FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                    (X) QUARTERLY REPORT PURSUANT TO SECTION
                         13 OR 15 (d) OF THE SECURITIES
                              EXCHANGE ACT of 1934

               For the quarterly period ended September 30, 2004
   --------------------------------------------------------------------------

                                       OR

             ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT of 1934

For the transition period from ______________________ to _______________________


                             Commission file number
                                     0-21560
                     ---------------------------------------


                            CNL Income Fund XI, Ltd.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


            Florida                                        59-3078854
---------------------------------             ----------------------------------
(State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                        Identification No.)


               450 South Orange Avenue
                  Orlando, Florida                          32801
----------------------------------------      ----------------------------------
(Address of principal executive offices)                  (Zip Code)


Registrant's telephone number
(including area code)                                   (407) 540-2000
                                              ----------------------------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by  Sections  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  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act): Yes___ No X


<PAGE>


                                    CONTENTS





                                                                           Page
Part I.

     Item 1.      Financial Statements:

                      Condensed Balance Sheets                             1

                      Condensed Statements of Income                       2

                      Condensed Statements of Partners' Capital            3

                      Condensed Statements of Cash Flows                   4

                      Notes to Condensed Financial Statements              5-6

     Item 2.      Management's Discussion and Analysis of Financial
                      Condition and Results of Operations                  7-10

     Item 3.      Quantitative and Qualitative Disclosures About
                      Market Risk                                          10

     Item 4.      Controls and Procedures                                  10

Part II.

     Other Information                                                     11-12



<PAGE>


                            CNL INCOME FUND XI, LTD.
                         (A Florida Limited Partnership)
                            CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
<S><C>

                                                                              September 30,             December 31,
                                                                                   2004                     2003
                                                                            -------------------      -------------------
                               ASSETS

   Real estate properties with operating leases, net                        $       20,107,217       $       20,452,460
   Net investment in direct financing leases                                         3,667,853                3,768,877
   Real estate held for sale                                                           671,330                3,101,531
   Investment in joint ventures                                                      4,001,893                3,885,112
   Cash and cash equivalents                                                         4,495,072                1,682,358
   Receivables, less allowance for doubtful accounts
       of $163,523 and $131,618, respectively                                            1,743                  164,328
   Due from related parties                                                                240                       --
   Accrued rental income                                                             1,312,198                1,351,304
   Other assets                                                                        143,587                  161,335
                                                                            -------------------      -------------------

                                                                            $       34,401,133       $       34,567,305
                                                                            ===================      ===================

                  LIABILITIES AND PARTNERS' CAPITAL

   Accounts payable and accrued expenses                                    $           64,718       $            8,301
   Real estate taxes payable                                                            35,898                   25,656
   Distributions payable                                                               875,006                  875,006
   Due to related parties                                                               34,885                   16,161
   Rents paid in advance and deposits                                                   92,050                  196,648
                                                                            -------------------      -------------------
       Total liabilities                                                             1,102,557                1,121,772

   Minority interests                                                                1,188,683                1,209,913

   Commitment (Note 4)

   Partners' capital                                                                32,109,893               32,235,620
                                                                            -------------------      -------------------

                                                                            $       34,401,133       $       34,567,305
                                                                            ===================      ===================
</TABLE>

           See accompanying notes to condensed financial statements.

                                        1


<PAGE>


                            CNL INCOME FUND XI, LTD.
                         (A Florida Limited Partnership)
                         CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
<S><C>

                                                            Quarter Ended                    Nine Months Ended
                                                            September 30,                      September 30,
                                                        2004             2003              2004              2003
                                                    -------------    --------------  -----------------  ---------------
Revenues:
    Rental income from operating leases             $    641,156     $     639,236   $      1,893,557   $    1,852,468
    Earned income from direct financing leases           131,496           123,727            397,326          409,962
    Contingent rental income                              26,212            15,933             65,573           18,764
    Interest and other income                             11,897             1,019             28,549            9,329
                                                    -------------    --------------  -----------------  ---------------
                                                         810,761           779,915          2,385,005        2,290,523
                                                    -------------    --------------  -----------------  ---------------

Expenses:
    General operating and administrative                 108,920            56,961            295,435          195,310
    Property related                                      10,934            18,834             31,931           36,401
    Management fees to related party                       9,246             9,118             27,781           28,608
    State and other taxes                                     --             1,466             67,564           52,144
    Depreciation and amortization                        119,509           114,939            356,235          336,489
    Provision for write-down of assets                        --                --                 --           67,694
                                                    -------------    --------------  -----------------  ---------------
                                                         248,609           201,318            778,946          716,646
                                                    -------------    --------------  -----------------  ---------------
Income before minority interests and equity in
    earnings of unconsolidated joint ventures            562,152           578,597          1,606,059        1,573,877

Minority interests                                       (35,609)          (27,657)           (92,269)         (82,507)

Equity in earnings of unconsolidated joint
    ventures                                             100,439            75,091            272,173          225,977
                                                    -------------    --------------  -----------------  ---------------

Income from continuing operations                        626,982           626,031          1,785,963        1,717,347
                                                    -------------    --------------  -----------------  ---------------

Discontinued operations:
    Income from discontinued operations                   20,933            36,528             95,355          217,091
    Gain on disposal of discontinued operations               --                --            617,973          377,961
                                                    -------------    --------------  -----------------  ---------------
                                                          20,933            36,258            713,328          595,052
                                                    -------------    --------------  -----------------  ---------------

Net income                                          $    647,915     $     662,559   $      2,499,291   $    2,312,399
                                                    =============    ==============  =================  ===============

Income per limited partner unit:
    Continuing operations                           $       0.15     $        0.16   $           0.44   $         0.43
    Discontinued operations                                 0.01              0.01               0.18             0.15
                                                    -------------    --------------  -----------------  ---------------
                                                    $       0.16     $        0.17   $           0.62   $         0.58
                                                    =============    ==============  =================  ===============
Weighted average number of limited partner
    units outstanding                                  4,000,000         4,000,000          4,000,000        4,000,000
                                                    =============    ==============  =================  ===============
</TABLE>

           See accompanying notes to condensed financial statements.

                                        2

<PAGE>


                            CNL INCOME FUND XI, LTD.
                         (A Florida Limited Partnership)
                    CONDENSED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
<S><C>

                                                                          Nine Months Ended          Year Ended
                                                                            September 30,           December 31,
                                                                                 2004                   2003
                                                                         ---------------------    ------------------

General partners:
    Beginning balance                                                    $            245,465     $         242,465
    Net income                                                                             --                    --
                                                                         ---------------------    ------------------
                                                                                      242,465               242,465
                                                                         ---------------------    ------------------

Limited partners:
    Beginning balance                                                              31,993,155            32,292,730
    Net income                                                                      2,499,291             3,200,449
    Distributions ($0.66 and $0.88 per
       limited partner unit, respectively)                                         (2,625,018)           (3,500,024)
                                                                         ---------------------    ------------------
                                                                                   31,867,428            31,993,155
                                                                         ---------------------    ------------------

Total partners' capital                                                  $         32,109,893     $      32,235,620
                                                                         =====================    ==================
</TABLE>

           See accompanying notes to condensed financial statements.

                                        3


<PAGE>


                            CNL INCOME FUND XI, LTD.
                         (A Florida Limited Partnership)
                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
<S><C>
                                                                                       Nine Months Ended
                                                                                         September 30,
                                                                                    2004               2003
                                                                               ---------------    ---------------


Net cash provided by operating activities                                      $    2,510,052     $    2,925,434
                                                                               ---------------    ---------------

Cash flows from investing activities:
    Proceeds from sale of assets                                                    3,041,179            931,858
                                                                               ---------------    ---------------
          Net cash provided by investing activities                                 3,041,179            931,858
                                                                               ---------------    ---------------

Cash flows from financing activities:
    Distributions to limited partners                                              (2,625,018)        (2,825,018)
    Distributions to holders of minority interests                                   (113,499)           (96,080)
                                                                               ---------------    ---------------
          Net cash used in financing activities                                    (2,738,517)        (2,921,098)
                                                                               ---------------    ---------------

Net increase in cash and cash equivalents                                           2,812,714            936,194

Cash and cash equivalents at beginning of period                                    1,682,358          1,777,200
                                                                               ---------------    ---------------

Cash and cash equivalents at end of period                                     $    4,495,072     $    2,713,394
                                                                               ===============    ===============

Supplemental schedule of non-cash financing activities:

    Distributions declared and unpaid at end of
       period                                                                  $      875,006     $      875,006
                                                                               ===============    ===============
</TABLE>

           See accompanying notes to condensed financial statements.

                                        4


<PAGE>


                            CNL INCOME FUND XI, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
           Quarters and Nine Months Ended September 30, 2004 and 2003


1.       Basis of Presentation

         The accompanying  unaudited  condensed  financial  statements have been
         prepared in accordance  with the  instructions  to Form 10-Q and do not
         include  all  of the  information  and  note  disclosures  required  by
         generally  accepted  accounting  principles.  The financial  statements
         reflect all adjustments,  consisting of normal  recurring  adjustments,
         which are, in the opinion of the general partners, necessary for a fair
         statement of the results for the interim periods  presented.  Operating
         results for the quarter and nine months  ended  September  30, 2004 may
         not be  indicative  of the results  that may be  expected  for the year
         ending December 31, 2004. Amounts as of December 31, 2003,  included in
         the  financial  statements,  have been derived  from audited  financial
         statements as of that date.

         These unaudited financial statements should be read in conjunction with
         the financial statements and notes thereto included in Form 10-K of CNL
         Income Fund XI, Ltd. (the  "Partnership")  for the year ended  December
         31, 2003.

         The Partnership  accounts for its 85% interest in Denver Joint Venture,
         its 77.33% interest in CNL/Airport  Joint Venture,  its 62.16% interest
         in Ashland Joint  Venture,  and its 76.60%  interest in Des Moines Real
         Estate Joint Venture using the consolidation method. Minority interests
         represent the minority joint venture partners'  proportionate  share of
         the equity in the joint ventures. All significant intercompany accounts
         and transactions have been eliminated.

         In December 2003,  the Financial  Accounting  Standards  Board issued a
         revision to FASB  Interpretation  No. 46 (originally  issued in January
         2003)  ("FIN  46R"),  "Consolidation  of  Variable  Interest  Entities"
         requiring  existing  unconsolidated  variable  interest  entities to be
         consolidated by their primary beneficiaries. The primary beneficiary of
         a variable  interest entity is the party that absorbs a majority of the
         entity's expected losses,  receives a majority of its expected residual
         returns, or both, as a result of holding variable interests,  which are
         the ownership,  contractual,  or other pecuniary interests in an entity
         that change with  changes in the fair value of the  entity's net assets
         excluding  variable  interests.  Prior to FIN 46R, a company  generally
         included  another  entity  in  its  financial  statements  only  if  it
         controlled the entity through voting interests.  Application of FIN 46R
         is  required  in  financial  statements  of public  entities  that have
         interests in variable  interest entities for periods ending after March
         15,  2004.  The  Partnership  adopted FIN 46R during the quarter  ended
         March 31,  2004,  which  resulted in the  consolidation  of  previously
         unconsolidated  joint  ventures,  which  were  accounted  for under the
         equity method. FIN 46R does not require, but does permit restatement of
         previously  issued financial  statements.  The Partnership has restated
         prior year's financial statements to maintain comparability between the
         periods presented.  Such  consolidation  resulted in certain assets and
         minority interests,  and revenues and expenses, of these entities being
         reported on a gross basis in the  Partnership's  financial  statements;
         however,  these  restatements had no effect on partners' capital or net
         income.

2.       Discontinued Operations

         During 2003, the  Partnership  identified four properties for sale that
         were  classified  as  discontinued   operations  in  the   accompanying
         financial  statements.  The  Partnership  sold the property in Abilene,
         Texas,  during  2003.  During the  quarter  ended March 31,  2004,  the
         Partnership sold its property in Lynchburg,  Virginia to the tenant and
         sold its  Properties  in  Cullman,  Alabama,  and  Huntersville,  North
         Carolina,  to separate third parties,  and received aggregate net sales
         proceeds of approximately  $3,041,000,  resulting in a gain on disposal
         of discontinued  operations of approximately  $618,000. The Partnership
         recorded  a  provision  for  write-down  of assets in a  previous  year
         related to the property in Lynchburg, Virginia.
                                       5
<PAGE>

                            CNL INCOME FUND XI, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
           Quarters and Nine Months Ended September 30, 2004 and 2003


2.       Discontinued Operations - Continued

         In May  2004,  the  Partnership  identified  for sale the  property  in
         Dothan,  Alabama  and  reclassified  the asset to real  estate held for
         sale.  Because the current  carrying  amount of this asset is less than
         its fair value less cost to sell,  no provision  for the  write-down of
         assets was recorded.

         The  following  presents  the  operating  results  of the  discontinued
         operations for these properties:
<TABLE>
<CAPTION>
<S><C>
                                                   Quarter Ended
                                                                                    Nine Months Ended
                                                   September 30,                      September 30,
                                               2004             2003             2004              2003
                                           --------------   --------------   --------------    --------------

              Rental revenues              $      21,183    $      83,981    $      95,605     $     269,229
              Expenses                              (250)          (6,298)            (250)          (10,983)
              Provision for the
                 writedown of assets                  --          (41,155)              --           (41,155)
                                           --------------   --------------   --------------    --------------
              Income from discontinued
                 operations                $      20,933    $      36,528    $      95,355     $     217,091
                                           ==============   ==============   ==============    ==============
</TABLE>


3.       Merger Transaction

         On August 9, 2004, the Partnership entered into a definitive  Agreement
         and Plan of Merger  pursuant  to which the  Partnership  will be merged
         with a subsidiary of U.S. Restaurant Properties,  Inc. (NYSE: USV). The
         merger is one of multiple concurrent  transactions pursuant to which 17
         other  affiliated  limited  partnerships  also  will be  merged  with a
         subsidiary  of  U.S.  Restaurant  Properties,  Inc.  and in  which  CNL
         Restaurant  Properties,  Inc., an  affiliate,  also will be merged with
         U.S.  Restaurant  Properties,  Inc.  CNL  Restaurant  Properties,  Inc.
         currently  provides  property  management  and  other  services  to the
         Partnership.  The merger of the  Partnership  (and each of the 17 other
         affiliated mergers) is subject to certain conditions including approval
         by a majority of the limited partners, consummation of a minimum number
         of limited partnership mergers representing at least 75.0% in value (as
         measured  by the  value of the  merger  consideration)  of all  limited
         partnerships,  consummation  of  the  merger  between  U.S.  Restaurant
         Properties,  Inc. and CNL Restaurant Properties,  Inc., approval of the
         shareholders of U.S. Restaurant  Properties,  Inc., and availability of
         financing.  The  transaction is expected to be consummated in the first
         quarter of 2005.

         Under  the  terms  of  the  merger  agreement,  if the  transaction  is
         approved,  the limited  partners  will receive total  consideration  of
         approximately  $39.66  million,   consisting  of  approximately  $33.16
         million in cash and  approximately  $6.50  million  in U.S.  Restaurant
         Properties, Inc. Series A Convertible Preferred Stock that is listed on
         the New York Stock  Exchange.  The general  partners will receive total
         consideration  of  approximately  $197,000  consisting of approximately
         $165,000 in cash and approximately $32,000 in preferred stock.


4.       Commitment

         In September  2004,  the  Partnership  entered into an agreement with a
         third party to sell the property in Dothan, Alabama.

                                       6
<PAGE>



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         CNL Income Fund XI, Ltd. (the  "Partnership,"  which may be referred to
as "we," "us," or "our") is a Florida limited  partnership that was organized on
August 20, 1991 to acquire for cash,  either  directly or through  joint venture
arrangements,  both  newly  constructed  and  existing  restaurants,  as well as
properties upon which  restaurants  were to be constructed  (the  "Properties"),
which are leased  primarily to operators of national and regional  fast-food and
family-style  restaurant chains. The leases are, in general,  triple-net leases,
with the lessees  responsible for all repairs and  maintenance,  property taxes,
insurance, and utilities. We owned 28 and 31 Properties directly as of September
30,  2004  and  2003,  respectively.  We also  owned  ten and  eight  Properties
indirectly  through  joint  venture  or  tenancy  in common  arrangements  as of
September 30, 2004 and 2003, respectively.

Merger Transaction

         The general  partners  believe their  primary  objective is to maintain
current operations with restaurant operators as successfully as possible,  while
evaluating  strategic  alternatives,  including  alternatives  that may  provide
liquidity to the limited  partners.  Real estate  markets are strong  throughout
much of the nation,  and the performance of restaurants  has generally  improved
after several  challenging years. As a result, the general partners believe that
this is an attractive  period for a strategic event to monetize the interests of
the limited partners.

         In furtherance of this, on August 9, 2004, we entered into a definitive
Agreement  and  Plan of  Merger  pursuant  to  which  we will be  merged  with a
subsidiary of U.S. Restaurant Properties, Inc. (NYSE: USV). The merger is one of
multiple concurrent  transactions  pursuant to which 17 other affiliated limited
partnerships  also  will  be  merged  with  a  subsidiary  of  U.S.   Restaurant
Properties,  Inc. and in which CNL  Restaurant  Properties,  Inc., an affiliate,
also will be merged with U.S. Restaurant  Properties,  Inc. Our merger (and each
of the 17 other affiliated  mergers) is subject to certain conditions  including
approval by a majority of the limited partners, consummation of a minimum number
of limited partnership mergers representing at least 75.0% in value (as measured
by  the  value  of  the  merger  consideration)  of  all  limited  partnerships,
consummation  of the merger between U. S.  Restaurant  Properties,  Inc. and CNL
Restaurant  Properties,  Inc.,  approval of the shareholders of U.S.  Restaurant
Properties,  Inc., and availability of financing.  U.S.  Restaurant  Properties,
Inc.  is a real  estate  investment  trust  (REIT)  that  focuses  primarily  on
acquiring, owning and leasing restaurant properties. The transaction is expected
to be consummated in the first quarter of 2005.

         Under  the  terms  of  the  merger  agreement,  if the  transaction  is
approved, our limited partners will receive total consideration of approximately
$39.66  million,   consisting  of  approximately  $33.16  million  in  cash  and
approximately  $6.50  million  in U.S.  Restaurant  Properties,  Inc.  Series  A
Convertible  Preferred Stock that is listed on the New York Stock Exchange.  The
general  partners will receive total  consideration  of  approximately  $197,000
consisting  of  approximately  $165,000  in cash and  approximately  $32,000  in
preferred stock.

         We received an opinion from Wachovia  Capital  Markets,  LLC that as of
August 9, 2004 the merger  consideration  to be  received  by the holders of our
general and limited  partnership  interests is fair,  from a financial  point of
view, to such holders.

         As reflected  above, the  contemplated  transactions  are complex,  and
contingent upon certain conditions. The restaurant marketplace,  the real estate
industry,  and the equities markets, all individually or taken as a whole, could
impact the  economics of this  transaction.  As a result,  there is no assurance
that we will be successful in completing the contemplated transaction.

Capital Resources

         Net cash provided by operating activities was $2,510,052 and $2,925,434
for the nine  months  ended  September  30,  2004 and  2003,  respectively.  The
decrease in net cash  provided by  operating  activities  during the nine months
ended September 30, 2004, was a result of changes in our working  capital,  such
as the timing of transactions  relating to the collection of receivables and the
payment of  expenses,  and  changes in income and  expenses,  such as changes in
rental revenues and changes in operating and property related expenses.

                                       7
<PAGE>

         Other sources and uses of cash  included the following  during the nine
months ended September 30, 2004.

         In 2004, we sold our Property in Lynchburg,  Virginia to the tenant and
sold our Properties in Cullman,  Alabama, and Huntersville,  North Carolina,  to
separate   third  parties,   and  received   aggregate  net  sales  proceeds  of
approximately  $3,041,000  resulting  in a  gain  on  disposal  of  discontinued
operations of approximately  $618,000. We recorded a provision for write-down of
assets in a previous  year related to the Property in Lynchburg,  Virginia.  The
general  partners  intend to  reinvest  the net  sales  proceeds  in  additional
Properties or to pay liabilities.

         Cash and cash  equivalents  increased to  $4,495,072  at September  30,
2004, from  $1,682,358 at December 31, 2003. At September 30, 2004,  these funds
were held in demand deposit  accounts at a commercial  bank and a certificate of
deposit  with a 90-day or less  maturity  date.  The  increase  in cash and cash
equivalents  at September  30,  2004,  was  primarily a result of holding  sales
proceeds from the current year sales. The funds remaining at September 30, 2004,
after the payment of distributions and other liabilities,  may be used to invest
in additional Properties and to meet our working capital needs.

Short-Term Liquidity

         Our  investment  strategy of acquiring  Properties for cash and leasing
them under triple-net leases to operators who generally meet specified financial
standards  minimizes our operating  expenses.  The general partners believe that
the leases will generate net cash flow in excess of operating expenses.

         Our  short-term   liquidity   requirements  consist  primarily  of  our
operating expenses.

         The general  partners have the right,  but not the obligation,  to make
additional capital  contributions if they deem it appropriate in connection with
our operations.

         We  generally  distribute  cash  from  operations  remaining  after the
payment of operating expenses, to the extent that the general partners determine
that such funds are available for distribution. Based on current and anticipated
future cash from  operations,  we declared  distributions to limited partners of
$2,625,018  for  each of the  nine  months  ended  September  30,  2004 and 2003
($875,006  for each of the quarters  ended  September  30, 2004 and 2003).  This
represents  distributions  of $0.66 per unit for each of the nine  months  ended
September  30,  2004  and  2003  ($0.22  for  each   applicable   quarter).   No
distributions  were made to the general  partners  for  quarters and nine months
ended  September  30,  2004 and 2003.  No  amounts  distributed  to the  limited
partners for the nine months ended  September  30, 2004 and 2003 are required to
be or have been treated as a return of capital for purposes of  calculating  the
limited partners' return on their adjusted capital  contributions.  We intend to
continue to make  distributions  of cash to the limited  partners on a quarterly
basis.

         Total  liabilities,   including  distributions  payable,  decreased  to
$1,102,557  at September  30, 2004 from  $1,121,772  at December  31, 2003.  The
decrease in total liabilities was due to a decrease in rents paid in advance and
deposits and was partially offset by an increase in accounts payable and accrued
expenses and amounts due to related  parties.  The general partners believe that
we have sufficient cash on hand to meet our current working capital needs.

Contractual Obligations, Contingent Liabilities, and Commitments

         In September  2004, we entered into an agreement  with a third party to
sell the Property in Dothan,  Alabama.  As of November 5, 2004, the sale had not
occurred.

Long Term Liquidity

         We have no long-term debt or other long-term liquidity requirements.
                                       8
<PAGE>

Results of Operations

         Rental revenues from continuing operations were $2,290,883 for the nine
months ended  September 30, 2004, as compared to $2,262,430  for the same period
in 2003, of which $772,652 and $762,963 were earned during the third quarters of
2004 and 2003,  respectively.  Rental revenues from  continuing  operations were
higher  during the quarter and nine months ended  September  30, 2004 because we
provided a rent reduction to the tenant of the Property in Yelm, Washington when
the  tenant  experienced  financial  difficulties  in 2002.  In March  2003,  we
executed a termination of the tenant's lease rights,  and the tenant surrendered
the premises.  The restaurant  operated under a temporary lease agreement with a
new  tenant  until  October  2003 when we  entered  into a new lease  with terms
substantially the same as our other leases.  The increase during the nine months
ended  September 30, 2004 was partially  offset due to the fact that during 2003
we stopped  recording rental revenues  relating to the Property in Dayton,  Ohio
when the tenant  experienced  financial  difficulties.  During  March 2004,  the
tenant  vacated the  Property.  In July 2004, we entered into a new lease with a
new tenant for the Property. We began receiving rental payments in August 2004.

         In April 2003, a tenant, The Melodie Corporation, filed for bankruptcy.
The tenant  has  neither  affirmed  nor  rejected  the one lease it has with us.
Subsequent  to the tenant filing for  bankruptcy,  we have  continued  receiving
rental payments  relating to this lease.  The lost revenues that would result if
the lease  were to be  rejected  will have an adverse  effect on the  results of
operations if we are not able to re-lease the Property in a timely manner.

         During the nine months  ended  September  30, 2004 and 2003,  we earned
$65,573  and  $18,764,  respectively,  in  contingent  rental  income  from  our
Properties and our  consolidated  joint  ventures,  of which $26,212 and $15,933
were  earned  during  the third  quarters  of 2004 and 2003,  respectively.  The
increase  in  contingent  rental  income  during  2004 was due to an increase in
reported gross sales of certain restaurants with leases that require the payment
of contingent rental income.

         During the nine months  ended  September  30, 2004 and 2003,  we earned
$272,173  and  $225,977,  respectively,  attributable  to net  income  earned by
unconsolidated joint ventures,  of which $100,439 and $75,091 were earned during
the third  quarters  of 2004 and 2003,  respectively.  The  increase  in 2004 is
primarily  the  result  of an  investment  in an  additional  tenancy  in common
relationship  in  November  2003.  Rental  payments  relating  to this  Property
commenced at the time of acquisition.

         Operating  expenses,   including   depreciation  and  amortization  and
provision for write-down of assets,  were $778,946 and $716,646  during the nine
months ended  September 30, 2004 and 2003,  respectively,  of which $248,609 and
$201,318 were incurred during the third quarters of 2004 and 2003, respectively.
The  increase in  operating  expenses  during the quarter and nine months  ended
September  30, 2004 was  primarily  due to an increase in general  operating and
administrative expenses including,  primarily, legal fees incurred in connection
with the merger  transaction  described  above. The increase for the nine months
ended  September  30,  2004 was also due to an  increase  in state  tax  expense
relating to several states in which we conduct  business,  partially offset by a
provision for the write-down of assets recorded in 2003.

         We recognized income from discontinued operations (rental revenues less
property  related  expenses) of $217,091 and $36,528  during the nine months and
quarter ended  September 30, 2003,  respectively,  relating to the Properties in
Abilene, Texas;  Lynchburg,  Virginia;  Cullman,  Alabama;  Huntersville,  North
Carolina;  and Dothan,  Alabama. We sold the Property in Abilene, Texas in March
2003  resulting  in a  gain  on  the  disposal  of  discontinued  operations  of
approximately  $378,000.  During the nine months and quarter ended September 30,
2004, we recognized income from discontinued  operations of $95,355 and $20,933,
respectively,  relating  to the  Properties  in  Lynchburg,  Virginia;  Cullman,
Alabama; Huntersville, North Carolina; and Dothan, Alabama. In 2004, we sold the
Property in Lynchburg,  Virginia,  to the tenant and the  Properties in Cullman,
Alabama, and Huntersville,  North Carolina,  to separate third parties resulting
in a gain on disposal of discontinued  operations of approximately  $618,000. As
of  November  5, 2004,  the sale of the  Property  in Dothan,  Alabama,  had not
occurred.
                                       9
<PAGE>

         In December 2003,  the Financial  Accounting  Standards  Board issued a
revision to FASB Interpretation No. 46 (originally issued in January 2003) ("FIN
46R"),   "Consolidation  of  Variable  Interest  Entities,"  requiring  existing
unconsolidated  variable  interest  entities to be consolidated by their primary
beneficiaries.  The primary  beneficiary  of a variable  interest  entity is the
party that  absorbs a  majority  of the  entity's  expected  losses,  receives a
majority  of its  expected  residual  returns,  or both,  as a result of holding
variable  interests,  which are the ownership,  contractual,  or other pecuniary
interests  in an  entity  that  change  with  changes  in the fair  value of the
entity's net assets excluding  variable  interests.  Prior to FIN 46R, a company
generally  included  another  entity  in its  financial  statements  only  if it
controlled  the  entity  through  voting  interests.  Application  of FIN 46R is
required in  financial  statements  of public  entities  that have  interests in
variable  interest  entities for periods ending after March 15, 2004. We adopted
FIN 46R  during  the  quarter  ended  March  31,  2004,  which  resulted  in the
consolidation of previously unconsolidated joint ventures, Ashland Joint Venture
and Des Moines Real Estate Joint Venture, both of which were accounted for under
the equity  method.  FIN 46R does not require,  but does permit  restatement  of
previously  issued  financial  statements.  We restated  prior year's  financial
statements  to  maintain  comparability  between  the  periods  presented.  Such
consolidation  resulted in certain assets and minority  interests,  and revenues
and expenses, of these entities being reported on a gross basis in our financial
statements;  however,  these  restatements had no effect on partner's capital or
net income.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Not applicable.


ITEM 4.  CONTROLS AND PROCEDURES

         The  general  partners  maintain  a  set  of  disclosure  controls  and
procedures  designed to ensure that information  required to be disclosed in our
filings  under  the  Securities  Exchange  Act of 1934 is  recorded,  processed,
summarized and reported within the time periods  specified in the Securities and
Exchange  Commission's  rules and forms.  The principal  executive and financial
officers of the corporate general partner have evaluated our disclosure controls
and procedures as of the end of the period  covered by this Quarterly  Report on
Form 10-Q and have determined  that such disclosure  controls and procedures are
effective.

         There was no change in internal  control over financial  reporting that
occurred during the most recent fiscal quarter that has materially affected,  or
is  reasonably  likely to materially  affect,  internal  control over  financial
reporting.

                                       10
<PAGE>


                           PART II. OTHER INFORMATION


Item 1.   Legal Proceedings.   Inapplicable.
          -----------------

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.
          ------------------------------------------------------------
          Inapplicable.

Item 3.   Defaults upon Senior Securities.  Inapplicable.
          -------------------------------

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

Item 5.   Other Information.  Inapplicable.
          -----------------

Item 6.   Exhibits and Reports on Form 8-K.
          ---------------------------------

          (a)   Exhibits

                2.1     Agreement  and  Plan of  Merger  among  U.S.  Restaurant
                        Properties,  Inc., Ivanhoe  Acquisition XI, LLC, and CNL
                        Income  Fund XI,  Ltd.,  dated  as of  August  9,  2004.
                        (Included  as  Exhibit  99.2 to Form 8-K filed  with the
                        Securities  and Exchange  Commission  on August 9, 2004,
                        and incorporated herein by reference.)

                3.1     Affidavit and Certificate of Limited  Partnership of CNL
                        Income  Fund  XI,  Ltd.  (Included  as  Exhibit  3.2  to
                        Registration  Statement  No.  33-43278  on Form S-11 and
                        incorporated herein by reference.)

                4.1     Affidavit and Certificate of Limited  Partnership of CNL
                        Income  Fund  XI,  Ltd.  (Included  as  Exhibit  3.2  to
                        Registration  Statement  No.  33-43278  on Form S-11 and
                        incorporated herein by reference.)

                4.2     Amended and Restated Agreement of Limited Partnership of
                        CNL Income  Fund XI,  Ltd.  (Included  as Exhibit 4.2 to
                        Form  10-K  filed  with  the   Securities  and  Exchange
                        Commission on April 15, 1993, and incorporated herein by
                        reference.)

                10.1    Management  Agreement  between  CNL Income Fund XI, Ltd.
                        and CNL Investment Company. (Included as Exhibit 10.1 to
                        Form  10-K  filed  with  the   Securities  and  Exchange
                        Commission on April 15, 1993, and incorporated herein by
                        reference.)

                10.2    Assignment of Management  Agreement  from CNL Investment
                        Company to CNL Income Fund Advisors,  Inc.  (Included as
                        Exhibit 10.2 to Form 10-K filed with the  Securities and
                        Exchange  Commission on March 30, 1995, and incorporated
                        herein by reference.)

                10.3    Assignment of Management  Agreement from CNL Income Fund
                        Advisors,  Inc. to CNL Fund Advisors,  Inc. (Included as
                        Exhibit 10.3 to Form 10-K filed with the  Securities and
                        Exchange  Commission on April 1, 1996, and  incorporated
                        herein by reference.)

                10.4    Assignment  of  Management   Agreement   from  CNL  Fund
                        Advisors,  Inc. to CNL APF  Partners,  LP.  (Included as
                        Exhibit 10.4 to Form 10-Q filed with the  Securities and
                        Exchange Commission on August 14, 2001, and incorporated
                        herein by reference.)
                                       11
<PAGE>

                10.5    Assignment   of  Management   Agreement   from  CNL  APF
                        Partners, LP to CNL Restaurants XVIII, Inc. (Included as
                        Exhibit 10.5 to Form 10-Q filed with the  Securities and
                        Exchange Commission on August 14, 2002, and incorporated
                        herein by reference.)

                31.1    Certification  of Chief  Executive  Officer of Corporate
                        General  Partner  Pursuant  to Rule  13a-14  as  Adopted
                        Pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
                        2002. (Filed herewith.)

                31.2    Certification  of Chief  Financial  Officer of Corporate
                        General  Partner  Pursuant  to Rule  13a-14  as  Adopted
                        Pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
                        2002. (Filed herewith.)

                32.1    Certification  of Chief  Executive  Officer of Corporate
                        General  Partner  Pursuant to 18 U.S.C.  Section 1350 as
                        Adopted  Pursuant to Section  906 of the  Sarbanes-Oxley
                        Act of 2002. (Filed herewith.)

                32.2    Certification  of Chief  Financial  Officer of Corporate
                        General  Partner  Pursuant to 18 U.S.C.  Section 1350 as
                        Adopted  Pursuant to Section  906 of the  Sarbanes-Oxley
                        Act of 2002. (Filed herewith.)

                                       12
<PAGE>


                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended,  the  registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

         DATED this 10th day of November 2004.


                                CNL INCOME FUND XI, LTD.

                                By:   CNL REALTY CORPORATION
                                      General Partner


                                      By:  /s/ James M. Seneff, Jr.
                                          -------------------------------------
                                           JAMES M. SENEFF, JR.
                                           Chief Executive Officer
                                           (Principal Executive Officer)


                                      By:  /s/ Robert A. Bourne
                                          -------------------------------------
                                           ROBERT A. BOURNE
                                           President and Treasurer
                                           (Principal Financial and
                                           Accounting Officer)



<PAGE>


                                  EXHIBIT INDEX


Exhibit Number

                 Exhibits

                 2.1    Agreement  and  Plan of  Merger  among  U.S.  Restaurant
                        Properties,  Inc., Ivanhoe  Acquisition XI, LLC, and CNL
                        Income  Fund XI,  Ltd.,  dated  as of  August  9,  2004.
                        (Included  as  Exhibit  99.2 to Form 8-K filed  with the
                        Securities  and Exchange  Commission  on August 9, 2004,
                        and incorporated herein by reference.)

                 3.1    Affidavit and Certificate of Limited  Partnership of CNL
                        Income  Fund  XI,  Ltd.  (Included  as  Exhibit  3.2  to
                        Registration  Statement  No.  33-43278  on Form S-11 and
                        incorporated herein by reference.)

                 4.1    Affidavit and Certificate of Limited  Partnership of CNL
                        Income  Fund  XI,  Ltd.  (Included  as  Exhibit  3.2  to
                        Registration  Statement  No.  33-43278  on Form S-11 and
                        incorporated herein by reference.)

                 4.2    Amended and Restated Agreement of Limited Partnership of
                        CNL Income  Fund XI,  Ltd.  (Included  as Exhibit 4.2 to
                        Form  10-K  filed  with  the   Securities  and  Exchange
                        Commission on April 15, 1993, and incorporated herein by
                        reference.)

                 10.1   Management  Agreement  between  CNL Income Fund XI, Ltd.
                        and CNL Investment Company. (Included as Exhibit 10.1 to
                        Form  10-K  filed  with  the   Securities  and  Exchange
                        Commission on April 15, 1993, and incorporated herein by
                        reference.)

                 10.2   Assignment of Management  Agreement  from CNL Investment
                        Company to CNL Income Fund Advisors,  Inc.  (Included as
                        Exhibit 10.2 to Form 10-K filed with the  Securities and
                        Exchange  Commission on March 30, 1995, and incorporated
                        herein by reference.)

                 10.3   Assignment of Management  Agreement from CNL Income Fund
                        Advisors,  Inc. to CNL Fund Advisors,  Inc. (Included as
                        Exhibit 10.3 to Form 10-K filed with the  Securities and
                        Exchange  Commission on April 1, 1996, and  incorporated
                        herein by reference.)

                 10.4   Assignment  of  Management   Agreement   from  CNL  Fund
                        Advisors,  Inc. to CNL APF  Partners,  LP.  (Included as
                        Exhibit 10.4 to Form 10-Q filed with the  Securities and
                        Exchange Commission on August 14, 2001, and incorporated
                        herein by reference.)

                 10.5   Assignment   of  Management   Agreement   from  CNL  APF
                        Partners, LP to CNL Restaurants XVIII, Inc. (Included as
                        Exhibit 10.5 to Form 10-Q filed with the  Securities and
                        Exchange Commission on August 14, 2002, and incorporated
                        herein by reference.)

                 31.1   Certification  of Chief  Executive  Officer of Corporate
                        General  Partner  Pursuant  to Rule  13a-14  as  Adopted
                        Pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
                        2002. (Filed herewith.)

                 31.2   Certification  of Chief  Financial  Officer of Corporate
                        General  Partner  Pursuant  to Rule  13a-14  as  Adopted
                        Pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
                        2002. (Filed herewith.)

                 32.1   Certification  of Chief  Executive  Officer of Corporate
                        General  Partner  Pursuant to 18 U.S.C.  Section 1350 as
                        Adopted  Pursuant to Section  906 of the  Sarbanes-Oxley
                        Act of 2002. (Filed herewith.)
<PAGE>

                 32.2   Certification  of Chief  Financial  Officer of Corporate
                        General  Partner  Pursuant to 18 U.S.C.  Section 1350 as
                        Adopted  Pursuant to Section  906 of the  Sarbanes-Oxley
                        Act of 2002. (Filed herewith.)

<PAGE>



                                  EXHIBIT 31.1




<PAGE>



                                  EXHIBIT 31.2




<PAGE>



                                  EXHIBIT 32.1



<PAGE>



                                  EXHIBIT 32.2