FAMILY STEAK HOUSES LETTERHEAD


Dear Shareholder:

You may have  received a letter  from Glen  Ceiley in the last few days where he
makes  some  pretty  outrageous  statements.   I'd  like  to  respond  to  those
statements.

         WHO'S THE PIRATE?

Ceiley accuses the Board of "pirating" your Company away from you. Well, I don't
have an  eyepatch  or a pegleg and  neither  do any of the other  members of the
Board.  I'm not sure what  Ceiley  is  talking  about  when he says the Board is
pirating the Company.  What the Board has done is discharge its fiduciary  duty,
in accordance  with Florida law and the rules and  regulations of the Securities
and  Exchange  Commission.  We've  looked at his offer and,  after  taking  into
consideration  everything  we know about the Company and about Ceiley and Bisco,
we've recommended  against the offer.  Interestingly,  most of you seem to agree
with  us -  based  on  Ceiley's  latest  filing,  owners  of  more  than  75% of
outstanding  shares have declined to tender him their shares. If anyone is doing
any "pirating" it seems to me that it's Ceiley.  He's the one who is costing the
Company  money.  He's the only one who stands to gain if he  prevails.  He would
acquire 30% of the outstanding  shares from you and then,  having gained control
over the Company,  would treat the rest of the  shareholders,  owning 70% of the
shares,  as he sees fit.  That's what a pirate does:  loots and raids and leaves
the victims behind to deal with the aftermath.

         BISCO'S RESULTS?

Ceiley touts his company's  financial  results in his letter.  Well,  anyone can
claim great financial results, but backing them up is something  different.  The
Company's  financial  statements are audited by a Big Six accounting  firm - are
Bisco's?  If so, let's see the audit.  The Company shares its audited  financial
statements  with its  shareholders  every year. If Ceiley wants you to base your
decision  on his  supposed  business  acumen,  then  we'd  like  to see  audited
financial  statements  from  Bisco for the last  several  years and make our own
decision.

Ceiley  also  claims  as  tremendous  successes  his last two  aborted  takeover
attempts:  Bell Industries and RB&W. He implies that as a result of his efforts,
the stock of those companies greatly increased in value. The management of those
two companies might have something to say about Ceiley's  contributions to their
stock 





price as compared to their own performance in running their businesses. In fact,
during the period  Ceiley says he held Bell  Industries  stock  (January  1989 -
February 1990), Bell declared a $4 dividend and almost doubled its earnings from
$.35 per share for its first two fiscal  quarters  of 1989 to $.60 per share for
its first two fiscal quarters of 1990. Those events may have had more to do with
the  increase in Bell's  stock price than  Ceiley's  "dubious"  offer as the Los
Angeles  Business  Journal  characterized  it.  Ceiley also  implies  that he is
responsible  for the rise in RB&W's stock price over a five year period.  Surely
Ceiley's  investment  in that  company  wasn't  the sole  event of any  business
significance over that five year period.

Typical  of a  corporate  raider,  Ceiley  thinks  that the only  thing that can
contribute to a stock's price is his manipulative  takeover efforts. What he and
others  like him  disregard  is the fact that a company's  business  performance
influences  stock  prices.  In fact, he wants to take credit for the increase in
our  Company's  stock price  between  February  and April of this year.  What he
neglects  to  mention  is that  during  this  same  period  of time the  Company
successfully  refinanced its long-term  debt,  obtained a line of credit to open
new restaurants and opened its first new restaurant in four years.  These events
did not go unnoticed and in January and February, the "Cheap Investor" and other
publications ran articles recommending our stock. It was immediately after these
articles that the  Company's  stock began  rising.  In fact,  another point that
Ceiley  chooses to ignore is that the  Company's  stock price was $.88 per share
the day before he announced his $.90 per share offer.  Obviously,  his offer had
little to do with the rise in the Company's stock price.

                           BISCO'S MISREPRESENTATIONS

Ceiley also makes several statements that are just plain not true. In fact, they
are materially false and libelous.

- -        MISREPRESENTATION NO. 1.  Ceiley says the Company has spent over 
$200,000 "to take the Company away from" the shareholders.

     NOT TRUE:  The Company has spent a lot of money  defending the interests of
all shareholders  against Ceiley's hostile takeover  attempt,  but substantially
less than $200,000. And every cent we have spent was a direct result of Ceiley's
actions.

- -        MISREPRESENTATION NO. 2.   Ceiley says the Company  "amended  their 
stock  option plans to make their  options  immediately  exercisable  on the 
first purchase of shares under a tender offer."


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     NOT TRUE:  The Company has not amended any of its stock option plans.  This
is just  another  "scare  tactic" by Ceiley  where he makes a statement  with no
basis in fact for the sole purpose of disparaging your Board and your Company.

- -        MISREPRESENTATION NO. 3.   Ceiley says "Bisco's financial resources are
strong."

     NOT TRUE:  Dun & Bradstreet  says that Bisco is a "slow pay," often running
more than 30 days behind in payments to its suppliers, and that Bisco's payments
to suppliers "average 19 days beyond terms."

Ceiley also takes a swipe at the Board for not asking him to increase  his offer
price.  We had  numerous  conversations  with  Ceiley  over the last two months,
(which the Board initiated, by the way). Not once did he bring up the subject of
increasing  his offer  price.  What does he want - an engraved  invitation?  Mr.
Ceiley,  materially  increase your offer price, make it fair to ALL shareholders
and the Board will review it and make their recommendation to our shareholders.


       MANAGEMENT'S OWNERSHIP

Ceiley  attacks the Board and  management  for only owning 196,641 shares of the
Company's  stock and says the Board is "more  concerned  with salary,  benefits,
perquisites  and director fees." Ceiley claims his interest is more in tune with
yours because he wants to own 3,000,000 shares of the Company's stock. Well, our
response is simple. We are not a bunch of millionaires.  We have been associated
with the Company,  in most cases,  for less than 4 years.  We are not collecting
extravagant salaries or perks. As your CEO, I have one of the lowest salaries of
any CEO of a public  company in North  Florida.  I am the only officer who has a
car allowance. More than two-thirds of outside directors' fees in 1996 were paid
in Company stock, not cash. Does Ceiley think these benefits are extravagant? He
compares  our Company to Bisco - what was his total  compensation  in 1996?  And
since he is so proud of his investment in our Company, does he tell you that the
majority of that  investment  was made by his company's  profit sharing plan? HE
DIDN'T  PERSONALLY  INVEST $500,000 IN OUR COMPANY - HE INVESTED THE PENSION AND
PROFIT SHARING FUNDS OF HIS EMPLOYEES!


         BISCO'S PLANS

Ceiley  continues  to insist  that the Board is using  "scare  tactics"  when it
expresses its concerns  regarding  his plans for the Company.  Then, in the very
next breath,  he says that the strategic  alternatives  he is looking at for the
Company include "sale of restaurant business" and "sale of real estate business"
and  "acquisitions  and mergers."  Your Board is not trying to alarm you, we are
simply  trying to educate you as to Bisco's  admitted  strategies.  You are then
free to make up your own mind  whether to tender  your shares and consent to his
proposals, or not.

         CEILEY'S CRYSTAL BALL

Ceiley finishes his letter by looking into his crystal ball and telling you that
if you  don't  vote for him that the  Company's  stock  price  will  immediately
collapse  to $.50 per share.  But if you do go along  with his plans,  then your
shares will be worth $1.25  before you know it. Well, I wish he would share that
crystal  ball with me. My review of the facts  shows  that our stock was at $.88
the day before he  launched  his offer of $.90 per  share.  I also note that our
stock  traded  as high as  $1.00 a 



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share in the last 12 months.  In fact, the average closing price for the 10 days
preceding  Ceiley's offer was $.92 per share. He threatens a stock price of $.50
per share - and he accuses the Board of using scare tactics?

Of  course,  we all want to see a per  share  price of $1.25 or  higher.  We are
working hard toward that goal.  Are we there yet? No. Are we closer than we were
six  months  ago?  A year ago?  Absolutely!  For the first  time in years,  your
Company has its financial house in order and is building new restaurants  again.
This should provide the foundation we need for renewed  profitability and growth
in our stock price.

We believe the Company is on the right track.  We appreciate all the support you
have shown us thus far. We ask for your continued  support so that we can finish
the job we have started.

*        Do not return the GOLD consent card sent to you by Bisco,  even to vote
         against  their  proposal.  If you have already done so, please mark the
         REVOCATION box on the enclosed WHITE  revocation of consent card,  sign
         and date the form and return it in the postage-paid envelope provided.

*        Do not tender your shares to Bisco.  If you have  already  done so, you
         can have your shares returned to you by completing the YELLOW Notice of
         Withdrawal previously mailed to you.

*        If your shares are held through a bank or broker,  please  contact your
         representative  at that firm and request the  representative to execute
         the WHITE revocation of consent card on your behalf.

If you  require  any  assistance,  please  call our proxy  solicitor,  Corporate
Investor Communications, at (800) 932-8498.

Thank you.


                                        Sincerely,
                                        Family Steak Houses of Florida, Inc.




                                        Lewis E. Christman, Jr.
                                        President and CEO




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