FORM 10-K

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Fee Required)

For the fiscal year ended December 29, 1996

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required)

For the transition period from ________________ to _____________________________

Commission file number 1-12692

MORTON'S RESTAURANT GROUP, INC.
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(Exact name of registrant as specified in its charter)

Delaware 13-3490149
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(State or other jurisdiction (I.R.S. employer identification no.)
of incorporation or organization)

3333 New Hyde Park Road, New Hyde Park, NY 11042
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(Address of principal executive offices) (zip code)

516-627-1515
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(Registrant's telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class Name of exchange

Common Stock, $.01 par value New York Stock Exchange
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Securities Registered Pursuant to Section 12(g) of the Act:

None
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(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

As of March 3, 1997, the aggregate market value of voting stock held by
non-affiliates of the registrant was $105,516,051.

As of March 26, 1997, the registrant had 6,458,988 shares of its common stock,
$.01 par value, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

(1) portions of the registrant's annual report to stockholders for the fiscal
year ended December 29, 1996 (the "Annual Report") are incorporated by
reference into Part II hereof; and

(2) portions of the registrant's definitive proxy statement (to be filed
pursuant to Regulation 14A) for the 1997 Annual Meeting of Stockholders
(the "Proxy Statement") are incorporated by reference into Part III hereof.

Part I

Item 1. Business

General

Morton's Restaurant Group, Inc., formerly known as Quantum Restaurant
Group, Inc., was incorporated as a Delaware corporation on October 3, 1988. As
used in this Report, the terms "MRG" or "Company" refer to Morton's Restaurant
Group, Inc. and its consolidated subsidiaries.

In December 1988, the Company acquired 89% of the outstanding common stock
of a predecessor company of Peasant Holding Corp. ("Peasant Holding"), the
holding company for The Peasant Restaurants, Inc. ("Peasant") and Mick's
Restaurants, Inc. ("Mick's"). On February 6, 1997, the Company completed the
sale of an 80.1% interest in its Atlanta-based Mick's and Peasant restaurants
and is in the process of selling or otherwise disposing of the five remaining
non-Atlanta Mick's restaurants (see Note 3 to the Company's consolidated
financial statements).

In 1989, the Company acquired 100% of the outstanding common stock,
preferred stock, stock options and common stock warrants of Porterhouse, Inc.
and subsidiaries, which do business as Morton's of Chicago ("Morton's").

At December 29, 1996, the Company owned and operated 67 restaurants
utilizing four distinct restaurant concepts: Morton's, Bertolini's Authentic
Trattorias ("Bertolini's"), Mick's, and Peasant restaurants. These concepts
appeal to a broad spectrum of consumer tastes and target separate price points
and dining experiences. During the first quarter of fiscal 1997, one new
Morton's restaurant was opened, two non-Atlanta Mick's were closed, and the
Company completed the sale of 19 Atlanta-based restaurants decreasing the total
to 47 restaurants (35 Morton's, 7 Bertolini's, and 5 Mick's).

The Company provides strategic support and direction to its subsidiary
companies, and evaluates and analyzes potential locations for new restaurants.
Management consists of Allen J. Bernstein, Chairman of the Board and Chief
Executive Officer, William L. Hyde, Jr., President and Chief Operating Officer,
and vice presidents responsible for site selection and development, finance, and
administration.

The Company plans to expand by adding new Morton's and Bertolini's
restaurants. In addition, the Company has investigated, and may possibly
continue to investigate, the acquisition of other restaurant concepts. The
Company has, and will continue to utilize, stringent criteria to evaluate
acquisition opportunities, which include the following attributes: (i) a proven
record of success and ample opportunities for geographic expansion; (ii)
fundamentally strong operations that could be enhanced by the Company's systems,
cost controls and standards; and (iii) a strong management team committed to
operating as a part of the Company.

The Company has no agreements or letters of intent with respect to any
potential acquisition. The Company does not currently intend to develop a
franchise program for any of its restaurant concepts. There can be no assurance
that the Company's expansion plans will be successfully achieved or that new
restaurants will meet with consumer acceptance or can be operated profitably.

Sale of Mick's and Peasant Restaurants

On February 6, 1997, the Company completed the sale of its Atlanta-based
Mick's and Peasant restaurants. MRI Acquisition Corporation acquired an 80.1%
interest in Mick's and PRI Acquisition Corporation acquired an 80.1% interest in
Peasant for an aggregate of $6,800,000, consisting of $4,300,000 in cash and
$2,500,000 in the form of two unsecured promissory notes. The Company retained a
19.9% interest in Mick's and Peasant. In connection with the sale, the remaining
non-Atlanta Mick's and Peasant restaurant subsidiaries were transferred to
another subsidiary of the Company. For more information see Note 3 to the
Company's consolidated financial statements.

Morton's of Chicago Steak House Restaurants

At December 29, 1996, Morton's operated 34 premium quality steak houses
located in 32 cities. During the first quarter of 1997, a new Morton's
restaurant was opened in Washington, DC. Morton's offers its clientele a
combination of excellent service and large quantities of the highest quality
menu items. Morton's has received awards in many locations for the quality of
its food and hospitality. Morton's serves only U.S.D.A. prime aged beef,
including a 24 oz. porterhouse, a 20 oz. NY strip sirloin and a 14 oz. filet
mignon. Morton's also offers fresh fish, lobster, veal and chicken. All Morton's
have identical dinner menu items. While the emphasis is on beef, the menu
selection is broad enough to appeal to many taste preferences. The Morton's
dinner menu consists of a table-side presentation by the server of many of the
dinner items, including a 48 oz. porterhouse steak and a live Maine lobster, and
all Morton's restaurants feature an open display kitchen where steaks are
prepared. Each restaurant has a fully stocked bar with a complete list of name
brands and an extensive premium wine list that offers approximately 150
selections.

Morton's caters primarily to high-end, business-oriented clientele. During
the year ended December 29, 1996, the average per-person check, including dinner
and lunch, was approximately $62.25. Management believes that, on a nationwide
basis, a vast majority of Morton's weekday sales and a substantial portion of
its weekend sales are derived from business people using expense accounts. Sales
of alcoholic beverages accounted for approximately 31% of Morton's revenues
during fiscal 1996. In the nine Morton's serving both lunch and dinner during
fiscal 1996, dinner service accounted for approximately 88% of revenues and
lunch service accounted for approximately 12%. All Morton's are open seven days
a week. Those 25 Morton's serving only dinner are open from 5:30 p.m. to 11:30
p.m., while those Morton's serving both lunch and dinner are also open from
11:30 a.m. to 2:30 p.m. for the lunch period.

All Morton's are very similar in terms of style, concept and decor and are
located in retail, commercial and office building complexes in major
metropolitan areas and urban centers. In 1996, 32 Morton's (including all
restaurants opened since the 1989 acquisition) had on-premises private dining
and meeting facilities referred to as "Boardrooms". During fiscal 1996,
Boardroom sales were approximately 16% of sales in those locations offering
Boardrooms. Boardrooms offer a valuable amenity to customers and fully
complement Morton's operations. It is anticipated that all future Morton's will
contain Boardrooms.

Morton's operations and cost systems, developed over 19 years, enable
Morton's to maintain tight controls over operating expenses. The cooking staff
is highly trained and experienced. The uniform staffing patterns throughout
Morton's restaurants enhance operating efficiencies. Morton's management
believes that its centralized sourcing from its primary suppliers of its
U.S.D.A. prime aged beef gives it significant cost and availability advantages
over many independent restaurants. Morton's purchases

Midwest-bred, grain-fed, U.S.D.A. prime aged beef (approximately the finest two
to three percent of an 1,100 pound steer).

Bertolini's Authentic Trattoria Restaurants

At December 29, 1996, there were seven Bertolini's, located in seven
cities. Bertolini's is a white tablecloth, authentic Italian trattoria, which
provides table service in a casual dining atmosphere. For the year ended
December 29, 1996, Bertolini's average per-person check, including dinner and
lunch, was approximately $18.75. Bertolini's restaurants are open seven days a
week, for lunch and dinner, with typical hours of 11:00 a.m. to 12:00 midnight.
Dinner service accounts for approximately 67% of revenues and lunch service
accounts for approximately 33%. Sales of alcoholic beverages accounted for
approximately 20% of Bertolini's restaurants' revenues during fiscal 1996.

Mick's and Peasant Restaurants

As noted on page 1 and in Note 3 to the Company's consolidated financial
statements, on February 6, 1997, the Company completed the sale of an 80.1%
interest in its Atlanta-based Mick's and Peasant restaurants and is in the
process of selling or otherwise disposing of the five remaining non-Atlanta
Mick's restaurants.

Site Development and Expansion

General. To date, the Company has attempted to maximize its capital resources by
receiving substantial development or rent allowances from its landlords. The
Company's leases typically provide for substantial landlord development or rent
allowances and an annual percentage rent based on gross sales, subject to
market-based minimum annual rents. This leasing strategy enables the Company to
reduce its net investments in newly developed restaurants.

The costs of opening a Morton's or Bertolini's varies by restaurant
depending upon, among other things, the location of the site and the extent of
any renovation required. The Company leases all of its restaurant sites and
operates both free-standing and in-line restaurants. In recent years, the
Company has received substantial landlord development or rent allowances for
leasehold improvements and furniture, fixtures and equipment and, in certain
instances, pre-opening expenses. The Company's average net cash investments for
the six restaurants opened between January 1, 1996 and March 1997, was
approximately $1.3 million, in each case, net of landlord development and or
rent allowances and restaurant equipment lease financings. The Company currently
targets its average net cash investment in new restaurants to be less than $1.5
million per restaurant, although the Company may expend greater amounts for
particular restaurants.

The Company believes that the locations of its restaurants are critical to
its long-term success, and management devotes significant time and resources to
analyzing each prospective site. As it has expanded, the Company has developed
specific criteria by which each prospective site is evaluated. Potential sites
are generally sought in major metropolitan areas. In addition to carefully
analyzing demographic information, such as average household size and income,
for each prospective site, management considers factors such as traffic
patterns, proximity of shopping areas and office buildings, area restaurant
competition, accessibility and visibility. The Company's ability to open new
restaurants depends upon locating satisfactory sites, negotiating favorable
lease terms, securing appropriate government permits and approvals, obtaining
liquor licenses and recruiting and transferring additional qualified management
personnel. For these and other reasons, there can be no assurance that the
Company's expansion plans will

be successfully achieved or that new restaurants will meet with consumer
acceptance or can be operated profitably.

The standard decor and interior design of each of the Company's restaurant
concepts can be readily adapted to accommodate different types of locations.

Morton's. The first Morton's was opened in 1978 in downtown Chicago, where
Morton's headquarters are still located. From 1978 to 1989, Morton's expanded to
a group of nine restaurants in nine cities. Under the Company, Morton's has
grown from nine to 35 restaurants through March 1997. During 1996, new Morton's
opened in Houston, TX; Phoenix, AZ; Orlando, FL; and a second restaurant in New
York City, NY. During the first quarter of 1997 a new Morton's opened in
Washington, DC.

Morton's are located in retail, commercial and office building complexes in
major metropolitan areas. Management believes that fixed investment/occupancy
costs have been relatively low as appropriate space for new Morton's restaurants
has been readily available. The approximate gross cost to the Company for the
five restaurants opened or relocated between January 1, 1996 and March 1997,
ranged from $2.1 million to $3.8 million, including the costs of leasehold
improvements, capital expenditures for furniture, fixtures and equipment, and
other pre-opening expenses. These aggregate per-restaurant costs were
substantially offset by landlord development and or rent allowances ranging from
$0.8 million to $1.4 million.

The Company plans to continue the development of Morton's and has selected
several possible sites for 1997 openings.

Bertolini's Authentic Trattoria Restaurants. As part of its ongoing restaurant
development program, the Company opened a Bertolini's restaurant in Las Vegas in
May 1992 (located in the Forum Shops Mall, adjacent to Caesar's Palace Casino).
A second Bertolini's was opened in September 1993. During 1995 four Bertolini's
were added and, during 1996, a new Bertolini's was opened in Indianapolis, IN.

The approximate gross cost to the Company for the one restaurant opened
during 1996, was approximately $2.3 million, including the costs of leasehold
improvements, capital expenditures for furniture, fixtures and equipment, and
other pre-opening expenses. These aggregate costs were substantially offset by a
landlord development allowance of $0.8 million.

The Company currently plans to continue the development of Bertolini's and
has selected several possible sites for 1997 openings.

As noted on page 1 and in Note 3 to the Company's consolidated financial
statements, on February 6, 1997, the Company completed the sale of its
Atlanta-based Mick's and Peasant restaurants. Accordingly, no new Mick's or
Peasant restaurants were opened during 1996 and none are planned.

Restaurant Locations

The Company operated 47 restaurants as of March 1997. The following table
provides information with respect to those restaurants which are open:

Month and
Year Opened
-----------
Morton's of Chicago Steakhouse Restaurants
Chicago, IL (1) December 1978
Washington (Georgetown), DC November 1982
Philadelphia, PA May 1985
Westchester/Oakbrook, IL June 1986
Dallas, TX May 1987
Boston, MA (1) December 1987
O'Hare/Rosemont, IL June 1989
Cleveland, OH September 1990
Tyson's Corner, VA November 1990
Columbus, OH April 1991
Cincinnati, OH August 1991
San Antonio, TX September 1991
Palm Beach, FL November 1991
Minneapolis, MN December 1991
Nashville, TN September 1992
Beverly Hills, CA (2) October 1992
Detroit/Southfield, MI November 1992
Las Vegas, NV January 1993
Sacramento, CA May 1993
Pittsburgh, PA August 1993
New York (Midtown Manhattan), NY October 1993
St. Louis/Clayton, MO December 1993
Palm Desert, CA January 1994
Atlanta/Buckhead, GA March 1994
Charlotte, NC July 1994
San Francisco, CA November 1994
Dallas/Addison, TX November 1994
Costa Mesa/Orange, CA March 1995
Denver, CO (3) March 1995
Atlanta/Downtown, GA (4) November 1995
Houston, TX January 1996
Phoenix, AZ March 1996
Orlando, FL March 1996
New York (Downtown Manhattan), NY June 1996
Washington (Connecticut Ave.), DC January 1997

Bertolini's Authentic Trattorias
Las Vegas, NV May 1992
Phipp's Plaza, Atlanta, GA September 1993
Pennsylvania Avenue, Washington, DC (5) September 1995
White Flint Mall, Rockville, MD October 1995

King of Prussia, PA November 1995
Irvine, CA November 1995
Indianapolis, IN October 1996

Mick's Restaurants
PA Ave., Washington, DC February 1993
Annapolis, MD February 1994
Fairfax, VA February 1994
Memphis, TN May 1994
Springfield, VA June 1994

Additional sites are under active review for potential leases representing
new Morton's and Bertolini's units to open. Including the restaurant that opened
during the first quarter of 1997, the Company currently intends to open
approximately six to seven new restaurants during 1997, comprised of both
Morton's and Bertolini's restaurants. There can be no assurance, however, that
the Company's expansion plans will be successfully achieved or that new
restaurants will meet with consumer acceptance or can be operated profitably.

(1) Excludes Morton's Boardroom Banquet facilities.
(2) Operates under the name "Arnie Morton's of Chicago."
(3) The Morton's Denver, CO location relocated in March 1995 to a new site. The
original location had been open since September 1985.
(4) The Morton's Atlanta/Downtown, GA location relocated in November 1995 to a
new site. The original location had been opened since March 1986.
(5) The Bertolini's on Pennsylvania Avenue in Washington, DC opened in
September 1995. It was converted from a Peasant Restaurant (Market Square)
which had been open since September 1990.

Restaurant Operations and Management

Morton's and Bertolini's restaurants have a well developed management
infrastructure and are set up as distinct operating divisions within the
Company. Each division has a senior officer responsible for overall operations.
Operations at the Company's restaurants are supervised by area directors, each
of whom is responsible for the operations of several restaurants and reports to
the appropriate division senior officer. Area directors meet frequently with
senior management to review operations and to resolve any issues. Working in
concert with area directors and restaurant general managers, senior management
defines operations and performance objectives for each restaurant. An incentive
plan has been established in which area directors and certain restaurant
managers participate. Awards under incentive plans are tied to achievement of
specified revenue, profitability and operating targets and related quality
objectives.

The Company strives to maintain quality and consistency in its restaurants
through the careful training and supervision of personnel and the establishment
of standards relating to food and beverage preparation, maintenance of
facilities and conduct of personnel. Restaurant managers, many of whom are drawn
from the Company's restaurant personnel, must complete a training program of at
least twelve weeks during which they are instructed in areas of restaurant
management, including food quality and preparation, customer service, alcoholic
beverage service, liquor liability avoidance and employee relations. Restaurant
managers are also provided with operations manuals relating to food and beverage
preparation and operation of restaurants. These manuals are designed to ensure
uniform operations, consistently high quality products and service and proper
accounting for restaurant operations. The Company holds regular

meetings of its restaurant general managers to discuss new products, continuing
training and other aspects of business management.

The staff for a typical Morton's consists of one general manager and up to
four assistant managers, and approximately 40 to 60 hourly employees. The staff
for a typical Bertolini's consists of one general manager and up to five other
managers, and approximately 100 hourly employees. Each new restaurant employee
of the Company participates in a training program during which the employee
works under the close supervision of restaurant managers. Management strives to
instill enthusiasm and dedication in its employees. Restaurant management
regularly solicits employee suggestions concerning restaurant operations,
strives to be responsive to the employees' concerns and meets regularly with
employees at each of the restaurants.

The Company devotes considerable attention to controlling food costs. The
Company makes extensive use of computers providing management with pertinent
information on daily sales and inventory requirements, thus minimizing the need
to carry large quantities of food inventory. This cost management system is
complemented by the Company's ability to obtain volume-based discounts. In
addition, each restaurant, within the Company's divisions, has similar menu
items and common operating methods, allowing for more simplified management
operating controls.

The Company maintains financial and accounting controls for each of its
restaurants through the use of centralized accounting and management information
systems and reporting requirements. Revenue, cost and related information is
collected daily from each restaurant. Restaurant managers are provided with
operating statements for their respective locations. Cash and credit card
receipts are controlled through daily deposits in local operating accounts, the
balances of which are wire transferred or deposited to cash concentration
accounts.

Purchasing

The Company's ability to maintain consistent quality throughout its
restaurants depends in part upon the ability to acquire food products and
related items from reliable sources in accordance with Company specifications.
The Company has no long-term contracts for any food items used in its
restaurants. The Company currently does not engage in any futures contracts and
all purchases are made at prevailing market prices. While management believes
adequate alternative sources of supply are readily available, these alternative
sources might not provide as favorable terms to the Company as its current
suppliers when viewed on a long-term basis. All of Morton's U.S.D.A. prime aged
beef is shipped to Morton's restaurants by refrigerated common carrier from its
primary Chicago-based suppliers. All other products used by Morton's are
procured locally based on strict group-wide specifications. Bertolini's
restaurants also adhere to strict product specifications and use both national
and regional suppliers. Food and supplies are shipped directly to the
restaurants and invoices for purchases are sent by vendors to the headquarters
office.

Marketing

Management believes that the Company's commitment to quality food,
hospitality and value/price is the most effective approach to attracting guests.
Accordingly, the Company has historically focused its resources on providing its
customers with superior service and value and has relied primarily on word of
mouth to attract new customers. The Company employs public relations consultants
and limited print, billboard and direct mail advertising, and typically conducts
some local restaurant promotions. The

Company's expenditure for advertising, marketing and promotional expenses as a
percentage of its revenues was 2.3% during fiscal 1996.

Competition

The restaurant business is highly competitive and fragmented, and the
number, size and strength of competitors varies widely by region. The Company
believes that competition in the markets of each operating division is based on,
among other things, quality of the food products, customer service, reputation,
restaurant location, name recognition and price points. The Company's
restaurants compete with a number of restaurants within their markets, both
locally owned restaurants and other restaurants which are members of regional or
national chains. Some of the Company's competitors are significantly larger and
have greater financial and other resources and greater name recognition than the
Company and its restaurants. Many of such competitors have been in existence
longer than the Company and are better established in areas where the Company's
restaurants are, or are planned to be, located. The restaurant business is often
affected by changes in consumer taste and spending habits, national, regional or
local economic conditions, population and traffic patterns and bad weather. In
addition, factors such as inflation, increased food, labor and benefit costs and
the lack of experienced management and hourly employees may adversely affect the
restaurant industry in general and, particularly, the Company's restaurants.

Service Marks and Trademarks

The Company has registered the names Morton's, Morton's of Chicago,
Bertolini's and certain other names used by its restaurants as trademarks or
service marks with the United States Patent and Trademark Office. The Company is
aware of names similar to that of the Company's restaurants used by third
parties in certain limited geographical areas, although the Company does not
anticipate that such use will prevent the Company from using its marks in such
areas. The Company is not aware of any infringing uses that could materially
affect its business. The Company believes that its trademarks and service marks
are valuable to the operation of its restaurants and are important to its
marketing strategy.

Government Regulation

The Company's business is subject to extensive Federal, state and local
government regulation, including regulations relating to alcoholic beverage
control, public health and safety, zoning and fire codes. The failure to obtain
or retain food, liquor or other licenses would adversely affect the operations
of the Company's restaurants. While the Company has not experienced and does not
anticipate any problems in obtaining required licenses, permits or approvals,
any difficulties, delays or failures in obtaining such licenses, permits or
approvals could delay or prevent the opening of a restaurant in a particular
area. Approximately 31%, 20%, 11% and 22% of the revenues of Morton's,
Bertolini's, Mick's and Peasant Restaurants, respectively, for fiscal 1996 were
attributable to the sale of alcoholic beverages. Each restaurant has appropriate
licenses from regulatory authorities allowing it to sell liquor and or beer and
wine, and each restaurant has food service licenses from local health
authorities. The Company's licenses to sell alcoholic beverages must be renewed
annually and may be suspended or revoked at any time for cause, including
violation by the Company or its employees of any law or regulation pertaining to
alcoholic beverage control, such as those regulating the minimum age of patrons
or employees, advertising, wholesale purchasing, and inventory control, handling
and storage. However, each restaurant is operated in accordance with
standardized procedures designed to assure compliance with all applicable codes
and regulations.

The Company is subject in certain states to "dram-shop" statutes, which
generally provide a person injured by an intoxicated person the right to recover
damages from an establishment which wrongfully served alcoholic beverages to
such person. While the Company carries liquor liability coverage as part of its
existing comprehensive general liability insurance, a judgment against the
Company under a dram-shop statute in excess of the Company's liability coverage,
or inability to continue to obtain such insurance coverage at reasonable costs,
could have a material adverse effect on the Company.

The development and construction of additional restaurants will be subject
to compliance with applicable zoning, land use and environmental regulations.
Management believes that Federal and state environmental regulations have not
had a material effect on the Company's operations, but more stringent and varied
requirements of local government bodies with respect to zoning, land use and
environmental factors could delay construction of new restaurants and add to
their cost.

The Company is also subject to the Fair Labor Standards Act, the
Immigration Reform and Control Act of 1986 and various state laws governing such
matters as minimum wages, overtime, tip credits and other working conditions. A
significant number of the Company's hourly personnel are paid at rates related
to the Federal minimum wage and, accordingly, increases in the minimum wage or
decreases in the allowable tip credit will increase the Company's labor cost.

Employees

As of December 29, 1996, the Company had approximately 4,057 employees, of
whom 3,605 were hourly restaurant employees, 354 were salaried restaurant
employees engaged in administrative and supervisory capacities and 98 were
corporate and office personnel. Many of the hourly employees are employed on a
part-time basis to provide services necessary during peak periods of restaurant
operations. None of the Company's employees are covered by a collective
bargaining agreement. The Company believes that its relations with its employees
are good.

Forward-Looking Statements

Except for the historical information contained in this document,
certain statements made herein are forward-looking statements that involve risks
and uncertainties and are subject to important factors that could cause actual
results to differ materially from these forward-looking statements, including
without limitation, the effect of economic and market conditions, the impact of
competitive activities, the Company's expansion plans, restaurant profitability
levels and other risks detailed in the Company's public reports and SEC filings.

Item 2. Properties

All of the Company's restaurants are located in space leased by
subsidiaries of the Company. Restaurant lease expirations, including renewal
options, range from one to twenty-five years. The majority of the Company's
leases provide for an option to renew for terms ranging from five years to ten
years. All of the restaurant leases provide for a specified annual rent, and
most leases call for additional or contingent rent based on sales volumes over
specified levels. Generally, the leases are "net leases" which require the
Company's subsidiary to pay its pro rata share of all taxes, insurance and
maintenance costs. In some cases, the Company or another subsidiary guarantees
the performance of new leases of the tenant subsidiary for a portion of the
lease term, typically not exceeding the first five years.

During 1996, in conjunction with the sale of an 80.1% interest in its
Atlanta-based Mick's and Peasant restaurants, the Company recorded a $11.5
million pre-tax charge. During 1995 the Company recorded a pre-tax charge of
$15.5 million representing asset write-offs ($8.3 million) and management's
estimate of the expected costs ($7.2 million) to terminate leases related to
certain Mick's and Peasant restaurants located outside of Atlanta. For more
information, see Note 3 to the Company's consolidated financial statements.

The Company maintains its executive offices of approximately 9,800 square
feet in New Hyde Park, New York. The executive offices for Morton's and
Bertolini's consist of approximately 11,300 square feet in Chicago. All such
executive offices are leased.

The Company believes its current office and operating space is suitable and
adequate for intended purposes.

Item 3. Legal Proceedings

The Company is involved in various legal actions incidental to the normal
conduct of its business. Management does not believe that the ultimate
resolution of these actions will have a material adverse effect on the Company's
consolidated financial position, equity, results of operations, liquidity and
capital resources.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 4A. Executive Officers of the Registrant

The following sets forth certain information regarding the Company's executive
officers:

Name Age Position
---- --- --------

Allen J. Bernstein (1) 51 Chairman of the Board and Chief Executive Officer

William L. Hyde, Jr. 49 President, Chief Operating Officer and Director

Thomas J. Baldwin 41 Executive Vice President, Chief Financial
Officer, Assistant Secretary and Treasurer

Agnes Longarzo 58 Vice President-Administration and Secretary

Allan C. Schreiber 56 Vice President-Real Estate

Klaus W. Fritsch 53 Vice Chairman and Co-Founder-Morton's of Chicago

Thomas J. Walters 38 President - Morton's of Chicago

Geoffrey D. Stiles 43 Vice President of Operations-Bertolini's
Restaurants, Inc.

(1) Member of Executive Committee of the Board of Directors.

Allen J. Bernstein has been Chairman of the Board of the Company since
October 1994 and Chief Executive Officer and a Director of the Company since
December 1988. He had been President of the Company from December 1988 through
October 1994. Prior to co-founding the Company, Mr. Bernstein served as a
Chairman and Chief Executive Officer of Le Peep Restaurants, Inc. and its
predecessors from July 1981 to December 1988. From 1975 to 1981, Mr. Bernstein
was President and Chief Operating Officer of Wenco Food Systems, Inc., a New
York City area franchisee for Wendy's Restaurants, Inc. Mr. Bernstein has been a
director of Dave and Busters, Inc. since February 1996.

William L. Hyde, Jr. has been President and a Director of the Company since
October 1994 and Chief Operating Officer since February 1994. He had been
Executive Vice President from February 1994 through October 1994. Mr. Hyde
served as President and Chief Operating Officer of Furr's Bishop's, Inc., a
restaurant company, from August 1992 to January 1994. From March 1992 to August
1992, Mr. Hyde was the Executive Vice President of Operations for Miami Subs
Corporation, a restaurant company. From February 1987 to August 1990, Mr. Hyde
served as President and Chief Executive Officer and from November 1985 to
January 1987 as Senior Vice President for Del Taco Restaurants, Inc. His prior
experience includes serving as President and Chief Executive Officer for Chart
House, Inc., a restaurant company.

Thomas J. Baldwin was elected Executive Vice President in January 1997. He
previously served as Senior Vice President--Finance of the Company since June
1992, and was Vice President--Finance from December 1988 until June 1992. In
addition, Mr. Baldwin has been Chief Financial Officer, Assistant Secretary and
Treasurer of the Company since December 1988. Mr. Baldwin was the Chief
Financial

Officer, Vice President of Finance and Treasurer of Le Peep Restaurants, Inc.
from October 1986 until December 1988. After seven years at Kraft General Foods
Corp., now a subsidiary of Philip Morris Companies Inc., Mr. Baldwin joined
Citicorp in April 1985 and became Vice President responsible for strategic
planning and financial analysis at a major corporate banking division. Mr.
Baldwin has an M.B.A. and is also a licensed certified public accountant in the
State of New York.

Agnes Longarzo has been Vice President of Administration and Secretary of
the Company since December 1988. Ms. Longarzo had been Vice President of
Administration and Corporate Secretary for Le Peep Restaurants, Inc. from March
1983 to December 1988. Prior to joining Le Peep Restaurants, Inc., Ms. Longarzo
served as the Director of Administration of Wenco Food Systems, Inc.

Allan C. Schreiber has been Vice President of Real Estate since January
1996 and prior to that was Director of Real Estate since November 1995. Mr.
Schreiber had been a Senior Managing Director at The Galbreath Company since
1991. Prior to joining Galbreath, he served as an Executive Vice President of
National Westminster Bank USA from 1982 to 1991. Previously, Mr. Schreiber had
been a Vice President and Division Executive of the Chase Manhattan Bank.

Klaus W. Fritsch has been the Vice Chairman of Morton's of Chicago, Inc.
since May 1992. Mr. Fritsch has been with Morton's of Chicago, Inc. since its
inception in 1978, when he co-founded Morton's. After Mr. Arnold Morton ceased
active involvement in 1987, Mr. Fritsch assumed all operating responsibilities
as President in which capacity he served until May 1992.

Thomas J. Walters has been President of Morton's of Chicago, Inc. since
April 1995. He had been Vice President of Operations from March 1994 to April
1995. Previously, Mr. Walters served as Regional Manager since March 1993.
Before joining Morton's, Mr. Walters was Director of Food and Beverage
Operations at the Ritz-Carlton Hotel Group, where he was employed for six years.

Geoffrey D. Stiles has been Vice President of Operations - Bertolini's
Restaurants, Inc. since November, 1996. From 1992 to 1996, Mr. Stiles was with
the Macaroni Grill, a subsidiary of Brinker International, Inc., serving in
various roles including area director, general manager and manager. Mr. Stiles
was an area supervisor for The Olive Garden, a subsidiary of General Mills, Inc.
from 1990 to 1992.

Officers are elected by and serve at the discretion of the Board of
Directors.

Part II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

"Price Range of Common Stock and Related Matters" contained on page 34 of
the Company's Annual Report is hereby incorporated by reference.

Item 6. Selected Consolidated Financial and Operating Data

"Selected Financial Information" contained on page three of the Company's
Annual Report is hereby incorporated by reference.

The graphs labeled "Revenues", "Consolidated Total Assets" and "Number of
Restaurants " on page three of the Company's Annual Report shall not be deemed
incorporated by reference into this Annual Report on Form 10-K.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained on pages 18 to 21 of the Company's Annual Report is hereby
incorporated by reference.

Item 8. Financial Statements and Supplementary Data

The following items are hereby incorporated by reference to the Company's
Annual Report on the pages indicated:

Page
----

(i) Independent Auditors' Report 21

(ii) Consolidated Balance Sheets as of December 29, 1996 and December 31, 1995 22

(iii) Consolidated Statements of Operations
For the years ended December 29, 1996, December 31, 1995 and January 1, 1995 23

(iv) Consolidated Statements of Stockholders' Equity
For the years ended December 29, 1996, December 31, 1995 and January 1, 1995 24

(v) Consolidated Statements of Cash Flows
For the years ended December 29, 1996, December 31, 1995 and January 1, 1995 25

(vi) Notes to Consolidated Financial Statements 26-34

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.

Part III

Item 10. Directors and Executive Officers of the Registrant

"Election of Directors" and "Reporting under 16(A) of the Securities
Exchange Act of 1934" contained in the Proxy Statement is hereby incorporated by
reference. See also Item 4A, "Executive Officers of the Registrant" in Part I of
this Annual Report on Form 10-K.

Item 11. Executive Compensation

"Executive Compensation" contained in the Proxy Statement is hereby
incorporated by reference. The matters labeled "Compensation Committee Report"
and "Performance Graph" contained in the Proxy Statement shall not be deemed
incorporated by reference into this Annual Report on Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management

"Security Ownership of Certain Beneficial Owners and Management" contained
in the Proxy Statement is hereby incorporated by reference.

Item 13. Certain Relationships and Related Transactions

None.

Part IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) The following documents are filed as part of this Annual Report on Form
10-K:

(1) The response to this portion of Item 14 is set forth in Item 8 of Part
II hereof.

(2) Financial Statement Schedules

Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have
been omitted.

(3) Exhibits

See accompanying Index to Exhibits. The Company will furnish to any
stockholder, upon written request, any exhibit listed in the
accompanying Index to Exhibits upon payment by such stockholder of the
Company's reasonable expenses in furnishing any such exhibit.

(b) Reports on Form 8-K:

Form 8-K filed on January 6, 1997 regarding the signing of definitive
agreements to sell Mick's Restaurants, Inc. and The Peasant Restaurants,
Inc.

Form 8-K filed on February 7, 1997 regarding the completion of the sale of
Mick's Restaurants, Inc. and The Peasant Restaurants, Inc.

(d) Reference is made to Item 14 (a)(2) above.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

MORTON'S RESTAURANT GROUP, INC.
(Registrant)

Date March 26, 1997 By: /s/ ALLEN J. BERNSTEIN
-------------------- ----------------------
Allen J. Bernstein
Chief Executive Officer and Chairman of the
Board of Directors, (Principal Executive
Officer)

Date March 26, 1997 By: /s/ THOMAS J. BALDWIN
-------------------- ---------------------
Thomas J. Baldwin
Executive Vice President, Chief Financial
Officer, Assistant Secretary and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

Date March 26, 1997 By: /s/ WILLIAM L. HYDE, JR.
-------------------- ------------------------
William L. Hyde, Jr.
President, Chief Operating Officer and
Director

Date March 26, 1997 By: /s/ THOMAS J. BALDWIN
-------------------- ---------------------
Thomas J. Baldwin
Executive Vice President, Chief Financial
Officer, Assistant Secretary and Treasurer
(Principal Financial and Accounting Officer)

Date March 26, 1997 By: /s/ ROBERT L. BARNEY
------------------ --------------------
Robert L. Barney
Director

Date March 26, 1997 By: /s/ DIANNE H. RUSSELL
------------------ ---------------------
Dianne H. Russell
Director

Date March 26, 1997 By: /s/ ALAN A. TERAN
------------------ -----------------
Alan A. Teran
Director

Date March 26, 1997 By: /s/ JOHN K. CASTLE
------------------- ------------------
John K. Castle
Director

Date:March 26, 1997 By: /s/ DR. JOHN J. CONNOLLY
------------------- ------------------------
Dr. John J. Connolly
Director

Date March 26, 1997 By: /s/ DAVID B. PITTAWAY
------------------- ---------------------
David B. Pittaway
Director

INDEX TO EXHIBITS

The following is a list of all exhibits filed as part of this report:

Exhibit
Number Page Document
- ------ ---- --------

3.01 (a) ~~~ Amended and Restated Certificate of Incorporation
of the Registrant.

(b) # Certificate of Designation for the Preferred Stock
issuable pursuant to the Rights Plan.

(d) OO Second Amendment to the Amended and Restated
Certificate of Incorporation of the Registrant.

3.02 # Amended and Restated By-Laws of the Registrant,
dated January 17, 1995.

4.01 (a) # Specimen Certificate representing the Common
Stock, par value $.01 per share including Rights
Legend.

(b) OO Specimen Certificate representing the Common
Stock, par value $.01 per share including Rights
Legend and name change to Morton's Restaurant
Group, Inc.

4.02 (a) * Registration Rights Agreement for Common Stock,
dated as of July 27, 1989, among the Registrant,
BancBoston Capital Inc., Legend Capital Group,
L.P., Legend Capital International, Ltd. and Allen
J. Bernstein.

(b) *** Amendment to Registration Rights Agreement for
Common Stock, dated as of April 1, 1992, among the
Registrant, BancBoston Capital Inc., Legend
Capital Group, L.P., Legend Capital International,
Ltd., Allen J. Bernstein, Castle Harlan, Inc. and
certain executive officers of the Registrant.

4.03 (a) *** + Stock Option Agreement, dated as of March 30,
1992, between Thomas J. Baldwin and the
Registrant.

(b) *** + Stock Option Agreement, dated as of March 30,
1992, between Gilbert F. Drake and the Registrant.

(d) * + Stock Option Agreement, dated as of March 30,
1992, between Allen J. Bernstein and the
Registrant.

4.04 (a) ~~~ Second Amended and Restated Revolving Credit and
Term Loan Agreement, dated June 19, 1995 among the
Registrant, The Peasant Restaurants, Inc.,
Morton's of Chicago, Inc. and The First National
Bank of Boston, individually and as agent.

(b) ^ First Amendment to the Second Amended and Restated
Revolving Credit and Term Loan Agreement, dated
February 14, 1996 among the Registrant, The
Peasant Restaurants, Inc., Morton's of Chicago,
Inc. and The First National Bank of Boston,
individually and as agent.

(c) ^ Second Amendment to the Second Amended and
Restated Revolving Credit and Term Loan Agreement,
dated March 5, 1996 among the Registrant, The
Peasant Restaurants, Inc., Morton's of Chicago,
Inc. and The First National Bank of Boston,
individually and as agent.

(d) O Letter Agreement, dated May 2, 1996, among the
Registrant, The Peasant Restaurants, Inc.,
Morton's of Chicago, Inc. and The First National
Bank of Boston, individually and as agent.

(e) OO Third Amendment to the Second Amended and Restated
Revolving Credit and Term Loan Agreement, dated
June 28, 1996 among the Registrant, The Peasant
Restaurants, Inc., Morton's of Chicago, Inc. and
The First National Bank of Boston, individually
and as agent.

(f) Fourth Amendment to the Second Amended and
Restated Revolving Credit and Term Loan Agreement,
dated December 26, 1996 among the Registrant, The
Peasant Restaurants, Inc., Morton's of Chicago,
Inc. and The First National Bank of Boston,
individually and as agent.

(g) Fifth Amendment to the Second Amended and Restated
Revolving Credit and Term Loan Agreement, dated
December 31, 1996 among the Registrant, The
Peasant Restaurants, Inc., Morton's of Chicago,
Inc. and The First National Bank of Boston,
individually and as agent.

(h) Sixth Amendment to the Second Amended and Restated
Revolving Credit and Term Loan Agreement, dated
February 6, 1997 among the Registrant, The Peasant
Restaurants, Inc., Morton's of Chicago, Inc. and
The First National Bank of Boston, individually
and as agent.

4.05 ~ Rights Agreement, dated as of December 15, 1994,
between the Registrant and The First National Bank
of Boston as Rights Agent, which includes as
Exhibit A thereto the form of Certificate of
Designation of Series A Junior Participating
Preferred Stock of the Registrant, as Exhibit B
thereto the form of Rights Certificate and as
Exhibit C thereto the Summary of Rights to
Purchase Preferred Stock.

10.01 # + Morton's of Chicago, Inc. Profit Sharing and Cash
Accumulation Plan as Amended Effective January 1,
1989.

10.02 *** Commercial Lease, between American National
Investor Services, Inc. and Morton's of Chicago,
Inc., dated October 15, 1992, relating to the
executive offices of Morton's located at 350 West
Hubbard Street, Chicago, Illinois.

10.03 * Shareholders Agreement, dated January 1, 1990,
among Stephan D. Nygren, Robert A. Amick, the
Registrant and Peasant Holding Corp.

10.04 **** Commercial Lease, between X-Cell Realty Associates
and the Registrant, dated January 18, 1994
relating to the executive offices of the
Registrant located at 3333 New Hyde Park Road,
Suite 210, New Hyde Park, New York 11042.

10.05 + Amended and Restated Employment Agreement, dated
as of February 1,1997, between the Registrant and
William L. Hyde, Jr.

10.06 (a) **** Commercial Lease Commitment, dated February 7,
1994, between BancBoston Leasing Inc. and the
Registrant relating to restaurant equipment.

(b) # Commercial Lease Commitment, dated August 30,
1994, between General Electric Capital Corporation
and the Registrant relative to restaurant
equipment.

(c) # Commercial Lease Commitment, dated February 14,
1995, between BancBoston Leasing Inc. and the
Registrant relating to restaurant equipment.

(d) ~~~~ Commercial Lease Commitment, dated May 26, 1995,
between ATEL Leasing Corporation and the
Registrant relating to restaurant equipment.

10.07 ~~+ Employment Agreement, dated as of January 31,
1994, between the Registrant and Allen J.
Bernstein.

10.08 ~~ Purchase Agreement, dated July 1, 1994 between the
Registrant and Stephan D. Nygren and related
Promissory Note, dated July 1, 1994, between the
Registrant and Stephan D. Nygren.

10.09 (a) # + Change of Control Agreement, dated December 15,
1994, between the Registrant and Allen J.
Bernstein.

(b) # + Change of Control Agreement, dated December 15,
1994, between the Registrant and William L. Hyde,
Jr.

10.10 # + Second Amended and Restated Employment Agreement,
dated as of February 28, 1995, between the
Registrant and Allen J. Bernstein.

10.11 + Quantum Restaurant Group, Inc. Stock Option Plan.

10.12 OOO Stock Purchase Agreement, dated as of December 31,
1996, by and among Peasant Holding Corp., Morton's
Restaurant Group, Inc., and MRI Acquisition
Corporation.

10.13 OOO Stock Purchase Agreement, dated as of December 31,
1996, by and among Peasant Holding Corp., Morton's
Restaurant Group, Inc., and PRI Acquisition
Corporation.

10.14 Promissory Note, dated March 4, 1997, between CNL
Financial I, Inc., as Lender, and Morton's of
Chicago, Inc.

13.01 Registrant's Annual Report to Stockholders for the
year ended December 29, 1996. Except for the
portions thereof which are expressly incorporated
by reference into this report, such Annual Report
is furnished solely for the information of the
Commission and is not to be deemed "filed" as part
of this report.

22.01 Subsidiaries of the Registrant.

23.01 Independent Auditors' consent to the incorporation
by reference in the Company's Registration
Statement on Form S-8 of the independent auditors'
report included in the Company's Annual Report to
Stockholders.

27.00 Financial Data Schedule

* Included as an exhibit to the Registrant's
Registration Statement on Form S-1 (No. 33-45738)
and incorporated by reference.

*** Included as an exhibit to the Registrant's Annual
Report on Form 10-K for the year ended December
31, 1992 and incorporated by reference.

**** Included as an exhibit to the Registrant's Annual
Report on Form 10-K for the year ended December
31, 1993 and incorporated by reference.

# Included as an exhibit to the Registrant's Annual
Report on Form 10-K for the year ended January 1,
1995 and incorporated by reference.

~ Included as an exhibit to the Registrant's Form
8-K dated on December 15, 1994 and incorporated by
reference.

~~ Included as an exhibit to the Registrant's
Quarterly Report on Form 10-Q, dated October 2,
1994.

~~~ Included as an exhibit to the Registrant's
Quarterly Report on Form 10-Q, dated July 2, 1995.

~~~~ Included as an exhibit to the Registrant's
Quarterly Report on Form 10-Q, dated October 1,
1995.

^ Included as an exhibit to the Registrant's Annual
Report on Form 10-K for the year ended December
31, 1995 and incorporated by reference.

O Included as an exhibit to the Registrant's
Quarterly Report on Form 10-Q, dated March 31,
1996.

OO Included as an exhibit to the Registrant's
Quarterly Report on Form 10-Q, dated June 30,
1996.

OOO Included as an exhibit to the Registrant's Form
8-K, dated January 6, 1996.

+ Management contracts or compensatory plans or
arrangements required to be filed as an exhibit to
the Registrant's Annual Report on Form 10-K
pursuant to Item 14 (a)(3) of this Form 10-K.