Dairy Mart Retains Morgan Keegan to Explore Possible Sale; Company Refutes Dissident's ``Inaccuracies''.

Business Editors

HUDSON, Ohio--(BUSINESS WIRE)--May 16, 2000

Dairy Mart Convenience Stores, Inc., (AMEX:DMC) announced today that it has retained the investment banking firm of Morgan Keegan & Company, Inc., to explore all of the Company's strategic options, including the possible sale of the Company.

"We are pleased to have Morgan Keegan involved in this process," said Robert B. Stein, Dairy Mart Chairman, President and Chief Executive Officer. "The firm has significant experience in the convenience store industry that will benefit our shareholders."

The Company also responded to inaccuracies in a letter to shareholders from a small group of dissident holders led by Frank Colaccino, who was Chief Executive Officer of Dairy Mart before being fired in 1994.

"Mr. Colaccino's letter contains significant inaccuracies," said Stein. "Perhaps most significantly, he flat out misrepresents the fact that management and the board own nearly three times as much of this Company as his group does."

Stein said management and the board directly and beneficially own more than 17 percent of the shares outstanding. The Colaccino letter said the dissident group owns nearly 6 percent of the Company and alleged that the directors own less than 2 percent.

Stein also questioned Colaccino's claim to have the overwhelming support of shareholders.

"I've spoken to a number of our largest shareholders, and they are very supportive of the efforts of management and the current board to maximize shareholder value," he said.

On April 6, nearly two weeks before Colaccino's proxy filing, Dairy Mart's board of directors approved a major initiative to sell stores that are not adequately profitable and do not meet the Company's one-stop-shopping store profile. The Company announced May 11 that it had received credible expressions of interest from potential purchasers, and that it would retain an investment banker to evaluate the interest and other strategic alternatives for maximizing shareholder value. Since that announcement, several additional expressions of interest have been received.

The company also announced today that it has sent a second letter to shareholders in its ongoing proxy fight with the Colaccino group. (NOTE TO EDITORS: Full text of the Company's mailing to shareholders follows this press release.)

Dairy Mart Convenience Stores, Inc., was named "Convenience Store Chain of the Year" in 1999 by Convenience Store Decisions magazine. The company owns and operates approximately 600 retail stores in seven states in the Midwest and Southeast. Through consulting and licensing agreements, the Company is also affiliated with more than 200 stores in Korea and approximately 400 locations in Malaysia. For more information, visit Diary Mart's web site at www.dairymart.com.

Morgan Keegan & Company, Inc., based in Memphis, Tennessee, provides securities brokerage, investment banking and other financial services through its 45 offices in 13 states. The firm is a subsidiary of Morgan Keegan, Inc., a financial services holding company listed on the New York Stock Exchange (symbol: MOR). Morgan Keegan has a dedicated Convenience Store and Retail Petroleum Group and has recently been involved in many transactions involving convenience store companies. In addition, Morgan Keegan equity research recently began covering the convenience store industry and expects to publish a comprehensive research report this summer.

Statements contained in this release that are not historical facts, including those relating to possible outcomes of exploring the Company's strategic alternatives, such as a possible sale of the Company and those relating to the effects of continuing a proxy fight may constitute forward-looking statements. Factors that could cause actual results to differ materially from those stated or implied in the forward-looking statements include competition, general economic conditions, the ability to find one or more suitable buyers for the stores or the whole Company at acceptable prices, the ability of such buyers to finance store purchases or the whole Company, the determination of the board of directors, which may or may not include a sale of the stores or the whole Company and other factors disclosed in Dairy Mart's periodic filings with the Securities and Exchange Commission. The Company assumes no obligation to update the information contained in this release.

Full text of the Company's mailing to shareholders:

THE ANNUAL MEETING IS LESS THAN 10 DAYS AWAY.

YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN THE

ENCLOSED WHITE PROXY CARD TODAY.

Dear Fellow Shareholders:

On Thursday, May 11, 2000, Dairy Mart issued a press release announcing that we have received credible expressions of interest from potential purchasers of the Company. By the close of the market on Monday, May 15, the value of your Dairy Mart shares had soared 70%.

I believe this increase in value is related directly to the expressions of interest we have received in purchasing Dairy Mart. Further, I believe that these expressions of interest are the direct result of the decisive actions your current Board has taken to put the Company back on track.

The best way to safeguard your investment in the Company is to support your current Board and management by signing, dating and returning the accompanying WHITE proxy card. The Company urges you to ignore Frank Colaccino's BLUE proxy card.

YOUR CURRENT BOARD IS EXPLORING EVERY OPTION

TO MAXIMIZE SHAREHOLDER VALUE,

INCLUDING THE SALE OF THE COMPANY

Your current Board fully understands its fiduciary responsibility to maximize value for all shareholders, and is fully committed to examining all alternatives to achieve this objective. It has been diligent in its efforts, despite the distraction of the proxy fight started by Colaccino. Your current Board of Directors has:

-- Approved a major initiative to sell approximately 246 stores

that are not providing adequate returns on investment and do

not meet our Company's one-stop-shopping store profile.

-- Engaged the investment banking firm of Morgan Keegan &

Company, Inc., to explore all of the Company's strategic

options, including the sale of the Company.

The plan to sell approximately 40% of our stores is designed to increase the value and potential of our portfolio. Since announcing this initiative, we have received credible expressions of interest from parties that may consider buying the entire Company. Morgan Keegan will review all such inquiries as it fully explores all of our strategic options.

MANAGEMENT HAS GUIDED THIS COMPANY

ON THE ROAD TO RECOVERY SINCE 1995

Under the leadership of the current Board and management, Dairy Mart has made significant operational gains:

-- Revenue per store has increased 68% since 1995. Last year

alone, we increased comparable store sales by 11%,

continuing three consecutive years as one of the industry

leaders in same-store sales growth.

-- Average gross profit per store has also improved steadily

since 1995, growing 52% over that period of time.

-- EBITDA (earnings before interest, taxes, depreciation and

amortization) per store has increased sixfold during that

same period.

-- We were selected the No. 1 convenience store chain in the

country by Convenience Stores Decisions magazine.

IT HAS TAKEN YOUR MANAGEMENT AND CURRENT BOARD

MORE THAN FIVE YEARS

TO FIX THE DAMAGE DONE BY COLACCINO

Thanks to the efforts of your current Board and management, Dairy Mart is now well positioned to travel the final leg of the road to recovery that began with the firing of Colaccino in 1994.

-- As CEO, Colaccino took Dairy Mart down a debt-ridden path by

acquiring industry discards, building a portfolio of

substandard, underperforming stores.

-- Colaccino entrenched and insulated himself from shareholders

and his own management team by creating an autocratic

corporate structure that gave him more than 61% of the

voting power of the Company's shares.

-- Colaccino left Dairy Mart saddled with $90 million in debt

and hundreds of low-volume, underperforming stores. Since

then, $26 million of the Company's cumulative pre-tax losses

can be directly traced to his legacy.

ELECTION OF COLACCINO WOULD UNDERMINE

EFFORTS TO MAXIMIZE VALUE FOR ALL SHAREHOLDERS

In the course of this proxy contest, Colaccino has provided shareholders with false and misleading statements. More importantly, he has neglected to tell you the following material facts:

-- Contrary to his statement that the board represents less

than 2% of outstanding shares, the board and senior

management team are, in aggregate, the single largest

shareholder, representing more than 17% of total shares, or

approximately three times as many shares as the Colaccino

slate. Clearly, the interests of the current board are

aligned with those of all shareholders.

-- The election of the Colaccino slate of directors could also

trigger change-of-control provisions in the Company's credit

agreements, and allow creditors to accelerate repayment of

$115 million of debt, a potentially disastrous development.

-- A change in control of the board could be disruptive to the

company's strong and vital relationship with suppliers and

vendors.

-- The return of Colaccino to a position of power within the

company could prove devastating to employee morale and

retention at a critical time for the Company.

-- Perhaps most importantly, a change in control could set

aside any expressions of interest from potential purchasers

of the company and derail the process your management and

current board has set in motion.

COLACCINO HAS UNDERPERFORMED IN THE PAST

HE IS MISINFORMING YOU NOW

HOW CAN HE BE TRUSTED?

I have no doubt that Colaccino will continue his proxy fight, a self-serving attempt to control the Company for his own personal gain. Unfortunately, his divisive actions will divert the attention of management, employees and the current Board, and create marketplace uncertainty that stands to hurt our efforts to maximize the value of your investment.

Your current Board has been diligent in doing its job and is reviewing every alternative for maximizing the value of your shares, including the sale of the company.

The vote of every shareholder is important. We ask you to sign, date and return the accompanying WHITE proxy card, using the enclosed postage-paid envelope. We urge you NOT to sign or return any BLUE proxy card.

-- If you have already completed a WHITE proxy card and

returned it to the Board of Directors, we thank your for

your support and confidence in us.

-- If you previously voted a BLUE proxy card, it is not too

late to change your vote. Simply sign, date and return the

enclosed WHITE proxy card in the envelope provided. Only the

latest dated proxy card will be counted at the annual

meeting.

PLEASE VOTE YOUR WHITE PROXY CARD AS SOON AS POSSIBLE.

We do not understand why Colaccino would continue with a proxy contest that will distract your current Board and management from its mission of maximizing shareholder value, and may have a damaging effect on further expressions of interest in Dairy Mart. Does it make sense to derail a process that is well under way and allow a new and unproven board to start all over again?

We greatly appreciate your continued support.

On Behalf of your Board of Directors

Robert B. Stein, Jr.

Chairman, President and CEO

May 16, 2000

If you have any questions or need assistance in voting your shares or changing your vote, please contact:

MacKenzie Partners, Inc.

156 Fifth Avenue

New York, New York 10010

[phone] (Call Collect)

or

CALL TOLL-FREE: [phone]