----------

Total Current Liabilities
Long Term Liabilities:

Notes Payable - Long Term 434,474 491,464
Obligations under Capital Lease 89,212 202,687

Total Long Term Liabilities 523,686 694,151
----------- -----------

Commitments and Contingencies: -- --
----------- -----------

Stockholders' Equity:
$.01 Par Value, Preferred Stock,
1,000,000 Shares Authorized, -- --
No Shares Issued and Outstanding

$.01 Par Value, Common Stock
- 19,000,000 Shares
Authorized and 6,727,324
Shares Issued and Outstanding 67,273 67,273

Additional Paid-in-Capital 6,489,611 6,489,611

Retained Earnings 267,416 511,898

Cumulative Foreign Currency
Translation Adjustment 48,541 31,622
----------- -----------

Total Stockholders' Equity 6,872,841 7,100,404
----------- -----------

Total Liabilities
and Stockholders' Equity $12,068,382 $12,193,901
----------- -----------
</TABLE>

The Accompanying Notes are an Integral Part of these Condensed Consolidated
Financial Statements

F-34

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
<TABLE>
<CAPTION>

For the Thirteen Weeks For the Thirty-Nine Weeks
July 1, July 3, January 1, 1996 January 2, 1995
1996 to 1995 to to to
September 29, October 1, September 29, October 1,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue:
Sales by Company Owned Stores $ 1,578,453 $ 754,747 $ 4,051,699 $ 1,992,068
Commissary Sales 3,039,451 2,546,101 8,520,528 7,127,537
Franchise Fees 151,934 38,789 332,273 139,762
Rental Income 341,987 298,501 965,345 907,266
Royalty Sales 749,824 687,002 2,076,167 1,727,322
Other Operating Income 156,618 251,322 589,397 448,616
------------ ------------ ------------ ------------

Total Revenue 6,018,267 4,576,462 16,535,409 12,342,571
------------ ------------ ------------ ------------
Cost of Sales
Company Owned Stores 1,007,948 463,608 2,652,620 1,341,254
Food and Packaging 2,730,664 2,390,428 7,643,351 6,466,452
Other Operating Expenses 613,451 553,582 1,855,890 1,376,368
------------ ------------ ------------ ------------
Total Cost of Sales 4,352,063 3,407,618 12,151,861 9,184,074
------------ ------------ ------------ ------------

Gross Margin 1,666,204 1,168,844 4,383,548 3,158,497
------------ ------------ ------------ ------------

Administrative Expenses 1,449,697 1,070,880 4,245,013 2,886,959
Operating and Closing Costs
of Pizzazz Restaurant
41,245 -- 442,231 --
------------ ------------ ------------ ------------
Operating Income/(Loss) 175,262 97,964 (303,696) 271,538

Interest Income 47,276 28,477 133,940 98,672
Interest Expense (24,868) (15,490) (74,726) (46,862)
------------ ------------ ------------ ------------
(Loss) Income Before Income Taxes 197,670 110,951 (244,482) 323,348

Income Taxes -- -- -- --
------------ ------------ ------------ ------------

Net Income/(Loss) $ 197,670 $ 110,951 $ (244,482) 323,348
------------ ------------ ------------ ------------

Earnings/(Loss) Per Share $ 0.03 $ 0.02 $ (0.04) $ 0.05
------------ ------------ ------------ ------------

Weighted Average Number
of Shares Outstanding
6,727,324 6,252,324 6,727,324 6,000,889
------------ ------------ ------------ ------------
</TABLE>

The Accompanying Notes are an Integral Part of these Condensed Consolidated
Financial Statements.

F-35
<PAGE>
INTERNATIONAL FRANCHISE SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
[UNAUDITED]
<TABLE>
<CAPTION>

Cumulative
Foreign
Common Stock Additional Currency Total
Number of Paid-in Retained Translation Stockholders'
Shares Amount Capital Earnings Adjustments Equity
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1995 6,727,324 67,273 6,489,611 511,898 31,622 7,100,404
Foreign Currency Translation Adjustment -- -- -- -- 16,919 16,919
Net Loss for the period
January 1, 1996 to September 29, 1996 -- -- -- (244,482) -- (244,482)
----------- ----------- ----------- ----------- ----------- -----------
Balance - September 29, 1996 6,727,324 $ 67,273 $ 6,489,611 $ 267,416 $ 48,541 $ 6,872,841
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>

Foreign Currency Translation

The functional currency for the Company's foreign operations is the British
pound sterling. The translation from the British pound sterling into U.S.
dollars is performed for balance sheet accounts using the current exchange rate
in effect at the balance sheet date and for revenue and expense accounts using a
weighted average exchange rate during the period. The gains or losses resulting
from such translations are included in stockholders' equity. Equity transactions
are denominated in British Pound sterling have been translated into U.S. dollars
using the effective rate of exchange at date of issuance.

The Accompanying Notes are an Integral Part of these Condensed Consolidated
Financial Statements.

F-36
<PAGE>
INTERNATIONAL FRANCHISE SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
<TABLE>
<CAPTION>
For the Thirty-Nine Weeks
January 1, January 2,
1996 to 1995 to
September 29, October 1,
1996 1995
<S> <C> <C>
Net Cash - Operating Activities $ 251,385 $(1,043,746)
----------- -----------

Investing Activities:
Purchase of Property, Equipment and Capitalized Costs (1,488,656) (1,464,412)
Proceeds on Disposal of Property and Equipment 445,338 52,944
Repayment of Loan to Officer -- 945
Loan to Related Party 554,687 (510,280)
----------- -----------
Net Cash - Investing Activities (488,631) (1,920,803)
----------- -----------

Financing Activities:
Proceeds from Loan 184,596 373,645
Payment of Debt (380,226) (1,439,231)
Proceeds from Sale of Common Stock -- 253,360

----------- -----------
Net Cash - Financing Activities (195,630) (812,226)
----------- -----------

Effect of Exchange Rate Changes on Cash (1,808) 11,133

Net [Decrease] in Cash and Cash Equivalents (434,684) (3,765,642)

Cash and Cash Equivalents - Beginning of Periods 1,039,915 4,813,224
----------- -----------
Cash and Cash Equivalents - End of Periods 605,231 $ 1,047,582
----------- -----------

Supplemental Disclosures of Cash Flow Information:
Cash paid during the periods for:
Interest Paid $ 133,940 $ 46,862
Taxes Paid $ -- $ --

Supplemental Disclosures of Non-Cash Financing and Investing Activities:
Total offering costs during the period January 2, 1995 to July 2, 1995 $ -- $ 76,210
Exchange of Marketable Securities and Assignment of Consulting Agreements $ 776,145 $ --
Issuance of 475,000 shares of Common Stock in connection with two consulting
agreements $ -- $ 825,000
Fixed Assets acquired under Capital leases $ 248,295 $ --
</TABLE>

The Accompanying Notes are an Integral Part of these Condensed Consolidated
Financial Statements.

F-37

<PAGE>

INTERNATIONAL FRANCHISE SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]

[A] Significant Accounting Policies

Significant accounting policies of INTERNATIONAL FRANCHISE SYSTEMS, INC.
[the "Company"] are set forth in the Company's Form 10-KSB for the year
ended December 31, 1995, as filed with the Securities and Exchange
Commission.

[B] Basis of Reporting

The balance sheet as of September 29, 1996, the statements of operations
for the period January 1, 1996 to September 29, 1996, and for the period
January 2, 1995 to October 1, 1995, the statement of stockholders' equity
for the period January 1, 1996 to September 29, 1996 and the statements of
cash flows for the period January 1, 1996 to September 29, 1996 and for the
period January 2, 1995 to October 1, 1995 have been prepared by the Company
without audit. The accompanying interim condensed unaudited financials have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions of Form 10-QSB
and Regulation SB. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of the management of the
Company, such statements include all adjustments [consisting only of normal
recurring items] which are considered necessary for a fair presentation of
the financial position of the Company at September 29, 1996, and the
results of its operations and cash flows for the thirty-nine weeks then
ended. It is suggested that these unaudited financial statements be read in
conjunction with the financial statements and notes contained in the
Company's Form 10-KSB for the year ended December 31, 1995.

Certain reclassifications may have been made to the 1995 financial
statements to conform to classification used in 1996.

[C] Assignment Of Consulting Agreements

The three consulting agreements entered into by the Company were assigned
to Woodland Limited Partnership at their net book value on April 1, 1996.

[D] Due from Related Parties

Crescent Capital owns 4,700,000 share or approximately 70% of International
Franchise Systems, Inc. outstanding stock. The Company has loaned funds to
Crescent Capital of $1,109,697. These loans are interest bearing and
principal and interest are now payable on or before December 29, 1996
(extended from September 29, 1996).

. . . . . . . . . .

F-38

<PAGE>

No dealer, salesman or any
other person has been authorized to give
any information or to make any
representations other than those
contained in this Prospectus, and, if
given or made, such information or
representations must not be relied on as
having been authorized by the Company.
This Prospectus does not constitute an
offer to sell or a solicitation of an
offer to buy, by any person in any
jurisdiction in which it is unlawful for
such person to make such offer or
solicitation. Neither the delivery of
this Prospectus nor any offer,
solicitation or sale made hereunder,
shall under any circumstances create an
implication that the information herein
is correct as of any time subsequent to
the date of the Prospectus.

TABLE OF CONTENTS

Page
Prospectus Summary
The Company
The Offering
Summary of Financial Information
Risk Factors
The Company
Use of Proceeds
Price Range of Common Stock
Dividend Policy
Dilution
Capitalization
Selected Financial Data
Management's Discussion and
Analysis of Financial Condition
and Results of Operations
Business
Principal Stockholders
Concurrent Registration of
Common Stock
Management
Executive Compensation
Certain Transactions
Description of Securities
Shares Available for
Future Sale
Plan of Distribution
Legal Matters
Experts
Financial Statements

<PAGE>

2,154,648 Shares of Common Stock
Underlying Class A and
Class B Warrants

INTERNATIONAL FRANCHISE
SYSTEMS, INC.

PROSPECTUS

PATTERSON TRAVIS, INC.

February, 1997
<PAGE>

[Alternate page for Selling Stockholder Prospectus]

PROSPECTUS

INTERNATIONAL FRANCHISE SYSTEMS, INC.

2,000,000 shares of Common Stock

This Prospectus relates to the offer and sale from time to time of up
to 2,000,000 shares of common stock, par value $.01 per share (the "Common
Stock"), of International Franchise Systems, Inc. (the "Company") by the
Company's majority stockholder (the "Selling Stockholder"), or by its pledgees,
donees, transferees or other successors in interest.

The Company will not receive any of the proceeds from the sale of the
Common Stock by the Selling Stockholder, or by its pledgees, donees, transferees
or other successors in interest. It is anticipated that such shares will be
offered and sold from time to time in the over-the-counter market, or otherwise,
at prices and terms then prevailing or at prices related to the then current
market price, or in negotiated transactions. All costs, expenses and fees in
connection with the registration of the shares offered by the Selling
Stockholder or by its pledgees, donees, transferees or other successors in
interest will be borne by the Company. Brokerage commissions, if any,
attributable to the sale of such shares will be borne by the Selling Stockholder
or by its pledgees, donees, transferees or other successors in interest. See
"Selling Stockholder and Plan of Distribution."

Shares of Common Stock offered hereby generally may be resold by the
persons acquiring them without further registration under the Securities Act of
1933, subject to compliance with certain conditions. For further information on
resales, see "Resales" in this Prospectus.

Concurrently with this offering, the Company is offering (the "Company
Offering"), pursuant to a separate prospectus included within the Registration
Statement of which this Prospectus forms a part (the "Company Prospectus"), (i)
up to 1,077,324 shares of Common Stock issuable upon exercise of 1,077,324 Class
A Common Stock Purchase Warrants ("Class A Warrants") and, (ii) up to 1,077,324
shares of Common Stock issuable upon exercise of 1,077,324 Class B Common Stock
Purchase Warrants ("Class B Warrants") issued in connection with the Company's
initial public offering of securities (the "IPO"). An aggregate of 1,077,324
Class A Warrants and 1,077,324 Class B Warrants were issued in connection with
the Company's "IPO" of Units consummated September 9, 1994. Each Unit consisted
of one share of Common Stock, one Class A Warrant and one Class B Warrant. The
Company also issued to Patterson Travis, Inc., the sole underwriter of the IPO
("Patterson Travis" or the "Underwriter"), an option (the "Underwriter's Unit
Purchase Option") to purchase 107,732 Units for a purchase price of $8.25 per
unit. The Units included in the Underwriter's Unit Purchase Option and the
underlying shares of Common Stock, Class A Warrants and Class B Warrants, and
underlying shares of Common Stock, are also being offered as part of the Company
offering.

<PAGE>

[Alternate page for Selling Stockholder Prospectus]

On December 31, 1996 the closing sale prices for the Company's Common
Stock was $.625.

The date of this Prospectus is February 10, 1997.

2
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3
<PAGE>

[Alternate page for Selling Stockholder Prospectus]

THE OFFERING

Securities Offered.......................... 2,000,000 shares of Common Stock
which is being offered by the
Company on behalf of the Selling
Stockholder or by its pledgees,
donees, transferees or other
successors in interest.

Common Stock Outstanding
Before the Company Offering................. 6,727,324 shares

After the Company Offering.................. 8,881,972 shares(1)

Use of Proceeds............................. The Company will not receive any
of the proceeds of this offering.

Risk Factors................................ The securities offered hereby are
speculative and involve a high
degree of risk and should not be
purchased by investors who cannot
afford the loss of their entire
investment. See "Risk Factors."

Ticker Symbol (2)........................... Units-DOMSU
Common Stock - DOMS
Class A Warrants - DOMSW
Class B Warrants - DOMSZ

(1) Gives effect to the exercise of all of the outstanding Class A and
Class B Warrants, of which there can be no assurance. Does not include
(i) the issuance of 107,724 shares of Common Stock to Patterson Travis
upon exercise of the Underwriters' Unit Purchase Option and 215,448
shares of Common Stock to Patterson Travis upon exercise of the Class A
and Class B Warrants underlying the Units issuable upon exercise of
Underwriters' Unit Purchase Option (ii) 400,000 shares of Common Stock
reserved for issuance upon exercise of stock options granted under the
Company's 1994 Stock Incentive Plan (the "Stock Plan"); and (iii)
100,000 shares of Common Stock reserved for issuance upon exercise of
Stock Options granted under the Company's 1995 Non-Employee Directors
Stock Option Plan (the "Directors Plan"). The Company has been advised
that the Underwriter has not determined if and when it will exercise
the Warrants underlying the Unit Purchase Option.

(2) The Company's securities are listed on the NASD Electronic Bulletin
Board, an inter-dealer, over-the-counter market.

7
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SUMMARY OF FINANCIAL INFORMATION

The summary financial information set forth below has been summarized
from the Company's Financial Statements included elsewhere in this Prospectus
and should be read in conjunction with the financial statements, including the
notes thereto, appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
Fifty-two weeks For the Thirty-Nine
Ended Weeks Ended
December 31, 1995 January 1, 1995 September 29, 1996 October 1, 1995

INCOME STATEMENT DATA:
<S> <C> <C> <C> <C>
Revenues $ 17,172,389 $ 12,458,809 $ 16,535,409 $ 12,342,571
Cost of Sales 13,378,482 9,406,524 12,151,861 9,184,074
Operating Expenses 3,480,812 2,938,541 4,687,244 2,886,959
Operating Income (loss) 313,095 113,744 (303,696) 271,538
Net Income (loss) 353,379 153,022 (244,482) 323,348
Earnings (loss) per share .06 .03 (.04) .05
Weighted Average Shares
Outstanding 6,165,558 4,708,365 6,727,324 6,000,889
</TABLE>

BALANCE SHEET DATA:
<TABLE>
<CAPTION>

As of
September 29, 1996 December 31, 1995

<S> <C> <C>
Working Capital................................. 2,022,467 2,875,644
Total Assets.................................... 12,068,382 12,193,901
Total Liabilities............................... 5,195,541 5,093,497
Shareholders Equity............................. 6,872,841 7,100,404
</TABLE>

<PAGE>
[Alternate page for Selling Stockholder Prospectus]

RISK FACTORS

Fast-Food Industry and Competition. The fast-food industry is highly
competitive with respect to price, service, location and food quality, and is
affected by changes in consumer tastes, as well as national, regional and local
economic conditions and demographic trends. The Company and its franchisees
compete with a wide variety of restaurants in the fast-food industry, including
those that offer dine-in, carry-out and delivery service. These competitors
include international, national and regional chains, franchisees of other
restaurant chains as well as locally operated restaurants. Many competitors have
been in existence longer and have a more established market presence and
substantially greater financial, marketing and other resources than the Company
and its franchisees. The Company faces direct competition for home delivery and
carry-out pizza in the Territory from Pizza Hut and Perfect Pizza, both of which
are larger and/or have greater financial resources than the Company. There is
also a large number of small independent pizza store operators that offer
delivery and carry-out services. There can be no assurance that the Company will
be able to compete successfully. The Company also competes for qualified

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<PAGE>

[Alternate page for Selling Stockholder Prospectus]

franchisees with many other business concepts, including international, national
and regional restaurant chains such as McDonalds, Kentucky Fried Chicken and
Burger King. The Territory also has a broad range of stores, pubs and other food
service establishments that offer more traditional fare.

Liability in Connection with Providing Delivery Service. A risk to the
Company, as with other companies which offer delivery services, is the potential
for claims resulting from traffic accidents involving its delivery personnel.
Domino's Pizza Inc. was recently held liable in connection with a traffic
accident involving one of its franchisee's delivery drivers. Although, that
judgment was rendered by a United States court, there can be no assurance that a
court in the Territory would not find the Company liable for substantial damages
if one of its drivers or one of its franchisee's drivers is involved in an
accident.

Dependence on Domino's. Due to the nature of franchising and the
Company's agreements with Domino's, the success of the Company is in part
dependent upon the overall success of Domino's and the Domino's operating
system, including Domino's financial condition, management and marketing success
and the successful operation of stores opened by other franchisees. If Domino's
becomes unable to provide necessary support to the Company, such inability could
have a materially adverse effect on the Company. See "Business-Relationship with
Domino's."

Taxation in the United Kingdom. The Company's U.K. operating
subsidiary, ("DP Group"), previously a wholly-owned subsidiary of Tuskpride,
will be subject to U.K. corporation

<PAGE>

[Alternate page for Selling Stockholder Prospectus]

tax on its profits. The Company expects DP Group to be able to use the tax loss
carry-forwards previously held by Tuskpride and carried over to DP Group to
offset some of its future tax payments. However, there can be no guarantee that
DP Group will be able to use the carry-forward tax losses. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Concentration of Ownership. Approximately 69.86% of the Company's outstanding
Common Stock is currently owned by Crescent Capital, Inc. ("Crescent"). If all
the shares offered hereby are sold, approximately 40% of Company's outstanding
stock will be owned by Crescent. As of the date of this Prospectus, the only
business of Crescent is the holding of Company's securities. Woodland Limited
Partnership ("Woodland"), a partnership controlled by certain members of Colin
Halpern's family, has voting control of Crescent and therefore has effective
control of Crescent and the Company. As a result, Mr. Halpern's family will be
able to elect the Company's entire Board of Directors, determine the vote on any
matter submitted for shareholder approval (including increasing the Company's
authorized capital stock and authorizing any merger, sale of assets or
dissolution of the Company), and generally direct the affairs of the Company.
See "The Company-Structure" and "Company Offering of Common Stock". If all of
the Class A and Class B Warrants outstanding are exercised in the Company
Offering, Crescent will own approximately 30% of the Company's outstanding
stock.

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[Alternate page for Selling Stockholder Prospectus]

Broad Discretion in Application of Proceeds. The net proceeds realized
by the Company from the Company offering, if any, will be used for working
capital and general corporate purposes. The Company has not received any firm
commitments for the exercise of the Warrants. To the extent the Company receives
any proceeds therefrom, the Company will have broad discretion as to the
application of such proceeds. See "Use of Proceeds."

Lack of Public Market. There has been no regular public trading market
for the Company's securities. The Company previously filed an application to
list the Units, Common Stock and Warrants on NASDAQ, however, such application
was denied, subject to appeal. The stated reason for the rejection was an
outstanding SEC investigative order dated December 8, 1992 relating to Crescent,
the Company's majority shareholder. The investigation of Crescent was initiated
prior to the time current management became affiliated with Crescent. To date,
no actions have been brought against Crescent or, insofar as the Company is
aware, its previous management. During 1995, Crescent completed an exchange
offer whereby it offered to exchange its Class A and Class B redeemable Common
Stock Purchase Warrants, issued as part of an investment unit in its initial
public offering in March 1992, for Class A Stock of Crescent. Any warrants not
exchanged expired on September 25, 1995. Crescent initiated the exchange offer
to eliminate the warrants and the potential volatility in the market for the
common stock the warrants could cause. The Company believes that the actions
taken to date by Crescent with respect to its warrants, make it more likely that
it will be successful in the future in getting its securities approved for
listing on NASDAQ. Although the Company intends to continue to pursue listing of
its securities on NASDAQ, there can be no assurance that the Company will be
successful in its efforts, and that even if the Company is successful, there can
be no assurance that a regular trading market for its securities will develop or
that, if developed, it will be sustained. The Company's Units, Common Stock and
Warrants are listed on the NASD Electronic Bulletin Board. The NASD Electronic
Bulletin Board is an unorganized inter-dealer, over-the-counter market which
provides significantly less liquidity than the NASDAQ National Market, and
quotes for stocks traded on the NASDAQ Electronic Bulletin Board are not listed
in the financial sections of newspaper as are those for the NASDAQ National
Market. Prices for securities traded solely on the NASDAQ Electronic Bulletin
Board may be difficult to obtain. Accordingly, purchasers of the Common Stock
may be unable to resell the securities herein at or near their offering price or
at any price.

12
<PAGE>

[Alternate page for Selling Stockholder Prospectus]

quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, monthly account statements showing the market
value of each penny stock held in the customer's account, to make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules. If the Company's Common Stock becomes subject to the penny
stock rules, investors in this Offering may find it more difficult to sell their
securities. If the Company's securities were subject to the existing or proposed
regulations on penny stocks, the market liquidity for the Company's securities
could be severely and adversely affected by limiting the ability of
broker/dealers to sell the Company's securities and the ability of purchasers in
this Offering to sell their securities in the secondary market.

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THE COMPANY

General

The Company has the exclusive right to own, operate and franchise
Domino's Stores in the Territory. The Company also has the exclusive right to
open and operate a supply Commissary for all Domino's Stores in the Territory.
The Company intends to conduct all of its purchasing, distribution and major
food supply and preparation operations at or from the Commissary. As of December
31, 1996, there were 127 Domino's Stores in operation in the Territory; 116 were
franchised and 11 were Company-owned. The Commissary provides food supplies to
virtually all of the Domino's Stores in the Territory. The Company is the fourth
largest Domino's franchisee outside the United States and the largest Domino's
franchisee in Europe.

16
<PAGE>

[Alternate page for Selling Stockholder Prospectus]

Structure

The Company was incorporated in Delaware on October 22, 1993. On
December 29, 1993, Woodland and Crescent entered into a Loan and Stock Exchange
Agreement pursuant to which Crescent loaned $400,000 to the Company (which at
the time was wholly-owned by Woodland) and Crescent agreed to exchange 315,000
shares of its Class A Common Stock and 2,000,000 shares of its Class B Common
Stock for equal amounts of the Class A Common Stock and Class B Common Stock of
the Company. On June 30, 1994, the Company became a wholly-owned subsidiary of
Crescent as the result of the completion of the stock exchange between Crescent
and Woodland. Crescent is a public company as the result of a public offering of
80,000 shares that commenced in November, 1991. In September, 1995, Crescent
issued an additional 87,402 shares of Class A Common Stock in exchange for
874,024 each of A Warrants and B Warrants and an additional 38,400 shares upon
the exercise of Warrants by certain Warrantholders of the Company. The remaining
Warrants expired on September 25, 1995. Woodland owns 315,000 shares of the
507,402 outstanding shares of Class A Common Stock of Crescent ("Class A
Stock"). 25,000 shares of the outstanding Class A Stock are owned by Judah
Wernick. See "Risk Factors - Determination of Offering Price," "Certain
Transactions". Woodland also owns 2,000,000 shares of Class B Common Stock of
Crescent ("Class B Stock"). The Class B Stock is convertible on a one for one
basis for Class A Stock and otherwise has the same rights, including voting
rights, as the Class A Stock. As a result, Woodland controls over 92% of the
voting shares of Crescent. On July 25, 1994, the Company renamed its Class A
Common Stock as "Common Stock" and reclassified each share of Class B Common
Stock into one share of Common Stock of the Company. In addition, the Company
issued 2,385,000 shares of Common Stock to Crescent in exchange for the receipt,
as a capital contribution, of $250,000 of the $400,000 note payable to Crescent
under the Loan and Stock Exchange Agreement.

17
<PAGE>

[Alternate page for Selling Stockholder Prospectus]

Shares of Common Stock owned by Crescent are being offered for sale in this
Prospectus. If all of the shares offered hereby are sold, Crescent will no
longer have voting control of the Company.

The Company intends to operate its business in the Territory primarily
through DP Group. The Company will conduct its real estate operations through DP
Realty, a wholly-owned subsidiary of DP Group and will conduct its company-owned
store operations through DPGS Limited, another wholly-owned subsidiary of DP
Group. Unless the context indicates otherwise, references herein to the Company
include all of its operating subsidiaries.

USE OF PROCEEDS

The Company will not receive any of the proceeds from the sale of the
shares of Common Stock by the Selling Stockholder or by its pledgees, donees,
transferees or other successors in interest. The proceeds, if any, received by
the Company from the Company Offering, net of expenses of the Company Offering,
will be $14, 848,070, assuming the issuance and sale of all securities
(excluding the Underwriter's Warrants) being offered by the Company pursuant to
the Company Prospectus. There can be no assurance as to the number of Warrants,
if any, which will be exercised in connection with the Company Offering.
Management anticipates that the net exercised in connection with the Company
Offering. Management anticipates that the net proceeds of the Company Offering,
if any, will be allocated to working capital and general corporate purposes.

The proceeds allocated to working capital and general corporate
purposes will be applied, to the extent necessary, to the Company's current
operations.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is currently listed on the NASDAQ Electronic
Bulletin Board, an inter-dealer, over-the-counter market under the symbol DOMS.

The high and low bid prices of the Common Stock, as reported by NASDAQ
were as follows:

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19
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21
<PAGE>

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CAPITALIZATION

<TABLE>
<CAPTION>
Actual As Adjusted(1)
<S> <C> <C>

Stockholders' Equity
$.01 Par Value,
Common Stock - 19,000,000
Shares Authorized and 6,727,324
Shares Issued and Outstanding; $ 67,273 $ 88,820
and 8,881,972 Shares Issued and
Outstanding, as Adjusted

Preferred Stock - $.01 Par
Value, 1,000,000 Shares
Authorized and No Shares
Issued and Outstanding -- --

Additional Paid-In Capital 6,489,611 21,316,135

Retained Earnings 267,416 267,416

Foreign Currency Translation
Adjustment 48,541 48,541

Total Stockholders' Equity $ 6,872,841 $21,720,912
=========== ===========
<FN>
(1) Gives effect to the sale in the Company Offering of 1,077,324 shares of
Common Stock upon the exercise of outstanding Class A Warrants and
1,077,324 shares of Common Stock upon the exercise of outstanding Class
B Warrants, resulting in net proceeds to the Company of $14,848,071
(after deducting expenses of the Company Offering.)
</FN>
</TABLE>

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[Alternate page for Selling Stockholder Prospectus]

PRINCIPAL STOCKHOLDERS
The table below sets forth certain information, as of the date of this
Prospectus, and as adjusted to reflect the sale by the Company of shares of
Common Stock in the Company Offering, regarding the beneficial ownership, as
defined in regulations of the Securities and Exchange Commission, of Common
Stock of (i) each person who is known to the Company to be the beneficial owner
of more than 5% of the outstanding shares of the Company's Common Stock, (ii)
each director and nominee for director of the Company, and (iii) all directors
and executive officers as a group. On September 30, 1996, there were 6,727,324
shares of the Company's Common Stock outstanding. Unless otherwise specified,
the named beneficial owner has sole voting and investment power. The information
in the table below was furnished by the persons listed. "Beneficial Ownership"
as used herein has been determined in accordance with the rules and regulations
of the Securities and Exchange Commission and is not to be construed as a
representation that any of such shares are in fact beneficially owned by any
person.

<TABLE>
<CAPTION>
Percent Beneficially
Percent Beneficially
Names and Addresses of Amount and Nature of Owned Prior to Owned Following
Beneficial Owner Beneficial Ownership(1) Offering and Offering and Company
Company Offering Offering (2)

<S> <C> <C> <C>
Crescent Capital, Inc.(3)(4)(5) 4,700,000 69.86% 30.40%
6701 Democracy Boulevard
Suite 300
Bethesda, MD 20817

H. Michael Bush -0- 0% 0%

Gerald Halpern -0- 0% 0%

Colin Halpern -0- 0% 0%

Melvin F. Lazar (6) 10,000 * *

Robert P. Flack (6) 10,000 * *

Kenneth R. Franklin (6) 10,000 * *

Franklen M. Abelman (6) 10,000 * *

All directors and officers
as a group (6 persons) 40,000 * *
- ----------------------
<FN>
* Less than 1%

<PAGE>

[Alternate page for Selling Stockholder Prospectus]

(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within sixty (60) days from the date of this
prospectus statement upon the exercise of options. Each beneficial owner's
percentage ownership is determined by assuming that options that are held
by such person (but not those held by any other person) and that are
exercisable within 60 days from the date of this Prospectus have been
exercised.

(2) Assumes the sale of (i) all 2,000,000 shares being offered hereby and (ii)
the exercise of all outstanding Class A and Class B Warrants. Does not
include (i) the issuance of 107,724 shares of Common Stock to Patterson
Travis upon exercise of the Underwriter's Unit Purchase Option and 215,448
shares of Common Stock to Patterson Travis upon exercise of the class and
Class B Warrants underlying the units issuable upon exercise of
Underwriter's Unit Purchase Option.

(3) If none of the Warrants are exercised in the Company Offering, and all of
the shares offered hereby are sold, Crescent will own 40.13% of the Common
Stock outstanding.

(5) On December 18, 1992, the SEC directed by Order that an investigation be
made into possible violations of certain of the federal securities laws,
including laws dealing with manipulation and false disclosure, by a number
of named individuals and entities, with respect to the securities of seven
issuers, including Crescent, and other unnamed issuers. The investigation
of Crescent was initiated prior to the time current management became
affiliated with Crescent. To date, no actions have been brought against
Crescent or, insofar as the Company is aware, its previous management.

(6) Includes 10,000 Shares of Common Stock issuable upon exercise of options
granted under the Company's Non-Employee Director Stock Option Plan.
</FN>
</TABLE>

<PAGE>

[Alternate page for Selling Stockholder Prospectus]

SELLING STOCKHOLDER AND PLAN OF DISTRIBUTION

This Prospectus relates to the offer and sale by the Selling
Stockholder, or by its pledgees, donees, transferees or other successors in
interest of up to 2,000,000 shares of Common Stock (the "Selling Stockholder's
Shares). The Company has agreed to register the public offering of the Selling
Stockholder's Shares under the Securities Act concurrently with the Company
Offering and to pay certain expenses in connection therewith. The Selling
Stockholders shares have been included in the Registration Statement of which
this Prospectus forms a part. The Company will not receive any of the proceeds
from the sale of the Selling Stockholder's Shares by the Selling Stockholder.

Crescent Capital, Inc., the Selling Stockholder, is currently the
beneficial owner of 4,7000,000 shares of Common Stock. Assuming, all of the
Selling Stockholder's Shares offered hereby are sold, Crescent will beneficially
own 2,700,000 shares of Common Stock. See "Principal Stockholders" for
additional information.

The Selling Stockholder's Shares may be offered and sold from time to
time as market conditions permit in the over-the-counter market, or otherwise,
at prices and terms then prevailing or at the prices related to the then-current
market price, or in negotiated transactions. The Selling Stockholder's Shares
may be sold by one or more of the following methods, including without
limitation: (a) a block trade in which a broker or dealer so engaged will
attempt to sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction; (b) purchases by a broker or
dealer as principal and resale by such broker or dealer for its account pursuant
to this Prospectus; (Corporate) ordinary brokerage transactions and transactions
between sellers and purchasers without a broker/dealer. In effecting sales,
brokers or dealers engaged by the Selling Stockholder's may arrange for other
brokers or dealers to participate. Such brokers or dealers may receive
commissions or discounts from Selling Stockholder's in amounts to be negotiated.
Such brokers and dealers and any other participating brokers or dealers may be
deemed to be "underwriters" within the meaning of the Securities Act, in
connection with such sales.

RESALES

Shares of Common Stock offered hereby may generally be resold by the
persons acquiring them without further registration under the Securities Act of
1933 (the "Act"), unless such persons are "affiliates" or "underwriters" within
the meaning of the Act.

Any person receiving shares of Common Stock offered hereby who is an
"affiliate" of the Company will be subject to certain limitations an resale for
a period of two years. An "affiliate" of a company is a person who directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with the Company. In the absence of a special
relationship between the Company and a person who receives shares from the
Company in an acquisition transaction (such as election of such person to the
board of directors of the Company or

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<PAGE>

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ownership by such person of a significant percentage of the Company's
outstanding common stock), such a person generally would not be considered an
"affiliate" of the Company within the meaning of the Act. Therefore, the
limitations on resale applicable to affiliates would not apply to such person.

Although any person receiving shares offered hereby who is an
"underwriter" within the meaning of the Act may be subject to certain
limitations upon resale. such persons may qualify for the "safe harbor"
provisions of Rule 145(d), which permit underwriters to freely resell their
shares so long as certain conditions are met. For example, a person who receives
Common Stock from the Company in a typical acquisition transaction is deemed to
be an "underwriter" as defined by the Act, but such person is generally free to
sell such shares at any time by complying with the provisions of Rule 145(d),
which requires that the amount of Common Stock which may be sold by such person
in any three-month period may not exceed the greater of (i) 1 % of the Common
Stock outstanding as shown by the most recent report or statement published by
the Company, or (ii) the average weekly trading volume in the Company's Common
Stock reported on the Nasdaq Stock Market during the four calendar weeks
preceding the order to sell. Such sales must also be made in "brokers'
transactions," which are ordinary sales through a broker acting as agent without
special commission arrangements or selling efforts.

In order for affiliates or underwriters not protected by Rule 145(d) to
resell shares of Common Stock offered hereby, the Company would have to agree
(1) to provide an opinion to the effect that an exemption applies to such
resale; (2) to amend the registration statement of which this Prospectus is a
part to permit such resale, or (3) to file a new registration statement which
includes the shares of Common Stock proposed to be resold. Unless a written
agreement obligates the Company to do so, there is no assurance that it will
agree to provide such opinion, amendment or registration.

COMPANY OFFERING OF COMMON STOCK
Concurrently with this Offering, the Company is offering pursuant to
the Company Prospectus (i) 1,077,324 shares of Common Stock issuable upon
exercise of 1,077,324 Class A Warrants and (ii) 1,077,324 shares of Common Stock
issuable upon exercise of 1,077,324 Class B Warrant. An aggregate of 1,077,324
Class A Warrants and 1,077,324 Class B Warrants were issued in connection with
the Company's IPO of Units consummated September 9, 1994. Each Unit consisted of
one share of Common Stock, one Class A Warrant and one Class B Warrant. The
Company also issued to Patterson Travis, Inc., the sole underwriter of the IPO,
an Underwriter's Unit Purchase Option to purchase 107,732 Units for a purchase
price of $8.25 per unit. The Units included in the Underwriter's Unit Purchase
Option and the underlying shares of Common Stock, Class A Warrants and Class B
Warrants, and underlying shares of Common Stock, are also being registered for
sale.

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[Alternate page for Selling Stockholder Prospectus]

Advances to Red Hot Concepts, Inc.

Advances to Colin Halpern

The Company has advanced funds from time to time to Mr. Halpern. At
December 31, 1995, the total amount due to the Company from Mr. Halpern was
$134,151. In February 1996, Mr. Halpern repaid $75,000 of the amount due to the
Company. As of September 29, 1996, Mr. Halpern owed $123,726 to the Company.

DESCRIPTION OF SECURITIES

Common Stock

The Company is authorized to issue 19,000,000 shares of Common Stock,
$.01 par value per share, of which 6,727,324 are issued and outstanding as of
September 30, 1996. The holders of Common stock have no preemptive and other
subscription rights and the Common Stock has no redemption, sinking fund or
conversion provisions. There are presently no plans to pay dividends with
respect to the shares of Common Stock. Upon liquidation, dissolution or
winding-up of the Company, after payment of creditors and the holders of any
senior securities of the Company, if any, the assets of the Company will be
divided pro rata on a per share basis among the holders of the shares of Common
Stock. The Common Stock is not subject to any liability for further assessments.

56
<PAGE>

[Alternate page for Selling Stockholder Prospectus]

SHARES AVAILABLE FOR FUTURE SALE
Rule 144

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including persons who may be deemed to be
"affiliates" of the Company as that term is defined under the 1933 Act, is
entitled to sell within any three-month period a number of shares beneficially
owned for at least two years that does not exceed the greater of (i) one percent
of the then outstanding shares of Common Stock or (ii) the average weekly
trading volume in the Common Stock during the four calendar weeks preceding such
sale. Sales under Rule 144 are also subject to certain requirements as to the
manner of sale, notice and the availability of current public information about
the Company. However, a person that is not an affiliate and has beneficially
owned such shares for at least three years is entitled to sell such shares
without regard to the volume, manner of sale or notice requirements.

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[Alternate page for Selling Stockholder Prospectus]

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58
<PAGE>

[Alternate page for Selling Stockholder Prospectus]

LEGAL MATTERS

EXPERTS

59
<PAGE>

[Alternate page for Selling Stockholder Prospectus]

TABLE OF CONTENTS

Page
Prospectus Summary
Risk Factors
The Company
Use of Proceeds
Price Range of Common Stock
Dividend Policy
Capitalization
Selected Financial Data
Management's Discussion and
Analysis of Financial Condition
and Results of Operations
Business
Principal Stockholders
Selling Stockholder
and Plan of Distribution
Resales
Company Offering of
Common Stock
Management
Description of Securities
Shares Available for
Future Sale
Legal Matters
Experts
Financial Statements

<PAGE>

2,000,000 Shares of Common Stock
INTERNATIONAL FRANCHISE
SYSTEMS, INC.

PROSPECTUS

PATTERSON TRAVIS, INC.

, 1997

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Directors and Officers.

Indemnification is provided for in Article 2.14 of the Bylaws of the
Registrant and in Articles VIII and IX of the Articles of Incorporation of the
Registrant and such provisions are incorporated herein by reference.

Reference is hereby made to the caption "Management - Personal
Liability and Indemnification of Directors" in the Prospectus which is part of
this Registration Statement for a more detailed description of indemnification
arrangements between the Company and its directors.

Item 25. Other Expenses of Issuance and Distribution.

The estimated expenses in connection with this offering are as follows:

Accounting Fees and Expenses* $ 5,000
Legal Fees and Expenses* 10,000
Blue Sky Fees and Expenses* 0
Printing and Engraving* 2,000
Miscellaneous Expenses* 2,000
-------
Total $19,000

*Estimated

Item 26. Recent Sales of Unregistered Securities.

(a) (i) In December 1993, International Franchise Systems, Inc. issued
315,000 shares of Class A common stock and 2,000,000 shares of Class B Common
Stock to Woodland Limited Partnership. On July 25, 1994 the Company renamed its
Class A Common Stock, par value $.01 per share, Common Stock and reclassified
each share of the class of Class B Common Stock, par value $.75 into one share
of Common Stock of the Company. In addition, the Company issued 2,385,000 shares
of Common Stock to Crescent and assigned the note receivable from Woodland in
the amount of $1,500,000 to Crescent in exchange for the receipt, as a capital
contribution, of $250,000 of the $400,000 note payable due Crescent per the Loan
and Stock Exchange Agreement.

(ii) On May 12, 1995, the Company issued 237,500 shares of Common Stock
valued at $350,000 in connection with entering a 4 year consulting agreement.

(iii) On June 5, 1995, the Company issued 237,500 shares of Common
Stock valued at $475,000 in connection with entering a 5 year consulting
agreement.

II-1

<PAGE>

(iv) On October 6, 1995, the Company issued 100,000 shares of stock,
valued at $375,000, under the Company's 1995 Consultants and Advisors Stock
Incentive Plan.

(b) No underwriters were used in connection with the issuance of the
above securities.

(c) The Class A Common Stock described in (a)(1) was sold for cash
without an underwriting discount at a price of $.01 per share. The Class B
Common Stock described in (a)(1) was sold for $.75 per share and the Company
received a $1,500,000 promissory note.

(d) The securities issued in the foregoing transactions were not
registered under the Securities Act of 1933, as amended (the "Act"), in reliance
upon the exemption from registration which is set forth in Section 4(2) of the
Act relating to transactions by an issuer not involving any public offering. The
only offer and sale of the Registrant's stock was made to Crescent Capital,
Inc., the holder of all of the outstanding shares of Crescent Capital, Inc. No
offers or sales were made to any other individuals or entities. The recipient of
shares in the Registrant in the foregoing transaction represented that such
interests were being acquired by it for purposes of investment and not with a
view to the distribution thereof.

Item 27. Exhibits.

1(A)(1) Underwriting Agreement between the Registrant and Patterson
Travis, Inc.

(B)(1) Selected Dealers Agreement by and between the Registrant and
Patterson Travis, Inc.

(C)(2) Warrant Agreement by and between the Registrant and Jersey
Transfer & Trust.

3(A)(1)(2) Amended and Restated Certificate of Incorporation of
Registrant dated October 22, 1993, as amended December 21,
1993 and July 25, 1994.

(B)(1) Bylaws of Registrant dated December 29, 1993 and amended on
June 30, 1994.

4(A)(2) Form of Common Stock Certificate

(B)(2) Class A and Class B Common Stock Purchase Warrant Specimens

(C)(2) Warrant Subscription Form

II-2

<PAGE>

5(A)** Opinion of Reed Smith Shaw & McClay as to
legality of securities issued

10(A)(1) Master Franchise Agreement dated
December 29, 1993 between Domino's
Pizza International, Inc. and
Domino's Pizza Group Limited

(B)(1) Know-How and Technical Knowledge,
License and Management Agreement
dated December 29, 1993 between
Domino's Pizza International, Inc.
and Domino's Pizza Group Limited

(C)(1) Stock Purchase Agreement dated
December 29, 1993 between the Company,
Domino's Pizza International, Inc.
and Domino's Pizza International
(UK) Limited

(D)(1) Store Lease Agreement dated December 29,
1993 between Domino's Pizza International,
Inc. and Domino's Pizza International
(UK) Limited

(E)(1) Loan and Exchange of Stock Agreement dated December 23, 1993
between the Company and Crescent Capital, Inc.

(H)(3) Stock Option and Incentive Plan

(I)(2) Unit Purchase Option

(J)(2) Escrow Agreement among the
Company, the Underwriter, Jersey
Transfer and Trust Co. and United
Jersey Bank dated September 9, 1994

(K)(1) Acquisition Agreement between DP Group
and Tuskpride

(L)(*) International Franchise Systems, Inc. 1995 Consultant
and Advisor Stock Incentive Plan

(M)(*) International Franchise Systems, Inc. 1995 Non-Employee
Director Stock Option Plan

II-3

<PAGE>

22(1) Subsidiaries of the Registrant

23(A) Consent of Reed Smith Shaw & McClay (included in opinions
filed as Exhibit 5(A)

23(B)(***) Consent of Moore Stephens, P.C.

24 Power of Attorney (Included at page II-5)
- ---------------------

(1) Filed as an exhibit to the Company's Form SB-2 (File No. 33-78950)
filed with the Commission on May 13, 1994.

(2) Filed as an exhibit to Amendment No. 1 of the Company's Form SB-2
(File No. 33-78950) filed with the Commission on July 28, 1994.

(3) Filed as an exhibit to Amendment No. 2 to the Company's Form SB-2
(File No. 33-78950) filed with the Commission on August 9, 1994.

(*) Denotes Compensatory Plans. Filed as an Exhibit to the Company's
Annual Report on Form 10-K filed with the Commission on _______________.

(**) To be filed by amendment

(***) Filed herewith

II-4

<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this post-effective
amendment to the registration statement to be signed on its behalf by the
undersigned, in Milton Keynes, United Kingdom on of February, 1997.

INTERNATIONAL FRANCHISE
SYSTEMS, INC.

By:/s/H. Michael Bush
H. Michael Bush, President

In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates indicated.

<PAGE>

KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Colin Halpern, Gerald Halpern and Melvin F.
Lazar, and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and revocation, for him and in his name, place and
stead, in any and all capacities, to sign any and all further amendments
(including post-effective amendments) to the Registration Statement, and to file
the same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.

/s/H. Michael Bush President February 10, 1997
H. Michael Bush (Principal Executive,
Financial and
Accounting Officer)

/s/Gerald Halpern Executive Vice President February 10, 1997
Gerald Halpern and Director

/s/Colin Halpern Chairman of Board February 10, 1997
Colin Halpern

/s/Robert Pace Flack Director February 10, 1997
Robert Pace Flack

/s/Kenneth R. Franklin Director February 10, 1997
Kenneth Ronald Franklin

/s/Franklen Myles Abelman Director February 10, 1997
Franklen Myles Abelman

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors and Stockholders of
International Franchise Systems, Inc.

We hereby consent to the use in the Registration Statement and Post
Effective Amendment No. 4 of our reports dated March 25, 1996 and April 26, 1994
relating to the consolidated financial statements of International Franchise
Systems, Inc. and Subsidiaries.

We also consent to the reference to us under the caption "Experts" in
the Prospectus.

/s/ Moore Stephens, P.C.
Moore Stephens, P.C.
Certified Public Accountants

Cranford, New Jersey
February 7, 1997