CONSOLIDATED PRODUCTS INC /IN/, S-3/A, 1997-05-21

CONSOLIDATED PRODUCTS INC /IN/
S-3/A, 1997-05-21
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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 21, 1997

REGISTRATION NO. 333-7373

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 1

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

CONSOLIDATED PRODUCTS, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
INDIANA 37-0684070
(State of Incorporation) (I.R.S. Employer
Identification No.)
</TABLE>

500 CENTURY BUILDING
36 SOUTH PENNSYLVANIA STREET
INDIANAPOLIS, INDIANA 46204
(317) 633-4100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

JAMES W. BEAR
CONSOLIDATED PRODUCTS, INC.
500 CENTURY BUILDING
36 SOUTH PENNSYLVANIA STREET
INDIANAPOLIS, INDIANA 46204
(317) 633-4100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------

Copies of all communications to:

BERKLEY W. DUCK
ICE MILLER DONADIO & RYAN
ONE AMERICAN SQUARE, BOX 82001
INDIANAPOLIS, INDIANA 46282-0002

(317) 236-2100

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.

If the only securities 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, other than securities offered only in connection with dividend or interest
reinvestment plans, 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. [ ]

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

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

================================================================================
<PAGE> 2

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 MAY 21, 1997

PROSPECTUS

1,000,000 SHARES

CONSOLIDATED PRODUCTS, INC.

CONSOLIDATED PRODUCTS LOGO COMMON STOCK STEAK N SHAKE LOGO

Consolidated Products, Inc. (the "Company") hereby offers up to 1,000,000
shares of Common Stock, to be sold either directly to investors on its own
behalf or through agents to be designated from time to time, on terms to be
determined at the time or times of sale. A supplement to this Prospectus setting
forth the terms of each issuance of the shares being offered hereby including
the purchase price of the shares, the name or names of any agents and any
selling commissions or other compensation from the Company and the proceeds to
the Company from such sale will be delivered together with this Prospectus. See
"Plan of Distribution."

The Common Stock is traded on the New York Stock Exchange under the symbol
"COP." On May 20, 1997, the last sale price of the Common Stock as reported on
the New York Stock Exchange was $17.63 per share. See "Price Range of Common
Stock."

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

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE 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.

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

, 1997

<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements and related notes thereto appearing elsewhere or incorporated by
reference in this Prospectus. Unless the context requires otherwise, all
references to the "Company" in this Prospectus include Consolidated Products,
Inc. and its subsidiaries.

THE COMPANY

The Company is engaged primarily in the ownership, operation and
franchising of Steak n Shake(R) restaurants through its wholly-owned subsidiary,
Steak n Shake, Inc. ("Steak n Shake"). Founded in 1934 in Normal, Illinois,
Steak n Shake is one of the oldest restaurant chains in the country. Steak n
Shake's reputation and long-standing customer loyalty have been earned over many
years by the consistent quality of the dining experience. As of May 7, 1997
Steak n Shake had 182 Company-operated restaurants and 52 franchised restaurants
located in 13 midwestern and southeastern states.

The Steak n Shake concept occupies a distinctive market niche offering
full-service dining room and counter seating as well as drive-thru and carry-out
service. Counter and dining room sales are approximately two-thirds of the sales
mix while sales for consumption off the premises represent approximately
one-third of the sales mix. All food is freshly prepared, made-to-order and
promptly served on china with flatware and glassware by friendly wait staff.
Steak n Shake offers a core menu of steakburgers made from 100% pure U.S. beef,
including cuts of t-bone, strip and sirloin steaks, thin and crispy french fries
and hand-dipped milk shakes. Over the years, Steak n Shake has responded to
changing customer tastes with greater menu variety without losing its focus or
customer appeal, by making carefully planned menu additions such as a grilled
chicken breast sandwich, beef and chicken taco salads and various homestyle
soups and salads. Steak n Shake believes that its restaurants offer a
significantly higher quality food product, ambiance and service level than is
available in fast-food restaurants, at only a slightly higher price.

Steak n Shake restaurants are generally open 24 hours a day, seven days a
week, and in addition to the core menu offer a breakfast menu from 2:00 a.m.
until 11:00 a.m. During fiscal 1996, lunch and dinner sales accounted for
approximately 37% and 44% of sales, respectively, while breakfast and late night
sales accounted for 7% and 12% of sales, respectively. The average check was
$5.00 per person, although the average check during the peak lunch and dinner
hours was $5.50 and $5.75, respectively.

Steak n Shake restaurants have a distinctive exterior appearance and
interior decor. The exterior design of a Steak n Shake restaurant has the unique
character of a branded logo embracing building shape, awning detail, building
graphics and pylon signing. The interior decor is reminiscent of the nostalgic
diner era using chrome, glass, neon and tile in a contemporary manner. Food
preparation takes place in view of the customer, as reflected by Steak n Shake's
slogan "In Sight It Must Be Right(R)".

In fiscal 1992, the Company embarked upon an expansion program that
contemplated the addition of 39 new Company-operated Steak n Shake units by the
end of fiscal 1997. However, by the end of fiscal 1996, the Company had exceeded
this goal by opening 67 Company-operated restaurants in four fiscal years.
During fiscal 1997, the Company expects to open 33 Company-operated restaurants,
of which 21 were open and eleven were under construction as of May 7, 1997.

Due to the success of the new restaurants and the progress made in further
developing its infrastructure and organizational quality, the Company has
gradually increased the objectives of the expansion plan in each of the years
subsequent to fiscal 1992. The Company's five-year plan for fiscal 1997 through
fiscal 2001 calls for an annual increase of at least 20% in the number of
Company-operated Steak n Shake units. In addition to the 242 Company-operated
units contemplated by the plan, the Company intends to expand its franchise
system during the five-year period. The plan, if successful, would result in
approximately 500 systemwide Steak n Shake restaurants by the end of fiscal
2001, of which approximately 400 would be Company-operated.

3
<PAGE> 4

restaurants in a television media market in order to implement effectively Steak
n Shake's marketing program which focuses on building brand awareness,
understanding of the Steak n Shake concept and customer loyalty. The addition of
Company-operated restaurants in markets where the Company's television marketing
effort has been implemented allows the Company to leverage its advertising costs
over more units and to benefit from management efficiencies. In existing
markets, the Company's media advertising expenditures are intended to create
high levels of customer recognition and immediate market acceptance for new
units. The Company's new restaurants opened in existing media markets have
typically experienced higher than average sales volumes. In new market areas,
the Company's strategy is to construct a cluster of units to allow the Company
to begin the effective use of television media advertising within a relatively
short period of time.

For the 52 weeks ended April 9, 1997, the 149 Company-operated Steak n
Shake restaurants open throughout the period generated average restaurant
revenues of approximately $1,337,000 and average restaurant cash flow before
rent, depreciation and amortization of approximately $419,000 (or 31.4% of
revenues). For this same period, the 26 Company-operated Steak n Shake
restaurants opened during the 52 weeks ended April 10, 1996 generated average
restaurant revenues of approximately $1,475,000 and average restaurant cash flow
before rent, depreciation and amortization of approximately $451,000 (or 30.6%
of revenues). The Company purchased the land for 20 of these 26 restaurants, and
the average total investment to open these 20 restaurants including land, site
improvements, building and equipment was approximately $1,376,000.

The principal executive offices of the Company, an Indiana corporation, are
located at 500 Century Building, 36 South Pennsylvania Street, Indianapolis,
Indiana 46204, and its telephone number is (317) 633-4100.

THE OFFERING

Common Stock offered by the Company..... 1,000,000 shares

Common Stock to be outstanding after the
offering................................ 16,522,106 shares(1)

Use of proceeds......................... To repay indebtedness, finance the
development of additional Steak n
Shake restaurants and for general
corporate purposes.

New York Stock Exchange symbol.......... COP

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

(1) Does not include 688,892 shares subject to issuance as of May 21, 1997
pursuant to awards granted under the Company's employee and director stock
plans.

4
<PAGE> 5

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
TWENTY-EIGHT
WEEKS ENDED(1)
FISCAL YEAR(1) -------------------------
--------------------------------------------------------- APRIL 10, APRIL 9,
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- --------- --------
(53 WEEKS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Revenues.......................... $127,444 $134,156 $161,173 $190,133 $229,421 $114,668 $133,835
Earnings before income taxes...... 7,022 8,411 11,324 16,126 20,934 9,040 11,412
Net earnings...................... 4,172 5,191 7,174 10,026 13,009 5,580 7,032
Net earnings per common and common
equivalent share:
Primary....................... $ .50 $ .56 $ .73 $ .78(2) $ .84(2) $ .36 $ .45
Fully diluted................. .36 .41 .53 .68 .84 .36 .45
Weighted average shares and
equivalents (000's):
Primary....................... 8,280 9,263 9,832 12,816(2) 15,520(2) 15,463 15,701
Fully diluted................. 13,737 14,548 15,033 15,334 15,563 15,504 15,723
STEAK N SHAKE RESTAURANT OPERATING
DATA:
Percentage change in Company-
operated same store sales(3).... 11.5% 5.9% 8.9% 5.7% (0.9%)(4) (1.3%)(4) (0.2%)(4)
Average unit net sales for
Company-operated units(5)....... $ 1,008 $ 1,078 $ 1,195 $ 1,279 $ 1,304 $ 675 $ 675(6)
Percentage change in average unit
net sales....................... 12.9% 6.9% 10.9% 7.0% 2.0% 1.0% 0.1%(6)
Systemwide sales.................. $141,088 $150,672 $185,776 $226,261 $286,747 $141,840 $167,039
Number of restaurants open at end
of period:
Company-operated.............. 104 108 118 137 161 149 180
Franchised.................... 16 19 23 34 47 43 49
-------- -------- -------- -------- -------- -------- --------
Total............................. 120 127 141 171 208 192 229
======== ======== ======== ======== ======== ======== ========

<CAPTION>
APRIL 9,
1997
--------
<S> <C>
STATEMENT OF FINANCIAL POSITION DATA:
Total assets................................................................................................. $150,180
Total debt, including current portion........................................................................ 53,358
Shareholders' equity......................................................................................... 66,105
</TABLE>

- -------------------------
(1) For accounting purposes, the Company has adopted a 52/53 week fiscal year
ending on the last Wednesday in September. The second quarter consists of 16
weeks with the first, third and fourth quarters each consisting of 12 weeks
(13 weeks in the fourth quarter of a 53-week fiscal year).

(2) Primary earnings per share are not comparable to the respective prior
periods because of the increase in the number of shares outstanding arising
from the conversion of the Company's 10% Subordinated Convertible Debentures
(the "Debentures") into Common Stock effective April 3, 1995.

(3) The term "same store sales" refers to the sales of only those units open for
at least six months prior to the beginning of the periods being compared.

(4) Same store sales increased 1.3% (fiscal year 1996), 3.0% (28 weeks ended
April 9, 1997) and 0.9% (28 weeks ended April 10, 1996) after excluding
existing units in close proximity (generally three miles) to new units
opened during the periods.

(5) Average unit net sales are for units that have been open during the entire
fiscal period.

(6) The Company believes that the soft retail environment, together with fewer
shopping days between Thanksgiving and Christmas, had a somewhat negative
effect on average unit volume in the current fiscal year compared to the
prior fiscal year.

5
<PAGE> 6

RISK FACTORS

In addition to the other information contained or incorporated by reference
in this Prospectus, the following risk factors should be considered carefully in
evaluating an investment in the Common Stock offered hereby.

EXPANSION STRATEGY

The Company's five-year plan for fiscal 1997 through fiscal 2001 calls for
an annual increase of at least 20% in the number of Company-operated Steak n
Shake units. In addition to the 242 Company-operated units contemplated by the
plan, the Company intends to expand its franchise system during the five-year
period. The plan, if successful, would result in approximately 500 systemwide
Steak n Shake restaurants by the end of fiscal 2001, of which approximately 400
would be Company-operated. The Company's strategy is to develop Company-operated
units primarily in existing market areas and in markets contiguous thereto, and
to pursue expansion into other market areas through franchise relationships.

The ability of the Company to meet its expansion goals will be dependent
upon continued success in addressing the factors relevant to its expansion plan.
Those factors include, but are not limited to: the selection and availability of
attractive sites for new restaurants; the negotiation of acceptable purchase or
lease terms for restaurant sites; the availability of adequate financing both to
the Company and to its franchisees; the Company's ability to attract qualified
franchisees and the ability of franchisees to perform their obligations to the
Company; the ability of the Company to hire, train and retain competent managers
and other personnel; the ability of the Company to obtain necessary governmental
permits and approvals; and suitable economic and business conditions in the
markets in which restaurants are to be located. Certain of the factors on which
the success of the plan depends are not within the control of the Company.

The Company intends to continue to employ the management philosophies and
expansion criteria that it has followed since 1992. However, there can be no
assurance that new restaurants will continue to generate sales or profit margins
consistent with those of existing Company-operated restaurants, or that the
Company will not encounter unanticipated problems or liabilities in connection
with new restaurants. There can be no assurance that the Company will be
successful in opening the anticipated number of restaurants as scheduled. The
opening of new restaurants has adversely affected sales for a period thereafter
at existing Company-operated restaurants in close proximity to those new
restaurants. Due to its market intensification strategy, the Company expects
that other existing Company-operated restaurants in close proximity to new
restaurants will be affected similarly in the future.

Management believes that the Company's existing borrowing capacity, the
proceeds of this offering and anticipated cash flow from operations will be
adequate to meet the working capital needs of the Company and provide the funds
needed for the expansion plan through fiscal 1998. The Company's ability to meet
the objectives of its expansion plan beyond fiscal 1998 also will be dependent
upon its ability to obtain additional capital through borrowings, the issuance
of equity and/or debt securities or sale and leaseback transactions. The Company
has no commitments with respect to any such additional financing. The Company
believes that any difficulty that the Company might experience in meeting the
objectives of its expansion plan resulting from the unavailability of additional
financing would not in and of itself materially adversely affect the
profitability of its existing operations. There can be no assurance that such
financing will be available or, if available, will be on terms which will be
acceptable to the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Business -- Expansion Strategy."

GEOGRAPHIC CONCENTRATION

For the 52 weeks ended April 9, 1997, approximately 24%, 22% and 15% of the
Company's net sales were derived from the St. Louis, Missouri, Indianapolis,
Indiana and central Florida markets, respectively. As a result, the Company's
results of operations may be materially affected by weather, economic or
business conditions within these markets. Also, given the Company's present
geographic concentration, adverse publicity relating to Steak n Shake
restaurants could have a more pronounced adverse effect on the Company's overall
sales than might be the case if the Company's restaurants were more broadly
dispersed.

6
<PAGE> 7

Due to the Company's geographic concentration, the Company has limited
experience in penetrating new markets, and there can be no assurance that the
restaurants located in new markets will perform in a manner consistent with the
restaurants in the Company's core markets.

THE RESTAURANT INDUSTRY

Historically, the restaurant industry has been affected by changes in
consumer tastes and by national, regional and local economic conditions and
demographic trends. The performance of individual restaurants may be affected by
factors such as traffic patterns, demographic factors and the type, number and
location of competing restaurants. Although management believes that the Company
has successfully responded to changes in the restaurant industry, in the future
factors such as inflation, increased food, labor and employee benefit costs and
the lack of availability of experienced management personnel and hourly
employees could adversely affect the restaurant industry in general and the
Company's restaurants in particular.

COMPETITION

The restaurant business is one of the most intensely competitive industries
in the United States, with price, menu offerings, location and service all being
significant competitive factors. The Company faces competition for sites on
which to locate new restaurants and for personnel, as well as for customers. The
Company's competitors include national, regional and local chains as well as
local owner-operated establishments. Although the Company believes its resources
are adequate for its operations and expansion plan through fiscal 1998, there
are established competitors with financial and other resources greater than
those of the Company in all of the Company's current and proposed future market
areas and the continued success of the expansion plans will be dependent upon
management's effectiveness in responding to these competitive factors in the
markets selected for development.

RISKS ASSOCIATED WITH FRANCHISING

The development of the franchised Steak n Shake restaurants included in the
current five-year expansion plan will be dependent upon the Company entering
into agreements for the construction of the additional franchised restaurants
and upon the ability of existing franchisees to meet their commitments for the
opening of new restaurants in their respective development areas. The Company's
existing development agreements require franchisees to construct 25 additional
restaurants by the end of fiscal 2001. There can be no assurance that the
franchisees will strictly adhere to these development commitments. Of the
Company's existing franchise relationships, one is with a corporation controlled
by E. W. Kelley, Chairman of the Company, and in which five other directors of
the Company have an indirect financial interest. Although the Company's
expansion plan does not contemplate the entry into a large number of new
franchise relationships, the Company competes for qualified franchisees with a
wide variety of investment opportunities, and there can be no assurance that the
Company will be able to attract qualified franchisees to meet its overall
expansion goals. The success of the Company's franchisees ultimately will be
dependent upon matters over which the Company has limited direct control
including the management skills and financial resources of the franchisees. The
factors that could affect the Company's expansion strategy also could affect the
ability of franchisees to meet their commitments to the Company. See "--
Expansion Strategy" and "Business -- Franchising."

GOVERNMENT REGULATION

The Company's business is subject to extensive state and local government
regulation, including regulations relating to building, public health, safety
and fire codes. The failure to obtain or retain required licenses could
adversely affect the operations of the Company's restaurants. Delays or failures
in obtaining such licenses, permits or approvals could delay or prevent the
opening of a restaurant in a particular area. The Company's business is also
subject to other government actions that are beyond the Company's control,
including increases in the minimum hourly wage requirements, worker's
compensation insurance rates, unemployment and other taxes. These and other
initiatives could adversely affect the restaurant industry in general and the
Company's results of operations in particular. The Company's franchising
activities are subject to federal and state regulations governing the content of
franchise offering materials and to certain state registration requirements.
Compliance with these requirements could delay or prevent the marketing of
franchises.

7
<PAGE> 8

DEPENDENCE ON KEY PERSONNEL

The Company is dependent upon the continued availability of the services of
Alan B. Gilman, its President and Chief Executive Officer, and its other
executive officers who collectively have been with the Company an average of
approximately ten years. The loss of the services of Mr. Gilman or other key
personnel could have a material adverse effect on the Company's business. The
directors and executive officers of the Company, as a group, are the beneficial
owners of approximately 30.8% of the outstanding Common Stock, and will own
approximately 28.9% of the outstanding Common Stock upon completion of this
offering. See "Management" and "Principal Shareholders."

CONTROL BY E. W. KELLEY AND AFFILIATES

As of April 30, 1997, E. W. Kelley, Chairman of the Company, was the
beneficial owner of 2,646,970 shares, or 17.1% of the outstanding Common Stock,
and will be the beneficial owner of 16.0% of the outstanding Common Stock
following this offering. Included in the shares beneficially owned are 1,424,106
shares owned by Kelley & Partners, Ltd., a limited partnership of which Mr.
Kelley and S. Sue Aramian, the Vice Chairwoman and a director of the Company,
are managing general partners, two other directors are general partners and two
other directors are limited partners. The significant investment and management
positions of Mr. Kelley and his affiliates may allow them to continue to
exercise effective control over the affairs of the Company following the
completion of this offering. See "Management" and "Principal Shareholders."

Mr. Kelley and certain of his affiliates have engaged in various
transactions with the Company in the past and may do so in the future. Although
the Company believes that all such transactions have been on terms no less
favorable to it than would have been available in the absence of these
relationships, potential conflicts of interest exist with respect thereto. See
"Business -- Franchising."

STOCK PRICE VOLATILITY

Quarterly operating results of the Company or other restaurant companies,
changes in general conditions in the economy, the financial markets or the
restaurant industry, natural disasters, changes in earnings estimates or
recommendations by research analysts, or other developments affecting the
Company or its competitors could cause the market price of the Common Stock to
fluctuate substantially. In addition, in recent years the stock market and
restaurant industry stocks in particular have experienced extreme price and
volume fluctuations. This volatility has had a significant effect on the market
prices of securities issued by many companies for reasons unrelated to the
operating performance of these companies.

RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS

This Prospectus contains certain statements that are "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Those statements include, but may not be limited to, the discussions of the
Company's expansion strategy, expectations concerning its future profitability,
capital sources and needs, marketing plans, franchising program and unit
economics. Investors in the Common Stock are cautioned that reliance on any
forward-looking statement involves risks and uncertainties, and that although
the Company believes that the assumptions on which the forward-looking
statements contained herein are reasonable, any of those assumptions could prove
to be inaccurate, and as a result, the forward-looking statements based on those
assumptions also could be incorrect. The uncertainties in this regard include,
but are not limited to, those identified above. In light of these and other
uncertainties, the inclusion of a forward-looking statement herein should not be
regarded as a representation by the Company that the Company's plans and
objectives will be achieved.

8
<PAGE> 9

PRICE RANGE OF COMMON STOCK

The Common Stock is traded on the New York Stock Exchange under the symbol
"COP." Prior to November 19, 1996, the Common Stock was traded on the Nasdaq
National Market. The following table sets forth the range of high and low
closing prices (rounded to the nearest eighth) for the Common Stock as reported
by the Nasdaq National Market and, subsequent to November 19, 1996, the New York
Stock Exchange for each of the quarters indicated. The reported prices reflect
the issuance of stock dividends as described under "Dividend Policy."

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C> <C> <C>
FISCAL 1994
First Quarter................................. $ 7 7/8 $ 5 7/8
Second Quarter................................ 7 3/4 6 1/2
Third Quarter................................. 8 3/8 6 3/8
Fourth Quarter................................ 8 5/8 7
FISCAL 1995
First Quarter................................. 8 1/4 7 1/8
Second Quarter................................ 10 3/8 7 3/8
Third Quarter................................. 12 5/8 9 7/8
Fourth Quarter................................ 12 5/8 10 3/4
FISCAL 1996
First Quarter................................. 13 7/8 11 7/8
Second Quarter................................ 15 5/8 11 1/2
Third Quarter................................. 16 1/8 14 1/8
Fourth Quarter................................ 15 1/2 12 7/8
FISCAL 1997
First Quarter................................. 17 1/8 14 1/8
Second Quarter................................ 18 5/8 15 1/8
Third Quarter (through May 20, 1997).......... 17 5/8 14 1/4
</TABLE>

On May 20, 1997, the closing sale price of the Common Stock as reported by
the New York Stock Exchange was $17.63 per share. As of May 20, 1997, there were
approximately 5,900 beneficial owners of the Common Stock.

DIVIDEND POLICY

The Company has distributed annual 10% stock dividends for each of the last
six years. It is the current policy of the Board of Directors to continue the
issuance of annual stock dividends. Except for the payment in 1990 of a special
dividend which included $4.25 in cash and $3.00 in principal amount of the
Debentures as part of a recapitalization plan, the Company has not paid cash
dividends during the past six years and currently intends to use the cash
provided by operations to finance its expansion program.

9
<PAGE> 10

USE OF PROCEEDS

The offering made by this Prospectus is not contingent upon the sale of any
minimum number of shares, and all proceeds from the sale of any of the shares
will be immediately available to the Company. The shares may be sold at varying
prices. See "Plan of Distribution." If all shares being offered were sold at the
average price of $17.63 per share and assuming that no selling commissions were
paid in connection therewith, the net proceeds to the Company would be
approximately $17,325,000. The Company intends to apply the net proceeds to
repayment of the indebtedness outstanding under the Company's Revolving Credit
Agreement ($17,000,000 at May 16, 1997) which has been used to finance the
development of new restaurants and for the renovation of existing restaurants,
(ii) to fund the Steak n Shake expansion plan and (iii) for general corporate
purposes. The Company's $30,000,000 Revolving Credit Agreement matures in
December 1998 and bears interest at a rate based on LIBOR plus 0.875% or the
prime rate, at the election of the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

10
<PAGE> 11

SELECTED CONSOLIDATED FINANCIAL DATA

(IN THOUSANDS, EXCEPT PER SHARE DATA)

The selected consolidated financial data presented in the following table
summarize certain consolidated financial information of the Company and, with
the exception of the selected data as of and for the 28-week periods ended April
10, 1996 and April 9, 1997, are derived from Consolidated Financial Statements
which have been audited by Ernst & Young LLP, independent auditors. The selected
data for the 28-week periods ended April 10, 1996 and April 9, 1997 are derived
from unaudited financial statements which, in the opinion of management, reflect
all adjustments (consisting only of normal recurring adjustments) necessary for
fair presentation of the results of operations for such periods. The information
for the 28-week periods is not necessarily indicative of operating results to be
expected for the entire fiscal year. The selected consolidated financial data
should be read in conjunction with, and are qualified in their entirety by
reference to, the Consolidated Financial Statements and the Notes thereto
included elsewhere or incorporated by reference in this Prospectus.

<TABLE>
<CAPTION>
TWENTY-EIGHT
WEEKS ENDED(1)
FISCAL YEAR(1) --------------
------------------------------------------------------- APRIL 10, APRIL 9,
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Revenues
Net sales........................ $126,024 $132,509 $158,636 $186,740 $224,147 $112,025 $131,430
Franchise fees................... 633 784 1,139 1,880 2,787 1,383 1,511
Other, net....................... 787 863 1,398 1,513 2,487 1,260 894
-------- -------- -------- -------- -------- -------- --------
127,444 134,156 161,173 190,133 229,421 114,668 133,835
-------- -------- -------- -------- -------- -------- --------
Costs and expenses
Cost of sales.................... 32,519 34,507 41,702 49,073 59,765 29,761 34,750
Restaurant operating costs....... 60,102 61,994 73,478 85,572 101,024 51,049 58,968
General and administrative....... 10,397 10,787 13,652 15,642 18,149 9,747 11,077
Depreciation and amortization.... 5,396 5,684 5,916 7,021 8,625 4,378 5,449
Marketing........................ 3,116 3,558 4,266 5,401 7,238 3,605 4,027
Rent............................. 3,294 3,718 4,641 6,049 7,322 3,835 4,301
Amortization of pre-opening
costs.......................... -- 397 1,555 1,965 3,216 1,613 1,860
Interest......................... 5,598 5,100 4,639 3,284 3,148 1,640 1,991
-------- -------- -------- -------- -------- -------- --------
120,422 125,745 149,849 174,007 208,487 105,628 122,423
-------- -------- -------- -------- -------- -------- --------
Earnings before income taxes....... 7,022 8,411 11,324 16,126 20,934 9,040 11,412
Income taxes....................... 2,850 3,220 4,150 6,100 7,925 3,460 4,380
-------- -------- -------- -------- -------- -------- --------
Net earnings....................... $ 4,172 $ 5,191 $ 7,174 $ 10,026 $ 13,009 $ 5,580 $ 7,032
======== ======== ======== ======== ======== ======== ========
Net earnings per common and common
equivalent share:
Primary.......................... $ .50 $ .56 $ .73 $ .78(2) $ .84(2) $ .36 $ .45
Fully diluted.................... .36 .41 .53 .68 .84 .36 .45
Weighted average shares and
equivalents:
Primary.......................... 8,280 9,263 9,832 12,816(2) 15,520(2) 15,463 15,701
Fully diluted.................... 13,737 14,548 15,033 15,334 15,563 15,504 15,723
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR END
----------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF FINANCIAL POSITION DATA:
Total assets............................................ $67,062 $70,643 $80,328 $99,834 $131,416
Debt, excluding current portion:
Obligations under capital leases...................... 12,742 11,178 9,886 8,263 6,957
Revolving line of credit.............................. -- -- -- -- 4,000
Senior note........................................... 20,500 17,750 14,250 20,000 25,000
Debentures............................................ 12,496 12,076 11,988 -- --
Shareholders' equity.................................... 1,779 11,107 19,715 42,615 57,829
</TABLE>

(2) Primary earnings per share are not comparable to the respective prior
periods because of the increase in the number of shares outstanding arising
from the conversion of the Debentures into Common Stock effective April 3,
1995.

11
<PAGE> 12

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

OVERVIEW

In November 1990, the Board of Directors of the Company adopted a
recapitalization plan pursuant to which it declared a special dividend
distribution of $4.25 in cash and $3.00 in principal amount of the Debentures
for each share of Common Stock outstanding. The plan was intended to provide to
shareholders a significant portion of the value of their Common Stock in cash
and interest-bearing debentures, while allowing them to retain their ownership
interests in the Company. In order to finance the plan and consolidate debt, the
Company borrowed $23,800,000 of senior debt, $6,400,000 of which was used to
repay existing debt. Approximately $11,600,000 of the Debentures were converted
from debt to equity in fiscal 1995.

The recapitalization plan imposed significant limitations on the
availability of funds for expansion of the Steak n Shake business, and in fiscal
1990, the Company intended to open only four units per year over the next five
years. By fiscal 1992, improved earnings and cash flow allowed the Company to
adopt a more aggressive expansion plan under which 39 Company-operated units
were to be constructed over the five-year period fiscal 1993 through fiscal
1997. However, by the end of fiscal 1996, the Company had exceeded this goal by
opening 67 Company-operated restaurants in four fiscal years.

The goals of the expansion program have been gradually increased in each
year subsequent to fiscal 1992. The Company's five-year plan for fiscal 1997
through fiscal 2001 calls for an annual increase of at least 20% in the number
of Company-operated Steak n Shake units. In addition to the 242 Company-operated
units contemplated by the plan, the Company intends to expand its franchise
system during the five-year period. The plan, if successful, would result in
approximately 500 systemwide Steak n Shake restaurants by the end of fiscal
2001, of which approximately 400 would be Company-operated.

RESULTS OF OPERATIONS

In the following discussion, the term "same store sales" refers to the
sales of only those units open at least six months prior to the beginning of the
periods being compared. The opening of new restaurants has adversely affected
sales for a period thereafter at existing Company-operated restaurants in close
proximity to those new restaurants. Due to its market intensification strategy,
the Company expects that other existing Company-operated restaurants in close
proximity to new restaurants will be affected similarly in the future.

12
<PAGE> 13

The following table sets forth the percentage relationship to total
revenues, unless otherwise indicated, of items included in the Company's
consolidated statements of earnings and certain Steak n Shake operating data for
the periods indicated:

<TABLE>
<CAPTION>
TWENTY-EIGHT
WEEKS ENDED
FISCAL YEAR -------------------------
------------------------------------ APRIL 10, APRIL 9,
1994 1995 1996 1996 1997
---- ---- ---- --------- --------
<S> <C> <C> <C> <C> <C>
Revenues
Net sales.......................... 98.4% 98.2% 97.7% 97.7% 98.2%
Franchise fees..................... 0.7 1.0 1.2 1.2 1.1
Other, net......................... 0.9 0.8 1.1 1.1 0.7
-------- -------- -------- -------- --------
100.0 100.0 100.0 100.0 100.0
-------- -------- -------- -------- --------
Costs and expenses
Cost of sales(1)................... 26.3 26.3 26.7 26.6 26.4
Restaurant operating costs(1)...... 46.3 45.8 45.1 45.6 44.9
General and administrative......... 8.5 8.3 7.9 8.5 8.3
Depreciation and amortization...... 3.7 3.7 3.7 3.8 4.1
Marketing.......................... 2.6 2.8 3.2 3.2 3.0
Rent............................... 2.9 3.2 3.2 3.3 3.2
Amortization of pre-opening
costs........................... 1.0 1.0 1.4 1.4 1.4
Interest........................... 2.8 1.7 1.4 1.4 1.5
Earnings before income taxes......... 7.0 8.5 9.1 7.9 8.5
Income taxes......................... 2.6 3.2 3.4 3.0 3.3
-------- -------- -------- -------- --------
Net earnings......................... 4.4% 5.3% 5.7% 4.9% 5.2%
======== ======== ======== ======== ========
Steak n Shake Restaurant Operating
Data:
Percentage change in
Company-operated same store
sales........................... 8.9% 5.7% (0.9%)(2) (1.3%)(2) (0.2%)(2)
Average unit net sales for Company-
operated units ($000's)(3)...... $ 1,195 $ 1,279 $ 1,304 $ 675 $ 675(4)
Percentage change in average unit
net sales....................... 10.9% 7.0% 2.0% 1.0% 0.1%(4)
Systemwide sales ($000's).......... $185,776 $226,261 $286,747 $141,840 $167,039
Number of restaurants open at end
of period:
Company-operated................ 118 137 161 149 180
Franchised...................... 23 34 47 43 49
-------- -------- -------- -------- --------
Total.............................. 141 171 208 192 229
======== ======== ======== ======== ========
</TABLE>

- -------------------------
(1) Cost of sales and restaurant operating costs are expressed as a percentage
of net sales.

(2) Same store sales increased 1.3% (fiscal 1996), 3.0% (28 weeks ended April 9,
1997) and 0.9% (28 weeks ended April 10, 1996) after excluding existing
units in close proximity (generally three miles) to new units opened during
the periods.

(3) Average unit net sales are for units that have been open during the entire
fiscal period.

(4) The Company believes that the soft retail environment, together with fewer
shopping days between Thanksgiving and Christmas, had a somewhat negative
effect on average unit volume in the current fiscal year compared to the
prior fiscal year.

13
<PAGE> 14

COMPARISON OF TWENTY-EIGHT WEEKS ENDED APRIL 9, 1997 TO TWENTY-EIGHT WEEKS ENDED
APRIL 10, 1996

Revenues

Net sales increased $19,404,000 to $131,430,000, or 17.3%, due primarily to
an increase in Steak n Shake's net sales of $19,742,000. The increase in net
sales of Steak n Shake of 19.3% was due to the opening of new units pursuant to
the Company's expansion plan (non-same stores), partially offset by a 0.2%
decrease in same store sales and the closure of three low-volume units. The
decrease in same store sales was attributable to a decrease of 1.5% in customer
counts partially offset by a 1.3% increase in check average. Steak n Shake
instituted price increases of 1.4%, 1.3%, and 1.0% in January 1996, October
1996, and March 1997, respectively. After excluding units in close proximity
(generally three miles) to the new units opened during the periods, Steak n
Shake same store sales increased 3.0%.

Franchise fees increased $128,000 to $1,511,000, as a result of an increase
in franchise royalties of $288,000 due to the opening of 15 Steak n Shake
franchised units since the beginning of fiscal 1996 partially offset by a
decrease in initial franchise fees of $160,000.

Other revenues decreased $365,000 due to lease buyout costs of
approximately $487,000 associated with the disposition of two leased properties,
partially offset by revenue generated by an increase in the number of properties
leased to franchisees by the Company's franchise financing subsidiary.

Costs and Expenses

Cost of sales increased $4,989,000, or 16.8%, as a result of net sales
increases. As a percentage of net sales, cost of sales decreased to 26.4% from
26.6%.

Restaurant operating costs increased $7,919,000, or 15.5%, due to increased
labor costs and other operating costs resulting from the higher sales volume and
the effect of the minimum wage increase. Restaurant operating costs, as a
percentage of net sales, decreased to 44.9% from 45.6%, primarily as a result of
improved labor utilization and a decrease in fringe benefit costs.

General and administrative expenses increased $1,330,000, or 13.6%. The
increase in expenses was attributable to personnel related costs, which included
costs for additional staffing in connection with the development of new
restaurants. As a percentage of revenues, general and administrative expenses
decreased to 8.3% from 8.5%.

The $1,071,000 increase in depreciation and amortization expense was
attributable to the net depreciable capital additions since the beginning of
fiscal 1996.

Marketing expense increased $422,000, or 11.7%. As a percentage of
revenues, marketing expense decreased to 3.0% from 3.2% due to the Company's
market intensification strategy.

Rent expense increased $466,000, or 12.2%, as a result of sale and
leaseback transactions since the beginning of fiscal 1996 involving twelve
Company-owned properties and a net increase in the number of other leased
properties.

The $248,000 increase in the amortization of pre-opening costs was
attributable to the increase in the number of new Company-operated units opened
since the beginning of fiscal 1996.

Interest expense increased $350,000 as a result of the increased borrowings
under the Company's revolving line of credit and senior note agreements, offset
by lower average costs of borrowing and the reduction in capital lease
obligations.

Income Taxes

The Company's effective income tax rate increased to 38.4% from 38.3% for
the twenty-eight weeks ended April 10, 1996 and from 37.8% for the year ended
September 25, 1996. A valuation allowance against gross deferred tax assets has
not been provided based upon the expectation of future taxable income.

14
<PAGE> 15

Net Earnings

Net earnings increased $1,453,000, or 26.0%, primarily as a result of the
increase in Steak n Shake's operating earnings. Fully diluted earnings per share
increased from $.36 to $.45.

COMPARISON OF YEAR ENDED SEPTEMBER 25, 1996 TO YEAR ENDED SEPTEMBER 27, 1995

Revenues. Net sales increased $37,407,000 to $224,147,000, or 20.0%, due
primarily to an increase in Steak n Shake net sales of $37,565,000. The increase
in net sales of Steak n Shake was due to the opening of new units pursuant to
the Company's expansion plan (non-same stores), partially offset by a 0.9%
decrease in same store sales and the closure of six low-volume restaurants
during the same period. The same store sales decrease was attributable to a
decrease of 3.1% in customer counts resulting in part from the Company's market
intensification strategy, partially offset by a 2.3% increase in check average.
Steak n Shake instituted price increases of 1.7% and 1.4% in February 1995 and
January 1996, respectively. After excluding units in close proximity (generally
three miles) to the new units opened during the periods, Steak n Shake same
store sales increased 1.3%.

Franchise fees, which includes both initial franchise fees and royalties on
franchised sales, increased $907,000 to $2,787,000 due to the opening of 24
Steak n Shake franchised restaurants since the beginning of fiscal 1995.

Other revenues increased $974,000 to $2,487,000 due to the increase in the
number of properties leased to franchisees by the Company's franchise financing
subsidiary.

Costs and Expenses. Cost of sales increased $10,693,000, or 21.8%, as a
result of net sales increases. As a percentage of net sales, cost of sales
increased to 26.7% from 26.3% primarily as a result of increased product sales
to franchisees.

Restaurant operating costs increased $15,452,000, or 18.1%, due to higher
sales volume. Restaurant operating costs, as a percentage of net sales,
decreased to 45.1% from 45.8% primarily as a result of the increase in Steak n
Shake sales and improved labor utilization.

General and administrative expenses increased $2,507,000, or 16.0%. As a
percentage of revenues, general and administrative expenses decreased to 7.9%
from 8.3%. The increase in expenses was attributable to personnel related costs,
which included costs related to additional staffing in connection with the
development of new restaurants.

The $1,603,000 increase in depreciation and amortization expense was
attributable to the net depreciable capital additions since the beginning of
fiscal 1995.

Marketing expense increased $1,837,000, or 34.0%. As a percentage of
revenues, marketing expense increased to 3.2% from 2.8% primarily as a result of
increased television advertising.

Rent expense increased $1,273,000, or 21.1%, as a result of sale and
leaseback transactions since the beginning of fiscal 1995 involving 12
Company-owned properties and a net increase in the number of other leased
properties.

The $1,250,000 increase in the amortization of pre-opening costs was
attributable to the increase in the number of new Company-operated restaurants
opened.

Interest expense decreased $136,000 as a result of the reduction in capital
lease obligations and the increase in capitalized interest resulting from the
increase in the number of units under construction, partially offset by interest
on increased borrowings under the Company's revolving line of credit and senior
note agreements.

Income Taxes. The Company's effective income tax rate remained constant at
37.8%. A valuation allowance against gross deferred tax assets has not been
provided based upon the expectation of future taxable income.

Net Earnings. Net earnings increased $2,983,000, or 29.8%, primarily as a
result of the increase in Steak n Shake's operating earnings. Fully diluted
earnings per share increased from $.68 to $.84.

15
<PAGE> 16

COMPARISON OF YEAR ENDED SEPTEMBER 27, 1995 TO YEAR ENDED SEPTEMBER 28, 1994

Revenues. Net sales increased $28,104,000 to $186,740,000, or 17.7%, due
primarily to an increase in Steak n Shake net sales of $27,253,000. The increase
in net sales of Steak n Shake was due to an increase of 5.7% in same store sales
and the opening of new units pursuant to the Company's expansion plan (non-same
stores), partially offset by the closure of three low-volume restaurants during
the same period. The same store sales increase was attributable to increases of
2.5% in check average and 3.0% in customer counts. Steak n Shake instituted a
1.2% price increase in January 1994 and a 1.7% price increase in February 1995.

Franchise fees, which includes both initial franchise fees and royalties on
franchised sales, increased $741,000 to $1,880,000, due to the opening of 15
Steak n Shake franchised restaurants since the beginning of fiscal 1994.

Costs and Expenses. Cost of sales increased $7,370,000, or 17.7%, as a
result of net sales increases. As a percentage of net sales, cost of sales
remained unchanged at 26.3%.

Restaurant operating costs increased $12,094,000, or 16.5%, primarily due
to higher labor costs and other operating costs resulting from the increased
sales volume. Restaurant operating costs, as a percentage of net sales,
decreased to 45.8% from 46.3% as a result of the economies of scale realized
with increased Steak n Shake sales.

General and administrative expenses increased $1,990,000, or 14.6%. As a
percentage of revenues, general and administrative expenses decreased to 8.3%
from 8.5%. The increase in expenses was attributable to personnel related costs,
which included costs related to additional staffing in connection with the
development of new restaurants.

The $1,105,000 increase in depreciation and amortization expense was
attributable to the net depreciable capital additions since the beginning of
fiscal 1994.

Marketing expense increased $1,135,000, or 26.6%. As a percentage of
revenues, marketing expense increased to 2.8% from 2.6%, primarily as a result
of increased television advertising.

Rent expense increased $1,408,000, or 30.3%, as a result of sale and
leaseback transactions since the beginning of fiscal 1994 involving 13
Company-operated properties and a net increase in the number of other leased
properties.

The $410,000 increase in the amortization of pre-opening costs was
attributable to the increase in the number of new Company-operated restaurants
opened.

Interest expense decreased $1,356,000 as a result of the conversion of the
Debentures on April 3,1995, the Company's adoption of the Statement of Financial
Accounting Standards No. 34, "Capitalization of Interest" in fiscal 1995 and
reductions in capital lease obligations.

Income Taxes. The increase in the Company's effective income tax rate to
37.8% from 36.7% resulted from a decrease in federal tax credits. A valuation
allowance against gross deferred tax assets has not been provided based upon the
expectation of future taxable income.

Net Earnings. Net earnings increased $2,852,000 to $10,026,000, or 39.8%,
primarily as a result of the increase in Steak n Shake's operating earnings and
the decrease in interest expense. Fully diluted earnings per share increased
from $.53 to $.68.

EFFECTS OF GOVERNMENTAL REGULATIONS AND INFLATION

Since most of the Company's employees are paid hourly rates related to
federal and state minimum wage laws, increases in the legal minimum wage
directly increase the Company's operating costs. Inflation in food, labor and
other operating costs directly affects the Company's operations.

16
<PAGE> 17

QUARTERLY FINANCIAL DATA

The following table presents unaudited quarterly financial data for the ten
fiscal quarters beginning September 29, 1994 and ending April 9, 1997. The
second quarter of each fiscal year includes 16 weeks and all other quarters
include 12 weeks. The second quarter, which falls during the winter months,
usually reflects lower average weekly unit volumes, and sales can be adversely
affected by severe winter weather.

<TABLE>
<CAPTION>
QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4
--------------------------- --------------------------- ----------------- -----------------
1995 1996 1997 1995 1996 1997 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $40,333 $48,111 $55,599 $55,701 $66,556 $78,236 $46,124 $56,437 $47,974 $58,316
Earnings before income
taxes................. 3,354 4,424 5,169 3,182 4,616 6,243 4,608 6,031 4,982 5,863
Net earnings............ 2,079 2,754 3,229 1,957 2,826 3,803 2,848 3,706 3,142 3,723
Net earnings per common
and common equivalent
share:
Primary............... .20 .18(1) .21 .18 .18(1) .24 .19 .24 .21 .24
Fully diluted......... .15 .18 .21 .14 .18 .24 .19 .24 .21 .24
</TABLE>

- -------------------------
(1) Primary earnings per share are not comparable to the respective prior
periods because of the increase in the number of shares outstanding arising
from the conversion of the Debentures into Common Stock on April 3, 1995.

LIQUIDITY AND CAPITAL RESOURCES

The Company primarily needs capital for the development of new Steak n
Shake restaurants. During fiscal 1995 and 1996, the Company opened 21 and 27 new
Company-operated Steak n Shake units, respectively, and incurred capital
expenditures of $42,899,000 and $46,184,000, respectively. During the 28 weeks
ended April 9, 1997, 19 additional Company-operated units were opened, and
capital expenditures totaled $30,475,000 as compared to $26,166,000 for the
comparable period in the prior fiscal year. The primary sources of funds for the
Company's expansion program have been cash flow from operations, borrowings and
capital generated by sale and leaseback transactions.

As of April 9, 1997, the Company had borrowed $25,000,000 under its
ten-year Senior Note Agreement and Private Shelf Facility. Borrowings under this
facility bear interest at an average fixed rate of 7.7%. On April 28, 1997, the
Company amended the Senior Note Agreement and Private Shelf Facility increasing
borrowing capacity to $50,000,000. The Company's $30,000,000 Revolving Credit
Agreement bears interest based on LIBOR plus 87.5 basis points or the prime
rate, at the election of the Company. During the second quarter of 1997, the
Company amended the Revolving Credit Agreement to extend the maturity date to
December 1998. The amount outstanding under the Revolving Credit Agreement was
$16,000,000 as of April 9, 1997. The Company expects to be able to secure a new
revolving credit facility upon expiration of the current agreement. The
Company's debt agreements contain restrictions, which among other things require
the Company to maintain certain financial ratios. See the Note to the
Consolidated Financial Statements captioned "Debt."

The Company's current expansion plan calls for 242 new Company-operated
restaurants to be opened during the five-year period from fiscal 1997 to fiscal
2001. The average cost of a new restaurant including land, site improvements,
building and equipment for fiscal 1996 was approximately $1,336,000. Management
believes that the Company's existing borrowing capacity, the proceeds of this
offering, anticipated cash flow from operations and proceeds from sale and
leaseback transactions will be adequate to meet the working capital needs of the
Company and provide the funds needed for the expansion plan through fiscal 1998.
Thereafter, the Company's ability to meet the objectives of its expansion plan
will be dependent, in part, upon its ability to generate additional capital
through borrowings, the issuance of equity and/or debt securities or sale and
leaseback transactions. The Company has no commitments with respect to any such
additional financing, and there can be no assurance that such financing will be
available or, if available, will be on terms acceptable to the Company.

17
<PAGE> 18

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard ("SFAS") No. 128, "Earnings Per Share." For its
fiscal year beginning September 25, 1997, the Company will be required to change
the method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating basic earnings per share,
the dilutive effect of stock options will be excluded. The change is expected to
result in an increase in primary (basic) earnings per share for both the sixteen
weeks ended April 9, 1997 and April 10, 1996 of $.01 per share, and for both the
twenty-eight weeks ended April 9, 1997 and April 10, 1996 of $.01 per share. The
adoption of SFAS No. 128 will have no effect on diluted earnings per share for
the same periods.

18
<PAGE> 19

BUSINESS

The Company is engaged primarily in the ownership, operation and
franchising of Steak n Shake restaurants through its wholly-owned subsidiary,
Steak n Shake, Inc. Founded in 1934 in Normal, Illinois, Steak n Shake is one of
the oldest restaurant chains in the country. As of May 7, 1997, Steak n Shake
had 182 Company-operated restaurants and 52 franchised restaurants, located in
13 midwestern and southeastern states. Steak n Shake restaurants are generally
open 24 hours a day, seven days a week, and in addition to the core menu offer a
breakfast menu from 2:00 a.m. until 11:00 a.m. During fiscal 1996, lunch and
dinner sales accounted for approximately 37% and 44% of sales, respectively,
while breakfast and late night sales accounted for 7% and 12% of sales,
respectively.

THE STEAK N SHAKE CONCEPT

Management's key concept strategies are to:

Capitalize on distinct market niche. Steak n Shake occupies a distinct
niche in the restaurant industry. The restaurants offer full-service dining with
counter and dining room seating as well as drive-thru and carry-out service.
Counter and dining room sales represent approximately two-thirds of the sales
mix while sales for off-premises dining represent approximately one-third of the
sales mix. Unlike most quick-service restaurants, all food is freshly prepared,
made-to-order in view of the customer and is served promptly on china with
flatware and glassware by friendly wait staff. Steak n Shake's prices are
considerably less than most casual dining concepts with an average check of
$5.00 per person in fiscal 1996, although the average check during the peak
lunch and dinner hours was $5.50 and $5.75, respectively. The Company believes
that Steak n Shake offers a much more compelling value and higher quality level
of core menu items than competitive quick-service and casual dining chains.

Focus on core menu items while offering variety. For over 60 years, Steak n
Shake's menu has featured core items which include steakburgers, thin and crispy
french fries and hand-dipped milk shakes. The Company believes that its focus on
certain menu items has allowed it to serve consistent, high quality food which,
in turn, has built brand loyalty with its customers. Menu items are prepared in
accordance with the Company's strict specifications using high quality
ingredients such as 100% pure U.S. beef, including cuts of T-bone, strip and
sirloin steaks, used in its steakburgers. Over the years, Steak n Shake has
responded to changing customer tastes with greater menu variety without losing
its focus or customer appeal, by making carefully planned menu additions such as
a grilled chicken breast sandwich, beef and chicken taco salads and various
homestyle soups and salads.

Emphasize customer satisfaction. Steak n Shake's reputation and
long-standing customer loyalty have been earned over many years by the
consistent quality of the dining experience. The success of Steak n Shake
depends on its employees' commitment to consistently exceed the customer's
expectations. All restaurant employees participate in a formal training program
that focuses on enhancing customer satisfaction and includes classroom and
on-the-job instruction. Restaurant managers are required to complete a
comprehensive eight-week training program on restaurant operating procedures,
employee relations and customer service. In order to ensure consistent execution
of the Company's standards for service, self-stamped comment cards are placed in
every restaurant, and management performs periodic on-site visits and formal
inspections.

RESTAURANT DESIGN

All of the Steak n Shake restaurants are free-standing structures except
for ten units, of which seven are part of travel centers. Restaurants
constructed prior to 1973 are similar in architectural style but differ in size
resulting

19
<PAGE> 20

in seating capacities varying from 39 to 138 customers. Restaurants built since
1973 are generally 3,800 square feet in area and seat approximately 100
customers. The travel center units are located in complexes that typically
include a fuel service area and a convenience store. These units are located on
interstate highways and serve both the general traveler and truck traffic. The
travel center unit exteriors and interiors are the same as those of the
free-standing units.

The Company has substantially completed an extensive program of remodeling
its most productive older Steak n Shake units to conform them to current
restaurant design specifications. Since the beginning of fiscal 1994, the
Company has remodeled 38 units at an average cost of approximately $165,000 per
unit.

UNIT ECONOMICS

EXPANSION STRATEGY

In fiscal 1992, the Company embarked upon a Steak n Shake expansion program
that contemplated the addition of 39 new Company-operated units by the end of
fiscal 1997. By May 7, 1997, the Company had opened 88 new Company-operated
restaurants, including 21 units opened since September 25, 1996, as follows:

<TABLE>
<CAPTION>
NUMBER OF
FISCAL YEAR UNITS ADDED
----------- -----------
<S> <C>
1993...................... 8
1994...................... 11
1995...................... 21
1996...................... 27
1997 (through May 7)...... 21
</TABLE>

During the remainder of fiscal 1997, the Company expects to open an
additional 12 units, eleven of which were under construction as of May 7, 1997.
For fiscal 1998, 39 Company-operated units are expected to be opened.

The Company's expansion strategy is based upon a strategic cluster
marketing approach in existing and contiguous markets. The execution of this
market intensification strategy involves opening a sufficient number of
restaurants in a television media market in order to implement effectively Steak
n Shake's marketing program which focuses on building brand awareness,
understanding of the Steak n Shake concept and customer loyalty. The addition of
Company-operated restaurants in markets where the Company's television marketing
effort has been implemented allows the Company to leverage its advertising costs
over more units and to benefit from

20
<PAGE> 21

management efficiencies. In existing markets, the Company's media advertising
expenditures are intended to create high levels of customer recognition and
immediate market acceptance for new units. The Company's new restaurants opened
in existing media markets have typically experienced higher than average sales
volumes. In new market areas, the Company's strategy is to construct a cluster
of units to allow the Company to begin the effective use of television media
advertising within a relatively short period of time.

The Company seeks to maximize media exposure while limiting advertising
costs to a targeted percentage of the revenues generated by the restaurants in a
particular media market. Examples of the implementation of this strategy are the
Company's development of the Cincinnati, Ohio market and the Orlando/Daytona,
Florida market. Since the beginning of fiscal 1994, the Company has added six
new restaurants in Cincinnati, bringing the total number of restaurants in that
market to eight. This increased number of restaurants allowed the Company to
begin television advertising in Cincinnati in October 1995. Similarly, the
Company began television advertising in the Orlando/Daytona market in the summer
of 1994, when it had seven restaurants in this market. Since that time, the
Company has added 14 new restaurants in this market and increased its level of
advertising expenditures. The Company believes that each of these markets has
the potential for additional growth. The Company is pursuing this strategy in
the Dayton, Ohio market, and its near-term expansion plans include the
development of the existing Tampa, Florida market. As the Cincinnati and Dayton,
Ohio and Orlando, Florida markets are being built out, the Company intends to
develop new markets in Jacksonville, Florida, Nashville, Tennessee, Lexington,
Kentucky, Columbus, Ohio and the outlying suburbs of Chicago, Illinois.

Another strategy is to link existing major Steak n Shake markets by
developing Steak n Shake units along interstate highways. Since the beginning of
fiscal 1995, 35 Company-operated and 14 franchised restaurants have been opened
at locations along interstate highways, and three additional units are currently
under construction.

The Company's franchising program is designed to extend brand name
recognition of Steak n Shake and derive additional revenues without substantial
investment by the Company. The Company's expansion plan contemplates the
controlled addition of franchised restaurants. See "-- Franchising."

SITE SELECTION

Management believes that the site selection process is critical to the
success of its restaurants, and senior management devotes significant time and
resources in analyzing each prospective site. A variety of factors are
considered in the site selection process, including local market demographics,
site visibility and accessibility, highway interchanges and proximity to
significant generators of potential customers such as major retailers, regional
malls, shopping centers, office complexes, hotels and entertainment centers
including stadiums, arenas and multi-screen theaters.

The Company's Vice President, Real Estate and Franchising, and the real
estate managers identify and research sites for review by the Company's senior
management prior to submission to the Board of Directors for purchase or lease
approval. Upon identification of a site, its success including the potential
return on investment is assessed by utilization of financial models which
evaluate the unit's projected sales and earnings. Management believes this
detailed process, along with a critical approval path, ensures the management
discipline and scrutiny to acquire sites that have the most potential to meet
the Company's required performance criteria.

21
<PAGE> 22

RESTAURANT LOCATIONS

The following table lists, as of May 7, 1997, the locations of the 234
Steak n Shake restaurants, the number of units in each state and the number of
units in each city if more than one:

ARKANSAS (2)
* Jonesboro
* Little Rock

FLORIDA (35)

Bradenton
Daytona Beach
Gainesville

Jacksonville

Kissimmee

Lakeland (2)
Lake Buena Vista
Lake Mary
Merritt Island
Ocala
Orange City

Orlando (8)

Ormond Beach
Oviedo
Palm Coast

Port Richey

Sanford

St. Petersburg

* Tallahassee (2)
Tampa (4)
West Melbourne
Wildwood
Winter Haven

GEORGIA (17)

* Albany

* Atlanta (10)

* Brunswick

* Columbus

* Macon

* Tifton
* Valdosta
* Warner Robbins

ILLINOIS (45)

Alton
Belleville
Bloomington (2)
Bradley
Carbondale
Champaign
Collinsville
Danville (2)
Decatur (3)

DeKalb

East Peoria

Edwardsville

Effingham

Elgin

Fairview Heights
Galesburg
* Jacksonville

Joliet (2)

* Lincoln
Marion
Mattoon

Moline

Mt. Vernon

Normal (2)

O'Fallon

Pekin
Peoria (4)
Peru
* Quincy

Rockford

* Springfield (3)

Tinley Park

Urbana (2)

INDIANA (52)

Anderson

Avon

Bloomington (3)
Carmel (2)
* Clarksville
Columbus
Elkhart
* Evansville (2)
Ft. Wayne (2)
Goshen

Greenwood (2)

Indianapolis (20)

Kokomo (2)
Lafayette (2)
Lebanon
Marion
Michigan City
Mishawaka
Muncie
Plainfield
Richmond

Schererville

Seymour
South Bend
Terre Haute

IOWA (2)

Davenport (2)

KANSAS (1)
Overland Park

KENTUCKY (7)

* Elizabethtown

Florence
* Louisville (3)
* Owensboro
Paducah

MICHIGAN (6)

Battle Creek
Benton Harbor
Grand Rapids
Holland

Kalamazoo

Portage

MISSOURI (51)

Arnold
* Branson
* Cape Girardeau
* Columbia

Eureka

* Farmington
Fenton
Festus
Independence
* Jefferson City
* Joplin
* Poplar Bluff
* Rolla

St. Louis (33)

* Springfield (4)

Sullivan

NORTH CAROLINA (1)

* Greensboro

OHIO (11)

Cincinnati (6)

Dayton (3)

Middletown
Troy

TENNESSEE (4)

* Chattanooga (2)
* Dickson

* Knoxville

- -------------------------
* Franchised units.

The Company leases 107 of the 182 Company-operated restaurants. The Company
prefers to own its restaurant properties, and seeks to do so whenever it can
negotiate favorable purchase terms. The Company will also enter into
build-to-suit arrangements and sale and leaseback arrangements on a very
selective basis. Steak n Shake restaurant leases typically have an initial term
of 18 to 25 years and renewal terms aggregating 20 years or more and require the
Company to pay real estate taxes, insurance and maintenance costs.

22
<PAGE> 23

(paste-up map here)

23
<PAGE> 24

RESTAURANT OPERATIONS

Restaurant Management. The operations of the restaurants are the
responsibility of the Senior Vice President of Operations and National General
Manager, Vice President of Operations and Deputy National General Manager, six
division managers, 28 district managers and the unit-level restaurant management
teams.

Division managers are responsible for the operations of the restaurants in
the division as well as supervision of the division support team, which includes
district managers, training and recruiting managers, division training
supervisors and maintenance and administration staff. District managers
generally have responsibility for the operating performance of six to eight
restaurants. The management team of a typical Steak n Shake restaurant consists
of a general manager, a restaurant manager and three assistant managers. The
number of assistant managers varies depending upon the volume of the unit.

The general manager of each restaurant has primary responsibility for the
day-to-day operation of the restaurant and is responsible for maintaining
Company-established operating standards and procedures. The general manager is
the key person in the success of a Steak n Shake restaurant. An experienced,
well-trained general manager promotes compliance with the Company's high
standards for food quality and customer service. Steak n Shake seeks to employ
restaurant managers who are customer service oriented and who manage the
restaurant from the dining room. Steak n Shake recognizes the important role of
a seasoned, well-trained and properly motivated restaurant team. The Company has
initiated innovative programs that involve training, hiring and career
development, and a wide variety of benefits to reward and recognize adherence to
Steak n Shake's high standards.

Recruiting and hiring programs have been intensified to seek the qualified
people required to support the Company's aggressive growth plans. Recruiting
efforts focus on hiring talented people through a variety of sources which
includes development and promotion of existing employees, as well as recruiting
people externally with prior casual dining restaurant experience. Additionally,
Steak n Shake has a program that recruits college students enrolled in
hospitality and restaurant schools, as well as liberal arts and business majors.

The Company believes that offering competitive compensation, including
incentive bonus plans tied to performance goals for all levels of restaurant
management personnel, is important to attracting and retaining competent and
highly motivated managers. Awards under the incentive bonus plan are based upon
attainment of defined operating performance standards. The Employee Stock
Purchase Plan also provides an opportunity for employees to become shareholders
on favorable terms.

Training. Each restaurant team member participates in a formal training
program that utilizes work station video presentations, training manuals, a
scheduled evaluation process and recognition awards which signify proficiency in
specific areas. This training process, which takes place within the restaurant,
is continuously reinforced and monitored.

Steak n Shake's goal is to continue to develop strong restaurant management
teams by providing carefully designed leadership training programs. Each
geographic division designates specific restaurants where intensified on-the-job
management training occurs under careful supervision by experienced restaurant
managers. Restaurant managers are required to complete a comprehensive
eight-week training program during which time they are instructed in subjects
such as the standards of food quality and preparation, customer service and
employee relations. Restaurant managers also are provided with video training
presentations and operations manuals relating to food preparation, customer
service standards, restaurant operation practices and Company procedures. During
fiscal 1996, 407 individuals entered the Company's management training program
as compared to 332 in fiscal 1995, approximately 25% of whom were promoted from
within the Company in each year.

The general managers, together with division personnel, are responsible for
hiring the hourly employees for each restaurant. Each restaurant employs
approximately 40 to 80 hourly employees, many of whom work part-time. Prior to
the opening of a restaurant, the Company's Division Recruiting and Training
Manager assembles a team of experienced employees to train and educate the new
employees. The training period for new employees lasts approximately two weeks
and includes one week of general training prior to opening and one week of
on-the-job supervision at the restaurant. Ongoing employee training remains the
responsibility of the restaurant general manager under the supervision of a
division training supervisor.

24
<PAGE> 25

Customer Satisfaction and Quality Control. Management believes that
employee commitment to consistently exceed customer expectations is critical to
the success of Steak n Shake. The Company intends to continue to develop and
implement standards of execution that will result in the efficient delivery of
high quality, good-tasting food served by friendly, competent wait staff.

Restaurant management is responsible for ensuring that the restaurants are
operated in accordance with strict operational procedures and quality
requirements. Compliance for Company-operated units is monitored through the use
of customer comment cards, periodic on-site visits and formal inspections by the
division and district managers as well as division training personnel, and for
franchised units through periodic inspections by the Company's two franchise
field representatives. Unfavorable comment cards are responded to by division
management.

Purchasing and Distribution Center Operations. Purchases are negotiated
centrally for most food and beverage products and supplies to ensure uniform
quality, adequate quantities and competitive prices. Food and supply items
undergo ongoing research, development and testing in an effort to maintain the
highest quality products and to be responsive to changing customer tastes. The
Company has not experienced any significant delays in receiving food and
beverage products, restaurant supplies or equipment.

Steak n Shake operates a distribution center in Bloomington, Illinois from
which food products (except for items purchased by the restaurants locally such
as bakery goods, produce and dairy products) and restaurant supplies are
delivered to 147 Company-operated and 26 franchised restaurants located in the
Midwest. The distribution center was built in 1975 and has adequate capacity to
handle the Company's current requirements for the Midwest. The remaining
Company-operated Steak n Shake restaurants, located primarily in the Southeast,
obtain food products and supplies which meet the Company's quality standards and
specifications from an independent distributor.

Restaurant Reporting. Systems and technology are essential for the
management oversight needed to monitor Steak n Shake's high standards for
quality of food with quick and friendly service and to achieve desirable
operating margins. Operational and financial controls are maintained through the
use of point of sale systems in each restaurant, personal computers in the
division offices and an automated data processing system at the corporate
office. The management accounting system polls data from the point of sale
system and generates daily reports of sales, sales mix, customer counts, check
average, cash, labor and food cost. Inventories are taken of key products daily
and of all products at the end of each four-week accounting period. Management
utilizes this data to monitor the effectiveness of controls and to prepare
periodic financial and management reports. The system is also utilized for
financial and budget analysis, planning and analysis of sales by revenue center
and product mix and labor utilization. Planned system developments include
additional enhancements, such as sales forecasting, labor scheduling and
ordering of food products and supplies. Cash is controlled through frequent
deposits in local bank operating accounts followed by transfers to the principal
corporate operating account.

Marketing. Management believes that Steak n Shake's commitment to customer
service and value is the most effective approach to attracting and retaining
customers, and that the strategy of locating multiple restaurants within a
defined geographic area has enabled newer restaurants to benefit from the name
recognition and reputation for quality and value developed by existing
operations. Accordingly, Steak n Shake's marketing strategy is directed toward
building brand loyalty.

Steak n Shake's media program, particularly television advertising, plays a
significant role in its marketing strategy. The advertising theme focuses on
demonstrating the specific product and service benefits that have been inherent
in the Steak n Shake concept for over 60 years and upon which Steak n Shake's
reputation has been built. In addition to its media program, Steak n Shake
relies upon word of mouth and point of purchase advertising to attract customers
and generate additional sales. Steak n Shake's strategy does not involve price
led marketing.

Additional marketing activities designed to build brand awareness and
loyalty, create new customer trials and introduce new products include quarterly
free-standing newspaper inserts and seasonal in-store offerings centered around
short-term, special promotions or product introductions. The fully integrated
marketing program

25
<PAGE> 26

also utilizes menu clip-ons, table cards, ceiling danglers and signage. During
fiscal 1996, the Company expended 3.2% of net sales on media and marketing
materials.

FRANCHISING

General. The Company's franchising program is designed to extend the brand
name recognition of Steak n Shake in selected markets and derive additional
revenues without substantial investment by the Company. The Company's expansion
plan calls for the controlled addition of franchised restaurants. The Company
does not intend to pursue franchising in markets in which Company-owned stores
are presently operating, in markets that are designated for Company-owned
expansion in the five-year plan or in any other markets deemed too remote to
permit effective management supervision of franchisee operations.

At May 7, 1997, the Company had 52 franchised Steak n Shake restaurants
operated by 18 franchisees, located in Arkansas, Florida, Georgia, Illinois,
Indiana, Kentucky, Missouri, North Carolina and Tennessee. These restaurants are
located in areas contiguous to markets in which there are Company-operated
restaurants. Forty-two franchised units have been added since June 1991,
including 13 in fiscal 1996 and five in fiscal 1997 to date, and one franchised
unit is currently under construction.

Principal Franchisees. Steak n Shake's principal franchise relationships
include: (i) an agreement with SnS Southern, Inc. ("Southern"), pursuant to
which Southern is to open nine additional restaurants in Georgia, northern
Florida and Alabama over the next four years (subject to Southern's ability to
meet Steak n Shake's operational requirements); and (ii) an agreement with
Kelley Restaurants, Inc., for the development of a total of seven Steak n Shake
restaurants in the Atlanta, Georgia and Charlotte, North Carolina markets over
the next three years. Kelley Restaurants, Inc. is controlled by E. W. Kelley,
the Chairman of the Company.

Approval. Franchisees undergo a rigorous selection process supervised by
the Vice President, Real Estate and Franchising, and require final approval by
senior management. Steak n Shake seeks franchisees with significant experience
in the restaurant business who have demonstrated the financial and management
capabilities required to develop and operate one or more franchised restaurants.
The Company initially enters into an agreement with the franchisee for the
development of one unit. After the franchisee has demonstrated the ability to
operate that unit in accordance with Company standards, the Company will
consider entering into a broader franchise relationship.

Training and Development. Steak n Shake assists franchisees with both the
development and the ongoing operation of their restaurants. Steak n Shake
management personnel assist with site selection, approve all franchise sites and
provide franchisees with prototype plans and specifications for construction of
their restaurants. Training staff provides both on-site and off-site instruction
to franchised restaurant management employees. Managers of franchised
restaurants are required to obtain the same training as that required of
managers of Company-operated units. Steak n Shake's support continues after a
restaurant opening with periodic training programs, the provision of manuals and
updates relating to product specifications, customer service and quality control
procedures, advertising and marketing materials and assistance with particular
advertising and marketing needs. Steak n Shake also makes available to
franchisees certain accounting services and management information reports
prepared at the corporate office for a monthly fee based on Steak n Shake's
actual costs. The Company has two franchise field representatives who monitor
franchisee operations.

Operations. All franchised restaurants are required, pursuant to their
respective franchise agreements, to serve Steak n Shake approved menu items. In
addition, although not required to do so, approximately half of the franchisees
purchase food, supplies and smallwares through Steak n Shake's distribution
center at Steak n Shake's cost, plus a markup to cover its cost of operation,
including freight for delivery. Steak n Shake's point of sale systems are also
available for purchase by franchisees. Access to these services enables
franchisees to benefit from Steak n Shake's purchasing power and assists Steak n
Shake in monitoring compliance with its standards and specifications for uniform
quality.

Franchise Agreement. The standard Steak n Shake franchise agreement
currently has an initial term of 20 years. Among other obligations, the
agreement requires the franchisee to pay an initial franchise fee of $30,000 for
the first unit in a market, $25,000 for each subsequent unit and a continuing
royalty of 4% of monthly gross sales. The franchise agreement also requires the
franchisee to pay 5% of monthly gross sales to the

26
<PAGE> 27

Company for advertising, of which 80% is to be spent on local, regional or
national marketing and 20% is to be used by Steak n Shake for creative and
promotional development, outside independent marketing agency fees and technical
and professional marketing advice.

Financing Assistance. In certain circumstances, the Company's financing
subsidiary, SNS Investment Company, Inc., will assist qualified franchisees in
financing the development of one or more franchised units by purchasing or
leasing approved sites from third parties, constructing the restaurant and
leasing or subleasing the finished facility to the franchisee. The lease terms
and rentals, including a surcharge by the Company for administrative services,
are negotiated based on prevailing real estate and construction rates in effect
in the franchised area. Through May 7, 1997, six restaurants had been financed
through this subsidiary and one restaurant is currently under construction.

CONSOLIDATED SPECIALTY RESTAURANTS, INC.

The Company also operates 11 theme restaurants located in Indiana and
Illinois through a wholly-owned subsidiary, Consolidated Specialty Restaurants,
Inc. ("CSR"). Eight of these restaurants are steakhouses operated under the name
of Colorado Steakhouse. The Company has substantially completed the capital
investment required to develop this concept, and is in the process of refining
and evaluating the operations of these restaurants. The Company does not intend
to expand the operations of CSR unless the existing restaurants demonstrate
satisfactory levels of profitability and return on investment.

EMPLOYEES

As of May 7, 1997, the Company had approximately 11,500 employees. None of
the employees is represented by a collective bargaining agreement. Approximately
two-thirds of the Company's hourly employees are part-time.

TRADEMARKS

"Steak n Shake(R)", "Takhomasak(R)", "Famous For Steakburgers(R)",
"FAXASAK(R)", "In Sight It Must Be Right(R)" and the "Wing and Circle(R)" logo
are federally registered trademarks and servicemarks of Steak n Shake. Steak n
Shake has licensed exclusive use of the "Steak n Shake" trademark in the state
of Rhode Island and within a three-county area of New Jersey, which would
restrict expansion of Steak n Shake into those geographical areas. CSR holds
federal registrations for "The Charley Horse" and "Colorado Steakhouse" as well
as other federal and state trademarks and servicemarks applicable to its
restaurant businesses as well as state registrations. The Company is not aware
of any infringing uses that could materially affect its business. The Company
will protect its trademark rights by appropriate legal action whenever
necessary.

LEGAL PROCEEDINGS

On May 3, 1995, Pepsi-Cola Company ("Pepsi") filed suit against Steak n
Shake, Inc. in the United States District Court for the Southern District of
Indiana alleging that Steak n Shake had breached a ten-year contract with Pepsi.
Under the contract in question, Steak n Shake agreed to serve certain Pepsi
products in return for cash payments aggregating in excess of $1,000,000, to be
made by Pepsi to Steak n Shake over the term of the contract, and the provision
by Pepsi of a joint marketing program. When Pepsi failed to provide the promised
marketing program, Steak n Shake terminated the contract for cause.

Pepsi claims that it was not legally required to provide the marketing
program in question, and it seeks damages in the amount of the profits it would
have made had the contract not been terminated. Pepsi's damage claims are based
upon its alleged lost profits over the remaining term of the contract. Pepsi
originally estimated its damages at approximately $2,800,000, but has since
claimed that those damages are increasing in relation to Steak n Shake's
increased cola sales. Steak n Shake denies it breached the contract, denies that
Pepsi would have made any profit on the contract had it been completed and
intends to vigorously defend this matter. Steak n Shake also has filed a
counterclaim against Pepsi seeking $360,000 in liquidated damages as a result of
Pepsi's breach of the contract.

There are no other legal proceedings pending against the Company which, if
adversely resolved, would have a material effect upon the Company.

27
<PAGE> 28

MANAGEMENT

The directors and executive officers of the Company and their respective
ages and positions with the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
E. W. Kelley......................... 80 Chairman and Director
S. Sue Aramian....................... 65 Vice Chairwoman, Secretary and Director
Alan B. Gilman....................... 66 President, Chief Executive Officer and Director
Alva T. Bonda........................ 80 Director
Neal Gilliatt........................ 79 Director
Charles E. Lanham.................... 64 Director
J. Fred Risk......................... 68 Director
John W. Ryan......................... 67 Director
James Williamson, Jr................. 65 Director
James W. Bear........................ 51 Senior Vice President, Administration and Finance and
Treasurer
Kevin F. Beauchamp................... 39 Vice President, Operations and Deputy National General
Manager of Steak n Shake
Kevin E. Dooley...................... 53 Vice President, Development of Steak n Shake
Gregory G. Fehr...................... 34 Vice President and Controller
Duane E. Geiger...................... 34 Vice President, Information Systems, Financial Planning
and Audit
William H. Hart...................... 47 Vice President, Purchasing of Steak n Shake
Charles D. Kono...................... 42 Vice President, National General Manager of
Consolidated Specialty Restaurants, Inc.
Mary H. Mueller...................... 48 Vice President, General Counsel and Associate Secretary
Gary T. Reinwald..................... 48 Senior Vice President, Operations and National General
Manager of Steak n Shake
James E. Richmond.................... 58 Vice President, Real Estate and Franchising
Victor F. Yeandel.................... 40 Vice President, Marketing
</TABLE>

Mr. Kelley has been a director of the Company since 1981 and Chairman since
1984. From 1981 to 1984, he served as Vice Chairman and Chief Executive Officer.
He served as President and Chief Executive Officer from January 1992 until July
1992, and continued to serve as Chief Executive Officer until October 1992.
Since 1974, he has been a Managing General Partner of Kelley & Partners, Ltd., a
Florida limited partnership which holds investments in companies engaged in
snack food distribution and restaurant operations and is a principal shareholder
of the Company. Prior to 1981, Mr. Kelley was the chief executive officer of
Fairmont Foods Company, a large consumer goods company listed on the New York
Stock Exchange.

Ms. Aramian has been Vice Chairwoman since 1990, a director since 1981 and
was named Secretary in 1995. She served as Vice President from 1984 to 1990. Ms.
Aramian has been a Managing General Partner of Kelley & Partners, Ltd. since
1974.

Mr. Gilman was elected President and a director in July 1992 after serving
as a consultant to the Company on special projects since February 1992 and
assumed the additional position of Chief Executive Officer effective October
1992. From 1985 to 1992, Mr. Gilman was a private investor, and from 1980 to
1985, he served as President of Murjani International, Ltd., an international
marketing firm. Prior to such time, Mr. Gilman served as a principal executive
of various divisions of Federated Department Stores, Inc., including Chairman
and Chief Executive Officer of the Abraham & Straus Division in New York.

Mr. Bonda has served as a director since 1982 and was Chairman of the Ohio
Board of Regents and former Chairman of Penril Corp., a manufacturer of
electronic equipment, until 1987. Mr. Bonda is a general partner of Kelley &
Partners, Ltd.

28
<PAGE> 29

Mr. Gilliatt was elected to the Board of Directors in 1991 and is the
former Chairman of the Executive Committee of Interpublic Group of Companies,
Inc., an advertising and public relations concern, where he served for many
years in senior marketing positions.

Mr. Lanham has served as a director since 1971. He is Chairman of Klipsch,
Lanham & Associates, Inc., an investment firm, and is Vice Chairman of Overhead
Door Company of Indianapolis, Inc. Mr. Lanham is a limited partner of Kelley &
Partners, Ltd.

Mr. Risk has served as a director since 1971 and is Chairman of the Board
of Sovereign Group, Inc., a private investment firm. Mr. Risk is a limited
partner of Kelley & Partners, Ltd.

Dr. Ryan was appointed a director of the Company in 1996. He is presently
serving as Chancellor for the State University of New York System and was
president of Indiana University from 1971 to 1987.

Mr. Williamson has served as a director of the Company since 1985 and
served as President and Chief Executive Officer of the Company from April 1985
until his retirement in July 1990. Mr. Williamson is a general partner of Kelley
& Partners, Ltd.

Mr. Bear was elected Senior Vice President, Administration and Finance and
Treasurer in 1991. Prior thereto, he served as Vice President and Treasurer of
the Company from 1980 to 1991.

Mr. Beauchamp was appointed Vice President, Operations and Deputy National
General Manager of Steak n Shake, Inc. effective March 1, 1997. Mr. Beauchamp
joined the Company as Vice President and Controller in 1993. From 1990 to 1993,
Mr. Beauchamp was Director of Accounting for a division of The Limited, Inc.

Mr. Dooley joined Steak n Shake, Inc. as Vice President, Development in
1993 and is responsible for engineering and construction. Prior to such time,
Mr. Dooley was a Director of Engineering with Wendy's, Inc. since 1991.

Mr. Fehr joined the Company as Vice President and Controller in April 1997.
From 1992 to 1997, Mr. Fehr served in various controllership functions for
Fruehauf Trailer Corporation and its former majority stockholder, Terex
Corporation, most recently as Vice President -- Corporate Controller and
Secretary of Fruehauf.

Mr. Geiger was appointed Vice President, Information Systems, Financial
Planning and Audit in 1995. From 1993 to 1995, Mr. Geiger served as Director of
Financial Planning and Audit and Assistant Treasurer for the Company. Prior to
such time, Mr. Geiger served in various capacities at Ernst & Young LLP, over a
period of eight years, and ultimately served as a Manager.

Mr. Hart has been Vice President, Purchasing of Steak n Shake, Inc. since
1991 and was Vice President of Operations of CSR from 1990 to 1991.

Mr. Kono joined the Company in July 1996 as Vice President and National
General Manager for Consolidated Specialty Restaurants, Inc. From 1992 to 1996,
Mr. Kono was Director of Operations of HCI, Inc., a hospitality management group
whose holdings include T.G.I. Friday's restaurants. Prior thereto, Mr. Kono
served in various capacities, over a period of 10 years, with Consul Restaurant
Corporation, a midwest franchisee of Chi-Chi's Mexican restaurants, and
ultimately served as Vice President of Operations.

Mrs. Mueller was appointed Vice President in December 1996, General Counsel
in July 1995 and Associate Secretary in August 1994. From 1994 to July 1995,
Mrs. Mueller served as the Company's Associate General Counsel for Real Estate
and Franchising. From 1992 to 1994, Mrs. Mueller served as Associate City
Attorney for the city of South Bend, Indiana. Prior to such time, Mrs. Mueller
served as General Counsel for the Indiana Toll Road since 1983.

Mr. Reinwald was appointed Senior Vice President, Operations and National
General Manager of Steak n Shake, Inc. in December 1996. Prior thereto, Mr.
Reinwald was Vice President, Operations and National General Manager of Steak
and Shake since 1983, and served in various capacities in the Company for 19
years prior to that date.

29
<PAGE> 30

Mr. Richmond joined the Company as Vice President, Real Estate and
Franchising in 1986 and is responsible primarily for real estate and franchise
matters.

Mr. Yeandel joined the Company as Vice President, Marketing in 1995. From
1992 to 1995, Mr. Yeandel served as Vice President, Franchise Development for
Long John Silver's, Inc. Prior to such time, Mr. Yeandel held various marketing
positions with Long John Silver's, Inc. since 1987.

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of Common Stock as of April 30, 1997 by (i) each person who
is known to be the beneficial owner of more than 5% of the Common Stock, (ii)
each director, (iii) the Company's President and the other four most highly
compensated executive officers in fiscal 1996, and (iv) the Company's directors
and executive officers, as a group:

<TABLE>
<CAPTION>
PERCENT OF CLASS
SHARES ----------------------------------
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PRIOR TO OFFERING AFTER OFFERING
------------------------ ------------------ ----------------- --------------
<S> <C> <C> <C>
E. W. Kelley.............................. 2,646,970(1)(2)(3) 17.1% 16.0%
Kelley & Partners, Ltd.................... 1,424,106(2) 9.2% 8.6%
S. Sue Aramian............................ 1,805,577(2)(3)(4) 11.6% 10.9%
James W. Bear............................. 354,139(5) 2.3% 2.1%
Alva T. Bonda............................. 1,755,894(2)(6) 11.3% 10.6%
Neal Gillatt.............................. 25,517(7) * *
Alan B. Gilman............................ 152,867(8) 1.0% *
Charles E. Lanham......................... 275,753(9) 1.8% 1.7%
Gary T. Reinwald.......................... 210,259(10) 1.4% 1.3%
J. Fred Risk.............................. 99,355(11) * *
John W. Ryan.............................. 3,960(12) * *
James Williamson, Jr. .................... 1,643,963(2)(13) 10.6% 10.0%
Victor F. Yeandel......................... 11,502(14) * *
T. Rowe Price & Assoc. ................... 797,488(15) 5.1% 4.8%
All directors and executive officers as a
group
(20 persons)............................ 4,778,185(16) 30.8% 28.9%
</TABLE>

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

* Less than 1%

(1) Includes 39,449 shares which may be acquired pursuant to stock options
exercisable within 60 days; 565,616 shares owned directly by Mr. Kelley;
401,226 shares owned of record and beneficially by Kelley, Inc.; and 22,797
shares owned of record and beneficially by KAHM, Inc. Kelley, Inc., and
KAHM, Inc. are corporations controlled by Mr. Kelley.

(2) Includes 1,424,106 shares owned of record and beneficially by Kelley &
Partners, Ltd., of which Mr. Kelley and Ms. Aramian are Managing General
Partners and Messrs. Bonda and Williamson are General Partners.

(3) Includes 193,776 shares owned of record and beneficially by King Cola,
Inc., of which Mr. Kelley and Ms. Aramian are officers and directors.

(4) Includes 31,559 shares which may be acquired pursuant to stock options
exercisable within 60 days.

(5) Includes 27,585 shares which may be acquired pursuant to stock options
exercisable within 60 days. Also includes 7,374 shares owned of record and
beneficially held by Mr. Bear's wife, with respect to which he disclaims
beneficial ownership.

(6) Includes 11,961 shares which may be acquired pursuant to stock options
exercisable within 60 days. Also includes 108,314 shares owned of record by
Mr. Bonda as executor of his wife's estate.

30
<PAGE> 31

(7) Includes 6,105 shares which may be acquired pursuant to stock options
exercisable within 60 days. Also includes 2,928 shares owned of record and
beneficially by Mr. Gilliatt's wife, with respect to which he disclaims
beneficial ownership.

(8) Includes 33,496 shares which may be acquired pursuant to stock options
exercisable within 60 days.

(9) Includes 11,961 shares which may be acquired pursuant to stock options
exercisable within 60 days. Also includes 6,359 shares owned by Mr.
Lanham's wife, with respect to which he disclaims beneficial ownership.

(10) Includes 26,121 shares which may be acquired pursuant to stock options
exercisable within 60 days. Also includes 213 shares owned by Mr.
Reinwald's son, with respect to which he disclaims beneficial ownership.

(11) Includes 7,569 shares which may be acquired pursuant to stock options
exercisable within 60 days. Also includes 3,762 shares owned by Mr. Risk's
wife, with respect to which he disclaims beneficial ownership.

(12) Includes 660 shares which may be acquired pursuant to stock options
exercisable within 60 days.

(13) Includes 11,961 shares which may be acquired pursuant to stock options
exercisable within 60 days. Also includes 11,062 shares owned of record and
beneficially by Mr. Williamson's wife, with respect to which he disclaims
beneficial ownership.

(14) Includes 6,882 shares which may be acquired pursuant to stock options
exercisable within 60 days.

(15) Based upon information obtained from T. Rowe Price & Assoc. on December 3,
1996.

(16) Includes 271,771 shares which may be acquired pursuant to stock options
exercisable within 60 days held by all directors and officers as a group.

DESCRIPTION OF COMMON STOCK

The Company's Articles of Incorporation, as amended, currently authorize
the issuance of up to 25,000,000 shares of Common Stock. As of May 21, 1997,
15,522,106 shares of Common Stock were outstanding. Upon the consummation of
this offering, the Company will have 16,522,106 shares of Common Stock
outstanding. An additional 1,686,482 shares of Common Stock are reserved for
issuance upon the exercise of employee and director stock options, of which
options to purchase 688,892 shares are outstanding as of May 21, 1997. The
following description of the Common Stock is qualified in its entirety by
reference to the Articles of Incorporation.

RIGHTS OF HOLDERS OF COMMON STOCK

Holders of Common Stock are entitled to receive, pro rata, dividends when
and as declared by the Board of Directors at its discretion out of any funds
lawfully available therefor. In the event of liquidation, dissolution or winding
up of the Company, the holders of Common Stock are entitled to participate
ratably in the distribution of such assets remaining after payment of
liabilities, in each case subject to any preferential liquidation or redemption
rights. The Common Stock does not have any preemptive rights or redemption or
sinking fund provisions. The issued and outstanding shares of Common Stock are,
and the Common Stock issued in this offering will be, fully paid and
nonassessable.

Holders of Common Stock are entitled to vote at all meetings of
shareholders of the Company for the election of directors and on any other
matters which may be submitted to a vote of the shareholders, with each share
entitled to one vote. In voting for directors, the Common Stock does not have
cumulative voting rights, which means that the holders of more than 50% of the
shares voting can elect all directors if they choose to do so and, in such
event, the holders of the remaining shares will not be able to elect any person
or persons to the Board of Directors.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock of the Company is
Harris Trust and Savings Bank.

31
<PAGE> 32

CERTAIN PROVISIONS OF INDIANA LAW

As an Indiana corporation, the Company is governed by the provisions of the
Indiana Business Corporation Law (the "BCL").

Voting Requirements for Certain Business Combinations. Chapter 43 of the
BCL establishes a five-year period beginning with the acquisition of 10% of the
voting power of the outstanding voting shares of a "resident domestic
corporation" (which definition includes the Company) during which certain
business transactions involving the acquiring shareholder are prohibited unless,
prior to the acquisition of such interest, the board of directors approves the
acquisition of such interest or the proposed business combination. After the
five-year period expires, a business combination involving the acquiring
shareholder may take place only upon approval by a majority of the disinterested
shares, or if the other shareholders receive a formula price based on the higher
of the highest price paid by the acquiring shareholder or at the time of the
announcement of the proposed transaction, whichever is higher. The minimum price
for shares other than common shares is to be determined under criteria similar
to that for common shares, except the minimum price as defined cannot be less
than the highest preferential amount to which the shares are entitled in the
event of any liquidation, dissolution or winding up of the corporation.

Changes of Control. Under Chapter 42 of the BCL, with certain exceptions, a
person proposing to acquire or acquiring voting shares of an "issuing public
corporation" (which definition includes only corporations having at least 100
shareholders and in which more than 10% of its shareholders are Indiana
residents, 10% of its shares are owned by Indiana residents, or which have
10,000 or more shareholders who are Indiana residents) sufficient to entitle
that person to exercise voting power within any of the ranges of one-fifth to
one-third of all voting power, more than one-third but less than one-half of all
voting power, or a majority or more of all voting power (a "control share
acquisition") may give a notice of such fact to the corporation containing
certain specified data. The acquiring person may request that the directors call
a special meeting of shareholders for the purpose of considering the voting
rights to be accorded the shares so acquired ("control shares"), and the control
shares have voting rights only to the extent granted by a resolution approved by
the shareholders. The resolution must be approved by a majority of the votes
entitled to be cast by each voting group entitled to vote separately on the
proposal, excluding shares held by the acquiring person and shares held by
management. Control shares as to which the required notice has not been filed
and any control shares not accorded full voting rights by the shareholders may
be redeemed at fair market value by the corporation if it is authorized to do so
by its articles of incorporation or bylaws before a control share acquisition
has occurred. The Company has not adopted such a provision in its Articles of
Incorporation or Bylaws. Shareholders are entitled to dissenters rights with
respect to the control share acquisition in the event that the control shares
are accorded full voting rights and the acquiring person has acquired control
shares with a majority of all voting power.

Other Provisions of the BCL. The BCL specifically authorizes directors, in
considering the best interest of a corporation, to consider both the long- and
short-term interests of the corporation, as well as the effects of any action on
shareholders, employees, suppliers and customers of the corporation, and
communities in which offices or other facilities of the corporation are located
and any other factors the directors consider pertinent. Under the BCL, directors
are not required to approve a proposed business combination or other corporate
action if they determine in good faith that the action is not in the best
interest of the corporation. In addition, the BCL states that directors are not
required to redeem any rights under or render inapplicable a shareholder rights
plan or to take or decline to take any other action solely because of the effect
such action or inaction might have on a proposed change of control of the
corporation or the amounts to be paid to shareholders upon such a change of
control. The Delaware Supreme Court has held that defensive measures in response
to a potential takeover must be "reasonable in relation to the threat posed."
The BCL explicitly provides that the different or higher degree of scrutiny
imposed in Delaware and certain other jurisdictions upon director actions taken
in response to potential changes in control will not apply.

The BCL requires directors to discharge their duties, based on the facts
then known to them, in good faith, with the care an ordinary, prudent person in
a like position would exercise under similar circumstances and in a manner the
director reasonably believes to be in the best interest of the corporation. A
director is not liable for any action taken as a director or for failure to take
any action unless the director has breached or failed to perform the duties of
the director's office in compliance with the foregoing standard and the breach
or failure to perform constitutes willful misconduct or recklessness.

32
<PAGE> 33

PLAN OF DISTRIBUTION

The Company may sell shares directly to investors on its own behalf in
those jurisdictions in which it is authorized to do so, acting through E.W.
Kelley, Chairman, S. Sue Aramian, Vice Chairwoman and Secretary, Alan B. Gilman,
President, and James W. Bear, Senior Vice President, Administration and Finance
and Treasurer, of the Company, each of whom performs substantial duties on
behalf of the Company other than in connection with this offering. None of these
officers will be separately compensated either directly or indirectly for his or
her services in connection with this offering. Alternatively, the Company may
from time to time offer the shares through agents who may receive compensation
from the Company in the form of commissions, which may be in excess of ordinary
brokerage commissions, and who may be reimbursed for certain expenses. The
Company may agree to indemnify such agents against certain liabilities,
including liabilities under the Securities Act of 1933 (the "Securities Act").
The Company has no agreements with or commitments from any such agents as of the
date of this Prospectus. Any agents that participate in the distribution of the
shares may be deemed to be "underwriters" as defined in the Securities Act, and
any profit on the sale of shares by them and any selling commissions received by
any such agents may be deemed to be underwriting discounts and selling
commissions under the Securities Act.

This offer is not contingent upon the sale of any minimum number of shares,
and all proceeds from the sale of any shares offered hereby will be immediately
available to the Company. See "Use of Proceeds." There can be no assurance that
any of the shares will be sold. No termination date for the offering of the
shares has been established. The Company will have the sole right to accept
offers to purchase shares and may reject any proposed purchase of shares in
whole or in part. The Company reserves the right to withdraw, cancel or modify
the offering of the shares at any time, without notice.

The shares may be sold from time to time in one or more transactions, and
may be sold at varying prices. The Prospectus Supplement sets forth the terms of
each offering of shares, including the purchase price of the shares, the name or
names of any agents and any selling commissions or other items constituting
compensation from the Company, and the proceeds to the Company from such sale.

All of the expenses incident to the offering and sale of the shares will be
paid by the Company. In order to comply with certain states' securities laws, if
applicable, the shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In certain states the shares may not
be sold unless previously registered under the "blue sky" laws of the state.

LEGAL MATTERS

Certain legal matters in connection with this offering will be passed upon
for the Company by Ice Miller Donadio & Ryan, Indianapolis, Indiana.

EXPERTS

The consolidated financial statements of Consolidated Products, Inc. at
September 27, 1995 and September 25, 1996, and for each of the three years in
the period ended September 25, 1996, appearing in this Prospectus have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 under the Securities Act with
respect to the Common Stock offered hereby (the "Registration Statement"). This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto. Certain items were omitted in accordance
with the rules and regulations of the Commission. For further information
regarding the Company and the Common Stock offered by this Prospectus,

33
<PAGE> 34

reference is made to the Registration Statement, including all amendments
thereto and the schedules and exhibits filed as part thereof.

The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Reports, proxy statements and other information
filed by the Company can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549; and its regional offices located at Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material can
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.

The Common Stock is listed on the New York Stock Exchange and the
aforementioned material concerning the Company also may be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005. The Company's principal offices are located at 500 Century Building, 36
South Pennsylvania Street, Indianapolis, Indiana 46204, and its telephone number
is (317) 633-4100.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed with the Commission by the Company (file
number 0-8445) pursuant to the Exchange Act are incorporated and made a part of
this Prospectus by reference, except as superseded or modified herein:

1. The Company's Annual Report on Form 10-K for the fiscal year ended
September 25, 1996.

2. The Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended December 18, 1996 and April 9, 1997.

3. The description of the Common Stock contained in the Company's Form 8-A
filed October 28, 1996.

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act, subsequent to the date of this Prospectus and prior
to the termination of this offering, shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the dates of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference in this Prospectus 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 in this Prospectus 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.

Any person, including any beneficial owner, receiving a copy of this
Prospectus may obtain without charge, upon written or oral request, a copy of
any of the documents incorporated by reference herein (not including exhibits to
such documents unless such exhibits are specifically incorporated by reference
in the information that this Prospectus incorporates). Requests for such copies
should be directed to Mary H. Mueller, Vice President, General Counsel and
Associate Secretary, Consolidated Products, Inc., 500 Century Building, 36 South
Pennsylvania Street, Indianapolis, Indiana 46204; telephone number (317)
633-4100.

34
<PAGE> 35

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Consolidated Statements of Financial Position as of
September 27, 1995, September 25, 1996 and April 9, 1997
(Unaudited)............................................... F-3
Consolidated Statements of Earnings for the years ended
September 28, 1994, September 27, 1995 and September 25,
1996 and the twenty-eight weeks ended April 10, 1996 and
April 9, 1997 (Unaudited)................................. F-4
Consolidated Statements of Shareholders' Equity for the
years ended September 28, 1994, September 27, 1995 and
September 25, 1996 and the twenty-eight weeks ended April
9, 1997 (Unaudited)....................................... F-5
Consolidated Statements of Cash Flows for the years ended
September 28, 1994, September 27, 1995 and September 25,
1996 and the twenty-eight weeks ended April 10, 1996 and
April 9, 1997 (Unaudited)................................. F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE> 36

REPORT OF INDEPENDENT AUDITORS

Shareholders and Board of Directors
Consolidated Products, Inc.

We have audited the accompanying consolidated statements of financial
position of Consolidated Products, Inc. as of September 25, 1996 and September
27, 1995, and the related consolidated statements of earnings, shareholders'
equity and cash flows for each of the three years in the period ended September
25, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Consolidated
Products, Inc. at September 25, 1996 and September 27, 1995, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended September 25, 1996, in conformity with generally
accepted accounting principles.

ERNST & YOUNG LLP

Indianapolis, Indiana

November 15, 1996, except for the

Subsequent Event -- Stock Dividend note,

as to which the date is December 18, 1996

F-2
<PAGE> 37

CONSOLIDATED PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

<TABLE>
<CAPTION>
SEPTEMBER 27, 1995 SEPTEMBER 25, 1996 APRIL 9, 1997
------------------ ------------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash, including cash equivalents of $615,000 in
1995, $190,000 in 1996 and $410,000 in 1997..... $ 1,350,139 $ 630,362 $ 789,641
Receivables....................................... 5,123,102 5,532,499 5,149,591
Inventories....................................... 3,619,687 3,940,075 4,276,952
Deferred income taxes............................. 747,000 1,248,000 1,248,000
Other current assets.............................. 3,611,261 3,792,620 4,428,766
------------ ------------ ------------
Total current assets.............................. 14,451,189 15,143,556 15,892,950
------------ ------------ ------------
PROPERTY AND EQUIPMENT
Land.............................................. 21,425,346 30,579,097 37,277,839
Buildings......................................... 18,138,352 29,417,926 34,422,305
Leasehold improvements............................ 31,062,184 37,235,370 40,305,327
Equipment......................................... 51,194,014 52,920,755 60,372,192
Construction in progress.......................... 7,957,312 7,496,456 8,748,772
------------ ------------ ------------
129,777,208 157,649,604 181,126,435
Less accumulated depreciation and amortization.... (51,664,749) (46,987,316) (51,709,145)
------------ ------------ ------------
Net property and equipment........................ 78,112,459 110,662,288 129,417,290
------------ ------------ ------------
NET LEASED PROPERTY................................. 5,970,236 5,035,635 4,337,169
DEFERRED INCOME TAXES............................... 558,000 -- --
OTHER ASSETS........................................ 741,913 574,023 532,376
------------ ------------ ------------
$ 99,833,797 $131,415,502 $150,179,785
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.................................. $ 9,242,512 $ 13,529,119 $ 13,038,592
Accrued expenses.................................. 14,292,194 17,473,046 17,353,676
Current portion of senior note.................... 4,250,000 5,000,000 5,738,889
Current portion of obligations under capital
leases.......................................... 1,170,946 1,302,523 1,336,496
------------ ------------ ------------
Total current liabilities......................... 28,955,652 37,304,688 37,467,653
------------ ------------ ------------
DEFERRED INCOME TAXES............................... -- 325,000 325,000
OBLIGATIONS UNDER CAPITAL LEASES.................... 8,262,690 6,956,882 6,021,270
REVOLVING LINE OF CREDIT............................ -- 4,000,000 16,000,000
SENIOR NOTE......................................... 20,000,000 25,000,000 24,261,111
SHAREHOLDERS' EQUITY
Common stock -- $.50 stated value, 25,000,000
shares authorized -- shares issued: 1995,
12,471,879; 1996, 14,045,486; 1997,
15,596,542...................................... 6,235,940 7,022,743 7,798,271
Additional paid-in capital........................ 31,952,996 51,766,742 75,006,361
Retained earnings (deficit)....................... 6,405,050 1,262,066 (14,513,336)
Less:
Unamortized value of restricted shares.......... (975,862) (1,416,851) (1,046,987)
Treasury stock -- at cost: 139,564 shares in
1995; 78,288 shares in 1996; 99,146 shares in
1997.......................................... (1,002,669) (805,768) (1,139,558)
------------ ------------ ------------
Total shareholders' equity........................ 42,615,455 57,828,932 66,104,751
------------ ------------ ------------
$ 99,833,797 $131,415,502 $150,179,785
============ ============ ============
</TABLE>

See accompanying notes.

F-3
<PAGE> 38

CONSOLIDATED PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

See accompanying notes.

F-4
<PAGE> 39

CONSOLIDATED PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
UNAMORTIZED
ADDITIONAL RETAINED VALUE OF TREASURY STOCK
COMMON PAID-IN EARNINGS RESTRICTED ---------------------
STOCK CAPITAL (DEFICIT) SHARES SHARES AMOUNT
------ ---------- --------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 29, 1993................ $3,389,528 $ 8,142,651 $ 1,735,217 $ 321,599 504,811 $1,838,544
Net earnings............................... 7,173,923
Shares issued under stock option plan...... 6,007 (238,293) (726,620)
Shares exchanged to exercise stock
options.................................. 38,572 371,628
Shares granted under Capital Appreciation
Plan..................................... 194,192 (34,400) (72,408)
Shares granted to Profit Sharing Plan...... 425 (5,000) (41,029)
Changes in unamortized value of shares
granted under Capital Appreciation Plan.. 40,446
Tax benefit relating to incentive stock
plans.................................... 370,715
Ten percent common stock dividend declared
December 20, 1993 (637,386 shares)....... 318,693 5,577,127 (5,895,820)
Cash dividends paid in lieu of fractional
shares................................... (8,790)
Shares issued for Employee Stock Purchase
Plan..................................... 23,120 320,798
Shares issued for conversion of
subordinated debentures (28,136 shares).. 14,068 84,914
---------- ----------- ------------ ---------- -------- ----------
BALANCE AT SEPTEMBER 28, 1994................ 3,745,409 14,696,829 3,004,530 362,045 265,690 1,370,115
Net earnings............................... 10,026,144
Shares issued under stock option plan...... (32,012) (70,532) (328,263)
Shares exchanged to exercise stock
options.................................. 14,906 193,958
Shares granted under Capital Appreciation
Plan..................................... 695,734 (70,500) (233,141)
Changes in unamortized value of shares
granted under Capital Appreciation Plan.. 613,817
Tax benefit relating to incentive stock
plans.................................... 471,945
Ten percent common stock dividend declared
December 20, 1994 (767,174 shares)....... 383,587 6,233,289 (6,616,876)
Cash dividends paid in lieu of fractional
shares................................... (8,748)
Shares issued for Employee Stock Purchase
Plan..................................... 24,858 368,992
Shares issued for conversion of
subordinated debentures (4,164,171
shares).................................. 2,082,086 9,518,219
---------- ----------- ------------ ---------- -------- ----------
BALANCE AT SEPTEMBER 27, 1995................ 6,235,940 31,952,996 6,405,050 975,862 139,564 1,002,669
Net earnings............................... 13,009,127
Shares issued under stock option plan...... 60,921 263,204 (72,826) (335,540)
Shares exchanged to exercise stock
options.................................. 14,870 242,857
Shares granted under Capital Appreciation
Plan..................................... 29,250 869,075 (8,000) (117,050)
Shares forfeited under Capital Appreciation
Plan..................................... (36,370) 4,680 12,832
Shares issued for exercise of warrants..... 36,603 163,397
Changes in unamortized value of shares
granted under Capital Appreciation Plan.. 440,989
Tax benefit relating to incentive stock
plans.................................... 536,752
Ten percent common stock dividend declared
December 12, 1995 (1,246,670 shares)..... 623,335 17,515,714 (18,139,049)
Cash paid in lieu of fractional shares..... (13,062)
Shares issued for Employee Stock Purchase
Plan..................................... 36,694 501,974
---------- ----------- ------------ ---------- -------- ----------
BALANCE AT SEPTEMBER 25, 1996................ 7,022,743 51,766,742 1,262,066 1,416,851 78,288 805,768
Net earnings............................... 7,032,460
Shares issued under stock option plan...... 45,112 436,396
Shares exchanged to exercise stock
options.................................. 17,408 289,352
Shares forfeited under Capital Appreciation
Plan..................................... (28,135) 3,450 44,438
Changes in unamortized value of shares
granted under Capital Appreciation
Plan..................................... (341,729)
Ten percent common stock dividend declared
December 18, 1996 (1,402,298 shares)..... 701,149 22,086,194 (22,787,343)
Cash paid in lieu of fractional shares..... (20,519)
Shares issued for Employee Stock Purchase
Plan..................................... 29,267 717,029
---------- ----------- ------------ ---------- -------- ----------
BALANCE AT APRIL 9, 1997 (UNAUDITED)......... $7,798,271 $75,006,361 $(14,513,336) $1,046,987 99,146 $1,139,558
========== =========== ============ ========== ======== ==========
</TABLE>

See accompanying notes.

F-5
<PAGE> 40

CONSOLIDATED PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED TWENTY-EIGHT WEEKS ENDED
--------------------------------------------- ---------------------------
SEPTEMBER 28, SEPTEMBER 27, SEPTEMBER 25, APRIL 10, APRIL 9,
1994 1995 1996 1996 1997
------------- ------------- ------------- --------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings...................... $ 7,173,923 $ 10,026,144 $ 13,009,127 $ 5,579,547 $ 7,032,460
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and
amortization............... 5,916,278 7,021,497 8,624,951 4,378,067 5,448,827
Amortization of pre-opening
costs...................... 1,555,294 1,965,334 3,215,716 1,612,734 1,860,251
Provision for deferred
income taxes............... 1,092,000 254,000 382,000 -- --
Changes in receivables and
inventories................ (849,931) (381,328) (1,544,703) (294,245) (232,166)
Changes in other assets...... (2,684,948) (1,970,901) (3,037,937) (1,806,717) (2,359,657)
Changes in income taxes
payable.................... 1,104,806 647,934 1,443,779 556,513 362,455
Changes in accounts payable
and accrued expenses....... 4,624,389 3,271,363 6,502,973 979,383 (966,457)
(Gain) loss on disposal of
property................... (81,920) 160,190 232,740 70,066 (17,541)
------------ ------------ ------------ ------------ ------------
Net cash provided by operating
activities...................... 17,849,891 20,994,233 28,828,646 11,075,348 11,128,172
------------ ------------ ------------ ------------ ------------
INVESTING ACTIVITIES
Additions of property and
equipment....................... (20,566,614) (42,898,950) (46,183,970) (26,165,718) (30,475,123)
Net proceeds from disposal of
property and equipment.......... 7,097,144 6,715,490 6,585,448 3,645,432 7,085,952
------------ ------------ ------------ ------------ ------------
Net cash used in investing
activities...................... (13,469,470) (36,183,460) (39,598,522) (22,520,286) (23,389,171)
FINANCING ACTIVITIES
Proceeds from senior note......... -- 10,000,000 10,000,000 5,000,000 5,000,000
Net proceeds from revolving line
of credit....................... -- -- 4,000,000 10,000,000 12,000,000
Proceeds from equipment and
property leases................. 845,486 695,386 750,089 429,608 398,686
Principal payments on debt and
capital lease obligations....... (3,650,192) (4,327,641) (5,106,924) (4,698,581) (5,500,575)
Lease payments on
subleased properties............ (768,618) (637,673) (735,480) (376,441) (379,465)
Cash dividends paid in lieu of
fractional shares............... (8,790) (8,748) (13,062) (13,062) (20,519)
Cash paid in lieu of fractional
shares.......................... -- (4,260) -- -- --
Proceeds from exercise of stock
options and warrants............ 360,999 102,293 616,808 360,192 175,855
Proceeds from employee stock
purchase plan................... 343,918 393,850 538,668 538,668 746,296
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in)
financing activities............ (2,877,197) 6,213,207 10,050,099 11,240,384 12,420,278
------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................... 1,503,224 (8,976,020) (719,777) (204,554) 159,279
Cash and cash equivalents at
beginning of year................. 8,822,935 10,326,159 1,350,139 1,350,139 630,362
------------ ------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 10,326,159 $ 1,350,139 $ 630,362 $ 1,145,585 $ 789,641
============ ============ ============ ============ ============
</TABLE>

See accompanying notes.

F-6
<PAGE> 41

CONSOLIDATED PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 28, 1994, SEPTEMBER 27, 1995 AND SEPTEMBER 25, 1996

(UNAUDITED WITH RESPECT TO INFORMATION AS OF APRIL 9, 1997

AND THE PERIODS ENDED APRIL 10, 1996 AND APRIL 9, 1997)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements of Consolidated Products, Inc. (the
"Company") include the accounts of Consolidated Products, Inc. (parent) and its
three wholly-owned subsidiaries: Steak n Shake, Inc., Consolidated Specialty
Restaurants, Inc. and SNS Investment Company. All intercompany items have been
eliminated. The Company's fiscal year ends on the last Wednesday in September.

Cash, Including Cash Equivalents

The Company's policy is to invest cash in excess of operating requirements
in income producing investments. Cash equivalents primarily consist of bank
repurchase agreements, U.S. Government securities and money market accounts,
substantially all of which have maturities of three months or less.

Receivables

At September 27, 1995, September 25, 1996 and April 9, 1997, receivables
include $3,150,000, $2,231,000 and $1,966,000, respectively, related to the cost
of three, two and two, respectively, properties for which sale and leaseback
contracts have been entered into. Receivables are net of any related allowances.

Inventories

Inventories are valued at the lower of cost (first-in, first-out method) or
market.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are recognized on the straight-line
method over the estimated useful lives of the assets (15 to 25 years for
buildings and 5 to 10 years for restaurant equipment). Leasehold improvements
are amortized by the straight-line method over the shorter of the estimated
useful lives of the improvements or the terms of the related leases.

Leased Property

The lower of fair market value or the discounted value of that portion of a
capital lease attributable to building costs is capitalized and amortized by the
straight-line method over the term of such leases and included with depreciation
expense. The portions of such leases relating to land are accounted for as
operating leases.

Franchise Fees

Unit franchise fees and area development fees are recorded as revenue when
the related restaurant begins operations. Royalty fees based on franchise sales
are recognized as revenue on the accrual basis of accounting.

Pre-Opening Costs

Pre-opening costs, which represent expenses incurred before a new
restaurant opens, are capitalized and then amortized from the opening date over
a one-year period. At September 27, 1995 and September 25, 1996, unamortized
pre-opening costs were $1,672,000 and $2,055,000, respectively.

F-7
<PAGE> 42

CONSOLIDATED PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

YEARS ENDED SEPTEMBER 28, 1994, SEPTEMBER 27, 1995 AND SEPTEMBER 25, 1996

(UNAUDITED WITH RESPECT TO INFORMATION AS OF APRIL 9, 1997

AND THE PERIODS ENDED APRIL 10, 1996 AND APRIL 9, 1997)

Income Taxes

The Company uses the liability method prescribed by the Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."

Employees' Profit Sharing Plan

The Consolidated Products, Inc. Employees' Profit Sharing Plan is a defined
contribution plan covering substantially all employees of the Company after they
have attained age 21 and completed one year of service. Contributions to the
Plan, which are subject to the discretion of the Board of Directors, amounted to
$710,000 for 1994, $880,000 for 1995 and $1,100,000 for 1996.

Deferred Debt Costs

Certain fees and expenses incurred to obtain long-term financing are being
amortized over the life of the related borrowings. These costs totaled $577,000
of which the unamortized balance was $218,000 as of September 25, 1996.

Advertising Expenses

Advertising costs are charged to expense as incurred.

Use of Estimates

Preparation of the consolidated financial statements requires management to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could
differ from the estimates.

Stock Options

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The Company is required to adopt the provisions of this Statement
for its fiscal year ending September 24, 1997. The Company will continue to
measure compensation cost in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" and provide the necessary
footnote disclosure in accordance with Statement of Financial Accounting
Standards No. 123.

Unaudited Interim Consolidated Financial Statements

The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements.

In the opinion of the Company, all adjustments (consisting of only normal
recurring accruals) considered necessary to present fairly the consolidated
financial position as of April 9, 1997, and the consolidated statements of
earnings, shareholders' equity and cash flows for the twenty-eight weeks ended
April 10, 1996 and April 9, 1997, have been included. The consolidated
statements of earnings for the twenty-eight weeks ended April 10, 1996 and April
9, 1997 are not necessarily indicative of the consolidated statements of
earnings for the entire fiscal year.

F-8
<PAGE> 43

CONSOLIDATED PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

YEARS ENDED SEPTEMBER 28, 1994, SEPTEMBER 27, 1995 AND SEPTEMBER 25, 1996

(UNAUDITED WITH RESPECT TO INFORMATION AS OF APRIL 9, 1997

AND THE PERIODS ENDED APRIL 10, 1996 AND APRIL 9, 1997)

INCOME TAXES

The components of the provision for income taxes consist of the following:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Current:
Federal................................................ $1,983,000 $4,486,000 $5,873,000
State.................................................. 1,075,000 1,360,000 1,670,000
Deferred................................................. 1,092,000 254,000 382,000
---------- ---------- ----------
Total income taxes....................................... $4,150,000 $6,100,000 $7,925,000
========== ========== ==========
</TABLE>

The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Tax at U.S. statutory rates.............................. $3,863,000 $5,578,000 $7,327,000
State income taxes, net of federal tax benefit........... 710,000 884,000 1,086,000
Employer's FICA tax credit............................... (201,000) (260,000) (384,000)
Targeted jobs tax credit................................. (135,000) (35,000) (13,000)
Other.................................................... (87,000) (67,000) (91,000)
---------- ---------- ----------
Total income taxes....................................... $4,150,000 $6,100,000 $7,925,000
========== ========== ==========
</TABLE>

Income taxes paid totaled $2,807,000 in 1994, $5,199,000 in 1995 and
$6,044,000 in 1996 and $2,764,000 and $4,018,000 in the twenty-eight weeks ended
April 10, 1996 and April 9, 1997, respectively.

Deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted marginal tax rates and laws that will be in effect
when the differences are expected to reverse. The components of the Company's
net deferred tax asset consist of the following:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Insurance reserves........................................ $ 776,000 $1,390,000
Capital leases............................................ 1,022,000 920,000
Other..................................................... 933,000 944,000
---------- ----------
Total deferred tax assets.............................. 2,731,000 3,254,000
---------- ----------
Deferred tax liabilities:
Depreciation.............................................. 743,000 1,427,000
Restaurant pre-opening costs.............................. 585,000 719,000
Other..................................................... 98,000 185,000
---------- ----------
Total deferred tax liabilities......................... 1,426,000 2,331,000
---------- ----------
Net deferred tax asset...................................... 1,305,000 923,000
Less current portion........................................ 747,000 1,248,000
---------- ----------
Long-term asset (liability)................................. $ 558,000 $ (325,000)
========== ==========
</TABLE>

F-9
<PAGE> 44

CONSOLIDATED PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

YEARS ENDED SEPTEMBER 28, 1994, SEPTEMBER 27, 1995 AND SEPTEMBER 25, 1996

(UNAUDITED WITH RESPECT TO INFORMATION AS OF APRIL 9, 1997

AND THE PERIODS ENDED APRIL 10, 1996 AND APRIL 9, 1997)

LEASED ASSETS AND LEASE COMMITMENTS

<TABLE>
<CAPTION>
SEPTEMBER 27, SEPTEMBER 25, APRIL 9,
1995 1996 1997
------------- ------------- --------
<S> <C> <C> <C>
Leased property under capital leases less accumulated
amortization of $9,079,286, $9,628,062 and
$9,698,942............................................ $3,802,939 $3,252,642 $2,958,385
Long-term portion of net investment in direct financing
leases................................................ 2,167,297 1,782,993 1,378,784
---------- ---------- ----------
Net leased property..................................... $5,970,236 $5,035,635 $4,337,169
========== ========== ==========
</TABLE>

The Company leases the majority of its physical facilities under
noncancelable lease agreements. Steak n Shake restaurants typically have initial
terms of eighteen to twenty-five years and renewal terms aggregating twenty
years or more and Consolidated Specialty Restaurants typically have terms of ten
to fifteen years and three five-year renewal terms. These leases require the
subsidiaries to pay real estate taxes, insurance and maintenance costs. Certain
leased facilities which are no longer operated by the subsidiaries, but have
been subleased to third parties, are classified as non-operating properties in
the table below of minimum future rental payments. Minimum future rental
payments have not been reduced by minimum sublease rentals of $2,884,000 related
to capital leases and $3,009,000 related to operating leases receivable in the
future under noncancelable subleases.

At September 25, 1996, obligations under noncancelable capital leases and
operating leases (excluding real estate taxes, insurance and maintenance costs)
require the following minimum future rental payments:

<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
(000'S) (000'S)
--------------------------------- ----------------------
NON- NON-
OPERATING OPERATING OPERATING OPERATING
YEAR PROPERTY PROPERTY TOTAL PROPERTY PROPERTY
---- --------- --------- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
1997......................................... $1,583 $ 672 $ 2,255 $ 6,771 $ 598
1998......................................... 1,525 672 2,197 6,733 603
1999......................................... 1,312 672 1,984 6,589 603
2000......................................... 1,133 604 1,737 6,249 518
2001......................................... 836 408 1,244 5,963 315
After 2001................................... 2,182 124 2,306 52,699 372
------ ------ ------- ------- ------
Total minimum future rental payments......... 8,571 3,152 11,723 $85,004 $3,009
======= ======
Less amount representing interest............ 2,645 818 3,463
------ ------ -------
Total obligations under capital leases....... 5,926 2,334 8,260
Less current portion......................... 914 389 1,303
------ ------ -------
Long-term obligations under capital leases... $5,012 $1,945 $ 6,957
====== ====== =======
</TABLE>

During 1995 and 1996, the Company received net proceeds of $6,651,645
involving six properties, and $6,586,958 involving six properties, respectively,
from sale and leaseback transactions. Since these leases are classified as
operating, any related gains on the transactions have been deferred and are
being amortized in proportion to the related gross rental charged to expense
over the eighteen-year lease terms.

F-10
<PAGE> 45

CONSOLIDATED PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

YEARS ENDED SEPTEMBER 28, 1994, SEPTEMBER 27, 1995 AND SEPTEMBER 25, 1996

(UNAUDITED WITH RESPECT TO INFORMATION AS OF APRIL 9, 1997

AND THE PERIODS ENDED APRIL 10, 1996 AND APRIL 9, 1997)

Direct financing leases resulted from subleasing certain of the
aforementioned leased facilities and the leasing of certain Company owned
facilities, identified for disposal. Net investment in direct financing leases
consisted of:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Total minimum lease payments to be received................. $3,899,160 $3,198,925
Less unearned income........................................ 1,391,265 1,031,990
---------- ----------
Net investment in direct financing leases................... 2,507,895 2,166,935
Less current portion included in receivables................ 340,598 383,942
---------- ----------
Long-term net investment.................................... $2,167,297 $1,782,993
========== ==========
</TABLE>

At September 25, 1996, minimum annual lease payments on direct financing
leases of approximately $568,000 per year are receivable over the next five
years.

DEBT

Revolving Credit Agreement

The Company's $30,000,000 Revolving Credit Agreement matures in December
1998 and bears interest at a rate based on LIBOR plus 87.5 basis points or the
prime rate, at the election of the Company. The line of credit includes an
option for conversion into a five-year term loan with a ten-year amortization
schedule.

Senior Note

The Company has borrowings of $5,000,000 available under its $25,000,000
ten-year Senior Note Agreement and Private Shelf Facility (the "Agreement") over
the period ending September 27, 1998, at interest rates based upon market rates
at the time of borrowing. As of September 25, 1996, outstanding borrowings under
the Senior Note Agreement had an average interest rate of 7.6% and the amounts
maturing in each of the five years ending September 30 are as follows: 1997 --
$738,889; 1998 -- $738,889; 1999 -- $1,305,794; 2000 -- $2,020,080; 2001 --
$2,531,747. A 12.44% senior note agreement with this same lender dated November
1, 1990 was consolidated into this Agreement. The amount from this previous
senior note outstanding at September 25, 1996 was $10,000,000 and is repayable
as follows: 1997 -- $5,000,000; 1998 -- $5,000,000. The Agreement is unsecured
and contains restrictions which, among other things, require the Company to
maintain certain financial ratios. On April 28, 1997, the Agreement was amended
increasing the borrowing capacity to $50,000,000.

10% Subordinated Convertible Debentures

On April 4, 1995, the Company completed the call of its 10% Subordinated
Convertible Debentures due November 20, 2002 ("the Debentures"). Holders of the
Debentures ("Holders") electing conversion of their Debentures into common stock
received one share of the Company's common stock for each $2.82 of Debenture
principal held on the date of conversion plus cash for any remaining fractional
portion. Holders electing redemption of their Debentures received cash in the
principal amount of the Debentures, plus accrued interest up to April 4, 1995.
The call of the Company's Debentures resulted in $10,468,000 of the Company's
long-term debt being converted to equity.

Interest capitalized in connection with financing additions to property and
equipment amounted to $538,000 and $668,000 in 1995 and 1996, respectively.

F-11
<PAGE> 46

CONSOLIDATED PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

YEARS ENDED SEPTEMBER 28, 1994, SEPTEMBER 27, 1995 AND SEPTEMBER 25, 1996

(UNAUDITED WITH RESPECT TO INFORMATION AS OF APRIL 9, 1997

AND THE PERIODS ENDED APRIL 10, 1996 AND APRIL 9, 1997)

Interest paid on all debt amounted to $4,259,000 in 1994, $4,063,000 in
1995 and $3,532,000 in 1996 and $1,301,000 and $1,646,000 for the twenty-eight
weeks ended April 10, 1996 and April 9, 1997, respectively.

NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE

Primary earnings per common and common equivalent share are computed by
dividing net earnings by the weighted average number of common shares
outstanding and common equivalent shares. Common equivalent shares include
shares subject to purchase under stock options and stock warrants. Primary
weighted average shares and equivalents increased due to an increase in the
number of shares outstanding arising from the conversion of the Debentures into
the Company's common stock effective April 3, 1995.

Fully diluted earnings per common and common equivalent share assumes, in
addition to the above, that the Debentures were converted at the date of
issuance, and that net earnings are increased by the actual amount of interest
expense, net of income taxes, related to the Debentures.

The following table presents information necessary to calculate earnings
per common and common equivalent share:

<TABLE>
<CAPTION>
FISCAL YEAR TWENTY-EIGHT WEEKS ENDED
---------------------------------------- --------------------------
APRIL 10, APRIL 9,
1994 1995 1996 1996 1997
---- ---- ---- --------- --------
<S> <C> <C> <C> <C> <C>
PRIMARY:
Shares outstanding:
Weighted average shares
outstanding............. 9,429,890 12,420,412 15,186,322 15,100,742 15,414,231
Share equivalents......... 401,739 395,135 333,971 361,911 287,149
---------- ----------- ----------- ----------- -----------
Adjusted shares
outstanding............... 9,831,629 12,815,547 15,520,293 15,462,653 15,701,380
========== =========== =========== =========== ===========
FULLY DILUTED:
Shares outstanding:
Weighted average shares
outstanding............. 9,429,890 12,420,412 15,186,322 15,100,742 15,414,231
Share equivalents......... 433,329 487,183 377,054 402,866 308,457
Conversion of Debentures..... 5,169,548 2,426,508 -- -- --
---------- ----------- ----------- ----------- -----------
Adjusted shares
outstanding............... 15,032,767 15,334,103 15,563,376 15,503,608 15,722,688
========== =========== =========== =========== ===========
Net earnings:
Net earnings for primary
earnings per share
computation............... $7,173,923 $10,026,144 $13,009,127 $ 5,579,547 $ 7,032,460
Add-interest expense net of
income taxes, applicable
to Debentures............. 722,368 333,003 -- -- --
---------- ----------- ----------- ----------- -----------
Net earnings, as adjusted for
fully diluted earnings per
share computation......... $7,896,291 $10,359,147 $13,009,127 $ 5,579,547 $ 7,032,460
========== =========== =========== =========== ===========
</TABLE>

F-12
<PAGE> 47

CONSOLIDATED PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

YEARS ENDED SEPTEMBER 28, 1994, SEPTEMBER 27, 1995 AND SEPTEMBER 25, 1996

(UNAUDITED WITH RESPECT TO INFORMATION AS OF APRIL 9, 1997

AND THE PERIODS ENDED APRIL 10, 1996 AND APRIL 9, 1997)

the twenty-eight weeks ended April 9, 1997 and April 10, 1996 of $.01 per share.
The adoption of SFAS No. 128 will have no effect on diluted earnings per share
for the same periods.

ACCRUED EXPENSES

<TABLE>
<CAPTION>
SEPTEMBER 27, SEPTEMBER 25,
1995 1996
------------- -------------
<S> <C> <C>
Salaries and wages.......................................... $ 4,402,889 $ 4,877,017
Insurance................................................... 2,938,352 3,848,533
Property taxes.............................................. 1,940,653 2,182,389
Other....................................................... 5,010,300 6,565,107
----------- -----------
$14,292,194 $17,473,046
=========== ===========
</TABLE>

CAPITAL APPRECIATION PLANS

The Capital Appreciation Plans established in 1991 and 1994 provide for
tandem awards of Common Stock (restricted shares) and book units of up to
265,733 and 159,720 shares and related units, respectively. These awards are
restricted for a period of three years and are returnable to the Company if the
grantee is not employed (except for reasons of retirement, permanent disability
or death) by the Company at the end of the period. The stock is valued at 100%
of market value at the date of grant, and the book units, which are granted in
an equal number to the shares of stock, provide for a cash payment at the end of
the three-year period equal to the sum of the net change in book value per share
and the common stock dividends paid per share during the period. The total value
of the stock grant (based upon market value at the date of the grant) is
credited to the unamortized value of restricted shares and amortized to
compensation expense ratably over the three-year period. The 1991 Plan expired
on December 31, 1993. The total number of shares and book units granted under
the 1991 Plan for which restrictions have not lapsed was 45,973 at September 25,
1996; 91,505 at September 27, 1995; and 131,769 at September 28, 1994. The total
number of shares and book units granted under the 1994 Plan for which
restrictions have not lapsed was 154,748 at September 25, 1996 and 87,785 at
September 27, 1995 and 2,307 shares were reserved for future grants. The amount
charged to expense under the Plans was $345,365 in 1994; $438,067 in 1995 and
$701,053 in 1996.

STOCK OPTION PLANS

Employee Stock Option Plan

In February 1995, the shareholders approved the 1995 Employee Stock Option
Plan ("the 1995 Plan"), which provides for the granting of 399,300 stock
options. All options granted under the 1995 Plan are incentive stock options
exercisable as to 20% on the date of grant and 20% on each anniversary of the
date of grant thereafter until fully exercisable. The options expire five years
from the date of grant. Options were granted under the 1995 Plan to officers and
key employees selected by the Stock Option Committee. At September 25, 1996,
248,666 options have been granted under the 1995 Plan and 73,086 are
exercisable.

In February 1993, the shareholders approved the 1992 Employee Stock Option
Plan ("the 1992 Plan"), which provides for the granting of 292,820 stock
options. All options granted under the 1992 Plan are incentive stock options
exercisable on the same terms as the 1995 Plan. The options expire five years
from the date of grant. Options were granted under the 1992 Plan to officers and
key employees selected by the Stock Option Committee. At September 25, 1996,
292,185 options have been granted under the 1992 Plan and 163,836 are
exercisable.

F-13
<PAGE> 48

CONSOLIDATED PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

YEARS ENDED SEPTEMBER 28, 1994, SEPTEMBER 27, 1995 AND SEPTEMBER 25, 1996

(UNAUDITED WITH RESPECT TO INFORMATION AS OF APRIL 9, 1997

AND THE PERIODS ENDED APRIL 10, 1996 AND APRIL 9, 1997)

The Company's 1983 Employee Stock Option Plan ("the 1983 Plan") expired on
September 30, 1992. All options outstanding at September 25, 1996 under the 1983
Plan are nonqualified stock options exercisable on the same terms as the 1992
Plan. At September 25, 1996, 95,960 options were exercisable under the 1983
Plan.

As of September 27, 1995, 260,439 options were available for grant and
377,818 were exercisable. The following table summarizes the changes in options
outstanding and related average prices under the 1995, 1992 and 1983 Plans:

<TABLE>
<CAPTION>
AVERAGE
SHARES PRICE
------ -------
<S> <C> <C>
Outstanding at September 29, 1993........................... 690,270 $ 3.59
Fiscal 1994 Activity:
Granted................................................... 137,758 7.23
Exercised................................................. (185,128) 2.35
Canceled.................................................. (15,716) 3.65
--------
Outstanding at September 28, 1994........................... 627,184 4.75
Fiscal 1995 Activity:
Granted................................................... 146,120 10.71
Exercised................................................. (88,435) 3.35
Canceled.................................................. (11,159) 6.70
--------
Outstanding at September 27, 1995........................... 673,710 6.15
Fiscal 1996 Activity:
Granted................................................... 113,965 14.75
Exercised................................................. (199,470) 3.79
Canceled.................................................. (4,898) 8.26
--------
Outstanding at September 25, 1996........................... 583,307 $ 8.71
========
</TABLE>

Nonemployee Director Stock Option Plans

The Company's 1991, 1994, 1995 and 1996 Nonemployee Director Stock Option
Plans ("the 1991, 1994, 1995 and 1996 Plans") provide for the grant of
nonqualified stock options at a price equal to the fair market value of the
Common Stock on the date of the grant. Options outstanding under each Plan are
exercisable as to 20% on the date of grant and 20% on each anniversary of the
date of grant thereafter until fully exercisable. The options expire five years
from the date of grant.

An aggregate of 49,604 shares of Common Stock are reserved for the grant of
options under the 1991 Plan. At September 25, 1996, all of the options
authorized under the 1991 Plan have been granted at a price of $2.75 and were
exercisable. All of the options, including 33,661 in fiscal 1996, have been
exercised.

An aggregate of 39,530 shares of Common Stock are reserved for the grant of
options under the 1994 Plan. At September 25, 1996, all of the options
authorized under the 1994 Plan have been granted at a price of $6.75 of which
19,326 are exercisable. No options have been canceled and 4,392 shares have been
exercised since the inception of the 1994 Plan.

An aggregate of 33,275 shares of Common Stock are reserved for the grant of
options under the 1995 Plan. At September 25, 1996, all of the options
authorized under the 1995 Plan have been granted at a price of $7.59 of which
13,310 are exercisable. No options have been canceled or exercised since the
inception of the 1995 Plan.

F-14
<PAGE> 49

CONSOLIDATED PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

YEARS ENDED SEPTEMBER 28, 1994, SEPTEMBER 27, 1995 AND SEPTEMBER 25, 1996

(UNAUDITED WITH RESPECT TO INFORMATION AS OF APRIL 9, 1997

AND THE PERIODS ENDED APRIL 10, 1996 AND APRIL 9, 1997)

An aggregate of 18,150 shares of Common Stock are reserved for the grant of
options under the 1996 Plan. At September 25, 1996, all of the options
authorized under the 1996 Plan have been granted at a price of $13.23 of which
3,630 are exercisable. No options have been canceled or exercised since the
inception of the 1996 Plan.

EMPLOYEE STOCK PURCHASE PLAN

In February 1993, the shareholders approved a tax-qualified Employee Stock
Purchase Plan, providing for a maximum of 73,205 shares of Common Stock per year
for five years. The Plan is available to all eligible employees of the Company
and its subsidiaries as determined by the Board of Directors and has a calendar
plan year. Employees are able to purchase shares of Common Stock each year
through payroll deductions from 2% to 10% of compensation up to a maximum
allowable fair market value of $10,000 or 1,000 shares per year, whichever is
less. The purchase price will be the lesser of 85% of the market price, as
defined, on the first or last trading day of the plan year. During fiscal 1995
and fiscal 1996, 60,156 shares and 80,726 shares, respectively, have been
purchased and issued to employees.

RELATED PARTY TRANSACTIONS

Kelley & Partners, Ltd. owned 1,423,996 shares, or 9.2%, of the Company at
September 25, 1996. Additionally, certain of the partners, who also serve as
officers and/or directors of the Company, collectively controlled 1,922,187
shares, or 12.4% of the Company's outstanding stock at September 25, 1996.

Kelley & Partners, Ltd. and affiliates held $4,860,100 of the Debentures at
September 28, 1994, all of which were converted into shares of the Company's
common stock upon call of the Debentures (see Debt note). Interest expense on
related party debt was $488,193 in 1994 and $249,681 in 1995. There was no
related party debt outstanding during fiscal 1996.

SUBSEQUENT EVENT -- STOCK DIVIDEND

On December 18, 1996, the Company declared a 10% stock dividend
distributable on January 20, 1997 to shareholders of record on January 6, 1997.
Accordingly, all references in the consolidated financial statements related to
per share amounts, average shares and equivalents outstanding, conversion prices
and information concerning Stock Option and Capital Appreciation Plans have been
adjusted retroactively to reflect the stock dividend.

F-15
<PAGE> 50

======================================================

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES OF COMMON STOCK OFFERED
HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
SOLICITATION OR OFFER. 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 SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 6
Price Range of Common Stock............ 9
Dividend Policy........................ 9
Use of Proceeds........................ 10
Selected Consolidated Financial Data... 11
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 12
Business............................... 19
Management............................. 28
Principal Shareholders................. 30
Description of Common Stock............ 31
Plan of Distribution................... 33
Legal Matters.......................... 33
Experts................................ 33
Available Information.................. 33
Incorporation of Certain Documents by
Reference............................ 34
Index to Consolidated Financial
Statements........................... F-1
</TABLE>

======================================================
======================================================

1,000,000 SHARES

CONSOLIDATED PRODUCTS LOGO

CONSOLIDATED PRODUCTS, INC.

STEAK N SHAKE LOGO

COMMON STOCK

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

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

, 1997

======================================================
<PAGE> 51

PART II

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Set forth below are estimates of all expenses incurred or to be incurred by
the registrant in connection with the issuance and distribution of the
securities to be registered, excluding underwriting discounts and commissions:

<TABLE>
<S> <C>
Registration fees........................................... $ 15,843
NASD fees................................................... 5,095
Transfer agent's fees....................................... 1,000*
Printing and engraving costs................................ 60,000*
Legal fees and expenses..................................... 125,000*
Accounting fees and expenses................................ 75,000*
Miscellaneous............................................... 18,062
--------
Total.................................................. $300,000
========
</TABLE>

- -------------------------
* Estimated

ITEM 16. EXHIBITS.

The following exhibits have been filed as a part of this Registration Statement:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <S>
4.01 Specimen certificate representing Common Stock of
Consolidated Products, Inc. (Incorporated by reference to
Exhibit 4.01 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended April 9, 1997.)
4.02 Amended and Restated Credit Agreement by and between
Consolidated Products, Inc. and Bank One, Indianapolis, N.A.
dated December 30, 1994 (amending that earlier credit
agreement between parties dated as of March 10, 1994 and
effective as of February 23, 1994, relating to a $5,000,000
revolving line of credit which was not filed pursuant to
Rule 601 of the Securities and Exchange Commission),
relating to a $30,000,000 revolving line of credit.
(Incorporated by reference to Exhibit 4.06 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended December 21, 1994.)
4.03 Note Purchase and Private Shelf Agreement by and between
Consolidated Products, Inc. and The Prudential Insurance
Company of America dated as of September 27, 1995 related to
$39,250,000 senior note agreement and private shelf
facility. (Incorporated by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated October 6,
1995.)
4.04 First Amendment to Amended and Restated Credit Agreement by
and between Consolidated Products, Inc. and Bank One,
Indianapolis, N.A. dated September 26, 1995. (Incorporated
by reference to Exhibit 4.2 to the Registrant's Current
Report on Form 8-K dated October 6, 1995.)
4.05 Second Amendment to Amended and Restated Credit Agreement by
and between Consolidated Products, Inc. and Bank One,
Indianapolis, N.A., effective January 31, 1997.
(Incorporated by reference to Exhibit 4.05 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended April 9, 1997.)
4.06 Amendment No. 1 to Note Purchase and Private Shelf Agreement
by and between The Prudential Insurance Company of America
dated as of April 28, 1997 related to senior note and
private shelf facility. (Incorporated by reference to
Exhibit 4.06 to Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended April 9, 1997.)
5.01 Opinion of Ice Miller Donadio & Ryan.
23.01 Consent of Ice Miller Donadio & Ryan. (Included in Exhibit
5.01.)
23.02 Consent of Ernst & Young LLP.*
24.01 Power of Attorney. (See the Signature Page to this
Registration Statement.)
</TABLE>

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

* Exhibits filed as a part of this Amendment.

II-1
<PAGE> 52

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 AMENDMENT TO
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF INDIANAPOLIS, STATE OF INDIANA, ON MAY 21, 1997.

CONSOLIDATED PRODUCTS, INC.

By: /s/ ALAN B. GILMAN
------------------------------------
Alan B. Gilman, President

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON MAY 21, 1997.

<TABLE>
<S> <C>
/s/ E. W. KELLEY* Director
- ---------------------------------------------------
E. W. Kelley

/s/ ALAN B. GILMAN President (Principal Executive Officer) and
- --------------------------------------------------- Director
Alan B. Gilman

/s/ JAMES W. BEAR Senior Vice President, Administration and
- --------------------------------------------------- Finance and Treasurer (Principal Financial
James W. Bear Officer)

/s/ S. SUE ARAMIAN* Director
- ---------------------------------------------------
S. Sue Aramian

/s/ ALVA T. BONDA* Director
- ---------------------------------------------------
Alva T. Bonda

/s/ NEAL GILLIATT* Director
- ---------------------------------------------------
Neal Gilliatt

/s/ CHARLES E. LANHAM* Director
- ---------------------------------------------------
Charles E. Lanham

/s/ J. FRED RISK* Director
- ---------------------------------------------------
J. Fred Risk

Director
- ---------------------------------------------------
John W. Ryan

/s/ JAMES WILLIAMSON, JR.* Director
- ---------------------------------------------------
James Williamson, Jr.

/s/ GREGORY G. FEHR Vice President and Controller (Principal
- --------------------------------------------------- Accounting Officer)
Gregory G. Fehr
</TABLE>

*By: /s/ ALAN B. GILMAN

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

Alan B. Gilman,
Attorney-in-fact

II-2
<PAGE> 53

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<C> <S> <C>

4.01 Specimen certificate representing Common Stock of
Consolidated Products, Inc. (Incorporated by reference to
Exhibit 4.01 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended April 9, 1997.)
4.02 Amended and Restated Credit Agreement by and between
Consolidated Products, Inc. and Bank One, Indianapolis, N.A.
dated December 30, 1994 (amending that earlier credit
agreement between parties dated as of March 10, 1994 and
effective as of February 23, 1994, relating to a $5,000,000
revolving line of credit which was not filed pursuant to
Rule 601 of the Securities and Exchange Commission),
relating to a $30,000,000 revolving line of credit.
(Incorporated by reference to Exhibit 4.06 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended December 21, 1994.)
4.03 Note Purchase Agreement by and between Consolidated
Products, Inc. and The Prudential Insurance Company of
America dated as of September 27, 1995 related to
$39,250,000 senior note agreement and private shelf
facility. (Incorporated by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated October 6,
1995.)
4.04 First Amendment to Amended and Restated Credit Agreement by
and between Consolidated Products, Inc. and Bank One,
Indianapolis, N.A. dated September 26, 1995. (Incorporated
by reference to Exhibit 4.2 to the Registrant's Current
Report on Form 8-K dated October 6, 1995.)
4.05 Second Amendment to Amended and Restated Credit Agreement by
and between Consolidated Products, Inc. and Bank One,
Indianapolis, N.A., effective January 31, 1997.
(Incorporated by reference to Exhibit 4.05 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended April 9, 1997.)
4.06 Amendment No. 1 to Note Purchase and Private Shelf Agreement
by and between The Prudential Insurance Company of America
dated as of April 28, 1997 related to senior note and
private shelf facility. (Incorporated by reference to
Exhibit 4.06 to Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended April 9, 1997.)
5.01 Opinion of Ice Miller Donadio & Ryan.
23.01 Consent of Ice Miller Donadio & Ryan. (Included in Exhibit
5.01.)
23.02 Consent of Ernst & Young LLP.*
24.01 Power of Attorney. (See the Signature Page to this
Registration Statement.)
</TABLE>

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

* Exhibits filed as a part of this Amendment.

<PAGE> 1
EXHIBIT 23.02

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" in Amendment No. 1 to the
Registration Statement (Form S-3, No. 333-7373) and related Prospectus of
Consolidated Products, Inc. for the registration of 1,000,000 shares of its
common stock and to the inclusion and to incorporation by reference therein of
our report dated November 15, 1996 (except for the Subsequent Event - Stock
Dividend note, as to which the date is December 18, 1996) with respect to the
consolidated financial statements of Consolidated Products, Inc. included in
its Annual Report (Form 10-K) for the year ended September 25, 1996, filed
with the Securities and Exchange Commission.

Ernst & Young LLP

May 20, 1997