DenAmerica reports first quarter results; margin improvements bolster results.

SCOTTSDALE, Arizona--(BUSINESS WIRE)--May 13, 1997--DenAmerica Corp. (AMEX: DEN), the nation's largest franchisee of Denny's restaurants and the owner and franchisor of the Black-eyed Pea (BEP) restaurant chain, today announced improved operating results for the 13-week first quarter ended April 2, 1997. The comparable year-ago period is the 13-week first quarter ended March 27, 1996. As a result of the Company's March 1996 merger with American Family Restaurants, and its July 1996 acquisition of Black-eyed Pea, year-over-year results for the first quarter are not comparable.

Restaurant sales for the quarter ended April 2, 1997 were $76.1 million, compared to sales of $20.2 million for the period ended March 27, 1996. The Company's restaurant operating income was $5.9 million versus $869,000 in the year-earlier period. The restaurant operating margin as a percentage of sales increased to 7.7%, up from 4.3% in the 1996 quarter. The restaurant operating margin improvement is primarily due to reduced labor and food costs as a percentage of restaurant sales.

The net loss for the 1997 first quarter was $589,000, or $0.04 per share, an improvement from a net loss before extraordinary item of $677,000, or $0.10 per share, in the first quarter of 1996. The net loss for the 1996 first quarter after extraordinary item was $1,323,000, or $0.19 per share. The weighted average number of common and common equivalent shares outstanding for the 1997 and 1996 periods was 13,424,000 and 6,938,000 shares, respectively, reflecting the March 1996 merger of Denwest Restaurant Corp. and American Family Restaurants, to form DenAmerica.

Comparable same store Denny's sales declined 3.9% in the 1997 first quarter compared to the 1996 first quarter, although margins improved. Both the same store sales decline and the margin increase were the result of the Company's withdrawal in September 1996 from a value pricing promotional strategy initiated by the Denny's franchisor.

Increasing competition in the Company's non-core markets caused comparable same store BEP sales to decline 3.2%, although same store sales in the Company's core markets of Texas and Oklahoma fell only 1.0%.

Commenting on DenAmerica's first quarter results, Chairman and Chief Executive Officer Jack M. Lloyd, said, "The restaurant industry continues to be extremely competitive, with many companies experiencing same store sales declines. Given this challenging environment, we believe our first quarter improvements reflect our continued focus on margin improvements and cost containment. The incremental guest counts associated with the Denny's value pricing strategy a year ago did not proportionally enhance margins. The elimination of this pricing strategy as well as the conversion of certain restaurants to the Denny's concept has resulted in higher operating margins and larger average guest checks.

"Last year, we completed a merger which effectively doubled the size of our Company. With the merger we acquired 82 restaurants which were not Denny's or Black-eyed Peas. Over the last twelve months we have implemented a strategy of either selling or converting these restaurants to the Denny's brand. This process is nearly complete. We plan to continue this process and to build new stores in 1997, particularly Black-eyed Pea restaurants.

"Operating results at our Black-eyed Pea stores continue to exceed expectations despite the modest decline in same store sales."

Mr. Lloyd concluded, "Flagstar Companies, Inc. (Nasdaq: FLST), which controls the Denny's brand, has recently announced that it is proceeding with its proposed financial restructuring plan. With an improved capital structure, Flagstar should be able to make additional investments in the Denny's concept, to the benefit of the entire brand. We look forward to the successful completion of this process, and we intend to fully support the Denny's management team in their efforts."

Except for the historical information in this press release, this press release includes forward-looking statements that involve risks and uncertainties, including, but not limited to, competitive pressures from within the restaurant industry, changes in the prices of food and beverages, quarterly fluctuations in results, the management of growth and other risks detailed from time to time in the Company's Securities and Exchange Commission filings. Actual results may differ materially from management expectations.

DenAmerica Corp. operates 296 family-oriented and casual dining, full-service restaurants, including 188 Denny's and 93 Black-eyed Pea restaurants. Company restaurants are located in 31 states, with the largest concentration in the Southeast, Midwest and West regions. -0-

                DENAMERICA CORP. AND SUBSIDIARIES
                 Unaudited Financial Highlights(a)
            (In thousands, except per share amounts)

                                          First Quarter Ended
                                           4/2/97    3/27/96
                                         (13 weeks)  (13 weeks)

Restaurant sales                           $ 76,114  $ 20,161
Restaurant operating expenses:
  Cost of food and beverages                 20,613     5,632
  Payroll and payroll related costs          26,101     7,260
  Amortization and depreciation               2,266       916
  Other restaurant operating costs           21,277     5,484
    Total restaurant operating expenses      70,257    19,292

Restaurant operating income                   5,857       869
Administrative expenses                       3,744     1,047

Operating income (loss)                       2,113      (178)
Interest expense, net                         3,203       860
Loss before minority interest, income taxes
  and extraordinary item                     (1,090)   (1,038)

Minority interest in joint ventures            (109)       (2)

Loss before income taxes and extraordinary
  item                                         (981)   (1,036)

Income tax benefit                             (392)     (359)

Loss before extraordinary item                 (589)     (677)
Extraordinary item                               -       (497)
Net loss                                       (589)   (1,174)
Preferred stock dividend and accretion           -       (149)
Net loss applicable to common shareholders  $  (589) $ (1,323)

Net loss per share                          $ (0.04) $  (0.19)

Weighted average common shares outstanding   13,424     6,938

(a) Historical Company financial statements are those of Denwest Restaurant Corp., and as a result of the reverse acquisition, historical American Family Restaurants financials are not presented.

CONTACT: Todd S. Brown Joseph N. Jaffoni

Chief Financial Officer or Robert L. Rinderman

DenAmerica Corp. Jaffoni & Collins Incorporated

602/483-7055 212/505-3015 or [e-mail]