Due to the chain's poor second-quarter performance,Ryan's wasn't able to meet its required debt coverageof 2.25 times, putting it in default of the debt covenants,Grant said. In fact, he expects that the restaurantoperator won't be able to meet the requirement for thenext several quarters. "Lenders have agreed to awaiver for the second quarter," he said, adding thatRyan's intends to work with its lenders in the thirdquarter to make some changes to the credit agreements.

Grant said that Ryan's is taking steps to improve itsoverall performance. On the store front, the chainwill continue to implement "theme nights" such asseafood night and barbeque night where certain foodsare highlighted.

Moreover, the restaurateur is testing a buffetbreakfast on Saturdays and Sundays at 10 locationsacross the country. "Breakfast is an excellent use ofour assets," Grant said. "We think there's some goodpotential here." In fact, the restaurants that aretesting the breakfast buffet have posted same-storesales increases ranging from 4% to 10%.

"We feel like we should see some improvement throughthe rest of the year," Grant said. Looking forward,management has decided to cut capital expenditures for2006 by $20 million for a total expense of $62million. The cost cutting efforts are primarilyfocused on store expansion. Next year, Ryan's willopen nine new stores including three relocationscompared to 15 new stores in 2005. Currently, Ryan'sowns and operates 346 restaurants.