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Five analysts and top management from eighteen sector firms examine the Restaurants sector in this 90 - page Special Focus - Restaurants Issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info586.htm.

TWST: Andy, what happened to earnings over the past couple of quarters? Have there been any earnings misses in the group?

Mr. Barish: For the most part, the earnings numbers over the past couple of quarters have been in line to better than expected. The second half of last year, with the challenges from 9/11 and the economy, were quarters that most restaurant companies aimed to achieve in — and, in fact, did. Then, coming into the first quarter of this year, as some of the cost items started to turn a little more favorable and sales improved, most companies beat Q1 EPS estimates, which were admittedly conservative coming out of the uncertainty last fall. As some of the panelists have mentioned, sales growth, in terms of comps, has continued to be very solid. Fortunately, most analysts have modeled a pretty conservative set of assumptions coming into 2002 given the uncertainty in terms of the economy and the world. So, again, that will be the case here with second quarter numbers. No one really got too excited and ramped up expectations for the second quarter. The industry is finishing up a quarter with very solid same-store sales and a good cost environment. Thus, I think we’ll see earnings being at the high end or better than expectations for most of these restaurant companies.

TWST: Andrew, I take it you’re still recommending Yum! Brands and Panera Bread. What else would you add to your list of recommendations today?

Mr. Barish: I also agree with some of the other panelists on the larger casual dining names — Brinker and Darden. I think they are very attractive at these levels. I would focus on two small cap names that I think have still pretty significant opportunity from recent levels. The first is California Pizza Kitchen. That’s a bit of a "show me" story right now, although they are putting another good quarter together. I think they will put some of the issues of 2001 behind them, when they stumbled on the earnings. It’s not an inexpensive stock, but it’s nowhere near the multiples of the high growth companies that we’ve talked about today that have executed — P.F. Chang’s, Panera, or Cheesecake Factory. So I think there’s some room for multiple expansion as California Pizza Kitchen gets back on track with its growth plans. The other story I would focus on is RARE Hospitality (Nasdaq:RARE), which is a steakhouse player with a very execution-focused management team. Longhorn SteakHouse is their main brand and will have a good chance to see a same-store sales recovery just given lower price points vis-à-vis an Outback. We’ll start to see more dramatic improvements as the economic picks back up. They also have a play on the high end with Capital Grille. So I think that’s a management team that really runs the business tight and, with some incremental same-store sales and lower beef costs that we’re seeing right now (which for these small cap names is definitely a driver for performance), I think you could see some nice upside to earnings numbers at RARE.

This special report includes:

1) Special Focus - Restaurants - In an in-depth (13,200 words) Analyst Roundtable, Andrew M. Barish, a Managing Director, Senior Restaurant Analyst for Banc of America Securities, Joseph T. Buckley, a Senior Managing Director of Bear, Stearns & Co., Bryan C. Elliot, a Senior Vice President at Raymond James & Associates, Dennis I. Forst, a Managing Director at McDonald Investments, Inc. , Janice L. Meyer, a Managing Director at Credit Suisse First Boston Equity Research Group, examine the outlook for the sector and share specific stock recommendations.

2) CEO interviews (average 2,500 words). Top management of 18 - sector firms examine the outlook for their firm and the sector.