<PAGE>   1
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)
[ X ]         QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended      March 31, 1998
                               ----------------------------------------------
                                      OR
[   ]         TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
                  EXCHANGE ACT

FOR THE TRANSITION PERIOD FROM                 to
                               ---------------    ---------------

COMMISSION FILE NUMBER:                     333-9371
                       -------------------------------------------------------
                    Captec Franchise Capital Partners L.P. IV
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

        Delaware                                    38-3304095
--------------------------------------------------------------------------------
        (State or other jurisdiction                (IRS Employer
        of incorporation or organization)           Identification Number)

                24 Frank Lloyd Wright Drive, Lobby L, 4th Floor
                 P.O. Box 544, Ann Arbor, Michigan 48106-0544
--------------------------------------------------------------------------------
                   (Address of principal executive offices)

                                (313) 994-5505
--------------------------------------------------------------------------------
                          (Issuer's telephone number)

                                Not Applicable
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last year)

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 filing requirements
for the past 90 days. Yes   X   No   
                          -----    -----

               APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Not Applicable.
                                            --------------

                     APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:  Not Applicable
                                            --------------

<PAGE>   2



                  CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV

                              INDEX TO FORM 10-Q


<TABLE>
<CAPTION>
PART I     FINANCIAL INFORMATION                                                               Page
<S>       <C>                                                                                 <C>


Item 1.    Balance Sheet, March 31, 1998 and December 31,1997.....................................1
           
           Statement of Operations for the three month periods
           ended March 31, 1998 and 1997..........................................................2
           
           Statement of Changes in Partners' Capital for the three month period
           ended March 31, 1998 ..................................................................3
           
           Statement of Cash Flows for the three month periods
           ended March 31, 1998 and 1997..........................................................4
           
           Notes to Financial Statements..........................................................5
           
Item 2.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations..............................................................7
           
           
PART II    OTHER INFORMATION......................................................................10

SIGNATURES........................................................................................11
</TABLE>

                                       i
<PAGE>   3

                    CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                                  BALANCE SHEET



<TABLE>
<CAPTION>
                                                                                           MARCH 31,              DECEMBER 31,
                                                                                             1998                    1997
                                                                                         ------------            -------------
                                                                                          (Unaudited)
<S>                                                                                      <C>                 <C>
                                                      ASSETS                              
Cash and cash equivalents                                                                 $  7,349,667        $  5,008,194
Investment in property under leases:
   Operating leases, net                                                                     6,199,447           5,805,870
   Financing leases, net                                                                     4,137,800           2,838,663
Accounts receivable                                                                             16,006               3,487
Unbilled rent                                                                                   33,383              25,983
Due from related parties                                                                        83,878              49,381 
                                                                                          ------------        ------------
    Total assets                                                                          $ 17,820,181        $ 13,731,578 
                                                                                          ============        ============


                                          LIABILITIES & PARTNERS' CAPITAL

Liabilities:
   Accounts payable                                                                           $ 46,563            $ 49,375
   Due to related parties                                                                      160,369             129,683 
                                                                                          ------------        ------------

    Total liabilities                                                                          206,932             179,058 
                                                                                          ------------        ------------
Partners' Capital:
Limited partners' capital accounts                                                          17,604,785          13,547,060
General partners' capital accounts                                                               8,464               5,460 
                                                                                          ------------        ------------

    Total partners' capital                                                                 17,613,249          13,552,520 
                                                                                          ------------        ------------

    Total liabilities & partners' capital                                                 $ 17,820,181        $ 13,731,578 
                                                                                          ============        ============
</TABLE>



The accompanying notes are an integral part of the financial statements.




                                      1

<PAGE>   4


                   CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                            STATEMENT OF OPERATIONS
              for the three months ended March 31, 1998 and 1997
                                  (Unaudited)



<TABLE>
<CAPTION>
                                                                               1998                               1997
                                                                         --------------                     --------------
<S>                                                                      <C>                                 <C>
Operating revenue:
   Rental income                                                           $   177,783                      $      6,486
   Finance income                                                               90,322                             6,101 
                                                                           -----------                      ------------

                     Total operating revenue                                   268,105                            12,587 
                                                                           -----------                      ------------
Operating costs and expenses:
   Depreciation                                                                 19,764                                -
   General and administrative                                                   27,769                             2,817 
                                                                           -----------                      ------------

                     Total operating costs and expenses                         47,533                             2,817 
                                                                           -----------                      ------------

                     Income from operations                                    220,572                             9,770 
                                                                           -----------                      ------------
Other income:
   Interest income                                                              79,819                            10,461 
                                                                           -----------                      ------------

                     Total other income                                         79,819                            10,461 
                                                                           -----------                      ------------

Net income                                                                     300,391                            20,231

Net income allocable to general partners                                         3,004                               202 
                                                                           -----------                      ------------

Net income allocable to limited partners                                   $   297,387                      $     20,029 
                                                                           ===========                      ============

Net income per limited partnership unit                                    $     16.99                      $      14.59 
                                                                           ===========                      ============

Weighted average number of limited partnership
   units outstanding                                                            17,508                             1,373 
                                                                           ===========                      ============
</TABLE>



The accompanying notes are an integral part of the financial statements.

                                      2
<PAGE>   5

                                       
                   CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                   STATEMENT OF CHANGES IN PARTNERS' CAPITAL
                   for the three months ended March 31, 1998
                                  (Unaudited)


<TABLE>
<CAPTION>

                                                          Limited        Limited                General                 Total
                                                         Partners'      Partners'              Partners'              Partners'
                                                           Units         Accounts               Accounts               Capital
                                                       ------------   -------------           -----------            -----------

<S>                                                    <C>            <C>                       <C>                  <C>
Balance, January 1, 1998                                15,392         13,547,060                5,460                13,552,520
                                                                                                               
Issuance of 4,720 limited partnership                                                                          
units, net                                               4,720          4,110,337                                      4,110,337
                                                                                                               
Distributions - ($26.26 per unit)                          -             (349,999)                 -                    (349,999)
                                                                                                               
Net income                                                 -              297,387                3,004                   300,391 
                                                        ------       ------------              -------              ------------

Balance, March 31, 1998                                 20,112       $ 17,604,785              $ 8,464              $ 17,613,249 
                                                        ======       ============              =======              ============

</TABLE>
                                                


The accompanying notes are an integral part of the financial statements.

                                       3
<PAGE>   6


                  CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                           STATEMENT OF CASH FLOWS
              FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
                                  (UNAUDITED)
                                                                 


<TABLE>
<CAPTION> 
                                                                1998               1997
                                                                ----               ----
<S>                                                        <C>                 <C>
Cash flows from operating activities:                                          
   Net Income                                               $   300,391         $    20,231
   Adjustments to net income:                                                  
        Depreciation                                             19,764                   -
        Increase in unbilled rent                                (7,400)                  -
        Increase in accounts receivable                         (12,519)             (4,465)
        Decrease (increase) in  accounts payable                 (2,812)             12,944 
                                                            -----------         -----------     

Net cash provided by operating activities                       297,424              28,710 
                                                            -----------         -----------     
                                                                               
Cash flows from investing activities:                                          
   Purchase of real estate for operating leases                (413,342)         (1,002,560)
   Purchase of equipment for financing leases                (1,427,462)           (418,081)
   Reduction of net investment in financing leases              128,326               9,241 
                                                            -----------         -----------     
                                                                               
Net cash used in investing activities                        (1,712,478)         (1,411,400)
                                                            -----------         -----------     
                                                                               
Cash flows from financing activities:                                          
   Increase in due from related parties                         (34,497)            (11,904)
   Increase in due to related parties                            30,686              39,556
   Issuance of limited partnership units                      4,717,201           2,589,143
   Offering costs                                              (606,864)           (335,450)
   Distributions to limited partners                           (349,999)                 - 
                                                            -----------         -----------     
                                                                               
Net cash provided by financing activities                     3,756,527           2,281,345 
                                                            -----------         -----------     
                                                                               
Net decrease in cash and cash equivalents                     2,341,473             898,655
                                                                               
Cash and cash equivalents, beginning of period                5,008,194                  - 
                                                            -----------         -----------     
                                                                               
Cash and cash equivalents, end of period                    $ 7,349,667         $   898,655 
                                                            ===========         ===========

</TABLE>
                                                                               

The accompanying notes are an integral part of the financial statements.

                                      4
<PAGE>   7


                    CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                          NOTES TO FINANCIAL STATEMENTS


1.     THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING PRINCIPLES:

       Captec Franchise Capital Partners L.P. IV (the "Partnership"), a Delaware
       limited partnership, was formed on July 23, 1996 for the purpose of
       acquiring income-producing commercial real properties and equipment
       leased on a "triple net" or "double net" basis, primarily to operators of
       national and regional chain and nationally franchised fast food and
       family style restaurants, as well as other national and regional retail
       chains. The general partners of the Partnership are Captec Franchise
       Capital Corporation IV (the "Corporation"), a wholly owned subsidiary of
       Captec Financial Group, Inc. ("Captec"), and Patrick L. Beach, an
       individual, hereinafter collectively referred to as the Sponsor. Patrick
       L. Beach is also the Chairman of the Board of Directors, President and
       Chief Executive Officer of the Corporation and Captec. The general
       partners have each contributed $100 in cash to the Partnership as a
       capital contribution.

       The Partnership commenced a public offering of limited partnership
       interests ("Units") on December 23, 1996. A minimum of 2,000 Units and a
       maximum of 30,000 Units, priced at $1,000 per Unit, were offered on a
       "best efforts, part or none" basis. The Partnership broke impound on
       March 5, 1997, and the Partnership immediately commenced operations. At
       March 31, 1998, the Partnership had accepted subscriptions for 20,112
       Units.

       Allocation of profits, losses and cash distributions from operations and
       cash distributions from sale or refinancing are made pursuant to the
       terms of the Partnership Agreement. Profits and losses from operations
       are allocated among the limited partners based upon the number of Units
       owned. In no event will the General Partners be allocated less than one
       percent of profits and losses in any year.

       The balance sheet of the Partnership as of March 31, 1998 and the
       statements of operations and cash flows for the period ending March 31,
       1998 and 1997 have not been audited. In the opinion of the Management,
       these unaudited financial statements contain all adjustments necessary to
       present fairly the financial position and results of operations and cash
       flows of the Partnership for the periods then ended. Results of
       operations for the interim periods are not necessarily indicative of
       results expected for the full year.





                                      5
<PAGE>   8


                    CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                          NOTES TO FINANCIAL STATEMENTS



2.     LAND AND BUILDING SUBJECT TO OPERATING LEASES:

       The net investment in operating leases as of March 31, 1998 is comprised
       of the following:


<TABLE>
           <S>                                                                        <C>
           Land                                                                       $  2,676,582
           Building and improvements                                                     3,162,275
           Construction draws on properties                                                413,342
                                                                                      ------------  

                                                                                         6,252,199
           Less accumulated depreciation                                                   (52,752)
                                                                                      ------------  

           Total                                                                      $  6,199,447
                                                                                      ============

</TABLE>


3.     NET INVESTMENT IN FINANCING LEASES:

       The net investment in financing leases as of March 31, 1998 is comprised
       of the following:

<TABLE>
           <S>                                                                        <C>
           Minimum lease payments to be received                                      $  5,256,055
           Estimated residual value                                                        149,656
                                                                                      ------------

           Gross investment in financing leases                                          5,405,711
           Less unearned income                                                         (1,267,911)
                                                                                      ------------

           Net investment in financing leases                                         $  4,137,800
                                                                                      ============

</TABLE>


                                      6
<PAGE>   9


                    CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                         PART I - FINANCIAL INFORMATION


Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

        When used in this discussion, the words, "intends", "anticipates",
"expects", and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties which
could cause actual results to differ materially from those projected. Such risks
and uncertainties include the following: (i) a tenant may default in making rent
payments, (ii) a fire or other casualty may interrupt the cash flow stream from
a property, (iii) the properties may not be able to be leased at the assumed
rental rates, (iv) unexpected expenses may be incurred in the ownership of the
properties, and (v) properties may not be able to be sold at the presently
anticipated prices and times.

        As a result of these and other factors, the Partnership may experience
material fluctuations in future operating results on a quarterly or annual
basis, which could materially and adversely affect its business, financial
condition and operating results. These forward-looking statements speak only as
of the date hereof. The Partnership undertakes no obligation to publicly release
the results of any revisions to these forward-looking statements which may be
made to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.

LIQUIDITY AND CAPITAL COMMITMENTS:

        The Partnership commenced the offering (the "Offering") of up to 30,000
limited partnership units ("Units") registered under the Securities Act of 1933,
as amended, by means of a Registration Statement which was declared effective by
the Securities and Exchange Commission on December 23, 1996. The Offering will
terminate when the maximum number of Units are sold (30,000) or December 23,
1998, whichever occurs first.

        As of March 31, 1998, the Partnership had accepted subscriptions for
20,112 Units. After payment of $2,602,689 in offering expenses, net proceeds
available for investment from the sale of units totaled $17,495,415. As of March
31, 1998 the partnership has purchased six properties including one property
that is still in the construction phase totaling $6,252,199, and twelve
equipment packages totaling $4,478,961. At March 31, 1998 the Partnership had
approximately $6.8 of uninvested capital and approximately $7.0 million invested
in interest bearing cash accounts.

        The Partnership intends to utilize the proceeds of the offering to
acquire income-producing commercial properties and equipment leased primarily to
operators of national chain and nationally franchised fast-food, family style
and dinner house restaurants as well as other franchised or chain businesses or
retail concerns, pursuant to triple net leases or double net leases. As of March
31, 1998 the Partnership's investments were allocated approximately 58% to
properties and 42% to equipment. This allocation is expected to change as
additional properties and equipment are acquired. The final asset mix allocation
is expected to be a least 75%, but not more than 90% properties and up to 25%,
but not less than 10% equipment.

        Once the proceeds of the offering have been invested, the Partnership
expects to obtain leverage of up to 35% of the sum of gross proceeds and the
aggregate amount of Partnership

                                      7

<PAGE>   10

                    CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                         PART I - FINANCIAL INFORMATION


indebtedness secured by Partnership assets (approximately 40% of the aggregate
purchase prices of Partnership assets). Such leverage, when incurred, will
provide additional funds to be used by the Partnership to purchase properties
and equipment. Presently, the Partnership does not have a financing commitment
for this leverage.

        Once substantially all of the Partnership's funds have been applied as
intended, the Partnership expects to require limited amounts of liquid assets
since the form of lease which it intends to use for its properties and equipment
will require lessees to pay all taxes and assessments, maintenance and repairs
items (except, with respect to double net properties, costs associated with the
maintenance and repair of the exterior walls and roof of the property) and
insurance premiums, including casualty insurance. The general partners expect
that the cash flow to be generated by the Partnership's properties and equipment
will be adequate to pay operating expenses and provide distributions to Limited
Partners.

ACQUISITIONS

        During the three months ending March 31, 1998, the Partnership entered
into three equipment leases with restaurant operators. The Partnership acquired
the restaurant equipment related to these leases at a total cost, including
acquisition fees, of $1,427,462. The partnership also acquired one real estate
property under construction at an anticipated cost of $811,200. The Partnership
purchased the real estate property subject to a lease with an operator of an
Arby's franchise. The Partnership funded $413,342 through March 31, 1998 related
to this project.


RESULTS OF OPERATIONS:
      
        For the three months ended March 31, 1998 and 1997 the Partnership
earned revenues totaling approximately $347,000 and $23,000 respectively. Total
revenue for the period ended March 31, 1998 is comprised of $178,000 of rental
income, $90,000 of equipment lease finance income, and $80,000 of interest
income.  Operations commenced in March of 1997.

        For the three months ended March 31, 1998, the Partnership incurred
expenses totaling approximately $48,000, comprised of general and administrative
expenses and depreciation as compared to approximately $3,000 for the three
months ended March 31, 1997.

        As a result of the above the Partnership earned net income of
approximately $300,000 for the three months ended March 31, 1998. Based upon the
results of operations for the three month period ended March 31, 1998, the
Partnership announced distributions totaling $437,001, of which $364,185 was
distributed to its limited partners on April 15, 1998 and the remaining $72,816
will be distributed to those limited partners who elected to receive
distributions on a monthly basis on May 15, 1998 and June 15, 1998.



                                      8

<PAGE>   11



                    CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                           PART II - OTHER INFORMATION

Item 1.    Legal Proceedings
           None
Item 2.    Changes in Securities
           None
Item 3.    Defaults Upon Senior Securities
           None
Item 4.    Submission of Matters to a Vote of Security Holders
           None
Item 5.    Other Information
           None
Item 6.    Exhibits and Reports on Form 8-K
           (a) The following exhibits are included herein or incorporated by
           reference:

<TABLE>
<CAPTION>
           Number          Exhibit
           ------          -------
           <S>             <C>

           4               Agreement  of  Limited  Partnership  of  Registrant.  (Incorporated  by  reference  from
                           Exhibit B of the final  Prospectus  dated December 23, 1996, as  supplemented  and filed
                           with the Securities and Exchange Commission, S. E. C. File No. 333-9371)

           27              Financial Data Schedule


</TABLE>



                                      9

<PAGE>   12


                                   SIGNATURES



         Pursuant to the requirements 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.

                           By:      Captec Franchise Capital Corporation IV
                                    Managing General Partner of
                                    Captec Franchise Capital Partners L.P. IV



                           By:      /w/ W. Ross Martin   
                                    -------------------------------------------
                                    W. Ross Martin
                                    Chief Financial Officer and Vice President,
                                    a duly authorized officer

                           Date:    May 15, 1998




                                      10
<PAGE>   13
                                Exhibit Index



<TABLE>
<CAPTION>

Exhibit No.                 Description
-----------                 -----------
<S>                         <C>
    27                      Financial Data Schedule 


</TABLE>