DENAMERICA CORP, S-3, 1996-06-27

DENAMERICA CORP
S-3, 1996-06-27
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<PAGE> 1
As filed with the Securities and Exchange Commission on June 27, 1996
Registration No. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
DENAMERICA CORP.
(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<CAPTION>
<S> <C> <C>
GEORGIA 5812 58-1861457
- ------------------------------- ---------------------------- ----------------------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
---------------

7373 NORTH SCOTTSDALE ROAD, SUITE D-120
SCOTTSDALE, ARIZONA 85253
(602) 483-7055
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
---------------

JACK M. LLOYD COPIES TO:
PRESIDENT ROBERT S. KANT, ESQ.
DENAMERICA CORP. JERE M. FRIEDMAN, ESQ.
7373 NORTH SCOTTSDALE ROAD, SUITE D-120 O'CONNOR, CAVANAGH, ANDERSON,
SCOTTSDALE, ARIZONA 85253 KILLINGSWORTH & BESHEARS, P.A.
(602) 483-7055 ONE EAST CAMELBACK ROAD, SUITE 1100
(Name, address, including zip code, PHOENIX, ARIZONA 85012
and telephone number, including (602) 263-2606
area code, of agent for service)
---------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practical after the Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, please 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 statement number of the earlier effective registration
statement for the same offering. / / __________

If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================
Proposed Maximum AMOUNT OF
Title of Shares Amount to be Aggregate REGISTRATION
to be Registered Registered(1) Offering Price(2) FEE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock(3)......................... 3,035,299 Shares $15,738,025.32 $5,426.91
Common Stock(4)......................... 290,000 Shares 1,740,000.00 600.00
Common Stock(5)......................... 311,800 Shares 1,870,800.00 645.10
Common Stock(6)......................... 66,500 Shares 332,500.00 114.66
Common Stock(7)......................... 60,218 Shares 329,994.64 113.79
Common Stock(8)......................... 26,585 Shares 158,446.60 54.64
Common Stock(9)......................... 10,500 Shares 69,300.00 23.90
Common Stock(10)........................ 124,532 Shares 821,911.20 283.42
Common Stock(11)........................ 37,360 Shares 224,160.00 77.30
----------------- --------------- ----------
Total.......................... 3,962,794 Shares $21,285,137.76 $7,339.72
==============================================================================================================
</TABLE>
<PAGE> 2

(1) Pursuant to Rule 416, this Registration Statement shall also cover any
additional shares of Common Stock which become issuable in connection with
anti-dilution provisions of the various warrants and unit purchase options
to which this Registration Statement applies.

(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c).

(3) Such shares are being registered for resale from time to time by certain
Selling Shareholders.

(4) Such shares are being registered for resale from time to time by certain
Selling Shareholders upon exercise of the warrants issued in October 1994
to the representatives of the underwriters of the Company's initial public
offering.

(5) Such shares are being registered for resale from time to time by certain
Selling Shareholders upon exercise of certain warrants issued from
September 17, 1992 through February 2, 1993 in connection with the
issuance of the Company's Series A Preferred Stock.

(6) Such shares are being registered for resale from time to time by certain
Selling Shareholders upon exercise of certain warrants issued in September
1993 in connection with an acquisition.

(7) Such shares are being registered for resale from time to time by certain
Selling Shareholders upon exercise of certain warrants issued in June 1993
as compensation for the issuance of subordinated notes.

(8) Such shares are being registered for resale from time to time by certain
Selling Shareholders upon exercise of certain warrants issued in June 1993
in connection with investment banking services.

(9) Such shares are being registered for resale from time to time by certain
Selling Shareholders upon exercise of certain warrants issued in November
1993 in connection with the waiver of certain rights.

(10) Such shares are being registered for resale from time to time by certain
Selling Shareholders upon exercise of unit purchase options (the "Unit
Purchase Options") issued in December 1992 in connection with placement
agent services.

(11) Such shares are being registered for resale from time to time by certain
Selling Shareholders upon exercise of certain warrants to be issued upon
exercise of the Unit Purchase Options.

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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH sTATE.

SUBJECT TO COMPLETION, DATED JUNE 27, 1996

PROSPECTUS
3,962,794 SHARES OF COMMON STOCK

DENAMERICA CORP.

This Prospectus relates to the following shares of common stock, par
value $.10 per share (the "Common Stock"), that may be sold from time to time by
certain selling shareholders (the "Selling Shareholders") of DenAmerica Corp.
(the "Company"): (i) 3,035,299 outstanding shares of Common Stock; (ii) 290,000
shares of Common Stock that may be sold upon exercise of certain non-redeemable
warrants (the "Representatives' Warrants") that were issued in October 1994 to
the representatives of the underwriters of the Company's initial public
offering, each of which entitles the holder to purchase one share of Common
Stock at a price of $6.00 per share until October 18, 1999; (iii) 311,800 shares
of Common Stock that may be sold upon exercise of certain redeemable warrants
(the "Preferred Warrants") that were issued from September 17, 1992 through
February 2, 1993 in connection with the issuance of the Company's Series A
Preferred Stock, each of which entitles the holder to purchase one share of
Common Stock at a price of $6.00 per share until their expiration during the
period from September 17, 1996 through February 2, 1997; (iv) 66,500 shares of
Common Stock that may be sold upon exercise of certain non-redeemable warrants
(the "MMR Warrants") that were issued in September 1993 in connection with the
acquisition of certain restaurants, each of which entitles the holder to
purchase one share of Common Stock at a price of $5.00 per share until October
18, 1996; (v) 60,218 shares of Common Stock that may be sold upon exercise of
certain non-redeemable warrants (the "Levy Warrants") that were issued in June
1993 in connection with the issuance of certain subordinated notes, each of
which entitles the holder to purchase one share of Common Stock at a price of
$5.48 per share until October 18, 1999; (vi) 26,585 shares of Common Stock that
may be sold upon exercise of certain non-redeemable warrants (the "Trask
Warrants") that were issued in June 1993 in connection with investment banking
services, each of which entitles the holder to purchase one share of Common
Stock at a price of $5.96 per share until July 27, 1997; (vii) 10,500 shares of
Common Stock that may be sold upon exercise of certain non-redeemable warrants
(the "Waiver Warrants") that were issued in November 1993 in connection with the
waiver of certain rights, each of which entitles the holder to purchase one
share of Common Stock at an exercise price of $6.60 per share until October 18,
1996; (viii) 124,532 shares of Common Stock that may be sold upon exercise of
4.98 unit purchase options (the "Unit Purchase Options") that were issued in
December 1992 in connection with placement agent services, each of which
entitles the holder to purchase units consisting of 25,000 shares of Common
Stock and non-redeemable warrants (the "Unit Warrants") to purchase 7,500 shares
of Common Stock at an exercise price of $165,000 per unit until October 18,
1997; and (ix) 37,360 shares of Common Stock that may be sold upon exercise of
the Unit Warrants issuable upon exercise of the Unit Purchase Options, each of
which entitles the holder to purchase one share of Common Stock at a price of
$6.00 per share until October 18, 1997. The Representatives' Warrants, Preferred
Warrants, MMR Warrants, Trask Warrants, Waiver Warrants, and Unit Warrants
sometimes are collectively referred to herein as the "Selling Shareholders'
Warrants." To the extent required by applicable law or Securities and Exchange
Commission regulations, this Prospectus shall be delivered to purchasers upon
resale of such Common Stock by the Selling Shareholders. None of the proceeds of
sales by such Selling Shareholders will be received by the Company.

The Company's Common Stock is traded on the American Stock Exchange
(the "AMEX") under the symbol "DEN." On June 21, 1996, the last sale price of
the Common Stock as reported on the AMEX was $5.13.

THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS," WHICH BEGINS ON PAGE 5 OF THIS PROSPECTUS.

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 , 1996.
<PAGE> 4
AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the Commission:
New York Regional Office, Seven World Trade Center, New York, New York 10048,
and Chicago Regional Office, 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material can be obtained from the Public Reference Section of the
Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 upon payment of the prescribed fees. The Commission also maintains a Web
site that contains reports, proxy and information statements and other materials
that are filed through the Commission's Electronic Data Gathering, Analysis, and
Retrieval system. This Web site can be accessed at http://www.sec.gov.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The Company hereby incorporates by reference in this Prospectus the
following documents previously filed with the Commission pursuant to the
Exchange Act: (i) the Company's Transition Report on Form 10-K for the year
ended December 27, 1995, as filed by the Company on June 12, 1996; (ii) the
Company's Quarterly Report on Form 10-Q for the quarter ended March 27, 1996, as
filed by the Company on May 16, 1996; (iii) the Company's Current Report on Form
8-K as filed by the Company on April 15, 1996, as amended by Form 8-K/A as filed
by the Company on June 12, 1996; (i) the Company's Current Report on Form 8-K as
filed by the Company on May 3, 1996; and (v) the description of the Company's
Common Stock contained in the Registration Statement on Form 8-A as filed with
the Commission on October 18, 1994. All reports and other documents subsequently
filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this Prospectus shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein prior to the date
hereof shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.

The information relating to the Company contained in this Prospectus
summarizes, is based upon, or refers to, information and financial statements
contained in one or more of the documents incorporated by reference herein;
accordingly, such information contained herein is qualified in its entirety by
reference to such documents and should be read in conjunction therewith.

The Company will furnish without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents referred to above that have been incorporated by
reference herein (other than exhibits to such documents, unless such exhibits
are specifically incorporated by reference into the information that this
Prospectus incorporates). Requests should be directed to DenAmerica Corp., 7373
N. Scottsdale Road, Suite D-120, Scottsdale, Arizona 85253, (telephone (602)
483-7055), Attention: Secretary.

2
<PAGE> 5
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to the
detailed information and financial statements, including the notes thereto,
incorporated by reference in this Prospectus. Unless otherwise indicated, all
information in this Prospectus assumes no exercise of the Selling Shareholders'
Warrants, Unit Purchase Options, or any other presently outstanding or
authorized options.
THE COMPANY

The Company operates 241 restaurants in 30 states in the western,
midwestern, and southeastern United States. Of these restaurants, 178 currently
are operated as Denny's restaurants, which represents approximately 10% of the
Denny's restaurant system, making the Company the world's largest Denny's
restaurant franchisee in terms of revenue and number of restaurants operated.
Denny's restaurants generally are open 24 hours a day, seven days a week, and
are designed to provide a casual dining atmosphere with moderately priced food
and quick, efficient service. The Company operates its 63 non-Denny's
restaurants under various other trade names. The Company's Denny's and
non-Denny's restaurants are family-oriented, full-service dining establishments
featuring a wide variety of traditional family fare.

The Company develops and operates its Denny's restaurants pursuant to
specific standards established by Denny's, Inc., the franchisor of Denny's
restaurants. Denny's restaurants have been operated for more than 40 years. The
Company believes that the uniform development and operating standards of the
Denny's system enables the Company to operate its Denny's restaurants
efficiently and profitably and affords the Company significate benefits,
including the national name recognition, popularity, and goodwill associated
with Denny's restaurants.

The Company has pursued an aggressive growth strategy and has acquired
or developed all of its restaurants since its inception in 1986. On March 29,
1996, the Company merged with Denwest Restaurant Corp. ("DRC") (the "Merger").
Prior to the Merger, DRC was the second largest Denny's franchisee and operated
82 Denny's restaurants and 20 restaurants under the "Kettle" trade name in 21
states in the western and midwestern United States. Since 1986, DRC had
developed more new Denny's restaurants than either Denny's, Inc. or any other
Denny's franchisee. Had the Merger occurred on December 28, 1994, the Company
would have had revenue of approximately $182.0 million and $49.0 million and net
income (loss) of approximately $884,000 and $(3.2 million), or $0.07 and $(0.24)
per share, on a pro forma basis in fiscal 1995 and the first three months of
fiscal 1996, respectively.

The Company believes that the Merger will provide enhanced strategic,
operational, and financial synergies and increased availability of capital
resources. These advantages include (i) substantial reductions in operating
expenses and increased operating income as the overhead of the combined
companies is consolidated, duplicative functions are eliminated, and other cost
savings are realized; (ii) complementary administrative skills and operating
capabilities of the management of the combined companies; (iii) expansion of the
Company's geographic network of restaurants into DRC's predominately western
markets, which the Company believes will provide significant opportunities for
growth through development of new restaurants and acquisition of existing
restaurants; (iv) increased ability to finance and develop new restaurants,
acquire existing restaurants, convert non-Denny's restaurants to the Denny's
concept, and re-image existing Denny's restaurants; and (v) increased ability to
attract and retain highly qualified management personnel.

On May 31, 1996, the Company entered into an agreement to purchase all
of the outstanding stock of Black-eyed Pea U.S.A., Inc., which operates 100
"Black-eyed Pea" restaurants and franchises the rights to operate an additional
30 Black-eyed Pea restaurants to third parties. Black-eyed Pea U.S.A., Inc. had
revenue of approximately $145.0 million during fiscal 1996.

The Company's business strategy is to (a) increase the number of its
Denny's restaurants through the development of new Denny's restaurants, the
acquisition of existing Denny's restaurants, the conversion of certain of its
current non-Denny's restaurants to the Denny's concept, and the acquisition and
conversion to Denny's of restaurants currently operating under other restaurant
concepts; (b) re-image certain of its Denny's restaurants that have not already
been re-imaged to the new Denny's format; (c) expand its operations to include
one or more additional restaurant concepts through the acquisition of one or
more restaurant chains or multiple restaurant locations; and (d) increase its
operational efficiencies by capitalizing on operating synergies and selling or
closing restaurants that are not profitable and cannot be successfully re-imaged
or converted. In connection with the Merger, the Company obtained a new $65.0
million credit facility that it intends to utilize to implement its strategy of
developing new restaurants, acquiring existing restaurants, and converting or
re-imaging restaurants. The Company anticipates that it will either convert to
the Denny's concept or dispose of or close all of its current non-Denny's
restaurants by the end of 1997. The Company also anticipates that all of its
lower-volume Denny's restaurants will either be re-imaged to the new Denny's
format or sold or closed by the end of 1997.

3
<PAGE> 6
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
Securities Offered by the Selling Shareholders................. 3,962,794 shares of Common Stock.
Common Stock Currently Outstanding............................. 13,138,944 shares.
Use of Proceeds................................................ The Company intends to use the
proceeds from the exercise of
the Selling Shareholders'
Warrants and Unit Purchase
Options described in this
Prospectus to provide working
capital. The Company will not
receive any of the proceeds of
sales by the Selling
Shareholders.
Risk Factors................................................... Investors should carefully consider
the factors discussed under "Risk Factors."
American Stock Exchange symbol................................. DEN
</TABLE>

<TABLE>
<CAPTION>
SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except share amounts)
AS OF AND FOR THE
AS OF AND FOR THE FISCAL YEAR ENDING THREE MONTHS ENDING
-------------------------------------------------- -------------------
DEC. 26, DEC. 31, DEC. 30, DEC. 28, DEC. 27, MAR. 29, MAR. 27
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA(1):
<S> <C> <C> <C> <C> <C> <C> <C>
Restaurant sales $20,702 $27,712 $32,584 $47,323 $74,683 $15,843 $20,161
Restaurant operating income 1,265 2,671 3,147 4,539 6,643 1,412 869
Administrative expenses 1,461 1,867 2,050 2,619 3,380 799 1,047
Operating income (loss) (23) 930 1,328 1,320 3,263 613 (178)
Interest expense (535) (449) (736) (1,301) (2,467) (484) (860)
Net income (loss), before
extraordinary item (701) (22) 140 (341) 200 69 (677)

OTHER DATA:
EBITDA(2) $655 $1,923 $2,656 $2,821 $6,722 $1,186 $738
Cash flows provided by (used in)
operating activities 985 1,633 2,493 2,410 6,305 1,486 (344)
Cash flows (used in) investing
activities (1,393) (1,988) (1,002) (9,667) (8,736) (3,711) (1,838)
Cash flows provided by (used in)
financing activities 400 (118) (1,168) 7,092 2,273 2,067 2,182
Capital expenditures 1,499 2,346 1,574 9,667 8,736 3,711 1,838
Depreciation and amortization 678 993 1,328 1,501 2,936 573 916
Ratio of earnings to fixed
charges(3) .41 1.11 1.15 .81 1.10 1.08 .47
Number of restaurants, end of
period 28 31 37 70 102 71 250

Balance Sheet Data:
Working capital (deficit) $(2,470) $(3,213) $(3,568) $(6,107) $(9,406) $(7,095) $(30,097)
Total assets 8,618 9,907 14,529 35,028 53,785 38,181 136,827
Long-term debt, less current
portion 602 475 2,135 7,552 10,371 10,035 34,792
Obligations under capital leases,
less current obligations 2,289 2,808 4,307 7,151 19,881 7,048 21,992
Redeemable convertible preferred
stock - - - 7,397 7,501 7,423 -
Shareholders' equity (deficit) (1,102) (1,703) (1,218) 957 564 860 17,623
</TABLE>
- ---------------
(1) The Company has consummated various acquisitions and has opened new
restaurants during each of the five fiscal years shown. Accordingly,
revenue increases in each of the years shown arise primarily from
restaurant acquisitions and openings in each year.
(2) EBITDA represents income (loss) before minority interest in joint ventures,
interest, income taxes, depreciation and amortization. EBITDA is not
intended to represent cash flows from operations as defined by generally
accepted accounting principles and should not be considered as an
alternative to net income (loss) as an indication of the Company's
operating performance or to cash flows from operations as a measure of
liquidity. EBITDA is included because it is a basis upon which the Company
assesses its financial performance.
(3) Earnings consist of pre-tax income after minority interests plus fixed
charges, excluding capitalized interest. The Company's fixed charges
consist of (i) interest, whether expensed or capitalized; (ii) amortization
of debt expense, including any discount or premium whether expensed or
capitalized; and (iii) a portion of rental expense representing the
interest factor. Earnings were inadequate to cover fixed charges in fiscal
years 1991 $(841,000) and 1994 $(550,000) and for the quarter ended March
27, 1996 $(1,036,000).

The Company was incorporated in Georgia on September 25, 1989. The
Company maintains its principal executive offices at 7373 North Scottsdale Road,
Suite D-120, Scottsdale, Arizona 85253, and its telephone number is (602)
483-7055. As used in this Prospectus, the term "Company" refers to DenAmerica
Corp. and its subsidiaries, predecessors, and acquired entities, including DRC.
See "Business - Development of the Company."

4
<PAGE> 7
RISK FACTORS

The following Risk Factors, in addition to those discussed elsewhere
in this Prospectus, should be considered carefully in evaluating the Company and
its business before purchasing any of the shares offered hereby.

NO ASSURANCE OF PROFITABILITY; INTEGRATION OF BUSINESS OPERATIONS FOLLOWING
THE MERGER

The Company's ability to generate operating profits will depend upon
its ability to successfully integrate the operations of DRC with those of the
Company subsequent to the Merger; the nature and extent of any future
developments, acquisitions, conversions, and re-imagings of restaurants; the
Company's capital resources; general economic and demographic conditions; and
the Company's ability to refinance, restructure, or repay its outstanding
indebtedness. There can be no assurance that the Company will be profitable in
the future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

The Company anticipates that it will be able to use the opportunities
created by the Merger to effect what it believes will be substantial cost
savings, including a reduction in operating expenses as a result of the
elimination of duplicative administrative facilities, personnel, and other
overhead expenses. Significant uncertainties, however, accompany any business
combination and its implementation with respect to the ability of the combined
companies to integrate administrative functions and management resources in
order to achieve operating efficiencies. There can be no assurance that the
Company will be able to realize cost savings as a result of the Merger, that
such reductions will not result in a decrease in revenue and profits, or that
there will not be other adverse effects from the reduction of such expenses. The
inability to achieve the anticipated cost savings could have a material adverse
effect on the Company's operating results in the future.

RISKS ASSOCIATED WITH BUSINESS STRATEGY

The Company intends to pursue a strategy of growth primarily through
the development of new Denny's restaurants, the acquisition of existing Denny's
restaurants, the conversion of certain non-Denny's restaurants to the Denny's
concept, the re-imaging of certain of its existing Denny's restaurants to the
new Denny's format, and the expansion of its operations to include one or more
additional restaurant concepts. There can be no assurance that the Company will
be successful in developing new Denny's restaurants or acquiring existing
Denny's restaurants on acceptable terms and conditions, that its operations can
be expanded to include other restaurant concepts, that any additional
restaurants it develops or acquires will be effectively and profitably managed
and integrated into its operations, that it will be able to effect its
contemplated conversions or re-imagings, or that any restaurants that it
develops, acquires, converts, or re-images will operate profitably. The
execution of the Company's business strategy will require the availability of
substantial funds. See "Risk Factors - Significant Borrowings and Future
Financings."

Unforeseen expenses, difficulties, and delays frequently encountered
in connection with the rapid expansion of operations also could hinder the
Company from executing its business strategy. The magnitude, timing, and nature
of future restaurant developments, acquisitions, conversions, and re-imagings
will depend upon various factors, including the availability of suitable sites,
the ability to negotiate suitable terms, the Company's financial resources, the
availability of restaurant management and other personnel, the ability to obtain
the consent of Denny's, Inc. to such development, acquisitions, and conversions,
and general economic and business conditions. Many of these factors will be
beyond the control of the Company.

EXPANSION OF OPERATIONS

The Company's operations have expanded significantly since 1990. The
Company's success in the future will depend on its ability to integrate the
operations of DRC with its prior operations, to expand the number of its
restaurants either through increasing the number of its Denny's restaurants or
expanding its operations to include one or more additional restaurant concepts,
such as the Black-eyed Pea concept, or both, and to operate and manage
successfully its growing operations. The Company's ability to expand
successfully will depend upon a number of factors, including the availability
and cost of suitable restaurant locations for development; the availability of
restaurant acquisition opportunities; the hiring,

5
<PAGE> 8
training, and retaining of additional management and restaurant personnel; the
availability of adequate financing; the continued development and implementation
of management information systems; and competitive factors.

The rate at which the Company will be able to increase the number of
restaurants it operates will vary depending upon whether the Company acquires
existing restaurants or develops new restaurants. The acquisition of existing
restaurants will depend upon the Company's ability to identify and acquire
restaurants on satisfactory terms and conditions. The opening of new restaurants
will depend upon the Company's ability to locate suitable sites in terms of
favorable population characteristics, density and household income levels,
visibility, accessibility and traffic volume, proximity to demand generators
(including shopping malls, lodging, and office complexes) and potential
competition; to obtain financing for construction, tenant improvements,
furniture, fixtures, and equipment; to negotiate acceptable leases or terms of
purchase; to secure liquor licenses and zoning, environmental, health and
similar regulatory approvals; to recruit and train qualified personnel; and to
manage successfully the rate of expansion and expanded operations. The opening
of new restaurants also may be affected by increased construction costs and
delays resulting from governmental regulatory approvals, strikes or work
stoppages, adverse weather conditions, and various acts of God. Newly opened
restaurants may operate at a loss for a period following their initial opening.
The length of this period will depend upon a number of factors, including the
time of year the restaurant is opened, sales volume, and the Company's ability
to control costs. There can be no assurance that the Company will be successful
in achieving its expansion goals through development or acquisition of
additional restaurants or that any additional restaurants that are developed or
acquired will be profitable.

SIGNIFICANT BORROWINGS AND FUTURE FINANCINGS

The development of new restaurants, the acquisition of existing
restaurants, and the conversion and re-imaging of restaurants requires funds for
construction, tenant improvements, furniture, fixtures, equipment, training of
employees, permits, initial franchise fees, and additional expenditures. See
"Business - Denny's Restaurants - Unit Economics." The Company has incurred
substantial indebtedness to effect its restaurant developments, acquisitions,
conversions, and re-imagings to date, and the Company may incur substantial
additional indebtedness in the future in order to implement its business plan
and growth strategy. The Company had long-term debt of $34.8 million,
subordinated notes of $20.8 million, and obligations under capital leases
aggregating $22.0 million and a working capital deficit of $30.1 million as of
March 27, 1996.

The Company may seek additional equity or debt financing in the future
to provide funds to develop or acquire additional restaurants. In addition, the
Company currently intends to raise sufficient capital, either through the sale
of equity or by incurring replacement indebtedness, to enable it to retire its
Series A 13% Subordinated Notes due 2003 (the "Series A Notes") and Series B 13%
Subordinated Notes due 2003 (the "Series B Notes," and, together with the Series
A Notes, the "Merger Notes") prior to the dates on which the related Series A
Warrants and Series B Warrants, respectively, become exercisable. See
"Description of Securities - Warrants." There can be no assurance that such
financing will be available or will be available on satisfactory terms, that the
Company will be able to repay its obligations to develop new restaurants or to
convert non-Denny's restaurants to the Denny's concept or that it will otherwise
be able to expand its restaurant operations, that the Company will be able to
refinance, restructure, or satisfy its obligations as they become due, or that
it will be able to retire its Series A Notes or Series B Notes before the
related Series A Warrants or Series B Warrants are exercised. See "Risk Factors
- - Expansion of Operations" and "Risk Factors - Inability to Develop or Convert
Restaurants." While debt financing enables the Company to add more restaurants
than it would otherwise be able to do, expenses are increased by such financing
and such financing must be repaid by the Company regardless of the Company's
operating results. Future equity financings could result in dilution to
shareholders.

The terms of the Series A Notes provide that the holders of such notes
may require the Company to redeem all of the Series A Notes in the event of a
"Change of Control," as defined in the Indentures governing the Series A Notes.
See "Description of Securities - Merger Notes." There can be no assurance that
the Company will have sufficient funds available to redeem all or any part of
the Series A Notes or that the Company will have access to adequate third-party
financing on acceptable terms in order to enable it to redeem the Series A Notes
upon the occurrence of a Change of Control. The inability to redeem the Series A
Notes or the lack of adequate financing on favorable terms could have a material
adverse effect on the Company.

6
<PAGE> 9
RELIANCE ON DENNY'S, INC.

The Company currently operates 178 Denny's restaurants as a Denny's
franchisee. As a result of the nature of franchising and the Company's franchise
agreements with Denny's, Inc., the long-term success of the Company depends, to
a significant extent, on the continued vitality of the Denny's restaurant
concept and the overall success of the Denny's system; the ability of Denny's,
Inc. to identify and react to new trends in the restaurant industry, including
the development of popular menu items; the ability of Denny's Inc. to develop
and pursue appropriate marketing strategies in order to maintain and enhance the
name recognition, reputation, and market perception of Denny's restaurants; the
goodwill associated with the Denny's trademark; the quality, consistency, and
management of the overall Denny's system; and the successful operation of
Denny's restaurants owned by other franchisees. Any business reversals that may
be encountered by Denny's, Inc., a failure by Denny's, Inc. to promote the
Denny's name or restaurant concept, the inability or failure of Denny's, Inc. to
support its franchisees, including the Company, or the failure to operate
successfully the Denny's restaurants that Denny's, Inc. itself owns could have a
material adverse effect on the Company. The Company has no control over the
management or operation of Denny's, Inc. or other Denny's franchisees. Negative
publicity with respect to Denny's, Inc. or the Denny's name could adversely
affect the Company. For example, the Company experienced a decline in traffic
and restaurant sales in certain of its Denny's restaurants as a result of the
negative publicity that arose in 1993 relating to claims of alleged racial
discrimination against customers in certain Denny's, Inc. restaurants and a
subsequent investigation of such claims by the United States Department of
Justice.

INABILITY TO DEVELOP OR CONVERT RESTAURANTS

The Company and Denny's, Inc. currently are parties to a development
agreement, as amended (the "Development Agreement") that gives the Company the
exclusive right to develop and open an additional 33 Denny's restaurants in
specified locations during the period ending December 31, 1997. See "Business -
Development Agreement." The acquisition of restaurants does not constitute the
opening of new restaurants under the Development Agreement. There can be no
assurance that the Company will be able to secure sufficient restaurant sites
that it deems to be suitable or to develop restaurants on such sites on terms
and conditions it considers favorable in order to satisfy the requirements of
the Development Agreement. In the event that the Company fails to timely comply
with the schedule for developing restaurants or otherwise defaults under the
Development Agreement, Denny's, Inc. will have the right to terminate the
Development Agreement and the Company's exclusive right to develop restaurants
under that agreement, which could have an adverse effect on the Company.

An agreement with Denny's Inc. requires the Company to convert 20
non-Denny's restaurants to the Denny's concept by September 1997. Another
agreement with Denny's, Inc. requires the Company to convert 21 designated
non-Denny's restaurants to the Denny's concept by January 1, 1998 at the rate of
11 conversions in 1996 and 10 in 1997. The Company also has agreed to close or
convert to a non-competing restaurant concept 24 designated non-Denny's
restaurants by January 1, 1998. The failure to meet the requirements of these
agreements will be deemed to be a material breach of all of the Company's
franchise agreements with Denny's, Inc., which would enable Denny's, Inc. to
terminate all such agreements. Such a termination would have a material adverse
effect on the Company.

At the request of the Company, Denny's, Inc. from time to time has
agreed to amend the terms of the agreements described above, so as to extend the
time in which the Company was required to develop new Denny's restaurants or to
convert restaurants to the Denny's concept. The Company requested such
amendments as a result of its inability to secure sites for new restaurants that
it believed to be attractive on favorable terms and conditions and to secure
adequate financing to enable it to convert restaurants to the Denny's concept
within the time periods required. There can be no assurance that Denny's, Inc.
will extend the development or conversion schedules in the future in the event
that the Company experiences any difficulty in satisfying such schedules for any
reason, including a shortage of capital.

RESTRICTIONS IMPOSED BY DENNY'S FRANCHISE AGREEMENTS

The Company is a party to a separate franchise agreement with Denny's,
Inc. for each of its Denny's restaurants (the "Denny's Franchise Agreements").
The Denny's Franchise Agreements impose a number of restrictions and obligations
on the Company. The Denny's Franchise Agreements require the Company to pay an
initial franchise fee and royalties equal to 4% of weekly gross sales and an
advertising contribution of 2% of weekly gross sales. Such amounts must be paid
or

7
<PAGE> 10
expended regardless of the profitability of the Company's Denny's restaurants.
In addition, the Denny's Franchise Agreements require the Company to operate its
Denny's restaurants in accordance with the requirements and specifications
established by Denny's, Inc. relating to the exterior and interior design,
decor, and furnishings of Denny's restaurants, menu selection, the preparation
of food products, and quality of service as well as general operating
procedures, advertising, maintenance of records, and protection of trademarks.
The failure of the Company to satisfy such requirements could result in the loss
of the Company's franchise rights for some or all of its Denny's restaurants as
well as its development rights for additional Denny's restaurants. See "Business
- - Denny's Restaurants - Denny's Franchise Agreements" and "Business -
Development Agreement." In the event that the Company defaults under the Denny's
Franchise Agreements, the Company could be subject to potential damages for
breach of contract and could lose its rights under those agreements, including
the right to what the Company believes are favorable franchise arrangements and
the right to use the "Denny's" trademarks and trade styles. The loss of such
rights would have a material adverse effect on the Company. Denny's, Inc. has
retained the right to open on its own behalf or to grant to other franchisees
the right to open other Denny's restaurants in the immediate vicinity of the
Company's Denny's restaurants. In addition, from time to time, Denny's, Inc. may
require the Company to modify its restaurants to conform with the then-existing
Denny's restaurant format.

The Company is a party to a separate franchise agreement with Denny's,
Inc. for each of its Denny's restaurants (the "Denny's Franchise Agreements").
The Denny's Franchise Agreements provide that, in the event an assignment is
deemed to have occurred thereunder, Denny's, Inc. will have the option to
purchase the interest being transferred. An assignment under the Denny's
Franchise Agreements will be deemed to have occurred if a person, entity, or
group of persons (other than a group including any of Jack M. Lloyd, William J.
Howard, Jeffrey D. Miller, William G. Cox, or BancBoston Ventures, Inc.
("BancBoston")) acquires voting control of the Board of Directors of the
Company.

CERTAIN FACTORS AFFECTING THE RESTAURANT INDUSTRY

The ownership and operation of restaurants may be affected by adverse
changes in national, regional, or local economic or market conditions; increased
costs of labor (including those which may result from any increases in
applicable minimum wage requirements); increased costs of food products; fuel
shortages and price increases; competitive factors; the number, density, and
location of competitors; limited alterative uses for properties and equipment;
changing consumer tastes, habits, and spending priorities; the cost and
availability of insurance coverage; management problems; uninsured losses;
changing demographics; changes in government regulation; changing traffic
patterns; weather conditions; and other factors. The Company may be the subject
of litigation based on discrimination, personal injury, or other claims,
including claims that may be based upon legislation that imposes liability on
restaurants or their employees for injuries or damages caused by the negligent
service of alcoholic beverages to an intoxicated person or to a minor.
Multi-unit restaurant operators, such as the Company, can be adversely affected
by publicity resulting from food quality, illness, injury, or other health and
safety concerns or operating issues resulting from one restaurant or a limited
number of restaurants operated under the same name, including those not owned by
the Company. None of these factors can be predicted with any degree of
certainty, and any one or more of these factors could have a material adverse
effect on the Company.

COMPETITION

As part of the nation's largest family-oriented, full-service
restaurant chain, the Company's Denny's restaurants compete primarily with
regional restaurant chains such as International House of Pancakes, Big Boy,
Shoney's, Friendly's, and Perkins. The Company's non-Denny's restaurants also
compete with these chains as well as with smaller regional, local, and
independent operators. The restaurant industry is intensely competitive with
respect to price, service, location, personnel, and type and quality of food. In
addition, restaurants compete for attractive restaurant sites and the
availability of restaurant personnel and managers. The Company has many
well-established competitors with financial and other resources substantially
greater than those of the Company. Certain competitors have been in existence
for a substantially longer period than the Company and may be better established
in markets where the Company's restaurants are or may be located. The restaurant
business often is affected by changes in consumer tastes, national, regional, or
local economic conditions, demographic trends, traffic patterns, and the type,
number and location of competing restaurants. The Company's success will depend,
in part, on the ability of both the Company's management and Denny's, Inc. to
identify and respond appropriately to changing conditions. In addition, factors
such as inflation, increased food, labor, and benefit costs, and the
availability of experienced management and hourly employees, which may adversely
affect the restaurant industry in general, would affect the Company's
restaurants.

8
<PAGE> 11
CONTROL BY CERTAIN SHAREHOLDERS; CONFLICTS OF INTEREST

The directors and officers of the Company currently own approximately
46.2% of the Company's outstanding Common Stock. In addition, BancBoston, a
former shareholder of DRC, currently owns approximately 14.3% of the Company's
outstanding Common Stock. Accordingly, such shareholders collectively have the
power to elect all of the members of the Company's Board of Directors and
thereby control the business and policies of the Company.

Jack M. Lloyd, the President and Chief Executive Officer of the
Company, William J. Howard, a Vice President of the Company, and BancBoston
currently hold an aggregate of $22,794,000 principal amount of the Company's
Series A Notes and Series B Notes in addition to their Common Stock. As a result
of such shareholders' ability, together with the Company's other directors and
officers, to direct the policies of the Company, an inherent conflict of
interest may arise in connection with decisions regarding the timing of and the
allocation of assets of the Company for the purposes of interest payments on, or
redemption of, the Series A Notes and Series B Notes. In addition, the Series A
Notes and Series B Notes contain restrictive covenants relating to the operation
of the Company and the maintenance of certain financial ratios and tests. There
can be no assurance that the holders of the Series A Notes and Series B Notes
will waive any default under the notes. A default not waived by a majority of
the holders of the Series A Notes and Series B Notes could have a material
adverse effect on the holders of the Company's Common Stock.

DEPENDENCE UPON KEY PERSONNEL

The Company's success will depend, in large part, upon the services of
Jeffrey D. Miller, the Company's Chairman of the Board; Jack M. Lloyd, the
Company's President and Chief Executive Officer; and William G. Cox, the
Company's Chief Operating Officer. Although the Company has employment
agreements with Messrs. Miller, Lloyd, and Cox expiring in September 1998,
December 1997, and May 1999, respectively, the loss of the services of any of
them could materially and adversely affect the Company. See "Management -
Employment Agreements."

GOVERNMENT REGULATION

The Company is subject to various federal, state, and local laws
affecting its business. The development and operation of restaurants depend to a
significant extent on the selection and acquisition of suitable sites, which are
subject to zoning, land use, environmental, traffic, and other regulations of
state and local governmental agencies. City ordinances or other regulations, or
the application of such ordinances or regulations, could impair the Company's
ability to construct or acquire restaurants in desired locations and could
result in costly delays. In addition, restaurant operations are subject to
licensing and regulation by state and local departments relating to health,
sanitation, safety standards, and fire codes; federal and state labor laws
(including applicable minimum wage requirements, tip credit provisions, overtime
regulations, workers' compensation insurance rates, unemployment and other
taxes, working and safety conditions, and citizenship requirements); zoning
restrictions; and, in the few restaurants currently operated by the Company at
which alcoholic beverages are served, state and local licensing of the sale of
alcoholic beverages. The delay or failure to obtain or maintain any licenses or
permits necessary for operations could have a material adverse effect on the
Company. In addition, an increase in the minimum wage rate, employee benefit
costs (including costs associated with mandated health insurance coverage), or
other costs associated with employees could adversely affect the Company. The
Company also is subject to the Americans with Disabilities Act of 1990 which,
among other things, may require the installation of certain fixtures or
accommodations in new restaurants or renovations to its existing restaurants to
meet federally mandated requirements.

POSSIBLE VOLATILITY OF STOCK PRICE

The market price of the Company's Common Stock could be subject to
wide fluctuations in response to quarterly variations in the operating results
of the Company or other restaurant companies, changes in analysts' estimates of
the Company's financial performance, changes in national and regional economic
conditions, the financial markets, or the restaurant industry, natural
disasters, or other developments affecting the Company or other restaurant
companies. The trading volume of the Company's Common Stock has been limited,
which increases the volatility of the market price for such stock. In addition,
the stock market has experienced extreme price and volume fluctuation in recent
years. This volatility has had a significant effect on the market prices of
securities issued by many companies for reasons not necessarily related to the
operating performances of these companies.

9
<PAGE> 12
RIGHTS TO ACQUIRE SHARES

A total of 1,235,000 shares of the Company's Common Stock have been
reserved for issuance upon exercise of options granted or which may be granted
under the Company's stock option plans. See "Management - Stock Option Plans."
Employee stock options to acquire an aggregate of 1,116,800 shares of Common
Stock at a weighted average exercise price of $4.01 per share currently are
outstanding. In addition, warrants and unit purchase options to acquire
2,031,523 shares of Common Stock at a weighted average exercise price of $3.66
per share are currently outstanding. During the terms of such options and
warrants, the holders thereof will have the opportunity to profit from an
increase in the market price of the Company's Common Stock. The existence of
such options and warrants may adversely affect the terms on which the Company
can obtain additional financing in the future, and the holders of such options
and warrants can be expected to exercise such options and warrants at a time
when the Company, in all likelihood, would be able to obtain additional capital
by offering shares of Common Stock on terms more favorable to it than those
provided by the exercise of such options and warrants. See "Description of
Securities."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of Common Stock in the public market
could adversely affect prevailing market prices for the Company's Common Stock
and could adversely affect the Company's ability to raise capital. There
currently are outstanding 13,138,944 shares of the Company's Common Stock. Of
these shares, approximately 10,170,700 shares are freely transferrable without
restriction under the Securities Act of 1933, as amended (the "Securities Act"),
unless they are held by "affiliates" of the Company, as that term is defined in
the Securities Act and the regulations promulgated thereunder or transfer of
certain shares is restricted as a result of contractual obligations.

The 6,937,500 shares of Common Stock issued pursuant to the Merger
generally are freely tradeable under Rule 145 under the Securities Act, unless
held by an affiliate, in which case such shares will be subject to the volume
and manner of sale restrictions under Rule 144. In connection with the Merger,
certain of the former shareholders of DRC entered into lock-up agreements with
respect to 4,660,256 shares of Common Stock issued to them upon consummation of
the Merger. See "Description of Securities - Shares Eligible for Future Sale."
The former shareholders of DRC have certain rights with respect to registration
of the shares of Common Stock issued in connection with the Merger or upon
exercise of the warrants issued in connection with the Merger. Holders of the
Selling Shareholders' Warrants and Unit Purchase Options have certain rights
with respect to registration of the shares underlying such warrants and options
for offer or sale to the public. See "Description of Securities - Registration
Rights." The Registration Statement of which this Prospectus forms a part is
intended to satisfy certain of the Company's obligations with respect to such
registration rights.

LACK OF DIVIDENDS; RESTRICTIONS ON ABILITY TO PAY DIVIDENDS IN THE FUTURE

The Company has never paid any dividends on its Common Stock, and it is
not anticipated that it will pay dividends in the foreseeable future. The
Company intends to apply any earnings to the expansion and development of its
business. In addition, the terms of the Company's $65.0 million credit facility
and the terms of the Indentures governing its Series A Notes and Series B Notes
also prohibit the Company from paying dividends on its Common Stock.

CHANGE IN CONTROL PROVISIONS

The Company's Restated Articles of Incorporation and Amended and
Restated Bylaws and certain provisions of the Georgia Business Corporation Code
contain provisions that may have the effect of making more difficult or delaying
attempts by others to obtain control of the Company, even when these attempts
may be in the best interests of shareholders. See "Description of Securities -
Certain Provisions of the Company's Restated Articles of Incorporation and
Amended and Restated Bylaws; Certain Provisions of Georgia Law."

USE OF PROCEEDS

The Company intends to use the proceeds from the exercise of the
Selling Shareholders' Warrants and Unit Purchase Options, a maximum of
approximately $5.5 million if all of the Selling Shareholders' Warrants and Unit
Purchase Options are exercised, net of the expenses of this offering, to provide
working capital which may be used for various

10
<PAGE> 13
corporate purposes, including the development of new restaurants, acquisitions
of existing restaurants, conversions of existing restaurants to the Denny's
concept, and re-imaging of existing Denny's restaurants.

The Company will not receive any of the proceeds of sales of shares of
Common Stock by the Selling Shareholders.

DIVIDENDS

The Company has never paid any dividends. The Company intends to
retain any earnings to fund the growth of its business and does not anticipate
paying any cash dividends in the foreseeable future. In addition, the payment of
dividends on the Company's Common Stock is prohibited under the Company's
existing credit facility with Banque Paribas.

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
March 27, 1996 and as adjusted to reflect the exercise of all of the Selling
Shareholders' Warrants and Unit Purchase Options and the application of the
estimated net proceeds therefrom.
<TABLE>
<CAPTION>
MARCH 27, MARCH 27,
1996 1996
ACTUAL AS ADJUSTED(1)
------ --------------
(UNAUDITED)
-----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt, less current portion........................... $34,792 $34,792
Subordinated notes (face value $24,250)........................ 20,840 20,840
Obligations under capital leases, less current obligations..... 21,992 21,992
Shareholders' equity:
Common stock, par value $.10 per share, 13,084,944 shares
outstanding at March 27, 1996; 14,012,439 shares
outstanding at March 27, 1996, as adjusted.................... 1,308 1,401
Additional paid-in capital................................... 33,525 38,904
Accumulated deficit.......................................... (17,210) (17,210)
------- -------
Total shareholders' equity..................................... 17,623 23,095
------ -------
Total capitalization........................................... $95,247 $100,719
======= ========
</TABLE>

(1) Excludes 604,500 shares of Common Stock reserved for issuance upon
exercise of stock options outstanding as of March 27, 1996, 604,800 shares
of Common Stock reserved for issuance upon the exercise of stock options
granted subsequent to March 27, 1996, and 438,000 shares reserved for
issuance upon the exercise of stock options that may be granted in the
future pursuant to the Company's stock option plans. See "Management -
Stock Option Plans." Also excludes (i) 666,000 shares of Common Stock
issuable upon exercise of the Series A Warrants and Series B Warrants and
(ii) 438,028 shares of Common Stock issuable upon exercise of the Paribas
Warrants. See "Description of Securities - Warrants."

11
<PAGE> 14
PRICE RANGE OF COMMON STOCK

The following table sets forth the high and low sales prices per share
of the Company's Common Stock as reported on the AMEX for the calendar periods
indicated since the Company's initial public offering on October 18, 1994.
<TABLE>
<CAPTION>
COMMON STOCK
---------------
HIGH LOW
1994
----
<S> <C> <C>
Fourth Quarter....................................... $5.125 $3.500

1995
----
First Quarter........................................ $4.125 $2.625
Second Quarter....................................... 4.750 3.125
Third Quarter........................................ 5.250 4.000
Fourth Quarter....................................... 6.000 4.000

1996
----
First Quarter........................................ $5.750 $3.625
Second Quarter (through June 21, 1996)............... 6.000 3.000
</TABLE>
The Company has never declared or paid any dividends. The Company
intends to retain earnings, if any, to fund the growth of its business and does
not anticipate paying any cash dividends in the foreseeable future. In addition,
the payment of dividends on the Company's Common Stock is prohibited under the
Company's existing credit facility with Banque Paribas.

As of June 21, 1996, there were approximately 200 holders of record of
the Company's Common Stock. On June 21, 1996, the closing sales price of the
Company's Common Stock on the AMEX was $5.13 per share.

12
<PAGE> 15
SELECTED CONSOLIDATED FINANCIAL DATA

The following selected historical consolidated financial data of the
Company for each of the fiscal years in the three-year period ended December 27,
1995 have been derived from and should be read in conjunction with the audited
consolidated financial statements and related notes thereto incorporated by
reference herein. The selected historical summary consolidated financial data
for the two fiscal years ended December 31, 1992 are derived from DRC's
historical financial statements (not included elsewhere herein), of which the
fiscal year ended December 26, 1991, is unaudited. The selected historical
summary consolidated financial data for the three-month periods ended March 29,
1995 and March 27, 1996 are derived from DRC's unaudited historical financial
statements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Basis of Presentation" and the consolidated
financial statements incorporated by reference herein.
<TABLE>
<CAPTION>
AS OF AND FOR THE
AS OF AND FOR THE FISCAL YEAR ENDING THREE MONTHS ENDING
----------------------------------------------------- -------------------
DEC. 26, DEC. 31, DEC. 30, DEC. 28, DEC. 27, MAR. 29, MAR. 27
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA(1):
<S> <C> <C> <C> <C> <C> <C> <C>
Restaurant sales $20,702 $27,712 $32,584 $47,323 $74,683 $15,843 $20,161
Restaurant operating income 1,265 2,671 3,147 4,539 6,643 1,412 869
Administrative expenses 1,461 1,867 2,050 2,619 3,380 799 1,047
Operating income (loss) (23) 930 1,328 1,320 3,263 613 (178)
Interest expense (535) (449) (736) (1,301) (2,467) (484) (860)
Net income (loss), before
extraordinary item (701) (22) 140 (341) 200 69 (677)

13
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

BASIS OF PRESENTATION

Upon consummation of the Merger, the former shareholders of DRC owned
an aggregate of approximately 53.0% of the outstanding voting power of the
Company immediately following the Merger. See "Business Development of the
Company." Accordingly, the Merger has been accounted for as a reverse purchase
under generally accepted accounting principles, pursuant to which DRC is
considered to be the acquiring entity and AFR the acquired entity for accounting
purposes, even though the Company is the surviving legal entity. In addition, as
permitted under generally accepted accounting principles, for accounting
purposes the Merger was deemed to have occurred on March 27, 1996, the last day
of DRC's first quarter for fiscal 1996. As a result, (i) the historical
financial statements of AFR for periods prior to the date of the Merger are no
longer the historical financial statements of the Company and therefore are no
longer presented; (ii) the historical financial statements of the Company for
periods prior to the Merger are those of DRC; (iii) all references to the
financial statements of the "Company" apply to the historical financial
statements of DRC prior to and subsequent to the Merger; and (iv) any references
to "AFR" apply solely to American Family Restaurants, Inc. and its financial
statements prior to the Merger. The following discussion and analysis should be
read in conjunction with the information set forth under "Selected Consolidated
Financial Data" and the consolidated financial statements and notes thereto
incorporated by reference herein.

COMPARISON OF RESULTS OF OPERATIONS

The following table presents for the periods indicated, certain items
in the historical consolidated statements of operations as a percentage of total
restaurant sales.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
------------------------------- --------------------
DEC. 30, DEC. 28, DEC. 27, MAR. 29 MAR. 27
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Restaurant sales:
Denny's restaurants 100.0% 100.0% 94.2% 100.0% 90.0%
Non-Denny's restaurants - - 5.8% - 10.0
----- ----- ----- ------ -----
Total restaurant sales 100.0 100.0 100.0% 100.0% 100.0%
----- ----- ----- ----- ------
Restaurant operating expenses:
Cost of food and beverage 27.4 27.0 27.2 26.9 27.9
Payroll and payroll related costs 31.6 33.8 33.5 33.9 36.0
Charge for impaired assets - - 0.7 - -
----- ----
Depreciation and amortization 4.1 3.2 3.9 3.6 4.5
Other restaurant operating costs 27.3 26.4 25.7 26.7 27.2
----- ----- ----- ----- -----
Total restaurant operating expenses 90.4 90.4 91.0 91.1 95.7
----- ----- ----- ----- -----
Restaurant operating income 9.6 9.6 9.0 8.9 4.3
Administrative expenses 6.3 5.5 4.5 5.0 5.2
Other items (0.8) 1.3 - - -
----- ----- ----- ----- ----
Operating income 4.1 2.8 4.5 3.9 (0.9)
Other income (expense) 0.4 (0.1) - - -
Interest expense (2.3) (2.7) (3.3) (3.1) (4.2)
----- ----- ----- ----- ----
Income (loss) before minority interest
in joint ventures, income taxes and
extraordinary item 2.2 - 1.2 0.8 (5.1)
Minority interest in joint ventures 1.4 1.1 0.4 (0.1) -
----- ----- ----- ----- ---
Income (loss) before income taxes and
extraordinary item 0.8 (1.1) 0.8 0.7 (5.1)
Income tax expense (benefit) 0.4 (0.4) 0.5 0.3 (1.8)
----- ----- ----- ----- -----
Income (loss) before extraordinary item 0.4 (0.7) 0.3 0.4 (6.9)
Extraordinary item - loss on
extinguishment of debt - - - - (2.5)
----- ----- ----- ----- -----
Net income (loss) 0.4% (0.7)% 0.3% 0.4% (9.4)%
===== ===== ===== ===== =====
</TABLE>

14
<PAGE> 17
THREE-MONTHS ENDED MARCH 27, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 29,
1995

Restaurant Sales. Restaurant sales increased $4.3 million, or 27.2%, to
$20.1 million for the three months ended March 27, 1996 as compared with
restaurant sales of $15.8 million for the three months ended March 29, 1995.
This increase was primarily attributable to acquisitions and new restaurants
opened during fiscal 1995.

Cost of Food and Beverage. Cost of food and beverage increased to 27.9%
of restaurant sales for the three months ended March 27, 1996 as compared with
26.9% of restaurant sales for the three months ended March 29, 1995, primarily
as the result of several promotional programs implemented in January 1996 and
the higher food costs associated with the Company's non-Denny's restaurants,
which were 30.6% of restaurant sales at the Company's non-Denny's restaurants
for the period.

Payroll and Payroll Related Costs. Payroll and payroll related costs were
36.0% of restaurant sales for the three months ended March 27, 1996 as compared
with 33.9% of restaurant sales for the three months ended March 29, 1995. This
increase was primarily attributable to staffing inefficiencies created by the
promotional programs implemented in the first quarter of 1996 and higher payroll
costs associated with the Company's non-Denny's restaurants, which were 43.0% of
restaurant sales at the Company's non-Denny's restaurants for the period.

Depreciation and Amortization. Depreciation and amortization of
restaurant equipment, leasehold improvements, intangible assets, pre-opening
costs and other items increased to 4.5% of restaurant sales for the three months
ended March 27, 1996 as compared with 3.6% of restaurant sales for the three
months ended March 29, 1995. This increase was primarily attributable to the
amortization of pre-opening costs associated with the new restaurants opened
during fiscal 1995 and an increase in amortization attributable to capital
leases associated with new store development.

Other Restaurant Operating Costs. Other restaurant operating costs were
27.2% of restaurant sales for the three months ended March 27, 1996 as compared
with 26.7% of restaurant sales for the three months ended March 29, 1995. This
increase was primarily attributable to higher occupancy costs associated with
the Company's non-Denny's restaurants.

Restaurant Operating Income. Restaurant operating income decreased
$543,000 to $869,000 for the three months ended March 27, 1996 as compared with
$1.4 million for the three months ended March 29, 1995. This decrease was
principally the result of the factors described above.

Administrative Expenses. Administrative expenses increased to 5.2% of
restaurant sales for the three months ended March 27, 1996 as compared with 5.0%
of restaurant sales for the three months ended March 29, 1995. This increase was
primarily the result of increased administrative staffing levels in anticipation
of the Merger and other merger related costs.

Interest Expense. Interest expense was $860,000, or 4.2% of restaurant
sales, for the three months ended March 27, 1996 as compared with $484,000, or
3.1% of restaurant sales, for the three months ended March 29, 1995. The
increase is the result of increased debt levels, including interest expense on
capitalized lease obligations associated with new store development.

Income Tax Expense (Benefit). The Company recorded an income tax benefit
of approximately $(359,000), an effective rate of 35%, for the three months
ended March 27, 1996 as compared with income tax expense of approximately
$40,000, an effective rate of 37%, for the three months ended March 29, 1995.

Net Income (Loss). The Company recorded a net loss of approximately $(1.2
million) for the three months ended March 27, 1996 as compared with net income
of $69,000 for the three months ended March 29, 1995, as a result of the factors
described above.

15
<PAGE> 18
FISCAL 1995 COMPARED WITH FISCAL 1994

Restaurant Sales. Restaurant sales increased $27.4 million, or 57.9%, to
$74.7 million for fiscal 1995 as compared with restaurant sales of $47.3 million
for fiscal 1994. This increase was primarily attributable to restaurant sales
associated with the 1994 acquisitions, restaurants opened during 1995, and the
restaurants associated with the Kettle leases.

Cost of Food and Beverage. Cost of food and beverage increased to 27.2%
of restaurant sales for fiscal 1995 as compared with 27.0% of restaurant sales
for fiscal 1994, primarily due to increased commodity prices in the fourth
quarter of 1995 and higher food costs at the restaurants associated with the
Kettle leases of 32.2% of restaurant sales. Excluding the food and beverage
costs at the restaurants associated with the Kettle leases, food and beverage
costs for fiscal 1995 would have been 26.9% of restaurant sales, a decrease of
0.1% from fiscal 1994.

Payroll and Payroll Related Costs. Payroll and payroll related costs were
33.5% of restaurant sales for fiscal 1995 as compared with 33.8% of restaurant
sales for fiscal 1994. This decrease was primarily attributable to improved
workers' compensation costs and the addition of new restaurants with higher
sales volumes without a proportionate increase in payroll costs. The payroll and
payroll related costs at the restaurants associated with the Kettle leases were
37.9% of restaurant sales. Excluding the payroll and payroll related costs at
the restaurants associated with the Kettle leases, payroll and payroll related
costs for fiscal 1995 would have been 32.9% of restaurant sales, a decrease of
0.8% from fiscal 1994.

Depreciation and Amortization. Depreciation and amortization of
restaurant equipment and leasehold improvements, intangible assets, and
pre-opening costs totaled $2.9 million, or 3.9% of restaurant sales, for fiscal
1995 as compared with $1.5 million, or 3.2% of restaurant sales, for fiscal
1994. The increase of approximately $1.4 million is attributable to the
amortization of the capital leases associated with new restaurants, the
amortization of intangible assets associated with the 1994 acquisitions, and the
amortization of pre-opening costs.

Other Restaurant Operating Costs. Other restaurant operating costs were
25.7% of restaurant sales for fiscal 1995 as compared with 26.4% of restaurant
sales for fiscal 1994. The decrease is attributable to improved cost controls at
the restaurant level as well as lower occupancy costs, including general
liability insurance costs. Other operating costs at the restaurants associated
with the Kettle leases, which include no franchise costs, were 30.8% of
restaurant sales. If the Kettle results were excluded, other operating costs for
fiscal 1995 would have been 25.5% of restaurant sales, a decrease of 0.9% from
fiscal 1994.

Restaurant Operating Income. Restaurant operating income increased $2.1
million to $6.6 million for fiscal 1995 as compared with $4.5 million for fiscal
1994. This increase was principally the result of increased restaurant sales and
the factors described above.

Administrative Expenses. Administrative expenses decreased to 4.5% of
restaurant sales for fiscal 1995 as compared with 5.5% of restaurant sales for
fiscal 1994. This decrease was primarily the result of increased sales volume
without proportionate cost increases.

Interest Expense. Interest expense increased to $2.5 million, or 3.3% of
restaurant sales, for fiscal 1995 as compared with $1.3 million, or 2.7% of
restaurant sales for fiscal 1994. This increase is attributable to the increased
level of long-term debt associated with the restaurant acquisitions in 1994 and
the capitalized lease obligations associated with new store development.

Income Taxes. The income tax provision was $305,000 for fiscal 1995 as
compared with income tax benefit of $(209,000) for fiscal 1994. Due to the
adjustment of several items from the prior year, a tax rate of 60.3% resulted in
fiscal 1995.

16
<PAGE> 19
FISCAL 1994 COMPARED WITH FISCAL 1993

Restaurant Sales. Restaurant sales increased $14.7 million, or 45.2%, to
$47.3 million for fiscal 1994 as compared with restaurant sales of $32.6 million
for fiscal 1993. This increase is due to the increased number of restaurants in
operation during 1994.

Cost of Food and Beverage. Cost of food and beverage decreased to 27.0%
of restaurant sales for fiscal 1994 as compared with 27.4% of restaurant sales
for fiscal 1993. This decrease is primarily attributable to improved cost
controls at the restaurant level.

Payroll and Payroll Related Costs. Payroll and payroll related costs were
33.8% of restaurant sales for fiscal 1994 as compared with 31.6% of restaurant
sales for fiscal 1993. This increase was attributable to staffing inefficiencies
associated with the 1994 acquisitions and increased workers' compensation costs.

Depreciation and Amortization. Depreciation and amortization of
restaurant equipment and leasehold improvements, intangible assets, and
pre-opening costs totaled $1.5 million, or 3.2% of restaurant sales, for fiscal
1994 as compared with $1.3 million, or 4.1% of restaurant sales, for fiscal
1993. This increase of approximately $200,000 is attributable to the increase in
obligations under capital leases associated with new restaurant openings and the
amortization of intangible assets associated with the 1994 acquisitions.

Other Operating Expenses. Other operating expenses were 26.4% of
restaurant sales for fiscal 1994 as compared with 27.3% of restaurant sales for
fiscal 1993. The decrease is attributable to improved cost controls at the
restaurant level as well as lower occupancy costs. Lower occupancy costs are
attributable to newly developed stores, which typically have higher sales
volumes and thus lower percentage occupancy costs.

Restaurant Operating Income. Restaurant operating income increased to
$4.5 million for fiscal 1994 as compared with $3.1 million for fiscal 1993 as a
result of the increased number of units inspected and operating.

Administrative Expenses. Administrative expenses decreased to 5.5% of
restaurant sales for fiscal 1994 as compared with 6.3% of restaurant sales for
fiscal 1993. This percentage decrease is primarily attributable to increased
sales volume without proportionate cost increases.

Interest Expense. Interest expense increased to $1.3 million, or 2.7% of
restaurant sales, for fiscal 1994 as compared with $736,000, or 2.3% of
restaurant sales for fiscal 1993. This increase is attributable to the increased
level of long-term debt associated with the 1994 acquisitions and the
capitalized lease obligations associated with new store development.

Income Taxes. The income tax benefit was $(209,000) for fiscal 1994 as
compared with income tax provision of $144,000 for fiscal 1993.

LIQUIDITY AND CAPITAL RESOURCES

The Company, and the restaurant industry generally, operate principally
on a cash basis with a relatively small amount of receivables. Therefore, like
many other companies in the restaurant industry, the Company operates with a
working capital deficit. The Company's working capital deficit was $3.6 million
at December 30, 1993, $6.1 million at December 28, 1994, $9.4 million at
December 27, 1995, and $30.1 million at March 27, 1996. The Company anticipates
that it will continue to operate with a working capital deficit.

The Company requires capital principally for the development of new
restaurants and the acquisition and conversion of existing restaurants. The
Company has historically satisfied its capital and operating requirements
through a combination of private placements of equity securities and debt
instruments, cash generated from operations, and leasing transactions.

17
<PAGE> 20
Expenditures for property and equipment totaled approximately $1.6
million, $9.7 million and $8.7 million for fiscal 1993, fiscal 1994, fiscal
1995, respectively. Expenditures for property and equipment and intangibles
totaled approximately $3.7 million and $1.8 million for the three months ended
March 29, 1995 and March 27, 1996, respectively.

The Company believes that its future capital requirements will be
primarily for the development of new restaurants, for continued acquisitions,
and for conversion of restaurants to the Denny's or other restaurant concepts.
Pursuant to the Development Agreement with Denny's, Inc., the Company is
required to develop and open 33 Denny's restaurants in specified locations
during the period ending December 31, 1997. During the first quarter of fiscal
1996, the Company developed and opened two new Denny's restaurants. Pursuant to
various other agreements with Denny's, Inc. and certain other parties, the
Company is required to (i) convert 20 restaurants currently operating under the
"Kettle" trade name to the Denny's concept by March 1997; (ii) convert at least
a total of 21 other non-Denny's restaurants to the Denny's concept before
January 1, 1998; and (iii) close or convert 24 non-Denny's restaurants to the
Denny's or other restaurant concept that is not in competition with the business
of Denny's, Inc., its affiliates, subsidiaries or franchisees. During the first
quarter of fiscal 1996, the Company converted five non-Denny's restaurants to
Denny's restaurants. The Company estimates that its costs to develop and open
new Denny's restaurants, excluding real estate and building costs, will be
approximately $350,000 to $390,000 per restaurant, and that its costs associated
with the conversion of a non-Denny's restaurant to the Denny's concept will be
approximately $160,000 to $450,000 per restaurant.

An affiliate of CNL Group, Inc. ("CNL") has agreed, subject to various
conditions, including that there be no material adverse change in the financial
condition of the Company, to make available to the Company up to $20.0 million
in each of 1996 and 1997 in order to finance development of new restaurants and
the conversion of non-Denny's restaurants to the Denny's concept. Each
financing will take the form of a "sale-leaseback," in which CNL would purchase
a particular restaurant property and lease it back to the Company for up to 30
years. During that period, the initial annual rent will be 10.625% of the
purchase price, subject to a 10% increase every five years (e.g., from 10.625%
to 11.6875% at the end of the first five-year period). The leases also will
provide for additional rent based on increases in gross sales at the respective
restaurants. The Company will have a right of first refusal on the sale of each
property by CNL, and will have the right to purchase each property during the
eighth year of the lease.

CREDIT FACILITY

In connection with the Merger, the Company entered into a $65.0 million
credit facility with Banque Paribas (the "Paribas Facility"). The Paribas
Facility consists of (i) a Term Loan (the "Term Loan"), (ii) Revolving Loans
(the "Revolver"), and (iii) a Delayed Draw Term Loan (the "Delayed Term Loan").
The Term Loan, the Revolver, and the Delayed Term Loan will mature and become
payable December 31, 2001. At the Company's option, interest on all amounts
borrowed under the Paribas Facility will accrue at the rate of either prime plus
1.5% or a "Eurodollar Rate" calculated based upon LIBOR plus 3.5%. Amounts
borrowed under the Paribas Facility are secured by substantially all of the
tangible and intangible assets of the Company. The Company will be required to
make mandatory prepayments of amounts borrowed under the Paribas Facility in the
event of certain asset sales, equity issuances, excess cash flows, and under
certain other circumstances. The Company, at its option and without penalty, may
cancel any unused commitments or prepay outstanding indebtedness under the
Paribas Facility, in whole or in part, at any time during the term of the
Paribas Facility.

The Paribas Facility contains certain provisions that, among other
things, will limit the ability of the Company and its subsidiaries, without the
consent of Banque Paribas, to incur additional indebtedness, pay certain
dividends or make certain distributions on their respective capital stock,
repurchase shares of their respective capital stock, enter into additional
restaurant leases, make acquisitions or sell assets, or exceed specified levels
of capital expenditures. The Paribas Facility also requires the Company to
maintain certain financial ratios and to meet certain financial tests. The
Paribas Facility also includes customary provisions for credit facilities of
this type, including representations, warranties, covenants, and events of
default.

The Company paid loan origination, investment banking, legal,
prepayment fees on existing debt, and other fees of approximately $4.0 million
in connection with the closing of the Paribas Facility. During the term of the
Paribas Facility, the Company will be required to pay an annual fee of $75,000
to Banque Paribas as agent of the lenders that

18
<PAGE> 21
participate with it in the facility and a fee of 0.5% of the unused portion of
amounts available for borrowing under the Paribas Facility. In addition, the
Company issued to Banque Paribas six-year warrants to acquire 438,028 shares of
the Company's Common Stock at an exercise price of $4.3065 per share, which was
in excess of the fair market value of the Common Stock on the date of issuance.

Term Loan

In connection with the Merger, the Company borrowed $35.0 million under
the Term Loan, which was used to refinance certain indebtedness of AFR and DRC
existing prior to the Merger and to pay certain transaction expenses incurred in
connection with the Merger and the Paribas Facility. The Company is required to
repay the Term Loan in quarterly payments of principal and interest.

Revolver

The Paribas Facility includes a $15.0 million Revolver which the Company
may utilize to finance working capital needs, to repay the Term Loan, to make
capital expenditures, and to support letters of credit. In connection with the
Merger, the Company borrowed $2.8 million under the Revolver.

Delayed Term Loan

Provided that certain conditions are met, the Company will be permitted
to make draws of all or a part of the $15.0 million available under the Delayed
Term Loan to finance acquisitions of additional restaurants beginning on June
30, 1996 and ending on December 31, 1997, and will be permitted to make draws
under the Delayed Term Loan to repay the Series A Notes and Series B Notes
beginning December 31, 1996 and ending on December 31, 1997. The Company will be
required to repay the total amount outstanding under the Delayed Term Loan in
equal quarterly payments over a four-year period commencing on January 1, 1998.
The maximum amount that the Company will be permitted to borrow under the
Delayed Term Loan will be limited by a specified ratio of the Company's adjusted
senior debt (as defined) to its earnings before interest, taxes, depreciation,
and amortization for the prior twelve-month period.

SEASONALITY

The Company's operating results fluctuate from quarter to quarter as a
result of the seasonal nature of the restaurant industry, the temporary closing
of existing restaurants for conversion, and other factors. The Company's
restaurant sales are generally greater in the second and third fiscal quarters
(April through September) than in the first and fourth fiscal quarters (October
through March). Occupancy and other operating costs, which remain relatively
constant, have a disproportionately negative effect on operating results during
quarters with lower restaurant sales. The Company's working capital requirements
also fluctuate seasonally, with its greatest needs occurring during its first
and fourth quarters.

INFLATION

The Company does not believe that inflation has had a material effect on
operating results in past years. Although increases in labor, food or other
operating costs could adversely affect the Company's operations, the Company
generally has been able to modify its operating procedures or to increase prices
to offset increases in its operating costs.

NEW ACCOUNTING STANDARDS

The Company adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," in fiscal 1995.

The Company has determined that it will not change to the fair value
method under Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation," but will continue to use Accounting Principles
Board Opinion No. 25 for measurement and recognition of employee stock based
transactions.

19
<PAGE> 22
BUSINESS

GENERAL

The Company currently operates 241 family-oriented, full-service
restaurants in 30 states in the southeastern, midwestern, and western United
States. Of the Company's 241 restaurants, 178 are Denny's restaurants, which
represents approximately 10% of the Denny's system and makes the Company the
world's largest Denny's franchisee in terms of revenue and the number of
restaurants operated. The Company also operates 63 non-Denny's restaurants under
the names "Jerry's," "Kettle," "Mr. Fable's," "Ike's Great American
Restaurants," "Ike's Diner," "Todd's," and "Bucky's Extraordinary Eatery."

The Company has pursued an aggressive growth strategy, having acquired or
developed all of its restaurants since April 1986. The Company intends to
increase the number of its Denny's restaurants through the development of new
Denny's restaurants, the acquisition of existing Denny's restaurants or other
restaurants that are suitable for conversion to the Denny's concept, and the
conversion of certain of its current non-Denny's restaurants to the Denny's
concept. The Company also plans to re-image certain of its Denny's restaurants
that have not already been re-imaged to the new Denny's format and to sell or
close other restaurants. In addition, the Company plans to expand its operations
to include one or more additional restaurant concepts through the acquisition of
one or more restaurant chains or multiple restaurant locations. See "Business -
Strategy."

DEVELOPMENT OF THE COMPANY

Prior to 1992, the operations of the Company were conducted through
several entities that were either wholly owned by Jeffrey D. Miller, the
Company's Chairman of the Board, or in which Mr. Miller had a significant
ownership interest. The first of these predecessor entities began operations in
1986 with 62 restaurants. The Company was incorporated in 1989 and acquired 23
Denny's restaurants at that time. The Company effected a reorganization in July
1992, in which the Company acquired all of the issued and outstanding stock and
warrants of the affiliated entities in exchange for shares of the Company's
Common Stock and warrants to purchase shares of the Company's Common Stock. On
October 18, 1994, the Company completed its initial public offering and used a
portion of the proceeds of the offering to acquire the remaining 50% interest in
a joint venture owned by CNL and all of the leasehold improvements owned by the
joint venture. As a result of a series of acquisitions from 1992 through 1995,
the Company operated a total of 91 Denny's restaurants and 57 non-Denny's
restaurants prior to March 29, 1996.

On March 29, 1996, DRC merged with and into the Company, at which time
the Company changed its name to DenAmerica Corp. Prior to the Merger, DRC
operated 82 Denny's restaurants and 20 restaurants under the "Kettle" trade
name. DRC, through its predecessors, began operations in 1986 and had developed
more new Denny's restaurants than either Denny's, Inc. or any other Denny's
franchisee prior to the Merger. In connection with the Merger, all of the
previously outstanding shares of DRC capital stock owned by Jack M. Lloyd,
William J. Howard, BancBoston, and the other former shareholder of DRC were
automatically converted into an aggregate of 6,937,500 shares of the Company's
Common Stock, $24,250,000 principal amount of Series A Notes and Series B Notes,
and warrants to purchase an aggregate of 666,000 shares of the Company's Common
Stock. See "Certain Transactions" and "Description of Securities."

20
<PAGE> 23
The following table sets forth certain information with respect to the
Company's Denny's and non-Denny's restaurants as of May 1, 1996.

<TABLE>
<CAPTION>
DENNY'S NON-DENNY'S
TO BE TO BE NON-DENNY'S
RESTAURANTS OWNED DEVELOPED CONVERTED DENNY'S TO TO BE SOLD
DENNY'S NON-DENNY'S BY 12/31/96 BY 12/31/97 BE CLOSED OR CLOSED
------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Alabama............ 8 3 3 1

Arizona............ 13 2

Arkansas........... 2

Colorado........... 8 2

Florida............ 15 10 6 4

Georgia............ 14 1 1

Idaho.............. 6

Illinois........... 1 1

Indiana............ 5 5 5

Iowa............... 5

Kansas............. 1 2

Kentucky........... 16 7 7

Louisiana.......... 1

Michigan........... 1 11

Minnesota.......... 1

Missouri........... 1

Nebraska........... 6

Nevada............. 1

North Carolina..... 2 2 2

Ohio............... 21 12 12

Oklahoma........... 2 5 5

Oregon............. 1

South Carolina..... 2 1 1

South Dakota....... 1

Tennessee.......... 5 1

Texas.............. 25 4 5 4

Utah............... 7 2

Virginia........... 1 1

Wisconsin.......... 3
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
DENNY'S NON-DENNY'S
TO BE TO BE NON-DENNY'S
RESTAURANTS OWNED DEVELOPED CONVERTED DENNY'S TO TO BE SOLD
DENNY'S NON-DENNY'S BY 12/31/96 BY 12/31/97 BE CLOSED OR CLOSED
------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Wyoming............ 5
--
178 63 13 23 2 29
=== == == == = ==
</TABLE>
STRATEGY

Increase of Denny's Restaurants

The Company intends to increase the number of Denny's restaurants it
operates through new restaurant development, acquisitions, and conversions of
non-Denny's restaurants to the Denny's concept. The Company believes Denny's
restaurants are an attractive growth vehicle because Denny's are more profitable
than other restaurant concepts within the full-service family segment, with
higher average unit volumes and higher operating margins. In addition, the
Company believes that the Denny's brand name, which has excellent customer
recognition and appeal, provides a strong market position for Denny's
restaurants.

New Restaurant Development

The Company plans to continue to develop new Denny's restaurants. The
Company's Development Agreement with Denny's, Inc. requires the Company to
develop 33 restaurants through 1997. The Company currently has 5 new restaurants
in various stages of development. The Company anticipates that it will develop
15 new restaurants in 1996 and approximately 18 new restaurants in 1997,
primarily within its current geographic territory, thus capitalizing on an
existing management structure and on positive demographic and traffic patterns
in many of the Company's existing markets. During the past three years, the
Company has developed approximately 20 new Denny's restaurants. Sales per
restaurant for those of the new restaurants that operated for all of fiscal 1995
averaged $1.3 million, which exceeds the average sales per restaurant for the
Company's other Denny's and non-Denny's restaurants.

Restaurant Acquisitions

The Company plans to continue to acquire Denny's and other family-style
restaurants that it can convert to the Denny's concept. The Company strives to
acquire restaurants when it believes it can improve their performance through
better management and greater operating efficiencies or through conversion to
the Denny's concept. The Company believes it can continue to take advantage of
its organizational and management expertise to bring improved quality and
operating efficiencies to the restaurants its acquires.

From January 1, 1994 through March 27, 1996, the Company acquired a
total of 83 restaurants in nine transactions. Of these restaurants, 45 were
Denny's restaurants either acquired from Denny's, Inc. or from other Denny's
franchisees. These strategic acquisitions increased market share in existing
marketplaces or extended geographic coverage and resulted

22
<PAGE> 25
in a decrease in administrative expenses as a percentage of sales primarily due
to increased sales volume without proportionate cost increases.

Conversions of Non-Denny's Restaurants

The Company plans to convert 23 of its current non-Denny's restaurants to
the Denny's concept. The Company converted two non-Denny's restaurants in 1994,
nine in 1995, and seven as of May 31, 1996. The Denny's restaurants currently
operated by the Company that were operating during the entire year had average
annual revenue and operating income in fiscal 1995 of approximately $858,000 and
$100,000, respectively, whereas the non-Denny's restaurants that were operated
during the entire year had average annual revenue and operating income of
approximately $637,000 and $61,000, respectively. Historically, the Company's
cost to convert a non-Denny's restaurant to a Denny's restaurant has ranged from
approximately $250,000 to $500,000, including opening costs and franchise fees.
The Company estimates the cost to convert each Kettle restaurant to be $350,000,
including opening costs and franchise fees, but the lessors of 12 of the
Company's Kettle restaurants have agreed to fund up to $250,000 of these
conversion costs.

Re-Imaging Program

The Company plans to re-image certain of its Denny's restaurants that
have not been re-imaged to the new Denny's concept implemented by Denny's, Inc.
in 1994, which is designed to result in a fundamental change in the competitive
positioning of Denny's restaurants. The re-imaging strategy includes an
extensive remodeling program featuring an updated exterior look, new signage,
and an improved interior layout with more comfortable seating and enhanced
lighting. The Company believes that re-imaging often results in a percentage
growth in operating income that exceeds the percentage growth in sales. The
Company re-imaged seven Denny's restaurants during 1995. Since their re-imaging,
sales in these restaurants have increased 15% over the results in the prior
year. The Company anticipates that it will re-image approximately 40 Denny's
restaurants by December 31, 1997. The Company's costs to re-image its Denny's
restaurants historically have averaged approximately $300,000 per restaurant.
Denny's, Inc. recently implemented a program of re-imaging its Denny's
restaurants at a cost of approximately $150,000 per restaurant. The Company
intends to implement this program for future re-imagings of its Denny's
restaurants. The re-imaging process generally takes approximately 20 days per
store, during which time the restaurant is closed, causing a loss of revenue.

New Restaurant Concepts

The Company plans to expand its operations to include one or more
additional restaurant concepts through the acquisition of one or more restaurant
chains or multiple restaurant locations. It is currently contemplated that such
acquisitions would be made only if they can be integrated with the Company's
existing restaurant operations and only if they would have a meaningful impact
on the Company's operations. On May 31, 1996, the Company entered into an
agreement (the "BEP Agreement") to purchase all of the outstanding stock of
Black-eyed Pea U.S.A., Inc., which operates 100 restaurants under the
"Black-eyed Pea" concept and franchises the rights to operate an additional 30
Black-eyed Pea restaurants to third parties. See "Business - Non-Denny's
Restaurants."

Enhancement of Operating Efficiencies

Capitalizing on Operating Synergies

The Company plans to continue to implement steps resulting in significant
operating efficiencies and cost savings made possible by the Merger. The
headquarters for the combined operations has been consolidated within DRC's
existing facility in Scottsdale, Arizona, which will reduce overall payroll
costs and other overhead expenses, including redundant legal, accounting, and
other corporate administrative costs. In addition, DRC's comprehensive insurance
policy was cancelled following the Merger. The Company's increased liquidity
should result in volume purchasing and the receipt of prompt payment discounts
that should yield additional savings.

23
<PAGE> 26
Sale or Closure of Certain Restaurants

The Company currently anticipates that it will sell or close a total of
two Denny's restaurants and 21 non-Denny's restaurants by December 31, 1997, of
which six restaurants have been closed as of May 31, 1996. The Company has
determined that these restaurants either cannot be converted to the Denny's
concept because they are situated in close proximity to an existing Denny's
restaurant or have below-average unit operating results. Upon consummation of
the Merger, the Company established reserves of approximately $6.0 million
related to the cost of closing these restaurants.

DENNY'S RESTAURANTS

The Company currently operates 178 Denny's restaurants, representing
approximately 10% of the Denny's system and making the Company the world's
largest Denny's franchisee in terms of revenue and the number of restaurants
operated.

Denny's, Inc.

The Company operates its Denny's restaurants pursuant to franchise
agreements with Denny's, Inc. See "Business - Denny's Restaurants - Denny's
Franchise Agreements." Denny's, Inc. is a wholly owned subsidiary of Flagstar,
Inc. ("Flagstar"), a diversified company with business interests in the
restaurant and wholesale food industries. Flagstar conducts its restaurant
operations through three principal chains: Denny's, the largest family-oriented,
full-service restaurant chain in the United States, with over 1,500
corporate-owned or franchised units in 49 states and six foreign countries;
Hardee's, a chain of quick-service restaurants specializing in sandwiches; and
Quincy's, one of the largest chains of steakhouse restaurants in the
southeastern United States. Flagstar also operates El Pollo Loco, a chain of
quick-service restaurants featuring flame-broiled chicken and steak products and
related Mexican food items.

Concept

Denny's are family-oriented, full-service restaurants, featuring a wide
variety of traditional family fare. The restaurants are designed to provide a
casual dining atmosphere with moderately priced food and quick, efficient
service. Denny's restaurants generally are open 24 hours a day, seven days a
week.

Menu and Pricing

All Denny's restaurants throughout the United States have uniform menus
with some regional and seasonal variations. Denny's restaurants serve breakfast,
lunch, and dinner and also feature a "late night" menu. Breakfasts include
Denny's popular "Original Grand Slam Breakfast" combinations, consisting of a
variety of eggs, breakfast meats, pancakes, biscuits, muffins, and other items,
as well as traditional breakfast items such as eggs, omelets, pancakes, waffles,
cereals, and muffins. Lunch and dinner entrees include prime rib, roast beef,
fried shrimp, fish, roast turkey, grilled or fried chicken, sirloin tips, and
liver. The restaurants also offer a variety of soups, salads, sandwiches,
appetizers, side orders, beverages, and desserts. Appetizers include mozzarella
sticks, buffalo wings, chili, chicken strips, and quesadillas; and desserts
include cakes, pies, ice cream, and sundaes. The restaurants offer free refills
on coffee, soft drinks, lemonade, and tea. Special menus are available for
senior citizens and children.

In 1994, Denny's, Inc. initiated a promotional strategy that has
resulted in increased guest counts and improved per store comparable revenue.
This promotional strategy involves the "value pricing" of several menu items and
directing the marketing efforts at such items. The first and best known "valued
priced" item has been the $1.99 Grand Slam, which was introduced in April 1994.
The Grand Slam consists of two eggs, two pancakes, two sausage links, and two
strips of bacon that typically would sell for approximately $3.99. The value
pricing strategy has since been expanded to include a $5.99 prime rib dinner and
$2.99 lunch baskets. This promotional strategy continues to be utilized by
Denny's, Inc., including the January 1996 introduction of the "Breakaway
Breakfast," a new three-tiered pricing program featuring popular menu
combinations. The Company currently participates in the Breakaway Breakfast
program in certain of its markets.

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Restaurant Layout

The Company's Denny's restaurants generally operate in free-standing
locations in high-traffic commercial areas. The restaurants average
approximately 4,800 square feet, with an average seating capacity of 180 people.
Generally, the dining areas are fully carpeted and informal in design and
contain booths, tables, and counter seating. The layout of each restaurant is
designed to easily accommodate both smaller groups of two and four as well as
large groups of guests. All guests are greeted and seated by a host or hostess
when they enter the restaurant.

Unit Economics

The Company estimates that its total costs of developing a new Denny's
restaurant currently ranges from $290,000 to $390,000, exclusive of annual
operating costs and assuming that the land and buildings are obtained under a
lease arrangement. These costs include approximately (i) $230,000 to $330,000
for furniture, fixtures, and equipment; (ii) $40,000 for pre-opening costs,
including hiring and training costs, employee wages, and advertising; and (iii)
$20,000 for the initial franchise fee. The Company estimates that its total cost
of converting an acquired restaurant to the Denny's concept currently ranges
from approximately $250,000 to $500,000, exclusive of annual operating costs and
assuming that the land and building are obtained under a lease arrangement.
These costs include approximately (i) $200,000 to $450,000 for remodelling and
improvements; (ii) $30,000 for pre-opening costs, including hiring costs,
employee wages, and advertising; and (iii) $20,000 for the initial franchise
fee. The Company leases substantially all of its restaurant sites in order to
minimize the costs of acquiring and developing new restaurants. The Company
currently intends to lease its restaurant sites in the future. See "Business -
Financing and Leasing."

Site Selection

When evaluating whether and where to develop a new Denny's restaurant,
the Company conducts an internal screening process to determine a restaurant's
estimated profit potential. The Company considers the location of a restaurant
to be one of the most critical elements of the restaurant's long-term success.
Accordingly, the Company expends significant time and effort in the
investigation and evaluation of potential restaurant sites. In conducting the
site selection process, the Company primarily evaluates site characteristics
(such as visibility, accessibility, and traffic volume), considers the
restaurant's proximity to demand generators (such as shopping malls, lodging,
and office complexes), reviews potential competition, and analyzes detailed
demographic information (such as population characteristics, density, and
household income levels). Because Denny's restaurants are often impulse rather
than destination restaurants, the Company's management emphasizes visibility and
high traffic patterns in its site selection and places somewhat less importance
on population demographics. Senior corporate management evaluates and approves
each restaurant site prior to its development. Denny's, Inc. provides site
selection guidelines and criteria as well as site selection counseling and
assistance and must approve sites selected by the Company.

The Denny's System

Denny's restaurants are developed and operated pursuant to a specified
system developed by Denny's, Inc. (the "Denny's System"). Denny's, Inc. prepares
and maintains the detailed standards, policies, procedures, manuals, and other
requirements that constitute the Denny's System in order to facilitate the
consistent operation and success of all Denny's restaurants. The Denny's System
includes distinctive interior and exterior designs, decors, color schemes,
furnishings, and employee uniforms; uniform specifications and procedures for
restaurant operations; standardized menus featuring unique recipes and menu
items; procedures for inventory and management control; formal training and
assistance programs; advertising and promotional programs; and special
promotional items. The Denny's System includes established, detailed
requirements regarding (i) the quality and uniformity of products and services
offered; (ii) the purchase or lease, from suppliers approved by Denny's, Inc.,
of equipment, fixtures, furnishings, signs, inventory, ingredients, and other
products and materials that conform with the standards and specifications of the
Denny's Systems; and (iii) standards for the maintenance, improvement, and
modernization of restaurants, equipment, furnishings, and decor. To ensure that
the highest degree of quality and service is maintained, each franchisee must
operate each Denny's restaurant in strict conformity with the methods,
standards, and specifications prepared by Denny's, Inc.

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Denny's Franchise Agreements

The Denny's Franchise Agreements generally require payment of an initial
franchise fee and a royalty equal to 4% of weekly gross sales (as defined in the
Denny's Franchise Agreements) and an advertising contribution of 2% of weekly
gross sales in markets where Denny's, Inc. conducts significant institutional
advertising. In markets where Denny's, Inc. does not conduct significant
institutional advertising, the Denny's Franchise Agreements require the Company
to pay Denny's, Inc. 0.5% of weekly gross sales and to spend an additional 1.5%
of weekly gross sales on local advertising. Initial franchise fees for the
Denny's restaurants operated by the Company have ranged from $0 to $35,000. The
Company negotiates the initial franchise fees, which vary based upon such
factors as involvement of Denny's, Inc. personnel in the training of the
Company's employees and the number of Denny's restaurants being developed or
acquired. Shorter development periods will result in lower initial franchise
fees. The Denny's Franchise Agreements generally have a term of 20 years or the
earlier expiration of the relevant building lease (including options for
extensions). A Denny's Franchise Agreement may be terminated by the Company only
upon the occurrence of a material breach by Denny's, Inc.

The Denny's Franchise Agreements entitle the Company to use the "Denny's"
name, trade symbols, and intellectual property, including menus, symbols,
labels, and designs, to promote the restaurants and the Denny's affiliation.
Denny's, Inc. also furnishes training and supervisory services for maintaining
modern and efficient operation of the restaurants and helps fund a national
advertising campaign. The Company generally is required to maintain a standard
exterior decor and exterior signs and a consistent interior color scheme and
layout. Each employee is required to wear a standard uniform. The Company is
free to establish its own prices, which may differ by location and are
influenced by geographic and other considerations.

In the event of a "change of control," the Denny's Franchise Agreements
give Denny's, Inc. the option to purchase within one year after the date of such
change of control of all of the Denny's restaurants owned or operated by the
Company for their fair market value. As long as the Company is a publicly held
corporation, a change of control will be deemed to have occurred only if any
person, entity, or group of persons (other than a group which includes Jeffrey
D. Miller, Jack M. Lloyd, William G. Cox, William J. Howard, each of whom is an
officer and director of the Company, or BancBoston) acquires voting control of
the Company's Board of Directors.

Without the consent of Denny's, Inc., the Company may not directly or
indirectly own, operate, control, or have any financial interest in any coffee
shop or family-style restaurant business or any other business that would
compete with the business of any Denny's restaurant, Denny's, Inc., or any
affiliate, franchisee, or subsidiary of Denny's, Inc. (other than restaurants
currently operated by the Company). For two years after the expiration or
termination of a Denny's Franchise Agreement, the Company will not be permitted,
without the consent of Denny's, Inc., directly or indirectly to own, operate,
control, or have any financial interest in any coffee shop or family-style
restaurant substantially similar to a Denny's located within a 15-mile radius of
a Denny's restaurant subject to the expired or terminated agreement. These
restrictions will not apply to the operation of another Denny's restaurant or
the ownership of less than 5% of the publicly traded stock of any other company.
An agreement with Denny's, Inc. and the terms of the leases for its Kettle
restaurants require the Company to convert 20 Kettle restaurants that it
currently operates to the Denny's concept prior to September 1997. Another
agreement with Denny's, Inc. requires the Company to convert at least 21
non-Denny's restaurants to the Denny's concept on a specified schedule prior to
January 1, 1998 and to close or convert 24 non-Denny's restaurants to a Denny's
or other restaurant concept that, as of September 13, 1994, was not in
competition with the business of Denny's, Inc., its affiliates, subsidiaries, or
franchisees. See "Risk Factors - Reliance on Denny's, Inc.," "Risk Factors
- -Inability to Develop or Convert Restaurants," and "Risk Factors - Restrictions
Imposed by Denny's Franchise Agreements."

NON-DENNY'S RESTAURANTS

In addition to its Denny's restaurants, the Company operates 63
non-Denny's restaurants, 21 of which it has agreed to convert to the Denny's
concept by January 1, 1998 and 24 of which it has agreed either to close or
convert to the Denny's concept or another restaurant concept that does not
compete with the Denny's restaurant concept. Of these restaurants, 12 operate
under the name "Jerry's," 20 under the name "Kettle," 15 under the name "Ike's
Great American Restaurants" or "Ike's Diner," 11 under the name "Mr. Fable's,"
four under the name "Todd's," and one under the name "Bucky's Extraordinary
Eatery." The operations of the non-Denny's restaurants are substantially similar
to those of the

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Denny's restaurants. These restaurants generally feature family-oriented dining
with full table service. Menu items vary slightly among the non-Denny's
restaurants, but they generally offer moderately priced items, such as
hamburgers, sandwiches, chicken, steaks, seafood and breakfast items.

In August 1995, DRC entered into a license agreement with Kettle
Restaurants, Inc., leases with CNL, an unaffiliated leasing company, and an
entity controlled by Jack M. Lloyd and William J. Howard, and subleases with
Kettle Restaurants, Inc. Upon consummation of the Merger, the Company assumed
DRC's rights and obligations under the license agreement, leases, and subleases,
pursuant to which the Company currently operates a total of 20 restaurants under
the Kettle family-style restaurant concept. See Item 13, "Certain Relationships
and Related Transactions." Pursuant to the terms of the license agreement, the
Company will not be required to pay franchise fees to Kettle Restaurant, Inc. as
the franchisor of the Kettle restaurant concept. The terms of the leases and
subleases and an agreement with Denny's, Inc. require the Company to convert
these restaurants to the Denny's concept by September 1997. The Company intends
to convert these restaurants to the Denny's concept as soon as practicable.
Historically, the annual revenue from Kettle restaurants averages $580,000 per
restaurant, compared with average revenue of $936,000 for the Denny's
restaurants currently operated by the Company. The Company believes that the
costs of these leases and subleases are on as favorable a basis as the lease
costs of similar Denny's restaurants. However, the costs of these leases may
result in unfavorable operating results until the restaurants are converted to
the Denny's concept and additional anticipated revenue is realized.

On May 31, 1996, the Company entered into the BEP Agreement to purchase
all of the outstanding stock of Black-eyed Pea U.S.A., Inc., which operates 100
restaurants under the "Black-eyed Pea" concept and franchises the rights to
operate an additional 30 Black-eyed Pea restaurants to third parties. Black-eyed
Pea U.S.A., Inc. had revenue of approximately $145.0 million during fiscal 1996.
The purchase price for the stock of Black-eyed Pea U.S.A., Inc. will be $65.0
million (subject to certain adjustments at closing), consisting of cash of $50.0
million and a promissory note for $15.0 million. In connection with the BEP
Agreement, the Company has obtained a commitment from a third party lender to
provide sale-leaseback and equipment lease financing of up to $50.0 million.

EXPANSION OF OPERATIONS

The Company has implemented an aggressive growth plan in its target
geographic markets based upon growth through the development of new Denny's
restaurants, acquisitions of existing Denny's restaurants, and acquisitions of
other family-style restaurants that can be converted to the Denny's concept.
This growth plan emphasizes a continued focus on restaurant locations and
operations. The Company's current target geographic market ranges from the
southeastern and midwestern United States west to Arizona, Nevada, and Idaho.
Many of the states within the target market, such as Arizona, Colorado, Florida,
Georgia, Idaho, Nevada, Texas, and Utah, are among the fastest growing states in
the United States. Before developing or acquiring any restaurants in a
particular location within its target market, the Company evaluates factors such
as the size of the market area, demographic and population trends, competition,
and the availability and cost of suitable restaurant locations. See "Business -
Denny's Restaurants - Site Selection."

The Company believes it is able to achieve significant cost savings
when it incorporates newly developed or acquired restaurants into its operations
by taking advantage of certain economies of scale associated with administrative
overhead and management personnel and systems. As a result, the Company believes
that its corporate infrastructure enables it to eliminate administrative and
managerial redundancies and to reduce the overall operating costs on a
per-restaurant basis. The Company also believes that it is able to increase
sales volume at acquired or converted restaurants through remodeling and
improved service. The Company intends to continue developing and acquiring
additional restaurants in order to enhance its presence in its target markets,
to establish the necessary base from which it can further penetrate these
markets, and to capitalize on purchasing, advertising, managerial,
administrative, and other efficiencies that result from the concentration of
restaurants in specific markets.

Restaurant Development

Since 1986, the Company has developed and opened more Denny's
restaurants than either Denny's, Inc. or any other franchisee. In 1994, the
Company entered into an agreement with Denny's, Inc., which requires it to
develop an additional 33 new Denny's restaurants by the end of 1997. See
"Business - Development Agreement." The specific time frame in

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which the Company is able to develop new restaurants will be determined by the
Company's success in identifying suitable sites; obtaining financing for
construction, tenant improvements, furniture, fixtures, and equipment;
negotiating acceptable lease or purchase terms; securing the appropriate
governmental permits and approvals (including those relating to zoning,
environmental, health, and liquor licenses); managing restaurant construction;
and recruiting and training qualified personnel. There can be no assurance as to
the number of new restaurants that the Company will be able to open or the
ultimate success of any such restaurants. The development of new restaurants
also may be affected by increased construction costs and delays resulting from
governmental regulatory approvals, strikes or work stoppages, and adverse
weather conditions. Newly developed restaurants may operate at a loss for a
period following their initial opening. The length of this period will depend
upon a number of factors, including the time of year the facility is opened,
sales volume, and the Company's ability to control costs. There can be no
assurance that the Company will be successful in achieving its expansion goals
through the opening of additional restaurants or that any additional restaurants
that are opened will be profitable.

Restaurant Acquisitions

The Company actively evaluates the opportunities to acquire additional
Denny's restaurants or franchise rights from Denny's, Inc. or other Denny's
franchisees and to acquire other family-style restaurants that can be converted
to the Denny's concept. The Company also actively evaluates opportunities to
acquire other restaurant concepts, such as the "Black-eyed Pea" concept, that it
can operate profitably by integrating the acquired restaurants with the
Company's existing operations. The Company evaluates such opportunities based on
numerous factors, including location, operating history, future potential,
acquisition price, and the terms and availability of financing for such
restaurants or additional franchise rights. The acquisition of any such existing
restaurants or additional franchise rights may require the approval of Denny's,
Inc. There can no be assurance that the Company will be able to acquire
additional operating Denny's restaurants, other restaurants that are suitable
for conversion to Denny's restaurants or that the Company may continue to
operate as non-Denny's restaurants, or other franchise rights or that any such
restaurants that are acquired will be profitable to the Company.

Restaurant Conversions

The Company plans to convert 23 of its current non-Denny's restaurants to
the Denny's concept. The Company believes that these conversions contribute
substantially to improved restaurant sales and restaurant contribution
(restaurant operating income before amortization and depreciation and occupancy
costs). The Company is obligated to convert 20 restaurants that it currently
operates under the "Kettle" trade name to the Denny's concept by September 1997,
to convert at least 21 of its other non-Denny's restaurants to the Denny's
concept by January 1, 1998, and to either close 24 non-Denny's restaurants or
convert them to the Denny's concept or another restaurant concept that is not in
competition with the business of Denny's, Inc., its affiliates, subsidiaries or
franchisees.

RESTAURANT OPERATIONS

Management Services

The Company believes that successful execution of basic restaurant
operations is essential to achieve and maintain a high level of customer
satisfaction in order to enhance the Company's success and future growth.
Therefore, the Company devotes significant efforts to ensure that all of its
restaurants offer quality food and service. The Company has established a
network of regional vice presidents of operations, district managers and
restaurant managers to communicate and maintain standards for the preparation
and service of quality food, the maintenance and repair of restaurant
facilitates and the appearance and conduct of employees.

Once a restaurant is integrated into its operations, the Company provides
a variety of corporate services to assure the proper execution of the Denny's
System and the operational success of the restaurant. The Company's executive
management continually monitors restaurant operations; maintains management
controls; inspects individual restaurants to assure the quality of products and
services and the maintenance of facilities; develops employee programs for
efficient

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staffing, motivation, compensation, and career advancement; institutes
procedures to enhance efficiency and reduce costs; and provides centralized
support systems.

The Company also maintains quality assurance procedures designed to
ensure compliance with the high quality of products and services mandated by
Denny's, Inc. Company personnel make unannounced visits to its restaurants to
evaluate the facilities, products, employees, and services. The Company believes
that its quality review program and executive oversight enhance restaurant
operations, reduce operating costs, improve customer satisfaction, and
facilitate the highest level of compliance with the Denny's System.

The Company's district and restaurant management personnel are
responsible for the maintenance of the operational standards specified by
Denny's, Inc. District managers are responsible for the six to eight restaurants
within their district. Restaurant managers are responsible for day-to-day
operations, including customer relations, food preparation and service, cost
control, restaurant maintenance, and personnel relations. As required by
Denny's, Inc., the Company staffs each of its Denny's restaurants with an
on-site general manager, two assistant managers, and 20 to 50 full-time of
part-time hourly employees.

Training

The Company seeks to attract and retain high-quality individuals with
prior restaurant experience for restaurant management positions. As the only
Denny's franchisee authorized to train its own restaurant management personnel,
the Company maintains a comprehensive training program that provides all
instructors, facilities, and required training materials necessary to train its
restaurant managers and other restaurant management personnel. The training
covers all aspects of management philosophy and overall restaurant operations,
including supervisory skills, customer interaction, operating standards, cost
control techniques, accounting procedures, employee selection and training, risk
management, and the skills required to perform all duties necessary for
restaurant operations. By training its own management personnel and opening its
own restaurants, the Company reduces its initial franchise fee per restaurant
from $35,000 to $20,000.

Newly hired employees are reviewed at regular intervals during their
first year, and all restaurant personnel receive annual performance reviews. New
managers work closely with experienced managers and district managers to
solidify their skills and expertise. The Company designates certain experienced
employees as "Certified Trainers" who are responsible for training newly hired
employees. The Company's district managers and general managers regularly
participate in on-going training efforts. The Company generally seeks to promote
existing employees to fill restaurant management positions.

Maintenance and Improvement of Restaurants

The Company maintains its Denny's restaurants and all associated
fixtures, furnishings, and equipment in conformity with the Denny's System. The
Company also makes necessary additions, alterations, repairs, and replacements
to its Denny's restaurants as required by Denny's, Inc., including periodic
repainting or replacement of obsolete signs, furnishings, equipment, and decor.
The Company may be required, subject to certain limitations, to modernize its
Denny's restaurants to the then-current standards and specifications of Denny's,
Inc.

Management Information Systems

The Company maintains a centralized, computerized accounting system for
financial controls and reporting functions. The Company has a point-of-sale
reporting system installed in each of its current Denny's restaurants.
Restaurants managers submit weekly reports on sales volume and mix, customer
counts, and labor costs to the Company's corporate management. Each restaurant
maintains "par stock" inventory levels and the restaurant manager takes monthly
physical inventories of all food, beverage, and supply items. The Company's
accounting department prepares monthly profit and loss statements, which
operational managers review and compare with the Company's prepared budgets.

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DEVELOPMENT AGREEMENT

In conjunction with the purchase of 13 Denny's restaurants from Denny's,
Inc. in 1994, the Company entered into the Development Agreement with Denny's,
Inc. The Development Agreement gives the Company the exclusive right to develop
and open Denny's restaurants in specified locations (the "Territory") in
Arizona, Colorado, Idaho, Kansas, Missouri, Nebraska, Texas, Utah, and Wyoming.
The Development Agreement requires the Company to develop 15 restaurants in the
Territory in 1996 and 18 in 1997. Acquisitions of existing Denny's restaurants
within the Territory and development of new restaurants outside the Territory
will not satisfy the Company's obligations under the Development Agreement.

During the term of the Development Agreement, Denny's, Inc. retains the
right (i) to open and operate or franchise Denny's restaurants at certain
non-standard locations within the Territory, such as universities, government
facilities, public transportation facilities, or shopping malls; (ii) to open
and operate or franchise non-standard Denny's restaurants within the Territory,
such as at drug or department stores, truck stops, or hotel or motel chains; and
(iii) to open and operate or franchise others to operate Denny's restaurants
located within the Territory that Denny's, Inc. acquires during the term of the
Development Agreement.

There can be no assurance that the Company will be able to identify
sufficient restaurant sites that it deems to be suitable or develop restaurants
on such sites on terms and conditions it considers favorable in order to satisfy
the requirements of the Development Agreement. The Development Agreement gives
Denny's, Inc. the right to terminate the Development Agreement and the Company's
exclusive right to develop restaurants in the Territory in the event that the
Company fails to timely comply with the development schedule for the restaurants
or if the Company otherwise defaults under the Development Agreement. Although
the Company believes it should be able to timely meet its development
commitments pursuant to the Development Agreement, no assurance can be given
that the Company will be able to satisfy its obligations. A failure to fulfill
such obligations may have an adverse effect on the Company. At the request of
the Company, Denny's, Inc. in the past has agreed to amend the terms of the
Development Agreement so as to extend the time in which the Company was required
to develop certain restaurants. There can be no assurance that Denny's, Inc.
will agree to extend the development schedules in the future in the event the
Company experiences any difficulty in satisfying such schedules for any reason,
including a shortage of capital. See "Risk Factors - Reliance on Denny's, Inc.,"
"Risk Factors - Inability to Develop or Convert Restaurants," and "Risk Factors
- - Restrictions Imposed by Denny's Franchise Agreements."

FINANCING AND LEASING

It is the Company's current strategy to lease, rather than own, the land
and buildings associated with the operations of its restaurants. Historically,
the Company has entered into sale-leaseback transactions or joint ventures under
which the financing company purchases the identified parcel of land and funds
the costs of the restaurant construction, excluding the initial franchise fee,
equipment costs, and restaurant preopening expenses. The financing company then
leases the restaurant property back to the Company for up to 30 years, including
renewal option periods, under terms of a triple-net lease. Initial rental rates
under these leases generally range from 10% to 12% of the financing company's
investment in land, improvements, and construction costs. The initial rate
typically is subject to rent increases of 10% every five years. The leases also
require the Company to pay additional rent based upon the gross sales of the
restaurant.

The Company's ability to effect its new store development strategy will
depend on the availability of additional sale-leaseback financing on terms and
conditions that the Company believes are appropriate for the risk of the
development. The Company currently has a commitment from CNL to provide $20.0
million of sale-leaseback financing through 1996. The commitment is subject to
various terms and conditions and provides for an initial rate of 10-5/8% on the
financing company's investment in land, improvements, and construction costs.
The inability of the Company to secure sufficient additional sale-leaseback
financing in the future could have a significant impact on its ability to
acquire or develop new restaurants.

The Company and CNL currently are parties to three joint venture
agreements for the purpose of acquiring, developing, owning, and operating a
total of 16 restaurants. The Company and CNL each has a 50% interest in each of
the joint ventures. The Company is responsible for day-to-day operations of the
restaurants owned by each joint venture,

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and CNL pays the Company a management fee of approximately 3.5% of sales for its
fservices. Under the terms of the joint ventures, CNL contributed 100% of the
initial capital required for land, building, and site development costs, and a
subsidiary of CNL contributed 100% of the capital required to equip the
restaurants, acquire the franchises, train the staff, stock the inventory, and
open the restaurants. On a quarterly basis, each of the joint ventures
distributes to CNL that amount of its cash flows available for distribution
equal to a 20% annual, non-compounded, cumulative distribution on CNL's initial
capital contributions plus all additional capital contributions. If any cash
flows remain available for distribution, each of the joint ventures next
distributes to the Company the amount necessary to provide the Company with
distributions up to the amount received by CNL, except that the distributions to
the Company in any fiscal year will not exceed the sum which would equal a 20%
annual, non-compounded, non-cumulative distribution on CNL's capital
contributions.

EQUIPMENT, FOOD PRODUCTS, AND OTHER SUPPLIES

The Company's ability to maintain consistent quality throughout its
Denny's restaurants depends in part upon its ability to acquire from reliable
sources the equipment, food products, and related items necessary to meet the
standards set by Denny's, Inc. The Company believes the maintenance of this
uniformity and consistency enables it to capitalize on the name recognition and
goodwill associated with Denny's restaurants. As a result, the Company leases or
purchases all fixtures, furnishings, equipment, signs, food products, supplies,
inventory, and other products and materials required for the development and
operation of its Denny's restaurants from suppliers approved by Denny's, Inc. In
order to be approved as a supplier, a prospective supplier must demonstrate to
the reasonable satisfaction of Denny's, Inc. its ability to meet the
then-current standards and specifications of Denny's, Inc. for such items, must
possess adequate quality controls, and must possess the capacity to provide
supplies promptly and reliably. Although the Company is not required to acquire
its equipment or supplies from any specified supplier, it must obtain the
approval of Denny's, Inc. before purchasing or leasing any items from an
unapproved supplier.

The Company's restaurants operate on a par stock system, which is a
system that enables restaurant managers to place weekly inventory orders based
on historical sales volumes, thereby focusing on customer service rather than on
purchasing decisions. The Company purchases most of its food inventory from a
single supplier that specializes in providing food products to Denny's
franchisees. The Company believes that its purchases from this supplier enable
the Company to maintain a high level of quality consistent with Denny's
restaurants, to realize convenience and dependability in the receipt of its
supplies, to avoid the costs of maintaining a large purchasing department, large
inventories, and product warehouses, and to attain cost advantages as a result
of volume purchases. The Company does not have a supply agreement or other
contractual arrangement with its primary supplier and effects purchases through
purchase orders. The Company believes that food goods could be readily purchased
from a large number of vendors throughout its regions of operation in the event
that it is unable to purchase sufficient inventory from its primary supplier.
The Company negotiates directly with manufacturers and packers for contract
pricing for equipment, food products, and other supplies used at its non-Denny's
restaurants. Each of the Company's restaurants purchases dairy, bakery, and
produce goods from approved local vendors.

ADVERTISING AND MARKETING

As generally required under the terms of the Denny's Franchise
Agreements, the Company contributes 2% of its restaurant sales to an advertising
and marketing fund controlled by Denny's, Inc. Denny's, Inc. uses this fund
primarily to develop system-wide advertising, sale promotions, and marketing
materials and programs. The Denny's Franchise Agreements prohibit franchisees,
including the Company, from conducting any local, regional, or national
advertising without the prior written consent of Denny's, Inc. From time to
time, Denny's, Inc. may establish advertising cooperatives for geographic areas
not covered by existing advertising campaigns. In the event that the Company
participates in such a cooperative, any contribution that it makes to a
cooperative is in addition to the 2% of gross sales that the Company is required
to contribute to Denny's, Inc. Cooperatives have recently been established in
several of the Company's markets. The Company anticipates that these
cooperatives will be efficient, economical methods of increasing sales through
more effective regional or local advertising.

31
<PAGE> 34
GOVERNMENT REGULATION

The restaurant business is subject to extensive federal, state and local
government regulation relating to the development and operation of restaurants.
Each of the Company's restaurants is subject to licensing and regulation by
state and local departments and bureaus of alcohol control, health, sanitation,
and fire and to periodic review by the state and municipal authorities for areas
in which the restaurants are located. In addition, the Company is subject to
local land use, zoning, building, planning, and traffic ordinances and
regulations in the selection and acquisition of suitable sites for constructing
new restaurants. Delays in obtaining, or denials of, revocation of, or temporary
suspension of, necessary licenses or approvals could have a material adverse
impact upon the Company's development or acquisition of restaurants or the
Company's operations generally. The Company also is subject to regulation under
the Fair Labor Standards Act, which governs such matters as working conditions
and minimum wages. An increase in the minimum wage rate or changes in tip-credit
provisions, employee benefit costs (including costs associated with mandated
health insurance coverage), or other costs associated with employees could
adversely affect the Company. In addition, the Company is subject to the
Americans with Disabilities Act of 1990 which, among other things, may require
certain installations in new restaurants or renovations to its existing
restaurants to meet federally mandated requirements. To the Company's knowledge,
the Company is in compliance in all material respects with all applicable
federal, state and local laws affecting its business.

Sales of alcoholic beverages comprised less than 1% of the Company's
total restaurant sales for fiscal 1995. The sale of alcoholic beverages is
subject to extensive regulations. The Company may be subject to "dram-shop"
statues, which generally provide an individual injured by an intoxicated person
the right to recover damages from the establishment that wrongfully served
alcoholic beverages to that person. The Company carries liquor liability
coverage as part of its existing comprehensive general liability insurance and
has never been a defendant in a lawsuit involving "dram-shop" statues.

TRADEMARKS

The Company licenses the right to use the "Denny's" trademark directly
from Denny's, Inc. The Company believes that the continued right to use the
"Denny's" trademark is important to its success. The Company also licenses the
right to use the "Kettle" trademark from Kettle Restaurants, Inc., pending the
Company's conversion of its Kettle restaurants to the Denny's concept, and
licenses the "Todd's" trademark for a period ending August 31, 1998. The Company
owns the rights to various trade names, including "Ike's," "Ike's Great American
Restaurant," "Jerry's," a registered trademark, "Mr. Fable's," a registered
trademark, and "Bucky's Extraordinary Eatery." The Company does not consider the
trademarks it owns important to its success. The Company has granted
non-exclusive royalty-free rights to the "Jerry's" trademark to the owners of 22
other Jerry's restaurants in the midwest. These owners are former Jerry's
franchisees and are not affiliated with the Company.

COMPETITION

The restaurant industry is highly competitive with respect to price,
service, and food type and quality. In addition, restaurants compete for the
availability of restaurant personnel and managers. The Company's restaurants
compete with a large number of other restaurants, including national and
regional restaurant chains and franchised restaurant systems, many of which have
greater financial resources, more experience, and longer operating histories
that the Company, as well as with locally owned independent restaurants. Changes
in factors such as consumer tastes, local, regional, or national economic
conditions, demographic trends, traffic patterns, cost and availability of food
products or labor, inflation, and purchasing power of consumers also could have
a material adverse effect on the Company's operations.

The Company's restaurants also compete with various types of food
businesses, as well as other businesses, for restaurant locations. The Company
believes that site selection is one of the most crucial decisions required in
connection with the development of restaurants. As the result of the presence of
competing restaurants in the Company's target markets, the Company devotes great
attention to obtaining what it believes will be premium locations for new
restaurants, although no assurances can be given that it will be successful in
this regard.

The Company's Denny's restaurants, as part of the nation's largest
family-oriented, full-service restaurant chain, compete primarily with regional
restaurant chains such as International House of Pancakes, Big Boy, Shoney's,
Friendly's

32
<PAGE> 35
and Perkins. The Company's non-Denny's restaurants also compete with these
chains, as well as with smaller regional, local and independent operators.

INSURANCE

The Company maintains general liability and property insurance and an
umbrella and excess liability policy in amounts it considers adequate and
customary for businesses of its kind. There can be no assurance, however, that
future claims will not exceed insurance coverage.

EMPLOYEES

At May 31, 1996, the Company had approximately 10,000 employees, of whom
approximately 115 were corporate personnel, approximately 750 were restaurant
management personnel, and the remainder were hourly personnel. The Company is
not a party to any collective bargaining agreement. The Company believes that
its relationship with its employees is good.

Each of the Company's typical Denny's restaurants has approximately 50
employees, including approximately 20 kitchen personnel and 30 service
personnel. Each of the Company's non-Denny's restaurant has approximately 30 to
50 employees, depending upon average restaurant sales. Many of the Company's
employees work part-time. Restaurant personnel, other than regional, district
and restaurant managers, are paid on an hourly basis. Hourly rates vary
according to geographical location, generally ranging from $5.00 to $6.00 an
hour for kitchen personnel. Service personnel are paid approximately $2.25 an
hour plus tips.

PROPERTIES

The Company leases for a term expiring in 1997 approximately 12,000
square feet of office space in Scottsdale, Arizona, for use as its principal
corporate offices. The Company believes that this space may not be adequate for
its reasonably anticipated needs following the Merger and intends to enter into
leases for new or additional space as and when the need arises.

The Company leases substantially all the land and buildings for its
restaurants. The initial lease terms range from 10 to 20 years and include
renewal options for up to 30 years. All of the Company's current leases have
remaining initial terms or renewal options that extend for more than five years
from the date of this Prospectus. The leases generally provide for a minimum
annual rent and additional rental payments if restaurant sales volume exceed
specified amounts. In addition, the leases generally require the Company to pay
real estate taxes, insurance premiums, maintenance costs, and certain other of
the landlords' operating costs. Contingent rentals have represented less than
15% of total rent expense for each of fiscal 1993, 1994, and 1995. Annual base
rent for each location ranges from approximately $8,900 a year to approximately
$151,000 a year, with the annual average rent approximating $53,000. The
Company's restaurants generally are located in single-purpose, one-story,
freestanding buildings with a capacity of between 90 and 150 customers. The
Company owns most of the furniture, fixtures and equipment in its restaurants,
including kitchen equipment, seating and tables.

33
<PAGE> 36
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect to each
of the Company's directors and executive officers.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jeffrey D. Miller......................... 42 Chairman of the Board

Jack M. Lloyd............................. 45 President, Chief Executive Officer, and Director

William G. Cox............................ 46 Chief Operating Officer and Director

William J. Howard......................... 51 Vice President, Secretary, and Director

Todd S. Brown............................. 40 Vice President, Chief Financial Officer, Treasurer,
and Director

Haig V. Antranikian....................... 44 Vice President and Director

Edward C. Williams........................ 35 Vice President - Finance

Michael Larsen............................ 42 Vice President

John M. Holliman, III..................... 41 Director

C. Alan MacDonald......................... 62 Director

Fred W. Martin............................ 63 Director

Philip B. Smith........................... 59 Director
</TABLE>

Jeffrey D. Miller has served as Chairman of the Board of the Company
since its inception in April 1986 and served as President and Chief Executive
Officer of the Company from April 1986 until March 1996. Mr. Miller served as
chairman of the Denny's Franchisee Advisory Board from 1989 to 1991.

Jack M. Lloyd has served as President, Chief Executive Officer, and a
Director of the Company since March 1996. Mr. Lloyd served as Chairman of the
Board and Chief Executive Officer of DRC from 1987 until March 1996 and served
as President of DRC from 1987 until November 1994. Since 1987, Mr. Lloyd,
through DRC, developed or acquired more than 70 Denny's restaurants throughout
the western United States. Mr. Lloyd engaged in commercial and residential real
estate development and property management as President of First Federated
Investment Corporation during the early and mid-1980s. Mr. Lloyd also held
senior management positions in accounting, financing, and budgeting for Texas
Utilities. Mr. Lloyd also currently serves as a director of Action Performance
Companies, Inc., a publicly held company.

William G. Cox has served as Chief Operating Officer and a Director of
the Company since March 1996. Mr. Cox served as Vice President of Operations for
Denny's, Inc. from June 1993 until November 1995, with responsibility for
approximately 590 company-owned and franchised Denny's restaurants located
throughout the United States. Mr. Cox served as a Senior Vice President of
Flagstar and as Chief Operating Officer of Flagstar's "Quincy's" restaurant
chain from May 1992 to June 1993. Mr. Cox served as Vice President of Eastern
Operations of Denny's, Inc. from March 1991 to May 1992 and as a Regional
Manager and Division Leader for Denny's, Inc. from 1981 to March 1991. Mr. Cox
joined Denny's, Inc. as a Manager-in-Training in September 1977 and had advanced
to the position of Regional Manager by 1981.

William J. Howard has served as Vice President, Secretary, and a Director
of the Company since March 1996. Mr. Howard served as President of DRC from
November 1994 until March 1996 and as a Director of DRC from 1990 until March
1996. Mr. Howard served as Vice President of DRC from 1990 until November 1994
and served as Chief Financial

34
<PAGE> 37
Officer of DRC from 1990 until August 1994. Prior to joining DRC, Mr. Howard
held numerous senior management positions with Citicorp and Citibank, including
Senior Vice President and Senior Credit Officer with Citicorp Mortgage, Inc.

Todd S. Brown has served as Chief Financial Officer, Treasurer, and a
Director of the Company since March 1996. Mr. Brown served as Vice President,
Chief Financial Officer, and a Director of DRC from September 1994 until March
1996. Mr. Brown was employed by Deloitte & Touche LLP from 1980 to September
1994, most recently as a Senior Manager. Mr. Brown is a Certified Public
Accountant in the state of Arizona.

Haig V. Antranikian has served as a Vice President of the Company since
March 1996 and as a Director of the Company since May 1993. Mr. Antranikian
served as Executive Vice President and Chief Operating Officer of the Company
from March 1989 until March 1996 and as Secretary from June 1994 until March
1996. Mr. Antranikian became a district manager for L-K Restaurants, Inc. in
1983, assuming supervision of eight restaurants. Mr. Antranikian joined the
Company in 1986, becoming an area director with responsibility for half of the
Company's restaurants. In December 1986, he was promoted to Vice President of
Operations and was subsequently placed in charge of all restaurant operations.

Edward C. Williams has served as Vice President - Finance of the Company
since March 1996. Mr. Williams served as Chief Financial Officer and Treasurer
of the Company from February 1993 until March 1996. From 1987 until February
1993, Mr. Williams was employed by KPMG Peat Marwick LLP and in 1991 was
promoted to Senior Manager. Mr. Williams is a Certified Public Accountant.

Michael Larsen has served as a Vice President of the Company since March
1996. From 1993 until March 1996, Mr. Larsen served as Vice President of Real
Estate and Development of DRC. Mr. Larsen directs the due diligence of site and
building acquisitions and coordinates the construction of new restaurants. From
April 1984 to April 1993, Mr. Larsen was the Operations Manager for B&B
Properties, an advisor to several publicly traded real estate investment trusts.

John M. ("Jock") Holliman, III has served as a Director of the Company
since March 1996. Mr. Holliman served as a Director of DRC from January 1995
until March 1996. Mr. Holliman is the sole general partner of AGP Management,
L.P., which is the managing general partner of Arizona Growth Partners, L.P., a
limited partnership formed in 1993 to purchase the venture capital portfolio of
Valley National Bank of Arizona. From 1985 to 1993, Mr. Holliman served as
Senior Managing Director of Valley National Investors, Inc., a wholly owned
Small Business Investment Corporation subsidiary of Valley National Bank of
Arizona. Mr. Holliman also currently serves as a director of Voxel, OrthoLogic
Corp., Express America Holdings Corp., TopoMetrix, PhotoMetrics, Ltd. (each of
which are part of the portfolio held by Arizona Growth Partners, L.P.), Antiqua
Group, Inc., and Ellerbe Becket, Inc. Mr. Holliman also serves as a director of
several non-profit organizations.

C. Alan MacDonald has served as a Director of the Company since July
1993. Mr. MacDonald currently is a General Partner of the Marketing Partnership
Inc., a packaged goods marketing consulting firm. From 1992 through 1994, Mr.
MacDonald was Chairman of the Board and Chief Executive Officer of Lincoln
Snacks Company and continues to serve on that company's Board of Directors. From
1983 to 1995, Mr. MacDonald served as President and Chief Executive Officer of
the Nestle Foods Corporation. From 1955 through 1982, Mr. MacDonald was employed
by the Stouffers Corporation, serving as President of The Stouffer Frozen Food
Company from 1971 through 1982. Mr. MacDonald currently serves as a director of
American Maize-Products Co., a producer of corn sweeteners, corn starches, and
tobacco products; Lord, Abbett & Company, a manager of mutual funds;
Fountainhead Water Company, a producer of bottled water; and J.B. Williams, a
producer of men's toiletries. Mr. MacDonald is a member of the Board of Trustees
of Manhattanville College.

Fred W. Martin has served as a Director of the Company since March 1996.
Mr. Martin served as a Director of DRC from November 1994 until March 1996. Mr.
Martin served as Western Regional Director of Franchise Development with
Denny's, Inc. from 1985 to 1994, during which time he approved and developed 400
franchise and company locations for Denny's, Inc. throughout the western United
States. Mr. Martin served as Western Real Estate Representative with Denny's,
Inc. until 1985. Mr. Martin has over 17 years of experience in the restaurant
industry.

35
<PAGE> 38
Philip B. Smith has served as a Director of the Company since May 1993.
Mr. Smith has been a Vice Chairman of the Board of Spencer Trask Securities
Incorporated since 1991. He was formerly a Managing Director of Prudential
Securities in its merchant bank. Mr. Smith is a founding general partner of
Lawrence Venture Associates, a venture capital limited partnership headquartered
in New York City. From 1981 to 1984, he served as Executive Vice President and
Group Executive of the worldwide corporations group at Irving Trust Company.
Prior to joining Irving Trust Company, he was at Citibank for 15 years, where he
founded Citicorp Venture Capital as President and Chief Executive Officer. Since
1988, Mr. Smith also has been the managing general partner of Private Equity
Partnership, L.P. Mr. Smith is also a director of Great Bear Technology Inc.,
Movie Gallery, Inc., and StarPress, Inc., which are publicly held companies.

All directors of the Company hold office until the Company's next annual
meeting of shareholders or the election and qualification of their successors.
The former shareholders of DRC collectively own a sufficient number of shares of
the Company's Common Stock to elect all of the members of the Board of
Directors. Except for the terms of Mr. Miller's employment agreement, which
provides for Mr. Miller to serve as Chairman of the Board of the Company, there
is no agreement or understanding between the Company and any of the persons who
constitute the Company's Board of Directors as to their serving on the Company's
Board of Directors in the future.

The Company's Board of Directors maintains an Audit Committee, a
Compensation Committee and a 1992 Stock Option Plan Committee. Messrs. Holliman
and Smith constitute the Audit Committee; and Messrs. Holliman, MacDonald and
Martin constitute the Compensation and 1992 Stock Option Plan Committees.

EXECUTIVE COMPENSATION

The following table sets forth information concerning the compensation of
the Company's Chief Executive Officer and the two other most highly compensated
executive officers whose cash salary and bonuses exceeded $100,000 during the
fiscal year ended December 27, 1995 (the "Named Executive Officers"). The table
does not include information concerning the compensation during fiscal 1995 of
Jack M. Lloyd, William J. Howard, Todd S. Brown, or Michael Larsen, who became
officers of the Company on March 29, 1996.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------- ------------
OTHER ANNUAL SECURITIES
FISCAL SALARY COMPENSATION UNDERLYING
NAME AND PRINCIPAL POSITION YEAR $ ($) OPTIONS (#)
--------------------------- ------ --- ------------ -----------
<S> <C> <C> <C> <C>
Jeffrey D. Miller, Chairman of the Board(1) 1995 $240,863 $ 23,750 --
1994 193,808 25,847 --
1993 178,969 39,183 --

Haig V. Antranikian, Vice President 1995 $150,594 $ 5,417 10,000(3)
and Director(2) 1994 117,275 406 28,000(4)
1993 103,158 5,294 --

Edward C. Williams, 1995 $99,509 $ 11,750 10,000(3)
Vice President - Finance(5) 1994 89,001 5,961 40,000(4)
1993 64,808 5,294 25,000(6)
</TABLE>
- ------------------
(1) Mr. Miller served as the President and Chief Executive Officer of the
Company or its predecessors from April 1986 until March 29, 1996.
(2) Mr. Antranikian served as Executive Vice President and Chief Operating
Officer of the Company from March 1989 until March 29, 1996.
(3) The options were granted at an exercise price of $4.75 per share (the fair
value of the shares on the date of grant) and vest and become exercisable
in three equal annual installments beginning on the first anniversary of
the date of grant.
(4) The options were granted at an exercise price of $4.00 per share (the fair
value of the shares on the date of grant) and vest and become exercisable
in three equal annual installments beginning on the first anniversary of
the date of grant.
(5) Mr. Williams served as Chief Financial Officer and Treasurer of the Company
from February 1993 until March 29, 1996.
(6) The options were granted at an exercise price of $2.00 per share (which was
below the fair value of the shares on the date of grant) and vest and
become exercisable in three equal annual installments beginning on the
first anniversary of the date of grant.

36
<PAGE> 39
OPTIONS GRANTS

The following table sets forth certain information with respect to stock
options granted to the Named Executive Officers during the fiscal year ended
December 27, 1995.

OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
POTENTIAL REALIZABLE
PERCENTAGE VALUE AT ASSUMED
NUMBER OF OF TOTAL ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION
OPTIONS EMPLOYEES IN PRICE EXPIRATION OPTION TERM(2)
NAME GRANTED (#) FISCAL YEAR ($/SH)(1) DATE 5% 10%
---- ----------- ----------- -------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Jeffery D. Miller,
Chairman of the Board - - - - - -

Haig V. Antranikian,
Vice President and
Director 10,000 50% $4.75 10/10/05 $29,900 $75,700

Edward C. Williams,
Vice President - Finance 10,000 50% $4.75 10/10/05 $29,900 $75,700
</TABLE>
- ---------------------
(1) The options were granted at the fair value of the shares on the date of
grant. The options vest and become exercisable in three equal annual
installments beginning on the first anniversary of the date of grant, and
have a ten-year term.
(2) Potential gains are net of the exercise price, but before taxes associated
with the exercise. Amounts represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. The assumed 5% and 10% rates of stock price appreciation are provided
in accordance with the rules of the Securities and Exchange Commission and
do not represent the Company's estimate or projection of the future price
of the Company's Common Stock. Actual gains, if any, on stock option
exercises will depend upon the future market prices of the Company's Common
Stock.

RECENT GRANTS OF STOCK OPTIONS

Pursuant to his employment agreement with the Company, on March 29, 1996,
the Company granted William G. Cox, its Chief Operating Officer and a director,
options to acquire 300,000 shares of Common Stock, of which options to acquire
60,000 shares were granted at an exercise price of $3.00 per share and were
immediately vested and exercisable. The remaining options to acquire 240,000
shares of Common Stock were granted at an exercise price of $4.00 per share,
which was the fair market value of the Common Stock on the date of grant,
and vest and became exercisable in equal annual installments of 60,000 shares
each year, beginning on March 29, 1997.

On April 29, 1996, the Company granted options to acquire an aggregate
of 264,800 shares of Common Stock at an exercise price of $4.00 per share,
which was the fair market value of the Common Stock on the date of grant. These
options include options to acquire 124,800 and 100,000 shares of Common Stock
granted to Todd S. Brown, Vice President, Chief Financial Officer, Treasurer,
and a director of the Company, and Michael Larsen, a Vice President of the
Company, respectively. Of the options granted, 20% were immediately vested and
exercisable and the remaining options vest and become exercisable in equal
annual installments beginning on April 29, 1997.

OPTION HOLDINGS

The following table sets forth information concerning the options exercised
in fiscal 1995, and the number and value of all options held at December 27,
1995, by the Named Executive Officers.

37
<PAGE> 40
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NAME ON EXERCISE REALIZED OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END ($)(1)
---- ----------- -------- -------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey D. Miller.......... None N/A - - N/A N/A
Haig V. Antranikian........ None N/A 49,333 28,667 $160,166 $ 39,084
Edward C. Williams......... None N/A 13,333 61,667 $ 11,666 $142,709
</TABLE>
- ---------------
(1) Calculated based upon the closing price of the Company's Common Stock on
December 27, 1995 of $5.625 per share, less the exercise prices of the
options held.

EMPLOYMENT AGREEMENTS

General

The Company currently is a party to employment agreements with each of
Jeffrey D. Miller, Jack M. Lloyd, William J. Howard, Todd S. Brown, William G.
Cox, Haig V. Antranikian, and Edward C. Williams. In addition to the provisions
of the individual employment agreements as described below, the employment
agreements generally require the Company to provide each person with certain
medical and life insurance benefits, to reimburse them for all travel,
entertainment, and other ordinary and necessary expenses incurred in connection
with the Company's business and their duties under their respective employment
agreements, and to provide such other fringe benefits that the Company makes
generally available to all of its employees on a non-discriminatory basis. The
employment agreements with Messrs. Miller, Lloyd, Howard, and Cox require the
Company to provide each such officer with an automobile for use in connection
with the Company's business. The agreements with Messrs. Lloyd, Howard, Brown,
and Cox contain provisions that prohibit the respective officer from (i)
competing with the business of the Company, (ii) taking certain actions intended
to solicit other persons to terminate their business relationship with the
Company or to terminate his or her employment relationship with the Company, and
(iii) making unauthorized use or disclosure of the Company's trade names,
fictitious names, or confidential information.

Jeffrey D. Miller

The employment agreement with Mr. Miller provides for his employment as
Chairman of the Board of the Company until September 30, 1998, subject to
automatic renewal for successive one-year periods unless either the Company or
Mr. Miller has given prior notice of non-renewal. The employment agreement
provides Mr. Miller with an annual base salary of $240,000 per year plus
performance bonuses and annual increases, if any, as determined by the Company's
Board of Directors. If the employment agreement is terminated without cause or
as a result of a constructive termination (as defined in the agreement), Mr.
Miller is entitled, subject to specified limitations, to receive a severance
payment over a 24-month period of twice the average of the sum of his
then-current base salary and bonus, determined for the three full fiscal years
ending on the last day of the Company's fiscal year immediately preceding the
termination.

Jack M. Lloyd; William J. Howard; Todd S. Brown

DRC entered into employment agreements, effective September 30, 1994,
with each of Jack M. Lloyd, William J. Howard, and Todd S. Brown. Upon
consummation of the Merger, the Company assumed DRC's obligations under these
agreements. The employment agreement with Mr. Lloyd provides for a base salary
of $312,000 per year; the agreement with Mr. Howard provides for a base salary
of $156,000 per year; and the agreement with Mr. Brown, as amended, provides for
a base salary of $124,800 per year. In addition, each agreement provides that
the Company may pay each of Messrs. Lloyd, Howard, and Brown additional
incentive compensation for each fiscal year, based upon standards to be
determined from time to time by the Company's Board of Directors in its sole
discretion. In order to be eligible to receive incentive compensation for any
fiscal year, however, the officer must be employed by the Company on
the last day of such fiscal year.

38
<PAGE> 41
Each employment agreement expires on December 25, 1997. The Company may
terminate each officer's employment only for cause, as defined in the respective
agreements. Each agreement also will terminate automatically upon the death of
the respective officer, and each officer may terminate his employment agreement
upon 60 days' written notice to the Company.

William G. Cox

In December 1995, the Company entered into an employment agreement with
William G. Cox, which became effective upon consummation of the Merger. Pursuant
to his agreement with the Company, Mr. Cox serves as the Chief Operating Officer
of the Company at a base salary of $220,000 per year. The agreement also
provides that Mr. Cox will be eligible to receive an annual bonus of up to 50%
of his annual base salary pursuant to a bonus pool plan to be established by and
administered in the sole discretion of the Company. Pursuant to the agreement,
the Company reimbursed Mr. Cox for certain relocation expenses and granted to
Mr. Cox options to purchase 300,000 shares of the Company's Common Stock. Mr.
Cox's agreement provides for his employment until March 29, 1999, subject to
extension for additional one-year periods under mutually agreeable terms and
conditions. The Company may terminate the agreement only for cause, as defined
in the agreement.

Haig V. Antranikian; Edward C. Williams

The employment agreement with Mr. Antranikian provides for his employment
until June 1, 2000, subject to automatic renewal for successive one-year periods
unless either Mr. Antranikian or the Company has given prior notice of
non-renewal. The employment agreement provides Mr. Antranikian with an annual
base salary of $150,000 per year plus (i) an annual option to purchase not less
than 10,000 shares of Common Stock and (ii) performance bonuses and annual
increases, if any, as determined by the Company's Board of Directors.

The employment agreement with Mr. Williams, effective as of June 1, 1995,
provides for his employment until December 1, 1997, subject to automatic renewal
for successive one-year periods unless either the Company or Mr. Williams has
given prior notice of non-renewal. The employment agreement provides Mr.
Williams with an annual base salary of $100,000 per year plus (i) an annual
option to purchase not less than 10,000 shares of Common Stock and (ii)
performance bonuses and annual increases, if any, as determined by the Company's
Board of Directors. In addition, Mr. Williams received a $50,000 non-interest
bearing loan from the Company upon consummation of the Merger. Mr. Williams will
be required to pay such loan only in the event that his employment agreement is
terminated as a result of a "termination without cause" or "constructive
termination" (as defined in the agreement).

Pursuant to their employment agreements, Messrs. Antranikian and Williams
will each have the option for a period of 720 days to terminate their respective
employment with the Company and receive an amount equal to two and one-half
times their current salary, as defined. Each of Mr. Antranikian and Mr. Williams
is entitled to receive a severance payment over a 12-month period of (i) twice
his current salary including bonus and benefit payments ("Current Salary") if
his employment agreement is terminated as a result of a "constructive
termination" in connection with a "change of control" (as such terms are defined
in the agreement), or (ii) two and one-half times his Current Salary if his
employment agreement is terminated as a result of a "constructive termination"
in connection with the Merger or as a result of the election of either party not
to renew the agreement, and (iii) three times his Current Salary if his
agreement is terminated as a result of a "termination without cause." In
addition, in the event that either Mr. Antranikian's or Mr. Williams' agreement
is terminated as a result of a "termination without cause" or "constructive
termination," any and all stock options held by Mr. Antranikian or Mr. Williams
will immediately become vested and exercisable. In the event all personal
guarantees by Mr. Antranikian of the Company's indebtedness are not removed upon
the termination of his employment, Mr. Antranikian will be entitled to a payment
of $50,000 per year until all such guarantees are terminated.

STOCK OPTION PLANS

Amended and Restated 1992 Stock Option Plan

The Company's Amended and Restated 1992 Stock Option Plan (the "1992
Plan") was adopted by the Company's Board of Directors and approved by the
Company's shareholders in August 1994. In January 1995, the Company's Board of
Directors adopted, and in March 1995 the shareholders approved, an amendment to
the 1992 Plan that increased the

39
<PAGE> 42
number of shares of Common Stock reserved for issuance under the 1992 Plan to
1,000,000 shares. The 1992 Plan provides for the granting of options to purchase
shares of Common Stock to employees and other key persons who, in the judgment
of the compensation committee of the Board of Directors (the "Committee"), have
made special contributions to the Company's efforts. The 1992 Plan limits the
persons eligible to receive options to directors, consultants, and key
employees, including officers, of the Company or a subsidiary of the Company and
"key persons" who are not employees but have provided valuable services, have
incurred financial risk on behalf of the Company, or have extended credit to the
Company or its subsidiaries. The 1992 Plan provides that options granted to
employees may be designated "incentive stock options" ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or non-qualified options subject to taxation pursuant to Section 83 of
the Code. Employees, including officers, are eligible to receive both ISOs and
non-qualified options under the 1992 Plan, while key persons who are not
employees are eligible to receive only non-qualified options. The 1992 Plan is
intended to comply with Rule 16b-3 as promulgated under the Exchange Act with
respect to persons subject to Section 16 of the Exchange Act. As of June 7,
1996, there were outstanding options to acquire a total of 792,000 shares of
Common Stock at a weighted average exercise price of $4.09 per share under the
1992 Plan.

The Committee determines the periods during which options granted under
the 1992 Plan may be exercised, but no option granted under the 1992 Plan may
expire more than 10 years from the date of grant. The Board of Directors or the
Committee, in its sole discretion, determines the exercise price of options
granted under the 1992 Plan. ISOs may not have an exercise price less than the
fair market value of the Common Stock on the grant date, except that, in the
case of an ISO granted to any participant who owns more than 10% of the
Company's outstanding voting shares, the exercise price must be at least 110% of
the fair market value of the Common Stock on the date of grant and the term of
the option may be no longer than five years. Options that are not ISOs may not
have an exercise price less than the greater of the minimum price required by
applicable state law, by the Company's Restated Articles of Incorporation, or
the par value of the Common Stock.

At the discretion of the Committee or the Board of Directors, options may
be exercised by delivery of any combination of cash, shares of Common Stock, or
by delivering to the Company a promissory note upon such terms and conditions as
the Committee or Board of Directors may determine. The 1992 Plan also permits
the Committee or the Board of Directors, in its sole discretion, to include a
provision in any option agreement that will allow the optionholder, on any date
on which the option is exercisable and on which the fair market value (as
defined in the 1992 Plan) of Common Stock exceeds the exercise price of the
option, to surrender the option in lieu of exercise and in exchange receive cash
or shares of Common Stock in an amount equal to the excess of the fair market
value of Common Stock over the exercise price of the option.

The Committee or the Board of Directors has the right to amend, alter or
discontinue the 1992 Plan. Without the consent of the affected optionholder,
however, no amendment or alteration may be made that would impair the rights of
such optionholder under any outstanding option, except in the case of certain
stock splits, certain mergers or sales of assets, or upon the dissolution or
liquidation of the Company. Without the approval of the Company's shareholders,
no amendment or alteration may be made to the 1992 Plan that would (i) increase
the total number of shares reserved for issuance under the 1992 Plan; (ii)
change the class of persons eligible to participate in the 1992 Plan; (iii)
decrease the minimum exercise price of options that may be granted under the
1992 Plan; or (iv) extend the maximum life of the 1992 Plan or maximum option
exercise period. The number of shares and option prices are subject to
adjustment pursuant to certain anti-dilution provisions contained in the 1992
Plan. The 1992 Plan terminates on April 1, 2002.

1995 Directors Stock Option Plan

The Company's 1995 Directors Stock Option Plan (the "1995 Plan") was
adopted by the Board of Directors in January 1995 and approved by the Company's
shareholders in March 1995. A total of 300,000 shares of Common Stock have been
reserved for issuance under the 1995 Plan. The purpose of the 1995 Plan is to
promote the interests of the Company and its shareholders by strengthening the
Company's ability to attract and retain the services of experienced and
knowledgeable non-employee directors and by encouraging such directors to
acquire an increased proprietary interest in the Company.

A committee of two or more directors appointed by the Board of Directors
is responsible for interpreting and administering the 1995 Plan. The terms of
options granted, including the exercise price and number of shares of Common
Stock subject to the options, are set forth in the 1995 Plan and are not subject
to the discretion of the Board of Directors.

40
<PAGE> 43
Options to purchase 10,000 shares of Common Stock are automatically granted to
each non-employee director of the Company on the date of his or her initial
election to the Board of Directors or re-election at an annual meeting of the
Company's shareholders. Directors who are first elected or appointed to the
Board of Directors on a date other than an annual meeting date are automatically
granted options to purchase the number of shares of Common Stock equal to the
product of 10,000 multiplied by a fraction, the numerator of which is the number
of days during the period beginning on such grant date and ending on the date of
the next annual meeting, and the denominator of which is 365. If no meeting is
scheduled at a time a director is first elected or appointed to the Board of
Directors, the date of the next annual meeting is deemed to be the 120th day of
the fiscal year next following the interim grant date. No option is transferable
by the optionholder other than by will or the laws of descent and distribution,
and each option is exercisable, during the lifetime of the optionholder, only by
the optionholder or a person who obtained the option pursuant to a qualified
domestic relations order. The exercise price of each option is the fair market
value of the Company's Common Stock on the business day preceding the date of
grant, and the term of each option may not exceed ten years. One-half of the
options granted vest and become exercisable after the first year of continuous
service as a director following the automatic grant date, and 100% vest after
two years of continuous service on the Board of Directors. The non-discretionary
provisions of the 1995 Plan are intended to satisfy the requirements of rules
promulgated under the Exchange Act with respect to non-employee directors of the
Company.

The exercise price of options granted pursuant to the 1995 Plan is
payable in full upon exercise of the options. Optionholders generally may pay
the exercise price by delivering to the Company any combination of cash, Common
Stock, or a promissory note with such terms and conditions as the Board of
Directors may determine. The 1995 Plan also permits the Board of Directors, in
its sole discretion, to include a provision in any option agreement that will
allow the optionholder, on any date on which the option is exercisable and on
which the fair market value (as defined in the 1995 Plan) of the Company's
Common Stock exceeds the exercise price of the option, to surrender the option
in lieu of exercise and in exchange receive cash or shares of Common Stock in an
amount equal to the excess of the fair market value of Common Stock over the
exercise price of the option.

The Board of Directors has the right to amend, alter or discontinue the
1995 Plan. Without the consent of the affected optionholder, however, no
amendment or alteration may be made that would impair the rights of any
optionholder under any outstanding options, except in the case of certain stock
splits, certain mergers or sales of assets, or upon the dissolution or
liquidation of the Company. Without approval of the Company's shareholders, no
amendment or alteration may be made that would (i) increase the total number of
shares reserved under the 1995 Plan; (ii) change the class of persons eligible
to participate in the 1995 Plan; (iii) decrease the minimum exercise price of
options that may be granted under the 1995 Plan; or (iv) extend the maximum life
of the 1995 Plan or maximum option exercise period. The number of shares and
option prices are subject to adjustment pursuant to certain anti-dilution
provisions contained in the 1995 Plan. The 1995 Plan expires on January
16, 2005.

The 1995 Plan replaced the Company's 1992 Directors' Stock Option Plan,
pursuant to which options to purchase 22,500 shares of Common Stock at an
exercise price of $6.00 per share were granted to each of Messrs. MacDonald,
Smith, and a former director of the Company. Each of Messrs. MacDonald, Smith,
and a former director of the Company received options to purchase 10,000 shares
of Common Stock at an exercise price of $3.00 per share at the time the 1995
Plan was approved by the Company's shareholders in March 1995. Upon consummation
of the Merger, C. Alan McDonald, Philip B. Smith, John M. Holliman, III, and
Fred W. Martin each were automatically granted options to purchase 10,000 shares
of Common Stock at an exercise price of $4.00 per share.

DIRECTOR COMPENSATION

Employees of the Company do not receive compensation for serving as
members of the Company's Board of Directors. Effective April 29, 1996,
non-employee members of the Board of Directors receive cash compensation in the
amount of $10,000 per annum. Non-employee directors receive automatic grants of
stock options under the 1995 Directors Stock Option Plan. See "Management -
Stock Option Plans."

41
<PAGE> 44
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

C. Alan MacDonald and Philip B. Smith served as members of the
Compensation Committee of the Board of Directors during fiscal 1995. Mr. Smith
was Director of Merchant Banking for Spencer Trask Securities Incorporated
("Securities Trask") from February 1992 through January 1994. From September
1992 through December 1993, Spencer Trask received from the Company as
compensation for acting as placement agent in the Company's private placement of
units consisting of Series A Preferred Stock and warrants to purchase Common
Stock (i) 4.98 Unit Purchase Options to purchase, at an exercise price of
$165,000 per unit, an aggregate of 124,532 shares of Common Stock and Unit
Warrants to purchase 37,360 shares of Common Stock at an exercise price of $6.00
per share; (ii) Trask Warrants to purchase 26,585 shares of Common Stock at an
exercise price of $5.96 per share, as adjusted; (iii) a commission of 8% of the
gross proceeds of all of the units sold in the private placement; (iv) a
management fee of 2% of the gross proceeds of all of the units sold in the
private placement; (v) a non-accountable expense allowance of 2% of the gross
proceeds of all of the units sold in the private placement; and (vi) an
agreement to enter into a consulting agreement pursuant to which Spencer Trask
received $3,000 per month for consulting services. In December 1992, the Company
executed the consulting agreement, which terminated upon the consummation of the
Company's initial public offering. In November 1993, the Company issued to
Spencer Trask Waiver Warrants to purchase 10,500 shares of Common Stock at an
exercise price of $6.60 per share in connection with the waiver by Spencer Trask
of its right of first refusal to serve as the underwriter of the Company's
initial public offering. Also in November 1993, the Company agreed to pay
Spencer Trask $145,000 for services rendered in connection with the acquisition
of certain restaurants, of which $50,000 was paid prior to the Company's initial
public offering in October 1994. The Company paid to Spencer Trask an aggregate
of $161,000 of the proceeds of the Company's initial public offering, which
represented the balance owed to Spencer Trask for services rendered in
connection with the acquisition of certain restaurants, all accrued consulting
fees under the consulting agreement from November 1993 through October 1994, and
a payment of $30,000 in connection with Spencer Trask's waiver of its right of
first refusal to serve as underwriter of the Company's initial public offering.
In July 1995, in consideration for rendering services to the Company in
connection with the Merger, the Company granted Mr. Smith options to purchase
50,000 shares of Common Stock at an exercise price of $4.9375 per share.
One-half of these options vest and become exercisable commencing in July 1996
and the remaining options vest and become exercisable commencing in July 1997.

INDEMNIFICATION AND LIMITATION OF PERSONAL LIABILITY OF DIRECTORS

The Company's Amended and Restated Bylaws require the Company to
indemnify its directors and officers against liabilities that they may incur
while serving in such capacities, to the full extent permitted and in the manner
required by the Georgia Business Corporation Code (the "GBCC"). Pursuant to
these provisions, the Company will indemnify its directors and officers against
any losses incurred in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a director or
officer of the Company or served with another corporation, partnership, joint
venture, trust or other enterprise at the request of the Company. In addition,
the Company will provide advances for expenses incurred in defending any such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such advances if it is ultimately determined
that he or she is not entitled to indemnification by the Company. The Company
has entered into indemnification agreements with certain of its directors and
executive officers pursuant to the foregoing provisions of its Amended and
Restated Bylaws.

As permitted by the GBCC, the Company's Restated Articles of
Incorporation contain provisions that eliminate the personal liability of
directors for monetary damages to the Company or its shareholders for breach of
their fiduciary duties as directors. In accordance with the GBCC, these
provisions do not limit the liability of a director for (i) any appropriation of
a business opportunity of the Company in violation of the director's duty, (ii)
acts or omissions that involve intentional misconduct or a knowing violation of
law, (iii) any dividend payment, stock repurchase, stock redemption or
distribution in liquidation that is prohibited under Georgia law, or (iv) any
merger from which the director derived an improper personal benefit. These
provisions do not limit or eliminate the rights of the Company or any
shareholder to seek an injunction or any other non-monetary relief in the event
of a breach of a director's fiduciary duty. In addition, these provisions apply
only to claims against a director arising out of his or her role as a director
and do not relieve a director from liability for violations of statutory law,
such as certain liabilities imposed on a director under the federal securities
laws.

42
<PAGE> 45
CERTAIN TRANSACTIONS

In June 1992, the Company, Jeffrey D. Miller, and Ronald C. Davis, a
former director of the Company and a beneficial owner of more than 5% of the
Company's Common Stock at the time, entered into a stock redemption agreement
(the "Davis Redemption Agreement"). Pursuant to the Davis Redemption Agreement,
on July 1, 1992, the Company redeemed certain shares of the Company's Common
Stock owned by Mr. Davis for a $4.5 million promissory note payable in June
1997. The Company's obligation to make payments under the note was secured by
the Company's pledge of the shares redeemed from Mr. Davis. Also pursuant to the
Davis Redemption Agreement, the Company agreed to provide payment of health
insurance premiums for Mr. Davis, payment for a four-year lease for an
automobile, payment of automobile insurance during the term of the automobile
lease, and payment of approximately $15,000 for legal costs incurred in
negotiations of agreements with respect to the redemption of Mr. Davis's shares.
In connection with the Company's obtaining a new credit facility in May 1995,
Mr. Davis agreed to release the pledge of the shares of Common Stock, to extend
the maturity date of the note, and to subordinate the note to amounts due under
the credit facility, in exchange for increasing the principal amount of the note
to $4.75 million, increasing the interest rate of the note, and the payment to
Mr. Davis of $500,000. In March 1996, the Company utilized a portion of the
proceeds of the Paribas Facility to repay the note, together with an additional
payment of $50,000 to obtain Mr. Davis' consent to the early repayment of the
note.

Each of Jeffrey D. Miller, the Company's Chairman of the Board, and Haig
V. Antranikian, a Vice President and director of the Company, owns a 20%
interest in a building located in Marion, Ohio that the Company leased for
administrative offices. The Company paid rent of $2,850 per month under the
lease, which was the amount payable per month under a promissory note issued to
finance the initial acquisition of the building. The Company also was
responsible for all taxes, utilities, maintenance, and other expenses associated
with the building. Effective with the closing of the Merger, the Company's
obligations under this lease were terminated by paying the lessor an amount
equal to 50% of the balance of payments remaining under the lease.

Jeffrey D. Miller and his wife have personally guaranteed repayment of
certain of the Company's obligations, including certain obligations of the
Company to its joint venture partners and its affiliates; obligations under the
Denny's Franchise Agreements; and certain property and equipment lease
obligations of the Company.

The Company has from time to time made loans to Mr. Miller. As of March
27, 1996, the outstanding principal balance of such loans was $102,000. The
largest outstanding principal balance of such loans during fiscal 1993, fiscal
1994, and fiscal 1995 was $202,000, $102,000, and $102,000, respectively. Such
loans do not bear interest and are repayable on demand.

On June 2, 1993, Lucien I. Levy, a beneficial owner of more than 5% of
the Company's Common Stock at that time, and persons affiliated with Mr. Levy
(collectively, the "Levy Investors") purchased $330,000 of the Company's 9%
Subordinated Notes due December 2, 1993 (the "1993 Notes") and received Levy
Warrants to purchase up to 60,218 shares of the Company's Common Stock at a
price of $5.48 per share, as adjusted. On September 1, 1993, the Company repaid
the 1993 Notes in full. In connection with the Merger, the Company extended the
period in which it is required to register the shares of Common Stock issuable
upon exercise of the Levy Warrants. The Registration Statement of which this
Prospectus forms a part is intended to satisfy the Company's obligation to
register such shares. See "Description of Securities - Registration Rights."

On September 1, 1993, the Levy Investors, including Lucien I. Levy, a
beneficial owner of more than 5% of the Company's Common Stock at that time,
purchased an aggregate principal amount of $3.5 million of the Company's 10%
Senior Bonds due June 30, 1996 (the "Bonds") and warrants to purchase up to
297,500 shares of Common Stock at an exercise price of $2.50 per share (the
"September Levy Warrants"). At the request of one of the Levy Investors, the
Company used a portion of the proceeds from the sale of the Bonds to repay
$100,000 of the principal of the Bonds. On September 30, 1993, the Company
repaid approximately $1.4 million of the Bonds and the number of shares that
could be purchased upon exercise of the September Levy Warrants was reduced to
228,125. In October 1994, the exercise price of the remaining September Levy
Warrants was reduced to $.02 per share because the Company did not complete its
initial public offering before the date specified in such warrants. The Company
utilized a portion of the proceeds of its initial public offering to repay the
Bonds in full. The Levy Investors exercised the September Levy Warrants on June
30, 1995. In connection with the Merger, the Company extended the period in
which it is required to register the shares of Common Stock

43
<PAGE> 46
issued upon exercise of the September Levy Warrants. The Registration Statement
of which this Prospectus forms a part is intended to satisfy the Company's
obligation to register such shares. See "Description of Securities -
Registration Rights."

On March 31, 1994, the Company issued 40,000 shares of Common Stock to
Frank Regas in exchange for (i) $215,000 in cash, (ii) Mr. Regas' ownership
interest in 2.5% of the stock of Rudy's County Store and Bar-B-Q, Inc. (the
"Rudy's Franchisor"), and (iii) an assignment of Mr. Regas' rights under a
development agreement between Mr. Regas and the Rudy's Franchisor. Mr. Regas
served as Senior Vice President - Product Development and as a director of the
Company from June 1994 to March 29, 1996. The Registration Statement of which
this Prospectus forms a part is intended to satisfy the Company's obligation to
register the shares of Common Stock issued to Mr. Regas. See "Description of
Securities - Registration Rights."

Philip B. Smith, a director of the Company since May 1993, was Director
of Merchant Banking for Spencer Trask from February 1992 through January 1994.
From September 1992 through December 1993, the Company paid Spencer Trask, as
compensation for acting as placement agent in the Company's private placement of
units consisting of Series A Preferred Stock and warrants to purchase Common
Stock (i) 4.98 Unit Purchase Options to purchase, at an exercise price of
$165,000 per unit, an aggregate of 124,532 shares of Common Stock and Unit
Warrants to purchase 37,360 shares of Common Stock; (ii) Trask Warrants to
purchase 26,585 shares of Common Stock at an exercise price of $5.96 per share,
as adjusted; (iii) a commission of 8% of the gross proceeds of all of the units
sold in the private placement; (iv) a management fee of 2% of the gross proceeds
of all of the units sold in the private placement; (v) a non-accountable expense
allowance of 2% of the gross proceeds of all of the units sold in the private
placement; and (vi) an agreement to enter into a consulting agreement pursuant
to which Spencer Trask received $3,000 per month for consulting services. In
December 1992, the Company executed the consulting agreement, which terminated
upon the consummation of the initial public offering. In November 1993, the
Company issued to Spencer Trask Waiver Warrants to purchase 10,500 shares of
Common Stock at an exercise price of $6.60 per share in connection with the
waiver by Spencer Trask of its right of first refusal to serve as the
underwriter of the Company's initial public offering. Also in November 1993, the
Company agreed to pay Spencer Trask $145,000 for services rendered in connection
with the acquisition of certain restaurants, of which $50,000 was paid prior to
the initial public offering. In October 1994, the Company paid to Spencer Trask
an aggregate of $161,000 of the proceeds of the initial public offering, which
represented the balance owed to Spencer Trask for services rendered in
connection with the acquisition of certain restaurants, all accrued consulting
fees under the consulting agreement from November 1993 through October 1994, and
a payment of $30,000 in connection with Spencer Trask's waiver of its right of
first refusal to serve as underwriter of the initial public offering.

The Company paid to affiliates of CNL (the "Selling Venturers") an
aggregate of $4.7 million from the net proceeds of the Company's initial public
offering in exchange for such persons' interests in a joint venture with the
Company. The Selling Venturers purchased an aggregate of 475,000 shares of the
Company's Common Stock in the initial public offering at the initial public
offering price of $5.00 per share.

In July 1995, the Company granted Philip B. Smith, a director of the
Company, options to purchase 50,000 shares of Common Stock at an exercise price
of $4.11 per share in consideration for rendering services to the Company in
connection with the Merger. One-half of these options vest and become
exercisable commencing in July 1996 and the remaining options vest and become
exercisable commencing in July 1997.

Prior to the Merger, certain officers of DRC lent funds to DRC or its
predecessors. On December 10, 1993, Jack M. Lloyd and William J. Howard
contributed as paid-in-capital obligations owed by DRC to them in amounts
aggregating $469,275 and accrued interest of $52,250.

In April 1995, DRC purchased, for a purchase price of $75,000, a parcel
of land adjacent to one of its restaurants from an entity controlled by Jack M.
Lloyd. The Company believes that the purchase price represents the fair value of
the property on the date of purchase.

In August 1995, DRC entered into leases for two restaurant properties
owned by Lloyd/Howard L.L.C. ("Lloyd/Howard"), a limited liability company
controlled by Jack M. Lloyd and William J. Howard. Lloyd/Howard acquired these
two properties and certain other properties from Kettle Restaurants, Inc. in
consideration of the assumption by Lloyd/Howard of environmental liabilities
associated with the two properties leased by DRC. The Company believes that

44
<PAGE> 47
the terms of the leases for these two restaurant properties are no less
favorable to the Company than could be obtained from an unaffiliated third party
for comparable properties.

Upon consummation of the Merger, the Company issued an aggregate of (i)
3,103,504 shares of Common Stock, $11,196,000 principal amount of Series B
Notes, and Series B Warrants to purchase an aggregate of 293,223 shares of
Common Stock to Jack M. Lloyd, the Company's President and Chief Executive
Officer; (ii) 1,551,752 shares of Common Stock, $5,598,000 principal amount of
Series B Notes, and Series B Warrants to purchase 146,611 shares of Common Stock
to William J. Howard, the Company's Vice President and Secretary; and (iii)
1,878,788 shares of Common Stock, $6,000,000 principal amount of Series A Notes,
and Series A Warrants to purchase 188,047 shares of Common Stock to BancBoston,
in exchange for such persons' respective shares of DRC capital stock. In
connection with the Merger, the Company entered into a registration rights
agreement with Mr. Lloyd, Mr. Howard, and BancBoston with respect to the shares
of Common Stock issued to them in the Merger and the shares issuable upon
exercise of the warrants. See "Description of Securities - Registration Rights."

In May 1996, Jeffrey D. Miller, Chairman of the Board, forgave a $1.0
million loan to the Company at the request of former shareholders of DRC. The
existence of the loan would have constituted a breach of obligations of the
Company to the former shareholders of DRC.

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<PAGE> 48
PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information regarding the shares
of the Company's outstanding Common Stock beneficially owned as of June 21, 1996
(i) by each of the Company's directors and executive officers; (ii) by all
directors and executive officers of the Company as a group; (iii) by each person
who is known by the Company to own beneficially or exercise voting or
dispositive control over more than 5% of the Company's Common Stock; and (iv) by
each of the Selling Shareholders.

SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(2) SHARES BEING OFFERING(2)
NAME AND ADDRESS OF -------------------- REGISTERED FOR ------------------
BENEFICIAL OWNER(1) NUMBER PERCENT SALE(3) NUMBER PERCENT(4)
- -------------------------------- ---------- ------- -------- --------- ----------
DIRECTORS AND EXECUTIVE OFFICERS
<S> <C> <C> <C> <C> <C>
Jeffrey D. Miller 1,194,192 9.1% 0 1,194,192 8.5%
Jack M. Lloyd 3,104,504 23.7% 0 3,104,504 22.1%
William G. Cox 60,000(5) * 0 60,000 *
William J. Howard 1,551,752 11.8% 0 1,551,752 11.0%
Todd S. Brown 24,960(6) * 0 24,960 *
Haig V. Antranikian 116,899(7) * 0 116,899 *
Edward C. Williams 38,833(8) * 0 38,833 *
Michael Larsen 20,000(9) * 0 20,000 *
John M. Holliman, III - - - - -
C. Alan MacDonald 10,000(9) * 0 10,000 *
Fred W. Martin 1,000 * 0 1,000 *
Philip G. Smith 27,500(10) * 0 27,500 *
All directors and executive
officers as a group (12 persons) 6,163,640 46.2% 0 6,163,640 43.2%

NON-MANAGEMENT 5% SHAREHOLDER
- -----------------------------
BancBoston Ventures, Inc.(11) 1,878,788 14.3% 1,878,788 0 -

SELLING SHAREHOLDERS
- --------------------
Fahnestock & Co., Inc. 290,000 2.2% 290,000 0 -
O T Finance S.A. 137,171 1.0% 137,171 0 -
Darier, Hentsch Private Bank & Trust Ltd. 130,000 * 130,000 0 -
Merck Finck & Co 117,355 * 117,355 0 -
Thomas M. Pisula 97,500 * 97,500 0 -
The Lucien I. Levy Revocable Living
Trust & the Elvire Levy Revocable
Living Trust 97,361 * 97,361 0 -
John F. Steinmetz 93,893 * 93,893 0 -
Niels Lauersen 70,993 * 70,993 0 -
Charles M. Harper TTEE, Charles M.
Harper Funnel Trust DTD 1/24/86 66,500 * 66,500 0 -
J. Roy Duggan, Trustee
Living Trust of J. Roy Duggan 65,000 * 65,000 0 -
Frap Co. as Nominee for National
Westminster Bank, Custodian F/B/O
Hongkong & Shanghai Bank Trustee 58,500 * 58,500 0 -
Merl Trust 47,989 * 47,989 0 -
Frank Regas(12) 40,000 * 40,000 0 -
</TABLE>

46
<PAGE> 49
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(2) SHARES BEING OFFERING(2)
NAME AND ADDRESS OF ------------------ REGISTERED FOR ---------------------
BENEFICIAL OWNER(1) NUMBER PERCENT SALE(3) NUMBER PERCENT(4)
- ------------------- ------ ------- ------- ------ ----------
<S> <C> <C> <C> <C> <C>
Brian T. Reardon and Robert J. Reardon
as JTWROS 27,300 * 27,300 0 -
Genossenschaftliche Zentralbank 26,000 * 26,000 0 -
Lance McFadden 24,938 * 24,938 0 -
Don O. Weide and Janet Weide(13) 24,700 * 24,700 0 -
ASC Trading Corp. 22,750 * 22,750 0 -
Arthur I. Meyer 16,625 * 16,625 0 -
Gail M. Asarch 16,625 * 16,625 0 -
Beverly Weitzel Mackey 16,250 * 16,250 0 -
Jerome W. Niedfelt 16,250 * 16,250 0 -
Spencer Trask Securities Incorporated 15,896 * 15,896 0 -
Asha Gupta 13,000 * 13,000 0 -
Albert G. Nickel 13,000 * 13,000 0 -
Walter F. Toombs 13,000 * 13,000 0 -
Affida Bank 13,000 * 13,000 0 -
Gerald L. Froemming 13,000 * 13,000 0 -
James D. Todd and Louise T. Ambler(14) 13,000 * 13,000 0 -
Michele Spycher 11,441 * 11,441 0 -
James F. Langan Sr. 11,211 * 11,211 0 -
Erma Vertwaltungs AG
Kurt Martin Consulting 11,211 * 11,211 0 -
Robert E. Vogel 10,400 * 10,400 0 -
Jim Burke 10,300 * 10,300 0 -
North American Trust Co. Custodian
FBO Arnold & Porter PSP/Richard Hubbard 9,750 * 9,750 0 -
Zobec Management Ltd. 9,750 * 9,750 0 -
Margaret S. Todd(15) 9,750 * 9,750 0 -
Kevin Kimberlin 9,306 * 9,306 0 -
Credit Suisse 9,000 * 9,000 0 -
John C. Metz 8,313 * 8,313 0 -
Stewart & Renate Savitsky 8,094 * 8,094 0 -
Carol and Jimmy Filler 7,500 * 7,500 0 -
TH Partnership, Anthony & Howard Kamin 7,500 * 7,500 0 -
The Royal Bank of Scotland AG 6,500 * 6,500 0 -
Peter F. Capuciati 6,500 * 6,500 0 -
Bruce D. Cowen 6,500 * 6,500 0 -
Howard Hirschmann 6,500 * 6,500 0 -
James F. Connell & Elaine G. Connell
Trustees UDT 7/9/79 6,500 * 6,500 0 -
Banque OBC - Odier Bungener Courvoisner 6,500 * 6,500 0 -
Karl A. Klein & Eleanor M. Klein,
as JTWROS 6,500 * 6,500 0 -
Jerold Mann(16) 5,951 * 5,951 0 -
ELJ Ltd 5,605 * 5,605 0 -
Stephen G. Franklin, Sr. 5,605 * 5,605 0 -
JTH Associates Partnership 5,605 * 5,605 0 -
James Kennedy 5,605 * 5,605 0 -
Nadine E. Hennelly 5,605 * 5,605 0 -
Richard L. Maender 5,605 * 5,605 0 -
James D. Sink 5,605 * 5,605 0 -
</TABLE>

47
<PAGE> 50
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(2) SHARES BEING OFFERING(2)
NAME AND ADDRESS OF ------------------ REGISTERED FOR ---------------------
BENEFICIAL OWNER(1) NUMBER PERCENT SALE(3) NUMBER PERCENT(4)
- ------------------- ------ ------- ------- ------ ----------
<S> <C> <C> <C> <C> <C>
Charles M. Merkel 5,605 * 5,605 0 -
William Wilkerson 5,605 * 5,605 0 -
Peter G. Vosburgh 5,200 * 5,200 0 -
J. Romeo & Co 5,000 * 5,000 0 -
William R. Bolton & Susan A. Bolton 4,500 * 4,500 0 -
John D. Broome 4,500 * 4,500 0 -
Peter F. Szabo 4,500 * 4,500 0 -
Henry H. Livingston III 4,333 * 4,333 0 -
Guarantee & Trust Co. TTEE
FBO Ronald J. Frank Sep - IRA 3,250 * 3,250 0 -
Frank L. King, Jr. 3,250 * 3,250 0 -
Laura Davis King 3,250 * 3,250 0 -
Carla S. Levesque IRA Rollover 3,250 * 3,250 0 -
Gloria Dare Baucon 2,600 * 2,600 0 -
A. G. Boyd-Gibbons 2,600 * 2,600 0 -
Henning Hoj and Inge Hoj(17) 2,600 * 2,600 0 -
Kathryn G. Shaifer 2,500 * 2,500 0 -
Dennis M. Sadler 2,402 * 2,402 0 -
Allen L. Notowitz 2,250 * 2,250 0 -
Erma Management, Ltd. 1,950 * 1,950 0 -
Victor Gick & Jackqueline M. Gick 1,868 * 1,868 0 -
Dennis Basler 1,800 * 1,800 0 -
First European Fund Ltd. 1,500 * 1,500 0 -
Richard Friedman 1,500 * 1,500 0 -
Josef and Shmuel Loffler TIC 1,500 * 1,500 0 -
William H. Blausey 1,168 * 1,168 0 -
John H. Blausey 1,167 * 1,167 0 -
Penny Davila 1,121 * 1,121 0 -
Chad Dubin 975 * 975 0 -
James R. Mercker 785 * 785 0 -
Mike Bovilagua 683 * 683 0 -
John W. Handel 277 * 277 0 -
Joseph E. Linger 168 * 168 0 -
Shawnee L. Tammaro 56 * 56 0 -
Sandra M. Conley 47 * 47 0 -
Marjorie Cross 47 * 47 0 -
Sophie M. Patterson 47 * 47 0 -
Lucinda M. Slosser 47 * 47 0 -
Linda S. Weingart 47 * 47 0 -
</TABLE>
- --------------------
*Less than 1% of outstanding shares of Common Stock.

(1) Except as otherwise indicated, each person named in the table has sole
voting and investment power with respect to all Common Stock beneficially
owned by him, subject to applicable community property law. Except as
otherwise indicated, each of such persons may be reached through the
Company at 7373 N. Scottsdale Road, Suite D-120, Scottsdale, Arizona 85253.
(2) The numbers and percentages shown include the shares of Common Stock
actually owned as of June 21, 1996 and the shares of Common Stock which the
person or group had the right to acquire within 60 days of such date. In
calculating the percentage of ownership, all shares of Common Stock which
the identified person or group had the right to acquire within 60 days of
June 21, 1996 upon the exercise of options and warrants are deemed to be

48
<PAGE> 51
outstanding for the purpose of computing the percentage of the shares of
Common Stock owned by such person or group, but are not deemed to be
outstanding for the purpose of computing the percentage of the shares of
Common Stock owned by any other person.
(3) Each of the Selling Shareholders is assumed to be selling all of the shares
of Common Stock registered for sale and will own no shares of Common Stock
after the offering. The Company has no assurance that the Selling
Shareholders will sell any of the securities being registered hereby.
(4) Calculation of percentages of shares of Common Stock beneficially owned
after the offering assumes exercise of all outstanding Selling
Shareholders' Warrants and Unit Purchase Options.
(5) Represents 60,000 shares issuable upon the exercise of currently
exercisable options.
(6) Represents 24,960 shares issuable upon the exercise of currently
exercisable options.
(7) Includes 9,333 shares issuable upon the exercise of currently exercisable
options.
(8) Includes 38,333 shares issuable upon the exercise of currently exercisable
options.
(9) Represents 20,000 shares issuable upon the exercise of currently
exercisable options.
(10) Represents 27,500 shares issuable upon the exercise of currently
exercisable options.
(11) The address of BancBoston Ventures, Inc. is c/o BancBoston Capital, Inc.,
100 Federal Street, Boston, Massachusetts 02110.
(12) Mr. Regas was an officer and director of the Company from June 1994 to
March 1996.
(13) Represents 3,500 shares of Common Stock held by and 1,050 shares issuable
upon exercise of Preferred Warrants held by General Agency Insurance
Development Services; 3,500 shares of Common Stock held by and 1,050 shares
issuable upon exercise of Preferred Warrants held by the General Agency
Insurance Development Services Profit Sharing Plan; 3,500 shares of Common
Stock held by and 1,050 shares issuable upon exercise of Preferred Warrants
held by the General Agency Insurance Development Services Pension Plan; and
8,500 shares of Common Stock held by and 2,550 shares issuable upon
exercise of Preferred Warrants held by the Don O. Weide and Janet Weide
Family Trust.
(14) Represents 10,000 shares of Common Stock held by and 3,000 shares issuable
upon exercise of Preferred Warrants held by various trusts for which Mr.
Todd and Ms. Ambler serve as Trustees.
(15) Represents 7,500 shares of Common Stock held by and 2,250 shares issuable
upon exercise of Preferred Warrants held by Ms. Todd as custodian under the
Uniform Gift to Minors Act.
(16) Represents 3,901 shares of Common Stock held by and 750 shares issuable
upon exercise of Preferred Warrants held by Mr. Mann and 1,000 shares of
Common Stock held by and 300 shares issuable upon exercise of Preferred
Warrants held by the Jerold Mann Defined Benefit Pension Plan.
(17) Represents 1,000 shares of Common Stock held by and 300 shares issuable
upon exercise of Preferred Warrants held by Henning Hoj and Inge Hoj; and
1,000 shares of Common Stock held by and 300 shares issuable upon exercise
of Preferred Warrants held by the Hoj Family Limited Partnership.

DESCRIPTION OF SECURITIES

GENERAL

The authorized capital stock of the Company currently consists of
20,000,000 shares of Common Stock, $0.10 par value per share, of which
13,138,944 shares were issued and outstanding as of June 21, 1996. An additional
2,025,523 shares of Common Stock have been reserved for issuance upon exercise
of various outstanding warrants and unit purchase options, and an additional
1,647,300 shares of Common Stock may be issued upon exercise of options
currently outstanding or issuable pursuant to the Company's stock option plans.
All of the outstanding shares of Common Stock are, and the shares of Common
Stock offered hereby when issued will be, fully paid and non-assessable.

COMMON STOCK

Holders of Common Stock are entitled to one vote per share on all matters
on which shareholders are entitled to vote, including the election of directors.
The shares do not have cumulative voting rights. Consequently, the holders of
more than 50% of the outstanding shares of Common Stock may elect all of the
Company's directors. All shares of Common Stock are entitled to share equally in
such dividends as the Board of Directors may declare, in its discretion, on the
Common Stock from sources legally available for such dividends. In the event of
a liquidation, dissolution, or winding up of the Company, holders of Common
Stock are entitled to share ratably in all assets available for distribution
after payment in full to all creditors of the Company. Holders of Common Stock
do not have preemptive rights to subscribe for additional shares on

49
<PAGE> 52
a pro rata basis if and when additional shares are offered for sale. No
redemption rights or sinking funds are available to holders of Common Stock.

WARRANTS

General

As of June 21, 1996, warrants to purchase an aggregate of 1,863,631
shares of Common Stock were outstanding. The shares of Common Stock underlying
the warrants, when issued upon exercise of a warrant and payment of the purchase
price for such shares of Common Stock, will be fully paid and nonassessable. The
Company will pay any transfer tax incurred as the result of the issuance of
Common Stock to the holder a warrant upon its exercise. The warrants contain
provisions that protect the holders against dilution of the equity interest
represented by the underlying shares of the Company's Common Stock by adjustment
of the exercise price and the number of shares issuable upon exercise in the
event of certain events such as stock dividends or distributions, stock splits,
or reorganizations. In the event of liquidation, dissolution, or winding up of
the Company, holders of unexercised warrants will not be entitled to receive any
assets of the Company available for distribution to the holders of the Company's
Common Stock. Holders of warrants will have no voting, preemptive, liquidation,
or other rights of a shareholder, as such, until such warrants have been duly
exercised and the exercise price is paid in full. No dividends will be payable
on the warrants prior to exercise.

Selling Shareholders' Warrants

From September 17, 1992 through February 2, 1993, the Company issued
Preferred Warrants to purchase an aggregate of 311,800 shares of Common Stock at
an exercise price of $6.00 per share in connection with the issuance of Series A
Preferred Stock. The Company recently amended the terms of the Preferred
Warrants to (i) extend the expiration dates of the Preferred Warrants to a
period from September 17, 1996 through February 2, 1997, and (ii) reduce the
trading price of the Company's Common Stock that triggers the Company's right to
redeem the Preferred Warrants from $18.00 per share to $8.50 per share. In
addition, the Company has agreed to register the shares of Common Stock
underlying the Preferred Warrants if requested by the holders of a majority in
interest of the Preferred Warrants at such time as the price of the Company's
Common Stock exceeds the exercise price of the Preferred Warrants for 30
consecutive days.

The Company issued to the representatives of the underwriters of its
initial public offering Representatives Warrants to purchase 290,000 shares of
Common Stock at an exercise price of $6.00 per share until October 18, 1999. In
connection with the acquisition of certain restaurants in September 1993, the
Company issued MMR Warrants to purchase 66,500 shares of Common Stock at an
exercise price of $5.00 per share, as adjusted, until October 18, 1996. In
connection with the issuance of subordinated notes in June 1993, the Company
issued Levy Warrants to purchase 60,218 shares of Common Stock at an exercise
price of $5.48 per share, as adjusted, until October 18, 1999. In connection
with investment banking services, in June 1993 the Company issued Trask Warrants
to purchase 26,585 shares of Common Stock at an exercise price of $5.96 per
share, as adjusted, until July 27, 1997. In connection with the waiver of
certain rights in November 1993, the Company issued Waiver Warrants to purchase
10,500 shares of Common Stock at an exercise price of $6.60 per share until
October 18, 1996.

Merger Warrants

The Company issued warrants to purchase an aggregate of 666,000 shares of
Common Stock to the former shareholders of DRC in connection with the Merger.
These warrants consist of Series A Warrants to purchase an aggregate of 188,047
shares of Common Stock and Series B Warrants to purchase an aggregate of 477,953
shares of Common Stock. Each Series A Warrant entitles the holder to purchase
one share of Common Stock at an exercise price of $.01 per share beginning on
March 29, 1998 and ending on March 29, 2001, subject to cancellation as set
forth below. Each Series B Warrant entitles the holder to purchase one share of
Common Stock at an exercise price of $.01 per share beginning on March 29, 1999
and ending on March 29, 1999, subject to cancellation as set forth below.

In the event that all of the Series A Notes are redeemed, any Series A
Warrants that have not been exercised prior to such redemption will be cancelled
at the time of the redemption. Likewise, in the event that all of the Series B
Notes are redeemed, any Series B Warrants that have not been exercised prior to
such redemption will be cancelled at the

50
<PAGE> 53
time of the redemption. The Company intends to use its best efforts to redeem
all the Series A Notes and Series B Notes prior to the time that the respective
Series A Warrants and Series B Warrants first become exercisable. No assurances
can be given, however, that the Company will be able to successfully redeem the
notes prior to the respective dates on which the Series A Warrants and the
Series B Warrants become exercisable.

Paribas Warrants

Upon consummation of the Merger and closing of the Paribas Facility, the
Company issued to Banque Paribas warrants (the "Paribas Warrants") to acquire
438,028 shares of Common Stock at an exercise price of $4.3065 per share. The
Paribas Warrants will expire on March 29, 2002.

UNIT PURCHASE OPTIONS

Holders of an aggregate of 4.9815 Unit Purchase Options may purchase
units consisting of 25,000 shares of Common Stock and Unit Warrants to purchase
7,500 shares of Common Stock. The Unit Purchase Options may be exercised at a
price of $165,000 per unit, or $6.60 per share of Common Stock, until October
18, 1997. The Unit Warrants will entitle the holders thereof to purchase shares
of Common Stock at an exercise price of $6.00 per share until October 18, 1997.
An aggregate of 124,532 shares of Common Stock and Unit Warrants to purchase an
aggregate of 37,360 shares of Common Stock are issuable upon exercise of the
Unit Purchase Options.

MERGER NOTES

General

There are currently outstanding $6,000,000 in aggregate principal
amount of the Company's Series A Subordinated Notes due 2003 and $18,250,000 in
aggregate principal amount of the Company's Series B 13% Subordinated Notes due
2003. The Merger Notes were issued pursuant to separate indentures (the
"Indentures"), each dated as of March 29, 1996, with State Street Bank and Trust
Company, Boston, Massachusetts, as trustee (the "Trustee"). The terms of the
Indentures are governed by certain provisions contained in the Trust Indenture
Act of 1939, as amended. The Merger Notes are general unsecured obligations of
the Company, issued only in fully registered form without coupons in
denominations of $1,000 and integral multiples thereof.

Interest Payments and Maturity

Interest on the Merger Notes will be paid semi-annually to the
registered holders of such notes commencing September 29, 1996 and continuing
every March 29 and September 29 thereafter until March 29, 2003, at which time
all principal and any unpaid and accrued interest will be due. Interest on the
Merger Notes is computed on the basis of a 360- day year of twelve 30-day
months. Payments of principal and interest will be made by mail to the
registered address of the respective holders of the Merger Notes.

Subordination

The payment of the principal of and interest on, and all premiums,
fees, costs, expenses, and liabilities arising under and in connection with, the
Merger Notes is subordinated and subject in right of payment, to the extent set
forth in the Indentures, to the prior payment in full of all senior indebtedness
of the Company, including the Paribas Facility, as defined under the Indentures.
In addition, the payment of the principal of or interest on the Series B Notes
is subordinated, to the extent and in the manner provided in the Intercreditor
Agreement (as defined below), to the prior payment in full, in cash, of the
Series A Notes. Pursuant to the terms of the Series B Indenture, as well as an
intercreditor agreement among the Company, the Trustee, and certain of the
holders of the Series B Notes (the "Intercreditor Agreement"), holders of Series
B Notes may not enforce remedies unless the holders of Series B Notes have given
the holders of Series A Notes written notice at least 30 days prior to taking
any action to enforce any remedies with respect to the Series B Notes and no
"Standstill Period" (as defined) is continuing. A "Standstill Period," as
defined in the Intercreditor Agreement, will be a period of up to 180 days
commencing on the date the Company receives a written notice of the imposition
of the Standstill Period from a representative appointed by the holders of
Series A Notes.

51
<PAGE> 54
Optional Redemption

The Company may, at its option, redeem the Merger Notes in whole or in
part at 100% of the principal amount thereof, plus accrued and unpaid interest
thereon to the applicable redemption date, at any time prior to March 29, 1999.
In addition, the Company may, at its option, redeem the Merger Notes in whole or
in part at any time after March 29, 1999 at the redemption prices (expressed as
percentages of the outstanding principal amount) set forth in the table below,
plus accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve-month periods beginning on the dates indicated in the
table below:

<TABLE>
DATE PERCENTAGE
---- ----------
<S> <C>
March 29, 1999 .......................................103%
March 29, 2000 .......................................102%
March 29, 2001 .......................................101%
March 29, 2002 .......................................100%
</TABLE>

The Paribas Facility, the Indentures, and the Intercreditor Agreement prohibit
the Company from making an optional redemption of Series B Notes, however, so
long as any Series A Notes remain outstanding. Notice of redemption will be
sent, by first class mail, postage prepaid, at least 30 days but not more than
60 days prior to the date fixed for redemption, to each holder whose Merger
Notes are to be redeemed at the last address for such holder then shown on the
registry books. If less than all of the Merger Notes are redeemed, the Company
will be required to redeem such notes in compliance with the requirements of the
principal national securities exchange or over-the-counter market, if any, on
which the Merger Notes are listed or, if the Merger Notes are not listed on a
securities exchange or over-the-counter market, on a pro rata basis. If any
DenAmerica Note is to be redeemed in part only, the notice of redemption that
relates to such DenAmerica Note will state the portion of the principal amount
thereof to be redeemed. A new Series A Note or Series B Note in principal amount
equal to the unredeemed portion thereof will be issued to the holder thereof as
soon as practicable upon receipt by the Company of each original Series A Note
or Series B Note, respectively, for cancellation.

Mandatory Redemption

Upon the occurrence of a "Change of Control", as defined in the Series A
Indenture, any holder of Series A Notes may, at such holder's option and subject
to the subordination of the Series A Notes to senior indebtedness, require the
Company to redeem all or any part of such holder's Series A Notes at a
redemption price equal to 100% of the principal amount of the notes to be
redeemed plus accrued and unpaid interest thereon to and including the date of
redemption. A "Change of Control" includes transactions in which (i) any person
or group acquires (a) more than 50% of the combined voting power, on a fully
diluted basis, of the Company's then-outstanding securities, or (b) 20% of the
combined voting power of the Company's then-outstanding securities, on a fully
diluted basis, if such person or group has the ability to elect a majority of
the Company's Board of Directors; (ii) Jack M. Lloyd ceases to own or control at
least 80% of the combined voting power, on a fully diluted basis, of the
Company's securities that he owned immediately following the Merger; (iii) Jack
M. Lloyd's employment as President or Chief Executive Officer of the Company is
terminated for any reason; or (iv) a majority of the Board of Directors is
replaced over a two-year period and such replacement has not been approved by
(A) the Board of Directors as so constituted at the beginning of the two-year
period or (B) directors elected by such Board of Directors or whose nomination
for election by the Company's shareholders was approved by such Board of
Directors or by directors elected or nominated by directors so approved. In the
event a Change of Control occurs, there can be no assurance that the Company
will have available sufficient funds to redeem all of the Series A Notes that
may be tendered by the holders for redemption. To the extent that it does not
have available sufficient funds to redeem such Series A Notes upon the
occurrence of a Change of Control, it is currently anticipated that the Company
would seek additional financing through the sale of equity securities or through
additional indebtedness to third parties. There can be no assurance, however,
that any such financing will be available on terms acceptable to the Company.
The inability of the Company to obtain adequate financing to enable it to redeem
the Series A Notes upon occurrence of a Change of Control could have a material
adverse effect on the financial condition of the Company following such Change
of Control.

52
<PAGE> 55
Upon the occurrence of certain equity issuances, the Series A Indenture will
require the Company, if and to the extent permitted by the Paribas Facility and
subject to the subordination provisions of the Series A Indenture, to commence
an offer to redeem the maximum principal amount of Series A Notes that may be
redeemed with a specified portion of the proceeds of such asset sale or equity
issuance, at the then-current redemption price plus accrued and unpaid interest
to the redemption date. In the event that the Company is prohibited by the
Paribas Facility or any other credit agreement from redeeming Series A Notes
with such proceeds, the Company will be required to promptly use all such
proceeds to permanently reduce outstanding senior indebtedness, as defined in
the Indentures. To the extent that any proceeds remain after prepayment of all
senior indebtedness and redemption of all Series A Notes tendered for redemption
pursuant to the redemption offer, the Company may use the remaining amount for
any purpose not prohibited by the Series A Indenture.

Upon the occurrence of certain equity issuances, the Series B Indenture will
require the Company, if and to the extent permitted by the Paribas Facility and
subject to the subordination provisions of the Series B Indenture, to redeem the
Series B Notes in the manner and in an amount and in a manner similar to the
mandatory redemption of Series A Notes described above. The Paribas Facility,
the Indentures, and the Intercreditor Agreement prohibit the Company from
redeeming any Series B Notes as a result of an equity issuance, however, so long
as any Series A Notes remain outstanding. The Series B Notes do not have any
provisions providing for a mandatory redemption in the event of an asset sale or
a change of control.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

No gain or loss will be recognized by a holder of any of the Selling
Shareholders' Warrants or Unit Purchase Options on the purchase of a share of
Common Stock for cash on exercise of the warrant or option. The adjusted basis
of a share of Common Stock received upon exercise of a warrant or option will
equal the sum of the holder's tax basis in the exercised warrant or option and
the exercise price. The tax holding period for the shares of Common Stock so
acquired will commence on the date the shares are purchased upon exercise of the
warrant or option and will not include the period during which the warrant or
option was held.

All gains or losses recognized upon the sale or exchange of Common Stock,
Selling Shareholders' Warrants, or Unit Purchase Options generally will be a
capital gain or loss. Such capital gain or loss will be long-term capital gain
or loss if the holder has held the security for more than one year.

The anti-dilution provisions of the Selling Shareholders' Warrants and Unit
Purchase Options require that the number of shares of Common Stock purchasable
upon exercise of warrants or options or the exercise price of the warrants or
options will be adjusted in the event of certain transactions. As to certain
types of adjustments, holders of warrants or options may be deemed to have
received a constructive distribution that may be taxable as a dividend under
Sections 301 and 305 of the Internal Revenue Code of 1986, as amended.

CERTAIN PROVISIONS OF THE COMPANY'S RESTATED ARTICLES OF INCORPORATION AND
AMENDED AND RESTATED BYLAWS; CERTAIN PROVISIONS OF GEORGIA LAW

The Company's Restated Articles of Incorporation and Amended and Restated
Bylaws contain various provisions that may have the effect, either alone or in
combination with each other, of making more difficult or discouraging a business
combination or an attempt to obtain control of the Company that is not approved
by the Company's Board of Directors. These provisions include (i) prohibitions
on the right of shareholders to remove directors other than for cause and by the
affirmative vote at a shareholders' meeting for which notice of such purpose was
given, of at least 75% of the votes entitled to vote in the election of such
directors; (ii) restrictions on the right of shareholders to call a special
meeting of shareholders; (iii) the requirement that actions taken by written
consent of shareholders be signed by holders of not less than 75% of the votes
that would be entitled to vote on such actions in lieu of a meeting; (iv) the
right of the Company's Board of Directors to consider the interests of various
constituencies, including employees, customers, suppliers and creditors of the
Company, as well as the communities in which the offices or other establishments
of the Company are located, in addition to the interests of the Company and its
shareholders, in discharging its duties and determining what is in the Company's
best interests; (v) the requirement that certain provisions of the Restated
Articles of Incorporation and Amended and Restated Bylaws may be amended only by
a supermajority vote of shareholders; and (vi) a provision making applicable to
the Company provisions authorized by the GBCC relating to certain business
combinations.

53
<PAGE> 56
The Amended and Restated Bylaws make applicable to the Company certain
provisions of the GBCC relating to business combinations with interested
shareholders, as such persons are defined in the GBCC (the "Corporate Takeover
Provisions"). The Corporate Takeover Provisions are designed to encourage any
person, before acquiring 10% or more of the Company's voting shares, to seek
approval of the Company's Board of Directors of the terms of any contemplated
business combination. The Corporate Takeover Provisions will prevent certain
business combinations with an interested shareholder for a period of five years
from the time that such shareholder became an interested shareholder unless (a)
prior to the time such shareholder became an interested shareholder the
Company's Board of Directors approved either the business combination or the
merger that resulted in the shareholder becoming an interested shareholder, (b)
in the merger that resulted in the shareholder becoming an interested
shareholder, the interested shareholder became the beneficial owner of at least
90% of the outstanding voting shares of the Company, excluding shares owned by
the Company's officers, directors, affiliates, subsidiaries, and certain
employee stock plans, or (c) subsequent to becoming an interested shareholder,
such shareholder acquired additional shares resulting in the interested
shareholder becoming the owner of at least 90% of the Company's outstanding
voting shares and the business combination was approved by the holders of a
majority of the Company's voting shares, excluding from said vote the shares
owned by the interested shareholder or by the Company's officers, directors,
affiliates, subsidiaries, and certain employee stock plans.

The Amended and Restated Bylaws also make applicable to the Company provisions
(the "Fair Market Provisions") authorized by the GBCC which provide that, unless
the consideration to be received in a business combination with an interested
shareholder equals the fair market value of the property exchanged, as
formulated in the Fair Market Provisions, and the interested shareholder will
receive no benefit from the merger except proportionately as a shareholder, the
business combination must either be (1) approved by the unanimous vote of the
continuing directors, provided there are at least three such continuing
directors, or (2) recommended by at least two-thirds of the continuing directors
and approved by the holders of a majority of the Company's voting shares,
excluding from said vote the shares owned by an interested director who is, or
whose affiliate is, a party to the business combination.

REGISTRATION RIGHTS

In connection with the Merger, the Company entered into a registration rights
agreement (the "Registration Rights Agreement") with each of the former
shareholders of DRC under which they have certain registration rights with
respect to the Common Stock issued in connection with the Merger and the shares
of Common Stock issuable upon the exercise of the Series A Warrants and Series B
Warrants. Pursuant to the terms of the Registration Rights Agreement, upon the
request of either BancBoston or the holders of at least 50% of the securities
subject to registration, the Company will be required to register all or a
portion of such persons' securities. The former shareholders of DRC will be
entitled to require the Company to effect an aggregate of three such
registrations. However, the Company will be required to effect only one such
registration in each 12-month period beginning on March 29, 1996. In addition,
if at any time the Company proposes to file a registration statement on its
behalf or on behalf of any of its other security holders, the former
shareholders of DRC will be entitled to include their shares of Common Stock in
that registration. The right of the DRC shareholders to have shares registered
pursuant to the Registration Rights Agreement are subject to certain
limitations, including customary underwriter's cutbacks and the terms of certain
lockup agreements. See "Description of Securities - Shares Eligible for Future
Sale."

In September 1993, the Company issued to the Levy Investors warrants to
purchase 228,125 shares of Common Stock. Such warrants were exercised in July
1995 at a price of $0.02 per share. See "Certain Transactions." The Company
currently is obligated to register the shares of Common Stock that were issued
upon exercise of such warrants and is obligated to obtain the consent of the
Levy Investors prior to filing a registration statement that does not include
such investors' shares. In March 1994, the Company issued 40,000 shares of
Common Stock to Frank Regas in exchange for cash, an ownership interest in the
Rudy's Franchisor, and an assignment of Mr. Regas' rights under a development
agreement with the Rudy's Franchisor. See "Certain Transactions." The Company
currently is obligated to register such shares during the period ending October
17, 1996. The Registration Statement of which Prospectus forms part is intended
to satisfy the Company's obligation to register the shares held by the Levy
Investors and Mr. Regas.

In connection with its initial public offering, the Company issued to the
representatives of the underwriters Representatives Warrants to purchase 290,000
shares of Common Stock at an exercise price of $6.00 per share. Holders of a
majority of the Representatives Warrants have the right to demand one
registration as well as piggyback registration rights with respect to

54
<PAGE> 57
the shares of Common Stock underlying such warrants. The holders of the Paribas
Warrants, the other outstanding Selling Shareholders' Warrants, and the Unit
Purchase Options have certain registration rights with respect to the shares of
Common Stock underlying such warrants or options. These registration rights
generally require the holders of a majority in interest of the respective
warrants or options to request a registration. Certain of the warrants also
include piggyback registration rights with respect to the underlying shares of
Common Stock. The Registration Statement of which this Prospectus forms a part
is intended to satisfy the Company's obligations to register the shares of
Common Stock underlying the Selling Shareholders' Warrants and Unit Purchase
Options.

REGISTRAR AND TRANSFER AGENT

The registrar and transfer agent for the Company's Common Stock is American
Stock Transfer & Trust Company in New York, New York.

SHARES ELIGIBLE FOR FUTURE SALE

There were 13,138,944 shares of Common Stock outstanding as of June 21, 1996.
Of these shares, 10,720,977 shares are freely transferable without restriction
under the Securities Act, unless they are held by "affiliates" of the Company,
as that term is defined in Rule 144 under the Securities Act. The remaining
2,417,967 shares outstanding are "restricted securities" within the meaning of
Rule 144 under the Securities Act and as such may be subject to the volume and
other resale limitations described below.

In general, under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated for purposes of Rule 144) who beneficially owns restricted
securities with respect to which at least two years have elapsed since the later
of the date the shares were acquired from the Company or from an affiliate of
the Company is entitled to sell, within any three-month period, a number of
shares that does not exceed the greater of (i) 1% of the then-outstanding shares
of Common Stock (approximately 131,389 shares as of June 21, 1996) or (ii) the
average weekly trading volume in the Common Stock during the four calendar weeks
preceding such sale, subject to the filing of a Form 144 with respect to such
sale and certain other limitations and restrictions. In addition, a person who
is not an affiliate, has not been an affiliate of the Company at any time during
the 90 days preceding a sale, and who beneficially owns restricted securities
with respect to which at least three years have elapsed since the later of the
date on which the shares were acquired from the Company or from an affiliate of
the Company, is entitled to sell such shares under Rule 144(k) without regard to
the requirements described above.

In connection with the Merger, the Company issued 6,937,500 shares of Common
Stock to the former shareholders of DRC. Such shares generally are freely
tradeable pursuant to Rule 145 under the Securities Act unless held by an
affiliate, in which case such shares will be subject to the volume and manner of
sale restrictions under Rule 144. In connection with the Merger, Jack M. Lloyd
and William J. Howard each entered into a lock-up agreement with the Company,
pursuant to which they agreed not to sell or otherwise transfer shares of Common
Stock received in the Merger until the earlier of (i) March 29, 1998, or (ii)
the day following the consummation of a financing pursuant to which all
outstanding Merger Notes are redeemed. The lock-up agreements also provide that,
in the event that the financing involves a public offering of Common Stock or
securities convertible into Common Stock, Messrs. Lloyd and Howard will not sell
their shares of Common Stock for an additional six-month period. The former
shareholders of DRC have certain registration rights with respect to the Common
Stock issued to them upon consummation of the Merger or upon exercise of the
Series A Warrants and Series B Warrants, subject to the lockup agreements
described above. See "Description of Securities - Registration Rights."

Holders of the Paribas Warrants, Selling Shareholders' Warrants, and Unit
Purchase Options have certain registration rights with respect to the shares
underlying such warrants and options. See "Description of Securities -
Registration Rights."

The Company has filed a registration statement under the Securities Act to
register for offer and sale the shares of Common Stock reserved for issuance
pursuant to the exercise of outstanding stock options and stock options that may
be granted under the 1992 Plan and 1995 Plan. See "Management - Stock Option
Plans." Shares issued upon exercise of stock options granted pursuant to the
Company's stock option plans generally will be eligible for sale in the public
market, except that affiliates of the Company will continue to be subject to
volume limitations.

55
<PAGE> 58
PLAN OF DISTRIBUTION

The Company is registering hereby 3,962,794 shares of Common Stock currently
outstanding or issuable to the Selling Shareholders upon exercise of Selling
Shareholders' Warrants and Unit Purchase Options, all of which shares may be
sold from time to time by the Selling Shareholders. The Company has granted
registration rights to certain of the holders of the Selling Shareholders'
Warrants and Unit Purchase Options and to certain of the other Selling
Shareholders, which the Registration Statement of which this Prospectus forms a
part is intended to satisfy. Each Selling Shareholder may use this Prospectus as
updated from time to time to offer the shares of Common Stock for sale in
transactions in which the Selling Shareholder is or may be deemed to be an
underwriter within the meaning of the Securities Act. The Company will not
receive any proceeds from the sale of any shares of Common Stock by the Selling
Shareholders. The Company will not pay any compensation to an NASD member in
connection with this offering. Brokerage commissions, if any, attributable to
the sale of the shares of Common Stock offered hereby will be borne by the
holders thereof.

Each currently outstanding share of Common Stock being registered hereby and
each share of Common Stock issued upon exercise of the Selling Shareholders'
Warrants or Unit Purchase Options may be sold by the holder thereof in
transactions that are exempt from registration under the Securities Act or so
long as the Registration Statement of which this Prospectus forms a part is
effective under the Securities Act, and so long as there is a qualification in
effect under, or an available exemption from, any applicable state securities
law with respect to the issuance or resale of such shares. The Selling
Shareholders, in addition to selling pursuant to the Registration Statement of
which this Prospectus is a part, also may sell under Rule 144 as promulgated
under the Securities Act, if applicable. See "Description of Securities - Shares
Eligible for Future Sale."

The Selling Shareholders also may pledge the shares of Common Stock being
registered for resale hereby to NASD broker/dealers (each a "Pledgee") pursuant
to the margin provisions of each Selling Shareholder's customer agreements with
such Pledgees. Upon default by a Selling Shareholder, the Pledgee may offer and
sell shares of Common Stock from time to time as described above.

EXPERTS

The financial statements and the related financial statement schedule
incorporated in this Prospectus by reference from the Company's Transition
Report on Form 10-K for the year ended December 27, 1995 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.

LEGAL OPINIONS

The legality of the shares of Common Stock offered hereby will be passed upon
for the Company by O'Connor, Cavanagh, Anderson, Killingsworth & Beshears, a
professional association, Phoenix, Arizona.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE

As a result of the reverse purchase accounting treatment described in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Basis of Presentation," the Company determined that it was in its
best interests that Deloitte & Touche LLP ("Deloitte & Touche"), DRC's
independent public accountants prior to the Merger, serve as the Company's
independent public accountants following the Merger. Accordingly, effective
April 29, 1996, the Company ceased its client-auditor relationship with KPMG
Peat Marwick LLP ("Peat Marwick") and on April 29, 1996, the Company retained
Deloitte & Touche as its independent public accountants. The change in
independent public accountants was approved by the Board of Directors of the
Company, including all of the members of the Audit Committee of the Board of
Directors.

56
<PAGE> 59
Peat Marwick's report on the financial statements of AFR, which are not
incorporated by reference herein, for the years ended September 28, 1994 and
September 27, 1995 did not contain an adverse opinion or a disclaimer of opinion
and was not qualified or modified as to uncertainty, audit scope, or accounting
principles. In connection with the two audits for the years ended September 28,
1994 and September 27, 1995, and subsequently to April 29, 1996, there were no
disagreements on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreement, if not
resolved to the satisfaction of Peat Marwick, would have caused it to make
reference to the subject matter of the disagreement in connection with its
report. Prior to retaining Deloitte & Touche, no discussions took place between
the Company and Deloitte & Touche regarding the application of accounting
principles or the type of opinion that might be rendered on the Company's
financial statements since the historical financial statements of DRC, as
audited by Deloitte & Touche, will be the continuing historical financial
statements of the Company. The Company has authorized Peat Marwick to respond
fully to inquiries from Deloitte & Touche.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission, Washington,
D.C. 20549, a Registration Statement on Form S-3 under the Securities Act with
respect to the shares offered hereby. This Prospectus does not contain all the
information contained in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information regarding the Company and the shares of Common Stock offered
hereby, reference is made to the Registration Statement, including the exhibits
which are a part thereof, which may be obtained upon request to the Commission
and the payment of the prescribed fee. Material contained in the Registration
Statement may be examined at the Commission's Washington, D.C. office and copies
may be obtained at the Commission's Washington, D. C. office upon payment of
prescribed fees. Statements contained in this Prospectus are not necessarily
complete, and in each case reference is made to the copy of such contracts or
documents filed as an exhibit to the Registration Statement, each such statement
being qualified by this reference.

OTHER INFORMATION

DENNY'S, INC. IS NOT SELLING, OFFERING FOR SALE OR UNDERWRITING ALL OR ANY
PART OF THE COMMON STOCK OFFERED HEREBY. DENNY'S, INC. DOES NOT ENDORSE OR MAKE
ANY RECOMMENDATIONS WITH RESPECT TO THIS OFFERING. NEITHER THE OFFERING NOR THE
CONTENTS OF THIS PROSPECTUS (AND, SPECIFICALLY, ANY FINANCIAL DATA CONTAINED OR
INCORPORATED BY REFERENCE HEREIN) HAVE BEEN APPROVED OR ENDORSED BY DENNY'S,
INC. AND DENNY'S, INC. ASSUMES NO OBLIGATION TO ANY INVESTOR IN CONNECTION WITH
THIS OFFERING OR THE ACCURACY OR ADEQUACY OF ANY PORTION OF THIS PROSPECTUS.

57
<PAGE> 60
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY OR ON BEHALF OF THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SHARES COVERED BY THIS PROSPECTUS
IN ANY JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

<TABLE>
<CAPTION>
Page

<S> <C>
Available Information..................................2
Incorporation of Certain
Information by Reference..............................2
Prospectus Summary.................................... 3
Risk Factors.......................................... 5
Use of Proceeds.......................................10
Dividends.............................................11
Capitalization........................................11
Price Range of Common Stock...........................12
Selected Consolidated Financial Data..................13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations...........................................14
Business..............................................20
Properties............................................33
Management............................................34
Certain Transactions..................................43
Principal and Selling Shareholders....................46
Description of Securities.............................49
Plan of Distribution..................................56
Experts...............................................56
Legal Opinions........................................56
Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure...............56
Additional Information................................57
</TABLE>
================================================================================

3,962,794 SHARES OF
COMMON STOCK

DENAMERICA CORP.

----------
PROSPECTUS
----------

, 1996

================================================================================
<PAGE> 61
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses payable by the Registrant in
connection with the offering described in the Registration Statement, other than
underwriting commissions and discounts. All of the amounts shown are estimates
except for the registration fees:
<TABLE>
<CAPTION>
Amount to be Paid
-----------------
<S> <C>
Registration Fee.................................. $ 7,339.72
Accountants' Fees and Expenses.................... 10,000.00
Legal Fees and Expenses........................... 40,000.00
Printing and Engraving Expenses................... 10,000.00
Blue Sky Filing Fees and Expenses................. 1,000.00
Miscellaneous Fees................................ 6,660.28
----------
Total........................................... $75,000.00
=========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Article VI of the Registrant's Restated Articles of Incorporation
contains the following provisions:

Section 6.1 "No director of the Corporation shall have personal
liability to the Corporation or to its shareholders for monetary damages for
breach of duty of care or other duty as a director, except for liability: (i)
for any appropriation, in violation of the director's duties, of any business
opportunity of the Corporation; (ii) for acts or omissions which involve
intentional misconduct or a knowing violation of law; (iii) for the types of
liability set forth in Section 14-2-832 of the Georgia Business Corporation
Code; or (iv) for any transaction from which the director received an improper
personal benefit.

Section 6.2 Neither the amendment nor repeal of this Article, nor the
adoption of any provision of the Articles of Incorporation of the Corporation
inconsistent with this Article, shall eliminate or adversely affect any right or
protection of a director of the Corporation existing immediately prior to such
amendment, repeal or adoption of an inconsistent provision.

Section 6.3 If the Georgia Business Corporation Code is amended to
authorize the further limitation of the liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Georgia Business Corporation Code, as amended."

Section 14-2-851 of the Georgia Business Corporation Code provides that
a corporation may indemnity of its directors and officers against civil and
criminal liabilities. Directors and officers may be indemnified against expenses
if they acted in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action, if they had no reasonable cause to believe their conduct was
unlawful. A director or officer may be indemnified against expenses incurred in
connection with a derivative suit if he acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made without court approval
if such person was adjudged liable for negligence or misconduct in the
performance of his or her duty to the corporation. The statutory indemnification
is not exclusive of any rights provided by any by-law, agreement, vote of
shareholders or disinterested directors or otherwise.

Article IX of the Registrant's Amended and Restated Bylaws sets forth
the extent to which the Registrant's directors and officers may be indemnified
against liabilities which they may incur while serving in such capacities. Such
indemnification will be provided to the full extent permitted and in the manner
required by the Georgia Business Corporation

II-1

<PAGE> 62
Code. Pursuant to these provisions, the directors and officers of the Registrant
will be indemnified against any losses incurred in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a director or officer of the Registrant or served with another corporation,
partnership, joint venture, trust or other enterprise at the request of the
Registrant. In addition, the Registrant will provide advances for expenses
incurred in defending any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such officer or director to repay such advances
if it is ultimately determined that he is not entitled to indemnification by the
Registrant.

The Registrant has entered into indemnification agreements with certain
directors and executive officers pursuant to the foregoing provisions of its
Amended and Restated Bylaws.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable.

ITEM 16. EXHIBITS

EXHIBIT NO DESCRIPTION OF EXHIBIT
- ---------- ----------------------

2.1 Amended and Restated Agreement and Plan of Merger, dated as of
August 9, 1995, between American Family Restaurants, Inc. and
Denwest Restaurant Corp. Included herein as Annex A to the
Proxy Statement/Prospectus.(1)
2.2 Amended and Restated Agreement and Plan of Reorganization by
and among Great Southeastern Restaurants, Inc., Jerry's
Licensing Corp., Great Restaurants of the Midsouth, Inc.,
Great American Restaurants, Inc., JLC Acquisition Corp., GRM
Acquisition Corp., and GAR Acquisition Corp., entered into as
of May 25, 1992.(2)
2.3 Articles of Merger of Great Midwestern Restaurants, Inc.,
Great Restaurants of the Midsouth, Inc., Jerry's
Licensing Corp., AFR Acquisition Corp., Inc., Florida
Family Restaurants, Inc. and McFadden Metz Leased Restaurants,
Inc. into American Family Restaurant, Inc.(1)
2.4 List of Schedules to Amended and Restated Agreement and Plan
of Merger, dated as of August 9, 1995, between American Family
Restaurants, Inc. and Denwest Restaurant Corp.(1)
3.1 Articles of Restatement of the Articles of Incorporation of
American Family Restaurants, Inc. and Articles of Amendment
thereto.(2)
3.2 Amended and Restated Bylaws of American Family
Restaurants, Inc.(3)
3.3 Certificate of Merger of Denwest Restaurant Corp. into
American Family Restaurants, Inc.(4)
4.1 Form of Indenture between DenAmerica Corp. and State Street
Bank and Trust Company, as trustee, relating to the Series A
Notes (including the Form of Series A Note).(4)
4.2 Form of Indenture between DenAmerica Corp. and State Street
Bank and Trust Company, as trustee, relating to the Series B
Notes (including the Form of Series B Note).(4)
4.3 Form of Series A Common Stock Purchase Warrant.(2)
4.4 Form of Series B Common Stock Purchase Warrant.(2)
4.5 Common Stock Purchase Warrant dated March 29, 1996, issued to
Banque Paribas.(4)
5.1 Opinion of O'Connor, Cavanagh, Anderson, Killingsworth &
Beshears, P.A.*
8.1 Opinion of Troy & Gould Professional Corporation with respect
to certain Federal income tax consequences of the Merger of
Denwest Restaurant Corp. with American Family Restaurants,
Inc.(1)
8.2 Opinion of O'Connor, Cavanagh, Anderson, Killingsworth &
Beshears, P.A. with respect to certain Federal income tax
consequences of the Merger of Denwest Restaurant Corp. with
American Family Restaurants, Inc.(1)
9.1 Voting Agreement, dated August 9, 1995, by and between Jeffrey
D. Miller and Denwest Restaurant Corp.(1)
9.2 Form of Voting Agreement to be entered into between American
Family Restaurants, Inc. and certain of the shareholders of
Denwest Restaurant Corp.(1)
10.1 American Family Restaurants, Inc. 1992 Stock Option Plan.(2)

II-2
<PAGE> 63
10.1A American Family Restaurants, Inc. Amended and Restated 1992
Stock Option Plan.(2)
10.2 American Family Restaurants, Inc. Directors Stock Option
Plan.(2)
10.3 Purchase Agreement by and between L-K Restaurants & Motels,
Inc. and L-K Restaurants, Inc., dated March 26, 1986.(2)
10.4 Adjustable Rate Note in the principal amount of $170,000
payable by Jeffrey D. Miller and Vickie A. Miller to State
Savings Bank, Marion, Ohio, dated February 1, 1988.(2)
10.5 Asset Purchase Agreement by and between Great Southeastern
Restaurants, Inc. and Restaurant Associates of Southeast,
Inc., dated October 17, 1989.(2)
10.6 Installment Note payable by Great Southeastern Restaurants,
Inc. to Sanwa Business Credit Corporation in the original
principal amount of $2,354,975, dated November 30, 1989.(2)
10.7 Loan Modification Agreement, made as of November 21, 1990, by
and among Sanwa Business Credit Corporation, Southeastern
Restaurants, Inc., and Great Southeastern Restaurants, Inc.,
whereby Great Southeastern Restaurants, Inc. assumed
$1,004,635 of indebtedness due to Sanwa Business Credit
Corporation, including First Amendment thereto, dated October
9, 1991.(2)
10.7A Security Agreement by and between Great Southwestern
Restaurants, Inc. and Sanwa Business Credit Corporation, dated
November 30, 1989, Master Security Agreement, dated November
21, 1990 and Amendments thereto, dated May 13, 1994 and August
30, 1994.(2)
10.8 Agreement for Purchase of Assets by and between Great
Restaurants of the Midsouth, Inc. and Jerrico, Inc., dated
April 16, 1990.(2)
10.9 Letter Agreement by and among Denny's, Inc., Great Restaurants
of the Midsouth, Inc., Jerry's Licensing Corp., Midsouth
Family Restaurants Joint Venture and Midsouth Family
Restaurants Real Estate Joint Venture, dated July 18, 1990,
with respect to the conversion of Denny's restaurants.(2)
10.10 Joint Venture Agreement of Midsouth Family Restaurants Joint
Venture, effective as of June 28, 1990, and entered into July
19, 1990, by and between Midsouth Foods I Joint Venture and
Midsouth Foods II Joint Venture, including First Amendment
thereto, dated June 17, 1992.(2)
10.11 Joint Venture Agreement of Midsouth Foods I Joint Venture,
effective as of June 28, 1990, and entered into July 19, 1990
by and between Great Restaurants of the Midsouth, Inc. and
Midsouth Foods I, Ltd., including First Amendment thereto,
dated June 17, 1992.(2)
10.12 Joint Venture Agreement of Midsouth Foods II Joint Venture,
effective as of June 28, 1990, and entered into July 19, 1990,
by and between Great Restaurants of the Midsouth, Inc. and
Midsouth Foods II, Ltd., including First Amendment thereto,
dated June 17, 1992.(2)
10.13 Management Agreement, entered into July 19, 1990, effective as
of June 28, 1990, by and among Midsouth Family Restaurants
Joint Venture, Great Restaurants of the Midsouth, Inc., and
Great American Restaurants, Inc., including First Amendment
thereto, dated June 1992.(2)
10.14 Contract for Sale and Purchase by and between Southeastern
Restaurants, Inc. and Great Southeastern Restaurants, Inc.,
dated October 29, 1990.(2)
10.15 Mortgage Note payable in the principal sum of $435,000 by
Midsouth Family Restaurants Joint Venture to Brock & Company,
Inc., dated December 26, 1990. (Note was later negotiated to
$50,000, as evidenced by payment schedule attached to
note.)(2)
10.16 Promissory Note in the principal sum of $1,000,000 payable by
Midsouth Family Restaurants Joint Venture to General Electric
Capital Corporation, dated November 12, 1991.(2)
10.17 Master Lease Agreement, dated and effective as of December 9,
1991, by and between General Electric Capital Corporation and
Midsouth Family Restaurants Joint Venture, including schedules
thereto.(2)
10.18 Promissory Note in the sum of $185,000 payable by American
Family Restaurants, Inc. to Walter F. Demming, dated March 1,
1992.(2)
10.19 Stock Redemption Agreement by and between Great Midwestern
Restaurants, Inc., Jeffrey D. Miller and Ronald C. Davis,
dated June 17, 1992.(2)
10.20 Promissory Note in the principal sum of $4,500,000 payable by
Great Midwestern Restaurants, Inc. to Ronald C. Davis, dated
July 1, 1992.(2)
10.21 Placement agency agreement between Spencer Trask Securities,
Incorporated and Great American Restaurants, Inc., dated July
17, 1992.(2)
II-3
<PAGE> 64
10.22 Warrant issued by Great American Restaurants, Inc. to Spencer
Trask Securities, Incorporated for 21,292 shares of Common
Stock, dated July 27, 1992. (American Family Restaurants, Inc.
issued five additional warrants which are substantially
identical in all material respects, except as to warrantholder
and number of shares. The six warrants give rights to purchase
a total of 48,000 shares of Common Stock.)(2)
10.22A Schedule of warrants substantially identical to Exhibit
10.22.(2)
10.23 Joint Venture Agreement of Densouth Restaurants 11 Joint
Venture, entered into September 4, 1992 and effective January
2, 1992, by and between Great Restaurants of the Midsouth,
Inc. and Densouth Foods II, Ltd., including First Amendment
thereto, dated September 4, 1992, and Amendment thereto, dated
April 15, 1993.(2)
10.24 Amended and Restated Promissory Note in the principal amount
of $435,655 payable by McFadden Metz Restaurants, Inc. to
Marriott Family Restaurants, Inc., dated December 1, 1992.(2)
10.25 Amended and Restated Promissory Note in the principal amount
of $914,487 payable by McFadden Metz Restaurant, Inc. to
Marriott Family Restaurants, Inc., dated December 1, 1992.(2)
10.26 Amended and Restated Promissory Note in the principal amount
of $396,523 payable by McFadden Metz Restaurants, Inc. to
Marriott Family Restaurants, Inc., dated December 1, 1992.(2)
10.27 Amended and Restated Promissory Note in the principal amount
of $396,299 payable by McFadden Metz Restaurants, Inc. to
Marriott Family Restaurants, Inc., dated December 1, 1992.(2)
10.28 Letter Agreement between Great American Restaurants, Inc. and
Denny's, Inc., dated August 25, 1992, regarding
reorganization.(2)
10.29 Form of registration rights agreement covering the sale of the
Series A Preferred Stock and warrants in the 1992 private
placement. (Each such registration rights agreement is
substantially identical in all material respects except as to
date, number of shares and holder.) (2)
10.29A Schedule of registration rights agreements substantially
identical to Exhibit 10.29.(2)
10.30 Form of warrant issued in connection with the 1992 private
placement. (Each agreement is substantially identical in all
material respects except as to the date, the holder and the
number of shares subject to the warrant.)(2)
10.30A Schedule of warrants substantially identical to Exhibit
10.30.(2)
10.31 Unit Purchase Option to purchase up to 2.2224 units at
$165,000 per unit, by Great American Restaurants, Inc. to
Spencer Trask Securities, Incorporated, dated December 31,
1992. (There are nine unit purchase options substantially
identical in all material respects except as to number of
units, and option holder.)(2)
10.31A Schedule of unit purchase options substantially identical to
Exhibit 10.31.(2)
10.32 Warrant No. W-0527933 issued by Great American Restaurants,
Inc. to Merl Trust for 33,333.33 shares of Common Stock, dated
June 2, 1993. (Three additional warrants were issued and are
substantially identical in all material respects except as to
the warrantholder and the number of shares.)(2)
10.32A Schedule of warrants substantially identical to Exhibit
10.32.(2)
10.33 Registration Rights Agreement between Great American
Restaurants, Inc. and Merl Trust, dated June 2, 1993 covering
warrants issued in connection with 9% subordinated notes.
(Registration Rights Agreements entered into by other holders
of warrants issued in connection with the 9% subordinated
notes are substantially identical in all material respects
except as to the name of the holder.)(2)
10.33A Schedule of registration rights agreements substantially
identical to Exhibit 10.33.(2)
10.34 Stock Purchase Agreement by and among Great Midwestern
Restaurants, Inc., Great American Restaurants, Inc., and the
stockholders of McFadden Metz Restaurants, Inc., dated
August 31, 1993.(2)
10.35 License Agreement by and among Lance McFadden, PB Cafes, Inc.
and Great Midwestern Restaurants, Inc., entered into as of
August 31, 1993.(2)
10.36 Option and Escrow Agreement by and among McFadden Metz Leased
Restaurants, Inc., Arthur 1. Meyer, Gail M. Asarch, Lance
McFadden and John C. Metz and Great American Restaurants,
Inc., Great Midwestern Restaurants, Inc. and Holland & Knight,
dated September 2, 1993, including Amendment No. I thereto,
entered into February 28, 1994.(2)
10.37 Restaurant Option Agreement by and among Arthur I. Meyer, Gail
M. Asarch, Lance McFadden and John C. Metz and Great American
Restaurants, Inc., executed August 31, 1993, including
Amendment thereto, entered into February 28, 1994.(2)
10.37A Termination of Restaurant Option Agreement by and among Arthur
I. Meyer, Gail M. Asarch, Lance McFadden, John C. Metz and
American Family Restaurants, Inc., executed July 14, 1994.(2)

II-4
<PAGE> 65
10.38 Amended and Restated Promissory Note in the principal sum of
$1,834,980 payable by Great Midwestern Restaurants, Inc. and
Great American Restaurants, Inc. to Arthur I. Meyer, Gail M.
Asarch, Lance McFadden and John C. Metz, dated August 31, 1993
and executed February 24, 1994.(2)
10.39 Restaurant Management Agreement by and between McFadden Metz
Leased Restaurants, Inc. and Great American Restaurants, Inc.
entered into September 2, 1993, including Amendment thereto,
dated February 28, 1994.(2)
10.40 Promissory Note in the principal sum of $156,000 payable by
Great American Restaurants, Inc. and Great Midwestern
Restaurants, Inc. to Lance McFadden, dated September 2,
1993.(2)
10.41 Bond Purchase Agreement among Great American Restaurants,
Great Midwestern Restaurants, Inc., O.T. Finance, S.A., The
Elvire Levy Revocable Living Trust, The Lucien I. Levy
Revocable Living Trust, Merl Trust and Michele Spycher, dated
as of September 1, 1993.(2)
10.42 Warrant No. W-14R-l by Great American Restaurants, Inc. to
Merck, Finck & Co. for 8,811 (adjusted to 9,878) shares of
Common Stock. (Additional warrants to purchase an aggregate of
88,097 (adjusted to 88,219) shares of Common Stock were issued
and are substantially identical in all material respects
except as to the issue date, the holder of record and the
number of shares.)(2)
10.42A Schedule of warrants substantially identical to Exhibit
10.42.(2)
10.43 10% Senior Bond No. R-1 issued by Great Midwestern
Restaurants, Inc. in the sum of $2,000,000 due June 30, 1996
to O.T. Finance, S.A., dated September 1, 1993.(2)
10.44 10% Senior Bond No. R-2 issued by Great Midwestern
Restaurants, Inc. in the sum of $900,000 due June 30, 1996 to
The Lucien 1. Levy Revocable Living Trust and The Elvire Levy
Revocable Living Trust, dated September 1, 1993.(2)
10.45 10% Senior Bond No. R-3 issued by Great Midwestern
Restaurants, Inc. in the sum of $500,000 due June 30, 1996 to
Merl Trust, dated September 1, 1993.(2)
10.46 10% Senior Bond No. R-4 issued by Great Midwestern
Restaurants, Inc. in the sum of $100,000 due June 30, 1996 to
Michele Spycher, dated September 1, 1993.(2)
10.46A Letter from Lucien I. Levy, dated June 14, 1994 waiving breach
of 10% Senior Bond provisions.(2)
10.47 Warrant No. W-1 issued by Great American Restaurants, Inc. to
O.T. Finance, S.A. for 237,845 shares of Common Stock, dated
September 1, 1993. (Three additional warrants were issued, and
each is substantially identical in all material respects
except as to the holder, the warrant number and the number of
shares subject to the warrant.)(2)
10.47A Schedule of warrants substantially identical to Exhibit
10.47.(2)
10.48 Registration Rights Agreement between Great American
Restaurants, Inc. and O.T. Finance, S.A., The Lucien I. Levy
Revocable Living Trust, The Elvire Levy Revocable Living
Trust, Merl Trust and Michele Spycher, dated September 1,
1993.(2)
10.48A Agreement by and among American Family Restaurants, Inc., O.T.
Finance, S.A., The Elvire Levy Revocable Living Trust, The
Lucien 1. Levy Revocable Living Trust, Merl Trust, Michele
Spycher and Lucien I. Levy, dated September 1, 1994, amending
Registration Rights Agreement.(2)
10.49 Letter agreement between Spencer Trask Securities,
Incorporated and Great American Restaurants, Inc., dated
November 18, 1993.(2)
10.50 Warrant No. W-5 issued by Great American Restaurants, Inc. to
Spencer Trask Securities, Incorporated for 10,500 shares of
Common Stock, dated November 18, 1993.(2)
10.51 Warrant No. W-6 issued by Great American Restaurants, Inc. to
John F. Steinmetz for 10,500 shares of Common Stock, dated
November 18, 1993.(2)
10.52 Asset Purchase Agreement by and among Great Restaurants of the
Midsouth, Inc. and Midsouth Family Restaurants Real Estate
Trust Venture, dated as of January 1994.(2)
10.52A Amendment to Asset Purchase Agreement between Great
Restaurants of the Midsouth, Inc. and Midsouth Family
Restaurants Real Estate Joint Venture, dated July 22, 1994.(2)
10.53 Agreement for Purchase and Sale of Partnership Interests by
and among Great Restaurants of the Midsouth, Inc., Midsouth
Foods I, Ltd., and Midsouth Foods II, Ltd., dated as of March
25, 1994.(2)
10.53A Amendment to Agreement for Purchase and Sale of Partnership
Assets among Great Restaurants of the Midsouth, Inc., Midsouth
Foods I, Ltd. and Midsouth Foods II, Ltd., dated July 22,
1994.(2)
10.54 Purchase Agreement between Denny's, Inc. and American Family
Restaurants, Inc., dated as of March 31, 1994, with respect to
a restaurant located in Texarkana, Arkansas. (American Family
Restaurants,

II-5
<PAGE> 66
Inc. has eleven other purchase agreements which are
substantially identical in all material respects except as to
location of restaurants and purchase price.)(2)
10.54A Schedule of purchase agreements substantially identical to
Exhibit 10.54.(2) 10.55 Amended and Restated Promissory Note
in the principal sum of $3,940,000 payable by American Family
Restaurants, Inc. to Denny's, Inc., dated June 13, 1994, and
Note Modification Agreement, dated June 13, 1994.(2)
10.55A Second Note Modification Agreement between American Family
Restaurants, Inc. and Denny's, Inc., dated September 12,
1994.(2)
10.55B Second Amended and Restated Note payable in the principal
amount of $3,940,000 by American Family Restaurants, Inc.,
dated September 12, 1994.(2)
10.56 Security Agreement between American Family Restaurants, Inc.
and Denny's, Inc., dated May 18, 1994.(2)
10.56A Security Agreement by and between American Family Restaurants,
Inc. and Denny's, Inc., dated September 12, 1994.(2)
10.57 Assignment and Assumption Agreement between American Family
Restaurants, Inc. and AFR Acquisition Corp., Inc., dated June
7, 1994.(2)
10.58 Executive Employment Agreement between Great American
Restaurants, Inc. and Jeffrey D. Miller, dated April 19,
1994.(2)
10.59 Executive Employment Agreement between Great American
Restaurants, Inc. and Haig V. Antranikian, dated April 19,
1994.(2)
10.60 Form of Franchise Agreement between American Family
Restaurants, Inc. and Denny's, Inc. (American Family
Restaurants, Inc. has 78 franchise agreements which are
substantially identical in all material respects except as to
location of restaurants and date of agreement.)(2)
10.60A Letter Agreement between American Family Restaurants, Inc. and
Denny's, Inc., dated September 13, 1994, regarding change of
control provisions.(2)
10.60B Letter Agreement between American Family Restaurants, Inc. and
Denny's, Inc., dated September 13, 1994, regarding non-compete
provisions.(2)
10.60C Schedule of franchise agreements substantially identical to
Exhibit 10.60.(2)
10.61 Rudy's Franchise Agreement for Tampa, Florida between Rudy's
Country Store and Bar-B-Q, Inc. and Great American
Restaurants, Inc., dated February 1994, including Addendum
thereto, dated February 1994.(2)
10.61A Letter from Rudy's Country Store and Bar-B-Q, Inc. to American
Family Restaurants, Inc. regarding additional advertising
expenditures, dated April 15, 1994.(2)
10.61B Letter from Rudy's Country Store and Bar-B-Q, Inc. to American
Family Restaurants, Inc., dated July 19, 1994.(2)
10.62 Rudy's Development Agreement for Tampa, Florida between Rudy's
Country Store and Bar-B-Q, Inc., and Great American
Restaurants, Inc., dated February 1994, including Addendum
thereto, dated February 1994. (American Family Restaurants,
Inc. has five other development agreements which are
substantially identical in all material respects except as to
location of restaurant and development timetable.)(2)
10.62A Schedule of development agreements substantially identical to
Exhibit 10.62.(2)
10.62B Letter from Rudy's Country Store and Bar-B-Q, Inc. to American
Family Restaurant, Inc., dated September 13, 1994, amending
Rudy's Development Agreements.(2)
10.63 Assignment and Assumption Agreement among Frank Regas, Great
American Restaurants, Inc. and Rudy's Country Store and
Bar-B-Q, Inc., dated March 31, 1994.(2)
10.64 Subscription Agreement between Great American Restaurants,
Inc. and Frank Regas for 40,000 shares of Common Stock, dated
March 31, 1994.(2)
10.65 Form of Warrant Agreement between American Family Restaurants,
Inc. and Fahnestock & Co. Inc. for 250,000 shares of Common
Stock.(2)
10.66 Stock Pledge and Assignment between American Family
Restaurants, Inc., and Denny's, Inc., dated June 13, 1994.(2)
10.67 Letter Agreement between CNL Group, Inc. and American Family
Restaurants, Inc. regarding sale- leaseback transactions,
dated August 18, 1994.(2)

II-6
<PAGE> 67
10.68 Letter Agreement from CNL Group, Inc. to American Family
Restaurants, Inc., dated October 13, 1994, regarding the
commitment letter.(2)
10.69 Form of Letter regarding Proposed Amendment of Redeemable
Warrants together with Registration Rights Agreement. (Letters
and Registration Rights Agreements entered into by holders of
warrants are substantially identical in all material respects
except as to the name of the holder, the number of warrants
and the expiration date of the warrants.)(1)
10.70 Schedule of Letters regarding Proposed Amendment of Redeemable
Warrants, together with Registration Rights Agreements,
substantially identical to Exhibit 10.69 (included as Exhibit
10.30.A hereto).(1)
10.71 Executive Employment Agreement between American Family
Restaurants, Inc. and Edward Williams, dated July 12, 1995.(1)
10.72 First Amended and Restated Executive Employment Agreement
between American Family Restaurants, Inc. and Haig V.
Antranikian, dated July 12, 1995.(1)
10.73 Employment Agreement dated December 8, 1995 between American
Family Restaurants, Inc. and William G. Cox.(1)
10.74 Amendment No. 1 to Executive Employment Agreement between
American Family Restaurants, Inc. and Jeffrey D. Miller.(1)
10.75 Asset Purchase Agreement, dated as of September 8, 1995, by
and among Fables-Innkeepers Management, Inc. and American
Family Restaurants, Inc.(1)
10.76 General Bill of Sale and Assignment of Assets, Properties and
Business of Certain Restaurants, dated as of January 1, 1995,
by and between DenGlass Foods Joint Venture and American
Family Restaurants, Inc.(1)
10.77 Credit Agreement by and among American Family Restaurants,
Inc., Great Midwestern Restaurants, Inc., Great Restaurants of
the Midsouth, Inc., AFR Acquisition Corp., Inc., Jerry's
Licensing Corp., Florida Family Restaurants, Inc., McFadden
Metz Leased Restaurants, Inc., The Provident Bank, as Agent
and various lenders described therein, dated as of May 17,
1995.(1)
10.78 Amendment to American Family Restaurants, Inc. Amended and
Restated 1992 Stock Option Plan.(1)
10.79 Letter Agreement, dated December 20, 1995, from American
Family Restaurants, Inc. to Denny's, Inc. and Denwest
Restaurant Corp.(1)
10.80 Form of Registration Rights Agreement to be entered into
between American Family Restaurants, Inc. and certain of the
existing shareholders of Denwest Restaurant Corp.(1)
10.81 Franchise Development Agreement, dated November 9, 1994,
between Denny's, Inc. and Denwest Restaurant Corp.(1)
10.82 Executive Employment Agreement, dated November 9, 1994,
between Jack M. Lloyd and Denwest Restaurant Corp.(1)
10.83 Executive Employment Agreement, dated November 9, 1994,
between William J. Howard and Denwest Restaurant Corp.(1)
10.84 Executive Employment Agreement, dated November 9, 1994,
between William S. Leto and Denwest Restaurant Corp.(1)
10.85 Executive Employment Agreement, dated as of November 9, 1994,
between Todd S. Brown and Denwest Restaurant Corp.(1)
10.86 Amended and Restated Joint Venture Agreement of Denwest Joint
Venture between Denwest Corp. and Denwest Foods, Ltd. dated
December 30, 1991.(1)
10.87 Joint Venture Agreement of Denwest II Joint Venture between
L&H Restaurant Corp. and Denwest Foods II, Ltd. dated December
30, 1991.(1)
10.88 Secured Credit Agreement dated as of November 9, 1994, among
Household Commercial Services, Inc., Household Commercial
Financial Services, Inc., Denwest Restaurant Corp., L&H
Restaurant Corporation, Wyden Restaurants, Inc., Phoenix
Foods, Inc., Denwest Corporation, and Wytex Corporation.(1)
10.89 Commitment Letter, dated as of January 5, 1996, by and among
American Family Restaurants, Inc., Denwest Restaurant Corp.
and Banque Paribas.(1)
10.90 Intercreditor Agreement among DenAmerica Corp., certain
holders of DenAmerica's Series B Notes, and State Street Bank
and Trust Company.(4)
10.91 Note Modification Agreement, dated as of May 12, 1995, by and
among American Family Restaurants, Inc., Great Midwestern
Restaurants, Inc., Jeffrey D. Miller, and Ronald C. Davis.(1)

II-7
<PAGE> 68
10.92 Credit Agreement dated as of February 29, 1996, among
DenAmerica Corp., the Banks named therein, and Banque Paribas,
as Agent (including the Form of Term Note, Form of Revolving
Note, and Form of Delayed Draw Term Note).(4)
10.93 Security Agreement dated as of February 29, 1996, between
DenAmerica Corp. and Banque Paribas, as Agent.(4)
10.94 Form of Senior Intercreditor Agreement among Banque Paribas,
as Agent, the holders of Series A Notes, and State Street Bank
and Trust Company.(4)
10.95 Stock Option Agreement dated March 29, 1996, between
DenAmerica Corp. and William G. Cox.(4)
11.1 DenAmerica Corp. Calculation of Earnings Per Share.(3)(6)
12.1 DenAmerica Corp. Ratio of Income to Fixed Charges.(6)
16. Letter Re: Change in Certifying Accountant.(5)
21.1 List of Subsidiaries of DenAmerica Corp.(6)
23.1 Consent of Deloitte & Touche LLP.
25.1 Form T-1 statement of eligibility and qualification of State
Street Bank and Trust Company relating to the Series A
Notes.(1)
25.2 Form T-1 statement of eligibility and qualification of State
Street Bank and Trust Company relating to the Series B
Notes.(1)
27.1 Financial Data Schedule.(3)(6)
99.1 Engagement Letter between American Family Restaurants, Inc.
and Montgomery Securities.(1)

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

* To be filed by amendment.

(1) Incorporated by reference to the Exhibits to the Registrant's Registration
Statement on Form S-4, No. 33-00216, and Amendment No. 1 thereto, as filed
on January 10, 1996 and February 1, 1996, respectively.
(2) Incorporated by reference to the Exhibits to the Registrant's Registration
Statement on Form S-1, File No. 33-80550, and Amendments 1-3 thereto,
filed on June 22, 1994, September 16, 1994, October 13, 1994, and October
17, 1994, respectively.
(3) Incorporated by reference to the Exhibits to the Registrant's to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended March 27,
1996, as filed on May 16, 1996.
(4) Incorporated by reference to the Exhibits to the Registrant's Current
Report on Form 8-K and Form 8-K/A as filed on April 15, 1996, and June 12,
1996, respectively.
(5) Incorporated by reference to the Exhibits to the Registrant's Current
Report on Form 8-K as filed on May 3, 1996. (6) Incorporated by reference
to the Exhibits to the Registrant's Transition Report on Form 10-K as
filed on June 12, 1996.

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes:

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

(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;

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

II-8
<PAGE> 69
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement, provided,
however, that clauses (1)(i) and (1)(ii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference into the Registration Statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

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

The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

II-9
<PAGE> 70
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Scottsdale, Arizona, on this 26th day of June, 1996.

DenAmerica Corp.

By: /s/ Jack M. Lloyd
------------------------------------
Jack M. Lloyd
President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints jointly and severally, Jack M. Lloyd and
Todd S. Brown and each of them, as his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
sign any Registration Statement and amendments thereto for the same offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, 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 in connection therewith, 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 or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>

/s/ Jeffrey D. Miller Chairman of the Board June 26, 1996
- ----------------------------------------
Jeffrey D. Miller

/s/ Jack M. Lloyd President, Chief Executive Officer, June 26, 1996
- ---------------------------------------- and Director (Principal Executive
Jack M. Lloyd Officer)

/s/ William G. Cox Chief Operating Officer and Director June 26, 1996
- ----------------------------------------
William G. Cox

/s/ William J. Howard Vice President, Secretary, and June 26, 1996
- ---------------------------------------- Director
William J. Howard

/s/ Todd S. Brown Vice President, Chief Financial Officer, June 26, 1996
- ---------------------------------------- Treasurer, and Director (Principal
Todd S. Brown Financial and Accounting Officer)

/s/ Haig V. Antranikian Vice President and Director June 26, 1996
- ----------------------------------------
Haig V. Antranikian

/s/ John M. Holliman, III Director June 26, 1996
- ----------------------------------------
John M. Holliman, III

/s/ C. Alan MacDonald Director June 26, 1996
- ----------------------------------------
C. Alan MacDonald

/s/ Fred W. Martin Director June 26, 1996
- ----------------------------------------
Fred W. Martin
Director
- ----------------------------------------
Philip B. Smith
</TABLE>

<PAGE> 1

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Registration Statement of
DenAmerica Corp. on Form S-3 of our report dated March 29, 1996 (except for Note
16, as to which the date is May 31, 1996), appearing in the Transition Report on
Form 10-K of DenAmerica Corp. for the year ended December 27, 1995 and to the
reference to us under the heading "Experts" in the Prospectus, which is part of
this Registration Statement.

DELOITTE & TOUCHE LLP
Phoenix, Arizona

June 26, 1996