FOOL CONFERENCE CALL SYNOPSIS*
By Dale Wettlaufer (MF Raleigh)

Rainforest Cafe <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAIN)") else Response.Write("(Nasdaq: RAIN)") end if %>
607 Washington Ave. South, Ste. 204
Minneapolis, MN 55415
612-945-5400

WASHINGTON, DC, February 9, 1997 /FOOLWIRE/ -- Rainforest Cafe reported on February 7, 1997 earnings for its fourth quarter of fiscal 1996.

"We had a strong quarter here at Rainforest," said CFO Mark Robineau. "Total sales for the quarter were $20.2 million," comprised 77% of restaurant sales and 23% of retail. Sales by unit were Mall of America, $2.7 million; Woodfield Mall, $3.2 million; GurneeMills, $2.0 million; Disney, $7.8 million; Tysons Corner (opened October 2), $3.0 million; and Sawgrass Mills (opened on November 20), $1.5 million. Comparable-store-sales going forward will be disclosed for stores open 18 months. Because the company only has one unit that has been open for that long a period, Woodfield comp's will be disclosed separately from the MOA location, but will qualify for the comp. Base in the third quarter of 1997. Comparable sales at MOA were flat and Woodfield sales were down compared to the opening period last year. A number of factors contributed to that decline: Woodfield Mall conducted a grand re-opening promotion in the year-ago period, causing mall traffic to fall this year. The unit was the company's second unit and had more than the optimal number of seats, at 430 seats. That configuration was 50-80 seats larger than current unit design specifications. That larger number of seats is likely exacerbating the "honeymoon effect" that the company saw at Woodfield and that it expects to see at other stores. Retail sales at the unit were very strong at $565 per square foot, 35% better than the mall average retail sales/square foot of $420. The unit is performing well financially. It had a 20.7% unit operating income in Q4, translating to a cash-on-cash return over 55%, which still exceeds the company's operating guidelines on an operating basis.

The company achieved its best-ever food costs of 24.4% of restaurant sales. Lower food costs resulted from favorable poultry pricing and continued corporate-driven volume contract purchases. Retail gross margins were strong at 57%. The company saw some effect from volume purchasing and a favorable year-end physical inventory. Retail operating expenses were approximately 100 basis points (100 basis points = 1 percentage point) higher than expectations, due to volume variances and new unit start-up costs as Tysons and Sawgrass. All other operating expenses were in-line. Unit operating income of 19.7% (before pre-opening costs) was solid, especially with the addition of two units during the quarter. Cash burn for the quarter was $1.7 million. Bottom line for the quarter was $4.1 million before tax with a 36% tax rate, bringing net income to $2.6 million, or $0.15 per share.

PRESIDENT AND COO MARTIN O'DOWD ON RAINFOREST DEVELOPMENTS. The development schedule for 1997 remains unchanged from the last conference call. Southcoast Plaza will open in Q2. In Q3, the Palisades Center and the Source, on Long Island, will open. The third Chicago location, across from the Hard Rock Cafe and two blocks from Planet Hollywood, will open during the quarter. Phoenix will open during the middle of Q3. During the fourth quarter, the MGM Grand Hotel location and the Grapevine Mills-Dallas locations will open.

INTERNATIONAL DEVELOPMENT. London will open in Q2, Cancun in Q3, and the first Canadian opening is planned for Q4 1998. Aventura Mall is still on the schedule for Q1. Trump Taj Mahal, which was moved out of 1997 because of regulatory legwork, is scheduled for Q1 1998. The Disney Animal Kingdom location is scheduled for a press opening in late Q1 with a general opening in Q2. Cherry Creek-Denver is scheduled for Q3. Projects on the drawing board include downtown San Francisco, Manhattan, Houston, a second location in Dallas, San Antonio, a second Miami location after the Aventura location, and Philadelphia. London has been the only location where development efforts have run into significant competition by other entertainment concepts. The company has set up a training center in Orlando, Florida to train 180 managers for these new units.

PRODUCT DEVELOPMENT. The company has continued to develop its animal merchandise. Apparel continues to sell well and the company just introduced ceramics and food products. Rainforest Cafe continues to build brand equity in its products. Because of ceramics and food products, the company can expand the array of price points, especially at the $10-12 impulse-buy price-point, with the objective being increasing retail sales per customer.

HUMAN RESOURCES. The company has hired another purchasing professional to keep margins up and has directors of operations hired up through the Phoenix openings. Rainforest Cafe continues to follow its mandate of profitability within the first month of operations.

QUESTION AND ANSWER SESSION. Unit-level managers for the London store are in Orlando training -- on February 10, personnel from the Cancun location begin training.

On margin improvement, the company was a little high on retail operating expenses due to labor costs and expectations of holiday sales. The company was happy with the rest of the margins.

Stratosphere has increased its foot traffic and the company is still in discussion the Stratosphere Group and continues to keep options open.

Cash balance at the end of the year was $162 million, with an average yield slightly above 5.5%.

Capital expenditures for 1996 were $39.2 million. 1997 cap. ex. is planned to come in around that number.

The MGM Grand contract restricts the company from setting up any other location on the strip in Las Vegas. The company has submitted signage proposals to MGM and has people who have worked on the Chicago projects working with MGM.

Quarterly sales at the Disney location were seasonally strong, following trend at Disney, according to that company's management. The company hasn't been there through a full cycle, but forecasts sales at that unit of $28 million+.

At the Taj Mahal location, CAPRA, a local regulatory agency, has captured some 6,000square feet off the bridge service, severely impacting the company's anticipated seating. That body does not impact the company's ability to build out retail in the boardwalk area.

On Woodfield sales, restaurant sales declined 12% and retail sales were down 25%. The company estimates that total mall traffic was down 10%. The new proprietary character products went into retail distribution at Woodfield late in Q4.

The company's development strategy is divided into three categories. 1. Icon units, as represented by Disney and MGM, doing $16 million+. The company believes there are eight such locations domestically. 2. Big Box, sales of $11-15 million. There are 50 such locations in the US. 3. Secondary units, $6-10 million revenue range. There are some 50 possibilities, as represented by San Antonio, Nashville, and Memphis.

The company has looked at a couple of different zoos and the foot traffic has fallen below expectations. A location such as Gurnee Mills generates 15 million visitors; Sawgrass Mills, 21 million visitors; Disney, 25+ million; and Mall of America, 40 million visitors. Zoos typically have 2-3 million visitors.

The London location is in the Trocodero and the Cancun location is off the beach, two doors down from the Convention Center and next door to the All Star Cafe with the Hard Rock Cafe moving next door. The two Canadian locations in the works right now are Toronto and Vancouver, with Toronto most likely coming on-line first.

The Orlando facility is budgeted to fall in general & administrative expense. G&A expense guidance is 6% or sub-6% of sales for 1997.

There are approximately 4,000 SKUs (stock keeping units) in the retail business, down from 5,000 in Q2. The SKU goal for the year is 3,500.

Cost of sales was reduced $100,000 through the reversal of an inventory reserve.

A reduction in poultry prices impacted COGS (cost of goods sold) favorably since that it the main protein item on the menu, being that the menu is not beef- or fish-dependent. Strong sales at the Disney location resulted in better gross margins, as well, since pricing there is a little higher. On November 1, the company raised prices less than 1% on less than 10% of menu items -- resulting in a very small contribution to gross margin. MOA operating profits were 18% in 1994, 20% in 1995, and 22.2% in 1996.

The company is in active negotiations with its first group in Asia. If those negotiations come to fruition, the agreement will be for five units in Hong Kong, Singapore, Jakarta, Taipei, and Manila, with the first unit opening in Q1 1998 with one unit opening every eight months thereafter. Strategically, the company looks to have two more development partners in Asia. One group would cover northern Asia in locations such as Tokyo, Seoul, Beijing with another group going into Sydney, Melbourne, and Kuala Lumpur. In Europe, the company is meeting with Euro Disney the week of February 10. There is strong interest out of Spain. The next management position to be filled at the company is its Senior VP of international development operations. All of these are very preliminary talks, but the company has prime real estate developers coming to the company every day. Going into the international markets -- getting a significant royalty stream or having to make a minimal investment -- adds value for shareholders.

Upon signing the Canadian agreement, the company will realize a $250,000 licensing fee, probably in Q1. The Canadian group will then pay $50,000 per year for the next five years. The company will also earn a $100,000 development fee for each unit.

The company has exercised its option to participate in the London restaurant, at a 20% equity interest level. Whether or not the company elects to take a 20% equity interest, the prototypical royalty stream in international operations will be made up of 6% of food and beverage and 10% of retail sales with a large up-front licensing fee.

The Disney store mix was 29% retail and 71% restaurant. The company plans on a higher retail sales mix at "icon" or resort units. Sawgrass and Southcoast malls also have higher percentages of tourist traffic.

At Disney, margins before occupancy costs are higher than at other units. That is offset by occupancy costs, which brings the bottom line on that unit to 19%.

Q1 same-store-sales trends at Woodfield reflect the trend seen in Q4. The smaller seating configurations in new restaurants should attenuate the run-up and falloff of the "honeymoon period," but that period can't be avoided with a themed restaurant. Same-store-sales are much more relevant at the 18-month waypoint than they are at the 13 months.

The share buyback program has not commenced; it will be reserved unless the company believes the market is acting irrationally.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.