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Acquisition of Ninety Nine Restaurant and Pub

Closely-held Ninety Nine Restaurants to be acquired by CHUX for $160 million ($120 million cash, $40 in CHUX stock). Deal is expected to close in early 2003 and to be accretive up to $.10 per share in 2003.

The present owner (the Doe Family) will continue to manage the operation as a stand-alone brand on a day-to-day basis. However, CHUX CEO Burns disputed the notion (suggested by some analysts on the call) that O'Charley's is adopting a passive, “holding company” type model going forward. CHUX will be actively involved in all aspects of the 99 unit's operations, he said.

99 Restaurants has 74 stores - in ME, VT, NH, MA, RI, and CT. Plans to expand to western NY next year. In the past, 99 Restaurants has used cash to finance expansion and has no debt. Many stores located in residential neighborhoods rather than business districts.

CHUX management visited all 74 locations and generally found them to be up-to-date and in good repair. Some older stores have bars that are in need of remodeling to fit a “Sports Bar” theme that the company uses in its newer stores. Expenditure required to renovate was not specified.

99's average check is $12 (vs. average check for CHUX of $11.63).

99's Sales mix – 80% food and 20% bar (vs. 90% food and 10% bar for CHUX)

Same Store Sales

O'Charley's – After many years of SSS increases, SSS decreased for the second consecutive quarter. The decrease was .5% in Q3. Weak economic conditions and rainy weather were to blame. SSS has improved in first few weeks of Q4, however.

Stoney River – SSS decreased 2.7%, due to the economy. Sales tend to spike up and down as the stock market moves up and down. Trends like that are typical of “upscale” restaurants, Burns said.

99 restaurants – SSS increased by an unspecified amount.

Guidance for 2003

Earnings guidance for 2003 is $1.50 to $1.55, vs. expected $1.32 to $1.34 for 2002. The guidance for 2003 does not include the 99 Restaurant acquisition.

Projected SSS increase for 2003 is 0% to 2%.

Franchising Program

O'Charley's - The company is continuing to look at the possibility of franchising. No franchises yet.

99 restaurants - franchising unlikely at this stage.

2003 Expansion plans

O'Charley's - Most of the expansion will occur only in markets where CHUX already has a presence. Only one new market next year: Kansas City.

99 Restaurants – 10 new stores this year, 30 new stores in last three years. 10 to 12 new stores expected next year.

Food “To Go”

Carryout orders represent 4% of O'Charley's sales. Packaging is being improved. Carryout will be promoted more than it has been in the past, through advertising.
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