<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        JUNE 30, 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)

                               (734) 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


                                                                       
PART I   FINANCIAL INFORMATION                                           Page

Item 1.  Balance Sheets, June 30, 1998 and December 31,1997 ..............  1

         Statements of Operations for the three and six month periods
         ended June 30, 1998 and 1997 ....................................  2

         Statement of Changes in Partners' Capital for the six month 
         period ended June 30, 1998 ......................................  3

         Statements of Cash Flows for the six month periods
         ended June 30, 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................................................  9

SIGNATURES................................................................  10

                                       i

<PAGE>   3
                  CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                               BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                            JUNE 30,         DECEMBER 31,
                                                                              1998               1997
                                                                           ---------        -------------
                                                                          (Unaudited)
                                                  ASSETS
<S>                                                                        <C>                 <C>        
Cash and cash equivalents                                                  $  5,230,394        $ 5,008,194
Investment in property under leases:
   Operating leases, net                                                     12,302,168          5,805,870
   Financing leases, net                                                      5,471,575          2,838,663
Accounts receivable                                                              11,388              3,487
Unbilled rent                                                                    52,818             25,983
Due from related parties                                                        112,824             49,381
                                                                           ------------       ------------
    Total assets                                                           $ 23,181,167       $ 13,731,578
                                                                           ============       ============

                                     LIABILITIES & PARTNERS' CAPITAL
Liabilities:
   Accounts payable                                                            $ 36,595           $ 49,375
   Due to related parties                                                       162,006            129,683
                                                                           ------------       ------------
    Total liabilities                                                           198,601            179,058
                                                                           ------------       ------------
Partners' Capital:
Limited partners' capital accounts                                           22,970,219         13,547,060
General partners' capital accounts                                               12,347              5,460
                                                                           ------------       ------------
    Total partners' capital                                                  22,982,566         13,552,520
                                                                           ------------       ------------
    Total liabilities & partners' capital                                  $ 23,181,167       $ 13,731,578
                                                                           ============       ============
</TABLE>


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




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<PAGE>   4
                     CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                  Three months ended               Six months ended
                                                                       June 30,                         June 30,
                                                               ------------------------          ----------------------
                                                                      Unaudited                         Unaudited
                                                                  1998           1997               1998         1997
                                                                  ----           ----               ----         ----
<S>                                                            <C>             <C>               <C>           <C>     
Operating revenue:
   Rental income                                               $ 199,649       $ 27,925          $ 377,432     $ 34,026
   Finance income                                                125,545         38,908            215,867       45,394
                                                               ---------       --------          ---------     --------
              Total operating revenue                            325,194         66,833            593,299       79,420
                                                               ---------       --------          ---------     --------
Operating costs and expenses:
   Depreciation                                                   19,764          3,992             39,528        3,992
   General and administrative                                     18,093          4,059             45,862        6,876
                                                               ---------       --------          ---------     --------
              Total operating costs and expenses                  37,857          8,051             85,390       10,868
                                                               ---------       --------          ---------     --------
              Income from operations                             287,337         58,782            507,909       68,552
                                                               ---------       --------          ---------     --------
Other income:
   Interest income                                               100,985         21,473            180,804       31,934
   Other                                                              35             -                  35           -
                                                               ---------       --------          ---------     --------
              Total other income                                 101,020         21,473            180,839       31,934
                                                               ---------       --------          ---------     --------
Net income                                                       388,357         80,255            688,748      100,486

Net income allocable to general partners                           3,884            802              6,887        1,005
                                                               ---------       --------          ---------     --------
Net income allocable to limited partners                       $ 384,473       $ 79,453          $ 681,861     $ 99,481
                                                               =========       ========          =========     ========
Net income per limited partnership unit                        $   16.51       $  18.62          $   33.40     $  34.46
                                                               =========       ========          =========     ========
Weighted average number of limited partnership
   units outstanding                                              23,282          4,268             20,413        2,887
                                                               =========       ========          =========     ========
</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 six months ended June 30, 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 10,947 limited partnership
units, net                                       10,947        9,528,299              -          9,528,299

Distributions - ($38.76 per unit)                     -         (787,001)             -           (787,001)

Net income                                           -           681,861          6,887            688,748
                                                -------     ------------       --------       ------------
Balance, June 30, 1998                           26,339     $ 22,970,219       $ 12,347       $ 22,982,566
                                                =======     ============       ========       ============
</TABLE>


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




                                      3

<PAGE>   6
                  CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
                           STATEMENTS OF CASH FLOWS
               for the six months ended June 30, 1998 and 1997
                                 (Unaudited)

<TABLE>
<CAPTION>
                                                                              1998               1997
                                                                              ----               ----
<S>                                                                         <C>                <C>      
Cash flows from operating activities:
   Net Income                                                                $  688,748         $  100,486
   Adjustments to net income:
        Depreciation                                                             39,528              3,992
        Increase in unbilled rent                                               (26,835)            (2,620)
        Increase in accounts receivable                                          (7,901)           (14,748)
        Decrease (increase) in  accounts payable                                (12,780)            24,004
                                                                             ----------         ----------
Net cash provided by operating activities                                       680,760            111,114
                                                                             ----------         ----------
Cash flows from investing activities:
   Purchase of real estate for operating leases                              (6,535,831)        (1,002,560)
   Purchase of equipment for financing leases                                (2,921,877)        (1,694,979)
   Reduction of net investment in financing leases                              288,970             53,199
                                                                             ----------         ----------
Net cash used in investing activities                                        (9,168,738)        (2,644,340)
                                                                             ----------         ----------
Cash flows from financing activities:
   Increase in due from related parties                                         (63,443)           (12,844)
   Increase in due to related parties                                            32,323            131,425
   Issuance of limited partnership units                                     10,939,743          6,212,886
   Offering costs                                                            (1,411,444)          (803,066)
   Distributions to limited partners                                           (787,001)           (29,900)
                                                                             ----------         ----------

Net cash provided by financing activities                                     8,710,178          5,498,501
                                                                             ----------         ----------

Net increase in cash and cash equivalents                                       222,200          2,965,275

Cash and cash equivalents, beginning of period                                5,008,194                 -
                                                                             ----------                 -
Cash and cash equivalents, end of period                                     $5,230,394         $2,965,275
                                                                             ==========         ==========
</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 June 30,
    1998, the Partnership had accepted subscriptions for 26,339 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 June 30, 1998 and the statements
    of operations and cash flows for the period ending June 30, 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 June 30, 1998 is comprised of
   the following:


<TABLE>
                 <S>                               <C>
                 Land                              $ 6,379,516
                 Building and improvements           5,569,341
                 Construction draws on properties      425,827
                                                   -----------

                                                    12,374,684
                 Less accumulated depreciation         (72,516)
                                                   -----------

                 Total                             $12,302,168
                                                   ===========
</TABLE>


3. NET INVESTMENT IN FINANCING LEASES:

   The net investment in financing leases as of June 30, 1998 is comprised of
   the following:


<TABLE>
              <S>                                    <C>
              Minimum lease payments to be received  $ 6,810,228
              Estimated residual value                   232,697
                                                     -----------

              Gross investment in financing leases     7,042,925
              Less unearned income                    (1,571,350)
                                                     -----------

              Net investment in financing leases     $ 5,471,575
                                                     ===========
</TABLE>


4. SUBSEQUENT EVENT:

   In August, 1998 the general partnership interest of the Partnership was
   acquired by Captec Net Lease Realty, Inc., an affiliate of Captec, for
   $2,912,000.



                                       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 June 30, 1998, the Partnership had accepted subscriptions for 26,339
Units. After payment of $3,407,269 in offering expenses, net proceeds available
for investment from the sale of units totaled $22,913,376.  As of June 30, 1998
the partnership has purchased nine properties including one property that is
still in the construction phase totaling $12,374,688, and fifteen equipment
packages totaling $5,973,376.  At June 30, 1998 the Partnership had
approximately $4,565,312 of uninvested capital and approximately $5.0 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
June 30, 1998 the Partnership's investments were allocated approximately 67% to
properties and 33% 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 six months ending June 30, 1998, the Partnership entered into
three real estate leases and five equipment leases with restaurant operators.
The Partnership acquired the properties subject to real estate leases at a
total cost, including acquisition fees, of $6,110,000, and the equipment
related to direct financing leases at a total cost, including acquisition fees,
of $2,921,877.  The partnership also acquired one real estate property under
construction at an anticipated cost of $811,200.  The Partnership funded
$425,831 through June 30, 1998 related to this project.


RESULTS OF OPERATIONS.
     For the six months ended June 30, 1998, the Partnership earned revenues of
approximately $774,000 as compared to $111,000 for the six months ended June
30, 1997.  Total revenue for the period ended June 30, 1998 is comprised of
$377,000 of rental income, $216,000 of equipment lease finance income, and
$181,000 of interest income.  The increase in revenues in 1998 resulted from
the acquisition of the properties noted above and the benefit of a full period
of revenue from properties acquired and leased in preceding periods.
Operations commenced in March of 1997.

     For the six months ended June 30, 1998, the Partnership incurred expenses
of approximately $85,000 as compared to $11,000 for the six months ended June
30, 1997. Total expenses for the period ended June 30, 1998 is comprised of
$39,000 of depreciation expense and $46,000 of general and administrative
expenses.

     As a result of the above the Partnership earned net income of
approximately $689,000 for the six months ended June 30, 1998.

DISTRIBUTIONS.
     The Partnership declared second quarter distributions totaling $582,000,
of which $490,668 was distributed to its limited partners on July 15, 1998 and
the remaining $91,332 will be distributed to those limited partners who elected
to receive distributions on a monthly basis.



                                       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:

        Number    Exhibit

          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






                                       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:   August 14, 1998
                                       



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