AMERICAN FAMILY RESTAURANTS REPORTS THIRD QUARTER RESULTS Net Income Increases 143%; Denny's Same Store Sales Increase 6.4%.

NORCROSS, Georgia, July 27, 1995--(BUSINESS WIRE)--American Family Restaurants, Inc. (AMEX: FRI) today reported increased revenues for the fiscal 1995 third quarter and nine months ended June 28, 1995.

Revenues for the quarter were $27.4 million, an increase of 16% over revenues of $23.7 million in the third quarter of fiscal 1994. Operating income for the fiscal 1995 third quarter increased 38% to $1.2 million, compared to operating income of $854,000 in the fiscal 1994 third quarter. Net income for the third quarter of fiscal 1995 rose 143% to $408,000, or $0.07 per share, compared with net income of $168,000, or $0.06 per share, for the third quarter of fiscal 1994. Net income for the third quarter of fiscal 1995 reflects a non-recurring net loss of $160,000, or $0.03 per share, on the early extinguishment of debt in connection with the Provident Bank loan facility closing. The weighted average number of shares outstanding for fiscal 1995 third quarter increased to 5,852,000, compared with 2,791,000 in the comparable quarter a year ago, as result of the Company's October 1994 initial public offering.

For the nine months ended June 28, 1995, revenues were $78.1 million, a 17% improvement over revenues of $66.9 million for the nine months ended June 29, 1994. Operating income for the fiscal 1995 nine months increased 85% to $2.3 million, compared to operating income of $1.3 million in the fiscal 1994 nine months. Net income for the nine months was $642,000, or $0.11 per share, compared to net income of $460,000, or $0.16 per share, in the prior year's period which included the $1.0 million, or $0.36 per share, non-recurring gain related to the renegotiation of certain capital leases to operating leases. Net income for the nine months ended June 28, 1995 was affected by an extraordinary loss on the early extinguishment of debt amounting to $298,000, or $(0.06) per share.

Commenting on American Family Restaurants performance, Chief Executive Officer, Jeffrey D. Miller, stated, "Our Denny's restaurants continue to show significant improvement with same store sales increasing by approximately 6.4 % over last year's third quarter. So far in the fourth quarter, we continue to see these Denny's same store sales increases.

"Accordingly, we are continuing to expand our Denny's restaurant base through converting existing restaurants to the Denny's format. During the third quarter of 1995 we converted two additional restaurants to the Denny's format, and subsequent to the close of the third quarter, we have completed the conversion of one additional restaurant and are pursuing others."

For same store sales comparisons, American Family Restaurants considers a Denny's store to be comparable after it has been open six full fiscal quarters.

American Family Restaurants, Inc. (AFR) headquartered in Norcross (Atlanta), Georgia, operates 134 family style restaurants, 81 of which are Denny's, in 12 contiguous states in the Midwest and Southeast. AFR has grown through the purchase of existing Denny's and the conversion of other restaurants into the Denny's format. On April 21, 1995, AFR announced that it had entered into a letter of intent to merge with privately-held Denwest Restaurant Corp., an operator of 72 Denny's restaurants throughout the Midwest and West. AFR expects to execute the definitive agreements with respect to the merger within the next three weeks. -0-

                    Unaudited Financial Highlights
               (In thousands, except per share amounts)

Summary Operating Information
                    Three Months Ended        Nine Months Ended
                  6/28/95        6/29/94   6/28/95        6/29/94

Revenues        $ 27,397       $ 23,691    $78,058        $ 66,943
Operating income $ 1,179       $    854    $ 2,322        $  1,253
Income before
 extraordinary item -
 loss on
 extinguishment
 of debt         $   568       $    168    $   940        $   460
Extraordinary item
 - loss on
 extinguishment of
 debt, net          (160)             -       (298)             -
Net income       $   408       $    168    $   642        $   460
Income per
 common and common
 equivalent share:
Income before
 extraordinary
 item - loss
 on extinguishment
 of debt         $  0.10       $   0.06     $  0.17       $  0.16
Extraordinary
 item - loss on
 extinguishment of
 debt, net         (0.03)            -        (0.06)            -
Net income       $  0.07       $   0.06     $  0.11       $   0.16
Weighted average
 common and common
 equivalent shares
 outstanding       5,852          2,791       5,579          2,791

Summary Balance
 Sheet Information          June 28, 1995      Sept. 28, 1994
Working capital (deficit)        $ (5,147)        $(15,736)
Total assets                       44,681           40,836
Long-term debt, less
 current portion                   14,187           11,438
Obligations under capital
 leases, less
 current obligations                2,125            3,362
Shareholders equity               $16,619           $3,372

CONTACT: Edward C. Williams

Chief Financial Officer

404/729-1300

or

Joseph N. Jaffoni

David C. Collins

Jaffoni & Collins Incorporated

212/505-3015