<PAGE>   1


                                United States

                     Securities and Exchange Commission

                            Washington, D.C. 20549


                                  FORM 10-Q


             Quarterly Report Pursuant to Section 13 or 15(d) of

                    the Securities Exchange Act of 1934


             For the Quarterly Period Ended September 27, 1998

                      Commission file number 0-19924


                      RARE Hospitality International, Inc.
             (Exact name of registrant as specified in its charter)


<TABLE>
   <S>                                                <C>        
             Georgia                                      58-1498312 
   -------------------------------                    ------------------
   (State or other jurisdiction of                    (I. R. S. Employer
    incorporation or organization)                     Identification No.)

   8215 Roswell Rd; Bldg 200;      Atlanta, GA              30350       
   --------------------------------------------           ----------
   (Address of principal executive offices)               (Zip Code)
</TABLE>

                                 (770) 399-9595
                                 --------------  
              (Registrant's telephone number, including area code)

  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
                                                    XX Yes              No
                                                   ----             ----
        Indicate the number of shares outstanding of each of the issuer's
           classes of common stock as of the latest practicable date.

<TABLE>
   <S>                                  <C>    
          Class                         Outstanding as of November 6, 1998
          ------                        ----------------------------------
   Common Stock, no par value                     12,073,306 shares
</TABLE>


                                       1
<PAGE>   2


Part I. Financial Information
Item 1. Financial Statements

              RARE Hospitality International, Inc. and Subsidiaries
                           Consolidated Balance Sheets
                            (In thousands, unaudited)

<TABLE>
<CAPTION>
                                                    September 27,     December 28,
                                Assets                  1998              1997
                                ------              -------------     ------------
<S>                                                 <C>               <C>
Current assets:
   Cash and cash equivalents ..................     $  4,124          $  1,752
   Marketable debt securities .................          648               609
   Accounts receivable ........................        2,832             2,054
   Inventories ................................        9,012             9,152
   Prepaid expenses ...........................          349             1,373
   Pre-opening costs, net of accumulated
      amortization ............................        2,010             3,385
   Refundable income taxes ....................        4,600             6,900
                                                    --------          --------
      Total current assets ....................       23,575            25,225

Property and equipment, less accumulated
   depreciation and amortization ..............      168,452           155,758
Goodwill, less accumulated amortization .......        5,095             5,304
Deferred income taxes .........................        3,659             4,408
Other assets ..................................        3,415             2,356
                                                    --------          --------
      Total assets ............................     $204,196          $193,051
                                                    ========          ========

Liabilities and Shareholders' Equity
Current liabilities:
   Accounts payable ...........................     $ 10,781          $ 12,739
   Accrued expenses ...........................       16,526            14,873
   Current installments of obligations
      under capital leases ....................          858               518
                                                    --------          --------
      Total current liabilities ...............       28,165            28,130

Long-term debt ................................       42,000            43,000
Obligations under capital leases,
  net of current installments .................        8,870             5,051
                                                    --------          --------
      Total liabilities .......................       79,035            76,181
                                                    --------          --------

Minority interest .............................        5,205             4,890

Shareholders' equity:
   Preferred stock ............................           --                --
   Common stock ...............................      105,049           103,981
   Unearned compensation - restricted stock
                                                        (540)               --
   Retained earnings ..........................       15,447             7,999
                                                    --------          --------
     Total shareholders' equity ...............      119,956           111,980
                                                    --------          --------

     Total liabilities and shareholders' equity
                                                    $204,196          $193,051
                                                    ========          ========
</TABLE>


See accompanying notes to consolidated financial statements.




                                       2
<PAGE>   3



              RARE Hospitality International, Inc. and Subsidiaries
                       Consolidated Statements of Earnings
                      (In thousands, except per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                      Quarter Ended           Nine Months Ended
Revenues:                                        Sept. 27,    Sept. 28,     Sept. 27,     Sept. 28,
                                                   1998         1997          1998          1997
                                                   ----         ----          ----          ----
<S>                                              <C>          <C>           <C>           <C>     
  Restaurant sales:
    LongHorn Steakhouse ....................      $52,856      $41,375      $156,908      $124,048
    Bugaboo Creek Steak House ..............       12,359       10,725        36,902        32,428
    The Capital Grille .....................       11,547        9,542        35,490        27,338
    Specialty concepts .....................        1,671        2,664         4,910         8,084
                                                  -------      -------      --------      --------
      Total restaurant sales ...............       78,433       64,306       234,210       191,898
    Franchise revenues .....................           --           --            --            27
                                                  -------      -------      --------      --------
      Total revenues .......................       78,433       64,306       234,210       191,925
                                                  -------      -------      --------      --------
Costs and expenses:
 Cost of restaurant sales ..................       28,628       23,875        86,019        70,710
 Operating expenses - restaurants ..........       35,491       29,726       104,496        86,814
 Depreciation and amortization - restaurants        4,468        3,614        13,378        10,776
 General and administrative expenses........        5,686        4,671        16,435        13,430
                                                  -------      -------      --------      --------
    Total costs and expenses ...............       74,273       61,886       220,328       181,730
                                                  -------      -------      --------      --------
 Operating income ..........................        4,160        2,420        13,882        10,195
Interest expense, net ......................          701          225         2,092           524
Minority interest ..........................          300          336           992           925
                                                  -------      -------      --------      --------
   Earnings before income taxes ............        3,159        1,859        10,798         8,746
Income tax expense .........................        1,050          565         3,350         2,625
                                                  -------      -------      --------      --------
   Net earnings ............................      $ 2,109      $ 1,294      $  7,448      $  6,121
                                                  =======      =======      ========      ========
Basic earnings per common share ............      $  0.18      $  0.11      $   0.62      $   0.52
                                                  =======      =======      ========      ========
Weighted average common shares
  outstanding (basic) ......................       12,023       11,742        12,004        11,687
                                                  =======      =======      ========      ========
Diluted earnings per common share
                                                  $  0.17      $  0.11      $   0.61      $   0.52
                                                  =======      =======      ========      ========
Weighted average common shares
  outstanding (diluted) ....................       12,201       11,777        12,120        11,743
                                                  =======      =======      ========      ========
</TABLE>



See accompanying notes to consolidated financial statements.




                                       3
<PAGE>   4




              RARE Hospitality International, Inc. and Subsidiaries

                 Consolidated Statements of Shareholders' Equity
                                 (In thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                          Unearned
                                                   Common Stock         compensation                   Total
                                               -------------------      -restricted    Retained      Shareholders'
                                               Shares       Amount         Stock       Earnings        Equity
                                               ------       ------         -----       --------        ------
<S>                                            <C>         <C>          <C>            <C>           <C>     
Balances, December 28, 1997 .............      11,979      $103,981      $     --       $ 7,999       $111,980
Net earnings ............................          --            --            --         2,671          2,671
Issuance of shares pursuant to
  exercise of stock options .............          29           308            --            --            308
                                               ------      --------       -------       --------      --------
Balances, March 29, 1998 ................      12,008       104,289            --        10,670        114,959
Net earnings ............................          --            --            --         2,668          2,668
Issuance of shares pursuant to restricted
stock award .............................          45           575          (575)
Issuance of shares pursuant to
  exercise of stock options .............           2            19            --            --             19
                                               ------      --------       -------       --------      --------
Balances, June 28, 1998 .................      12,055       104,883          (575)       13,338        117,646
Net earnings ............................          --            --            --         2,109          2,109
Amortization of restricted stock
                                                   --            --            35             --            35
Issuance of shares pursuant to
  exercise of stock options .............          18           166            --            --            166
                                               ------      --------       -------       --------      --------
Balances, September 27, 1998 ............      12,073      $105,049       $  (540)      $ 15,447      $119,956
                                               ======      ========       =======       ========      ========
</TABLE>



See accompanying notes to consolidated financial statements.



                                       4
<PAGE>   5




              RARE Hospitality International, Inc. and Subsidiaries
                 Condensed Consolidated Statements of Cash Flows
                                 (In thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                         Nine Months Ended
                                                                     Sept. 27,      Sept. 28,
                                                                       1998           1997
<S>                                                                  <C>            <C>     
Cash flows from operating activities:
   Net earnings ...............................................      $  7,448       $  6,121
   Adjustments to reconcile net earnings to net cash
     provided by (used in) operating activities:
     Depreciation and amortization ............................        14,189         11,168
     Changes in operating assets and liabilities ..............        (7,631)        (8,651)
     Minority interest ........................................           992            925
     Preopening costs .........................................        (2,239)        (3,607)
     Deferred tax (benefit) expense ...........................           750         (2,175)
                                                                     --------       --------

       Net cash provided by operating activities ..............        13,509          3,781
                                                                     --------       --------


Cash flows from investing activities:
   Proceeds from maturity of marketable debt securities .......            --            252
   Purchase of property and equipment .........................       (18,950)       (34,860)
   Asset acquisitions .........................................            --         (3,262)
                                                                     --------       --------

       Net cash used in investing activities ..................       (18,950)       (37,870)
                                                                     --------       --------

Cash flows from financing activities:
   Proceeds from (repayments of)lines of credit ...............        (1,000)        28,900
   Proceeds from minority partners' contributions .............         1,672          1,313
   Distributions to minority partners .........................        (2,349)        (2,233)
   Increase in bank overdraft included in accounts payable, net         8,997             --
   Proceeds from exercise of stock options ....................           493          2,543
                                                                     --------       --------
       Net cash provided by financing activities ..............         7,813         30,523
                                                                     --------       --------

Net increase (decrease) in cash and cash equivalents ..........         2,372         (3,566)
Cash and cash equivalents, beginning of period ................         1,752          6,478
                                                                     --------       --------
Cash and cash equivalents, end of period ......................      $  4,124       $  2,912
                                                                     ========       ========
</TABLE>




See accompanying notes to consolidated financial statements.




                                       5
<PAGE>   6



              RARE Hospitality International, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements
                                   (unaudited)


1. Basis of Presentation

The consolidated financial statements of RARE Hospitality International, Inc.
and Subsidiaries (the "Company") as of December 28, 1997 and September 27, 1998
and for the quarters and nine-month periods ended September 27, 1998 and
September 28, 1997 have been prepared by the Company, pursuant to the rules and
regulations of the Securities and Exchange Commission. The information furnished
herein reflects all adjustments (consisting of normal recurring accruals and
adjustments) which are, in the opinion of management, necessary to fairly
present the operating results for the respective periods. Certain information
and footnote disclosures normally presented in annual financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. These financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto contained in the Company's annual report on Form 10-K for the year
ended December 28, 1997.

2. Income Taxes

Income tax expense for the quarter has been provided for based on the estimated
effective tax rate then currently expected to be applicable for the full 1998
fiscal year. The effective income tax rate of 33.2% for the third quarter
increased the effective tax rate for the nine-months ended September 27, 1998,
to 31.0%. This effective rate differs from applying the statutory federal income
tax rate of 35% to pre-tax earnings primarily due to employee FICA tip tax
credits (a reduction in income tax expense) partially offset by state income
taxes. Assuming favorable earnings trends continue, the Company expects the
effective tax rate to increase again in the fourth quarter, bringing the
effective rate to 32.0% for the year.

3. Long-Term Debt

On August 26, 1998, the Company amended and restated its revolving credit
facility to increase the aggregate commitment from $60 million to $100 million
with a three year initial term. The revolving credit facility bears interest at
LIBOR plus 1.625% or the prime rate plus 0.375%, at the Company's option, and
requires the Company to pay a commitment fee of 0.325% on any unused portion of
the facility. The revolving credit facility contains various covenants and
restrictions which, among other things, require the maintenance of stipulated
leverage and fixed charge coverage ratios and minimum consolidated net worth, as
defined, and also limit additional indebtedness in excess of specified amounts.
The Company is currently in compliance with such covenants.

At September 27, 1998, $42.0 million was outstanding under the Company's
revolving credit agreement at a weighted average interest rate equal to 7.3125%.

In August 1998, the Company entered into an interest rate swap agreement 



                                       6
<PAGE>   7


with a commercial bank, which effectively fixes the interest rate on $40 million
at 7.515%.

4. Earnings Per Common Share

Basic earnings per common share equals net earnings divided by the weighted
average number of common shares outstanding and does not include the dilutive
effect of stock options. Diluted earnings per common share equals net earnings
divided by the weighted average number of common shares outstanding, after
giving effect to dilutive stock options and restricted stock. A reconciliation
between basic and diluted weighted average shares outstanding and the related
earnings per share calculation is presented below (in thousands, except per
share amounts):

<TABLE>
<CAPTION>
                                                     13 Weeks Ended            39 Weeks Ended
                                                Sept. 27,    Sept. 28,    Sept. 27,    Sept. 28,
                                                  1998         1997         1998         1997
                                                ---------    ---------    ---------    ---------
<S>                                             <C>          <C>          <C>          <C>    
Net Earnings ..............................      $ 2,109      $ 1,294      $ 7,448      $ 6,121
                                                 =======      =======      =======      =======  
Basic weighted average
  Shares outstanding ......................       12,023       11,742       12,004       11,687
Dilutive effect of stock options ..........          176           35          116           56
Dilutive effect of restricted stock                    2           --           --           --
                                                 -------      -------      -------      -------
Diluted weighted average shares outstanding       12,201       11,777       12,120       11,743
                                                 =======      =======      =======      =======
Basic net earnings per common share .......      $  0.18      $  0.11      $  0.62      $  0.52
                                                 =======      =======      =======      =======
Diluted net earnings per common share .....      $  0.17      $  0.11      $  0.61      $  0.52
                                                 =======      =======      =======      =======
</TABLE>


5. Comprehensive Income

In 1997, the Financial Accounting Standards Board (the "FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." SFAS No. 130 which is effective for the Company in 1998, establishes
standards for reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. Comprehensive income is
defined as the change in equity of a business enterprise during a period from
transactions and other events and circumstances from nonowner sources. It
includes all changes in equity during a period, except those resulting from
investments by owners and distributions to owners. For the quarter and
nine-month period ended September 27, 1998, there were no differences between
the Company's net earnings and comprehensive income.

6. Subsequent Event

In November 1998, the Company acquired the ownership interests of its joint
venture partner in ten LongHorn Steakhouse restaurants located in the Cleveland,
Ohio and St. Louis, Missouri markets for an aggregate purchase price of $5.5
million in cash.


                                       7
<PAGE>   8



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


RESULTS OF OPERATIONS

REVENUES

The Company currently derives all of its revenues from restaurant sales. Total
revenues increased 22.0% for both the quarter and nine-months ended September
27, 1998, respectively, from the same periods of the prior year.

Same store sales comparisons for each of the Company's restaurant concepts for
the quarter ended September 27, 1998, consist of sales at restaurants opened
prior to December 29, 1996.

LongHorn Steakhouse:

Sales in the LongHorn Steakhouse restaurants for the third quarter and the
nine-months ended September 27, 1998, increased 27.7% and 26.5%, respectively,
as compared to the same periods of the prior year. The increase reflects a 18.1%
and 19.3% increase in restaurant weeks in the third quarter and first nine
months of 1998, respectively, as compared to the same periods of the prior year,
resulting from an increase in the restaurant base from 90 LongHorn Steakhouse
restaurants at the end of the third quarter of 1997 to 100 restaurants at the
end of the third quarter of 1998. Average weekly sales for all LongHorn
Steakhouse restaurants in the third quarter of 1998 was $41,005, an 8.3%
increase over the comparable period in 1997. Same store sales for the 73
comparable LongHorn Steakhouse restaurants increased 5.5% in the third quarter
of 1998 as compared to the same period in 1997, primarily due to an increase in
customer counts.

Bugaboo Creek Steak House:

Sales in the Bugaboo Creek Steak House restaurants for the third quarter and the
nine-months ended September 27, 1998 increased 15.2% and 13.8% compared to the
same periods of the prior year. The increase reflects an 8.1% and 10.0% increase
in restaurant weeks in the third quarter and first nine months of 1998,
respectively, as compared to the same periods of the prior year, resulting from
an increase in the restaurant base from 15 Bugaboo Creek Steak House restaurants
at the end of the third quarter of 1997 to 16 restaurants at the end of the
third quarter of 1998. Average weekly sales for all Bugaboo Creek Steak House
restaurants in the third quarter of 1998 were $61,491, a 6.6% increase from the
comparable period for 1997. Same store sales for the 13 comparable Bugaboo Creek
Steak House restaurants in the third quarter of 1998 decreased 0.1% as compared
to the same period in 1997. The increase in average weekly sales was greater
than the percentage change in same store sales due to i) the closure of one
Bugaboo Creek Steak House restaurant that was operating well below the system
average sales volume and ii) significantly higher than system average sales
volumes for the Bugaboo Creek Steak House restaurant that opened during the
first nine months of 1998 and one of the Bugaboo Creek Steak House restaurants
that opened during 1997.




                                       8
<PAGE>   9


The Capital Grille:

Sales in The Capital Grille restaurants increased 21.0% and 29.8% for the third
quarter and the nine-months ended September 27, 1998, compared to the same
periods in 1997. The increase reflects a 40.4% and 48.0% increase in restaurant
weeks in the third quarter and first nine months of 1998, respectively, as
compared to the same periods in 1997, resulting from an increase in the
restaurant base from eight The Capital Grille restaurants at the end of the
third quarter of 1997 to 12 restaurants at the end of the third quarter of 1998.
Average weekly sales for all The Capital Grille restaurants in the third quarter
of 1998 were $79,085, a 13.8% decrease from the comparable period in 1997. The
decrease in average weekly sales is due to i) expected lower than system average
sales volumes at the Company's newer The Capital Grille restaurants and ii)
significantly lower than system average sales volumes at one The Capital Grille,
which opened in the fourth quarter of 1997. Same store sales for the six
comparable The Capital Grille restaurants increased 2.2% in the third quarter of
1998 as compared to the same period in 1997, which is primarily attributable to
an increase in customer counts.

Company-wide:

Franchise revenues were eliminated prior to the first quarter of 1998. During
1997, the two remaining LongHorn Steakhouse restaurants, which operated as a
franchise and paid a royalties, were acquired by the Company. In September 1998,
a Franchise Longhorn Steakhouse restaurant opened in Puerto Rico. No royalties
were earned during the quarter ended September 27, 1998.

COSTS AND EXPENSES

Cost of restaurant sales as a percentage of restaurant sales decreased to 36.5%
from 37.1% for the third quarter of 1998 and decreased to 36.7% from 36.8% for
the first nine-months of 1998 as compared to the respective periods of 1997. The
decrease in the cost of sales percentage for the 1998 periods were primarily due
to the favorable comparisons with the second and third quarters of 1997 when
operational difficulties were occuring in the LongHorn concept. Additionally,
effective in February 1998, the Company began purchasing meat under a 
contract at prices which have stabilized the cost of restaurant sales as a
percentage of restaurant sales. This contract continues for the remainder of
1998. The impact of this favorable meat pricing has been partially offset by
higher dairy prices incurred industry wide during the third quarter of 1998.

Restaurant operating expenses as a percentage of restaurant sales decreased to
45.3% from 46.2% for the third quarter of 1998 and to 44.6% from 45.2% for the
first nine-months of 1998 as compared to the respective periods for 1997. The
decreases in operating expenses as a percentage of sales for the third quarter
and first nine months of 1998 were due to the increase in average unit sales
providing greater leverage of fixed and semi-fixed expenses, principally rent
and certain other restaurant operating expenses.

Restaurant depreciation and amortization increased over the corresponding
periods of the prior year primarily due the construction of new restaurants.

General and administrative expenses as a percentage of total revenues decreased
to 7.2% from 7.3% for the third quarter and remained constant at 7.0% for the
first nine-months of 1998 as compared to the respective 



                                       9
<PAGE>   10


periods of the prior year. This decrease in the third quarter of 1998 is
primarily due to the increase in sales leveraging fixed and semi-fixed
expenses, partially offset by an increase in staffing levels to allow for future
acceleration of the Company's new restaurant openings.

As a result of the relationships between revenues and expenses discussed above,
the Company's operating income increased to $4.2 million for the third quarter
of 1998 as compared to $2.4 million for the corresponding period of the prior
year.

Interest expense, net increased to $701 thousand in the third quarter of 1998
from $225 thousand for the same period of the prior year due to an increase in
the average balance outstanding under the Company's revolving credit agreements
as well as more capitalized interest in 1997 relating to the relatively higher
development activity during the third quarter of 1997.

Minority interest expense decreased to $300 thousand for the third quarter of
1998 from $336 thousand for the same period of the prior year due to a change in
the Company's ownership percentage and in the average profitability of certain
LongHorn Steakhouse restaurants.

Income tax expense for the third quarter of 1998 was 33.2% of earnings before
income taxes, which brings the effective income tax rate to 31.0% for the
nine-month period. Further, assuming favorable earnings trends continue, the
Company expects the effective tax rate to increase again in the fourth quarter,
bringing the effective rate to 32.0% for the year. The Company's effective
income tax rate differs from applying the statutory federal income tax rate of
35% to earnings before income taxes primarily due to employee FICA tip tax
credits partially offset by state income taxes.

Net earnings increased 63.0% to $2.1 million for the third quarter of 1998 from
net earnings of $1.3 million for the third quarter of 1997, reflecting the net
effect of the items discussed above.


Liquidity and Capital Resources:

The Company requires capital primarily for the development of new restaurants,
selected acquisitions and the remodeling of existing restaurants. During the
first nine-months of 1998, the Company's principal source of cash was cash
provided by operating activities ($13.5 million). The principal use of cash was
capital expenditures ($19.0 million) for new and improved facilities.

On August 26, 1998, the Company amended and restated it's revolving credit
facility to increase the aggregate commitment from $60 million to $100 million
with a three year initial term. The revolving credit facility bears interest at
LIBOR plus 1.625% or the prime rate plus 0.375%, at the Company's option, and
requires the Company to pay a commitment fee of 0.325% on any unused portion of
the facility. The revolving credit facility contains various covenants and
restrictions which, among other things, require the maintenance of stipulated
leverage and fixed charge coverage ratios and minimum consolidated net worth, as
defined, and also limit additional indebtedness in excess of specified amounts.
The Company 



                                       10
<PAGE>   11


is currently in compliance with such covenants.

At September 27, 1998, $42.0 million was outstanding and $58 million was
available under the Company's revolving credit agreement at a weighted average
interest rate equal to 7.3125%.

In August 1998, the Company entered into an interest rate swap agreement with a
commercial bank, which effectively fixes the interest rate on $40 million at
7.515%. The Company is exposed to credit losses in the event of counterparty
nonperformance, but does not anticipate any such losses.

During the first nine months of 1998, the Company opened six LongHorn Steakhouse
restaurants, one Bugaboo Creek Steak House restaurant and two The Capital Grille
restaurants. During the first nine months of 1998, the Company also closed one
Bugaboo Creek Steak House restaurant and closed two other specialty concept
restaurants, all of which the Company had provided reserves for in the fourth
quarter of 1997. In the fourth quarter of 1998, the Company has already opened
one Bugaboo Creek Steak House restaurant and intends to open three new LongHorn
Steakhouse restaurants, bringing the total restaurant development for 1998 to
nine Company-owned and joint venture Longhorn Steakhouse restaurants, two
Bugaboo Creek Steak House restaurants and two The Capital Grille restaurants in
1998. The Company estimates that its capital expenditures for 1998 will be
approximately $23 to $25 million. The Company intends to open 15 to 18
Company-owned and joint venture restaurants in 1999. The Company estimates that
its capital expenditures (without consideration of contributions from joint
venture partners) will be approximately $48 to $52 million for 1999. Management
believes that available cash, cash provided by operations, and available
borrowings under the Company's existing and amended lines of credit will provide
sufficient funds to finance restaurant expansion plans into the year 2000.

Since substantially all sales in the Company's restaurants are for cash, and
accounts payable are generally due in seven to 30 days, the Company operates
with little or negative working capital.

IMPACT OF THE YEAR 2000 ISSUE

INTRODUCTION. The term "Year 2000" issue is a general term used to describe the
various problems that may result from the improper processing of dates and
date-sensitive calculations by computers and other machinery as the year 2000 is
approached and reached. These problems generally arise from the fact that most
of the world's computer hardware and software has historically used only two
digits to identify the year in a date, often meaning that the computer will fail
to distinguish dates in the "2000's" from dates in the "1900's." These problems
may also arise from other sources as well, such as the use of special codes and
conventions in software that make use of the date field. The following
information was prepared to comply with the guidelines for Year 2000 disclosure
that the Securities and Exchange Commission issued in an Interpretive Release,
effective August 4, 1998. These guidelines required significantly more and
detailed information than was previously required by the Securities and Exchange
Commission.

THE COMPANY'S STATE OF READINESS. The Company's key financial, informational and
operational systems have been assessed and detailed plans have been developed to
address system modifications required by September 30, 1999. These systems
include information technology systems ("IT"). The 



                                       11
<PAGE>   12


Company has assessed its major IT vendors and technology providers and is in the
process of testing its systems to determine Year 2000 compliance. In addition,
the Company is in the process of assessing its non-IT systems that utilize
embedded technology such as microcontrollers and reviewing them for Year 2000
compliance.

To operate its business, the Company relies upon government agencies, utility
companies, providers of telecommunication services, suppliers, and other third
party service providers ("Material Relationships"), over which it can assert
little control. The Company's ability to conduct its core business is dependent
upon the ability of these Material Relationships to fix their Year 2000 issues
to the extent they affect the Company. If the telecommunications carriers,
public utilities and other Material Relationships do not appropriately rectify
their Year 2000 issues, the Company's ability to conduct its core business may
be materially impacted, which could result in a material adverse effect on the
Company's financial condition.

The Company has begun an assessment of all Material Relationships to determine
risk and assist in the development of contingency plans. This effort is to be
completed by March 1, 1999.

COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES. The Company expenses costs
associated with Year 2000 system changes as the costs are incurred except for
system change costs that the Company would otherwise capitalize. To date, the
Company has incurred costs of approximately $37,500 in connection with its Year
2000 compliance plan ("Year 2000 Plan") and estimates it will spend an
additional $75,000 to $150,000 to complete its Year 2000 Plan. The financial
impact of these expenses has not been material, and the Company does not expect
future remediation costs to be material to the Company's consolidated financial
position or results of operations. However, the Company is unable to estimate
the costs that it may incur as a result of Year 2000 problems suffered by the
parties with which it deals, such as Material Relationships, and there can be no
assurance that the Company will successfully address the Year 2000 problems
present in its own systems.

RISKS PRESENTED BY YEAR 2000 PROBLEMS. The Company has recently begun the system
integration testing phase of its Year 2000 Plan. However, until system
integration testing is substantially in process the Company cannot fully assess
the risks of its Year 2000 issue. As a result of system integration testing, the
Company may identify areas of its business that are at risk of Year 2000
disruption. The absence of any such determination at this point represents only
the status currently in the implementation of the Company's Year 2000 Plan, and
should not be construed to mean that there is no area of the Company's business
which is at risk of a Year 2000 related disruption. As noted above, many of the
Company's business critical Material Relationships may not appropriately address
their Year 2000 issues, the result of which could have a material adverse affect
on the Company's financial condition and results of operations.

THE COMPANY'S CONTINGENCY PLANS. The Company's Year 2000 Plan calls for the
development of contingency plans for areas of the business that are susceptible
to a substantive risk of a disruption resulting from a Year 2000 related event.
Because the Company has only recently begun system integration testing, and
accordingly has not fully assessed its risk from potential Year 2000 failures,
the Company has not yet developed detailed contingency plans specific to Year
2000 event for any specific area of 



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<PAGE>   13


business. The Company does, however, maintain contingency plans, outside of the
scope of the Year 2000 issue, designed to address various other business
interruptions. The Company is prepared for the possibility that system
integration testing may hereafter identify certain areas of business at risk.
Consistent with its Year 2000 Plan, the Company will develop specific Year 2000
contingency plans for such areas of business as and if such determinations are
made.


RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued, SFAS No. 131 Disclosure about Segments of an
Enterprise and Related Information. SFAS No. 131 establishes standards for the
way public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. This statement is
effective for financial statements for periods beginning after December 15,
1997. In the initial year of application, comparative information for earlier
years is to be presented. This statement need not be applied to interim
financial statements in the initial year of its application, but comparative
information for interim periods is to be reported in financial statements for
interim periods in the second year of application.

In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. SOP 98-1 identifies the characteristics
of internal-use software and specifies that once the preliminary project stage
is complete, certain external direct costs, certain direct internal payroll and
payroll-related costs and interest costs incurred during the development of
computer software for internal use should be capitalized and amortized. SOP 98-1
is effective for financial statements for fiscal years beginning after December
15, 1998, with earlier application encouraged, and must be applied to
internal-use computer software costs incurred in those fiscal years for all
projects, including those projects in progress upon initial application of this
SOP. The Company currently expenses all such costs as incurred. Management has
not yet quantified the dollar impact of adopting SOP 98-1; however, when
implemented in 1999, it will result in the capitalization of costs which would
have been previously expensed.

As is currently the practice of many casual dining and upscale restaurant
entities, the Company defers its restaurant pre-opening costs and amortizes them
over the twelve-month period following the opening of each respective
restaurant.

Statement of Position 98-5 Reporting on the Costs of Start-Up Activities was
issued in April 1998. SOP 98-5 requires entities to expense as incurred all
start-up and pre-opening costs that are not otherwise capitalizable as
long-lived assets. SOP 98-5 is effective for fiscal years beginning after
December 15, 1998, although earlier adoption is encouraged. Restatement of
previously issued financial statements is not permitted by SOP 98-5, and
entities are not required to report the pro forma effects of 



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the retroactive application of the new accounting standard. The Company's
adoption of the expense-as-incurred accounting principle required by SOP 98-5
will involve the recognition of the cumulative effect of the change in
accounting principle required by SOP 98-5 as a one-time charge against earnings,
net of any related income tax effect, retroactive to the beginning of the fiscal
year of adoption. The Company expects to adopt SOP 98-5 in the first quarter of
1999. The adoption of this change in accounting method is expected to result in
a one-time charge of approximately $1.5 to $1.7 million, less applicable income
taxes.


FORWARD-LOOKING STATEMENTS

Statements contained in this Report concerning future results, performance or
expectations, including those regarding the opening of additional restaurants,
planned capital expenditures, the adequacy of the Company's capital resources,
disclosures related to the effect of the advent of the year 2000 on the Company
and its systems and other statements regarding trends relating to various
revenue and expense items, are forward looking statements. These statements are
subject to a number of risks and uncertainties beyond the Company's control that
could cause the Company's actual results to differ materially from those
projected in such forward-looking statements.

Actual results, performance or developments could differ materially from those
expressed or implied by those forward-looking statements as a result of known or
unknown risks, uncertainties and other factors, including those associated with
restaurant openings, restaurant sales and operating expenses and others
described from time to time in the Company's filings with the Securities and
Exchange Commission, press releases and other communications.


Part II - Other Information

Item 1. Legal Proceedings.

In January 1996, the Company and Moo Management, Inc. ("Moo") formed a joint
venture ("RTL Joint Venture") for the development of Longhorn Steaks
restaurants. The parties never developed Longhorn Steaks restaurants and,
beginning in the fall of 1996, negotiated to amend their joint venture agreement
to develop Bugaboo Creek Steak House restaurants in an expanded territory. While
these negotiations were taking place, the parties entered into a ground lease
(the "Ground Lease") in the name of RTL Joint Venture and the Company, with its
own funds, subsequently built on the leased premises a Bugaboo Creek Steak House
restaurant. In the fall of 1997, the negotiations between the Company and Moo
broke down. The Company believes that the parties did not reach a binding
agreement to develop Bugaboo Creek Steak House restaurants while Moo asserts
that such an agreement was reached.

On, April 30, 1998, the Company filed a Petition for Declaratory Relief and
Contract Reformation styled Rare Hospitality International, Inc. v. Centercap
Associates, L.L.C. and Moo Management, Inc., C.A. No. 16350 NC in the Chancery
Court of New Castle County, Delaware seeking a determination that the Company,
and not RTL Joint Venture, is the tenant under the Ground Lease. In its amended
Answer and Counterclaim in this action, Moo alleges 



                                       14
<PAGE>   15


that the Company and Moo agreed to the terms of a binding joint venture
agreement to develop Bugaboo Creek Steak House restaurants and entered into the
Ground Lease in furtherance thereof. In its Counterclaim, Moo alleges that the
Company has breached the alleged agreement and, as a result, Moo has been
deprived of the profit that it would have earned from the purchase and operation
of three Bugaboo Creek Steak House restaurants owned by the Company, has been
damaged by the efforts undertaken and the expenses incurred by Moo in
preparation for performance of the alleged joint venture agreement and has been
deprived of the profits lost and that would be lost as the result of the
Company's failure to perform the alleged joint venture agreement. Moo seeks an
unspecified amount of monetary damages and the dismissal of the Company's
petition.

On June 9, 1998, the Company filed a demand for arbitration versus Moo with the
American Arbitration Association in Atlanta, Georgia. In this arbitration, the
Company sought an immediate hearing and injunctive relief directing that the
Ground Lease be transferred to the Company and that Moo and its principals be
relieved from liability on the Ground Lease. The Company further requested an
award declaring that there is no joint venture or partnership between the
Company and Moo to develop Bugaboo Creek Steak house restaurants and granting
monetary damages for the Company's losses incurred as a result of the wrongful
conduct of Moo.

On July 7, 1998, the Company filed a complaint in the Superior Court of Fulton
County, Georgia in the matter styled Rare Hospitality International, Inc. v. Moo
Management, Inc., Robert C. Rosenblit, David C. Tuttleman, Mark Greene and RTL
Joint Venture, C.A. File No. E-71219. In this action, the Company seeks
injunctive relief and damages resulting from the defendants', Rosenblit, Greene,
Tuttleman and Moo, enticing certain of the Company's top managers to discontinue
their employment with the Company and enticing others not to enter into or
continue business relationships with the Company.

Moo has not yet filed an answer to the Company's demand for arbitration and the
defendants have not yet filed an answer in the action in Fulton County, Georgia.

A hearing was held on July 23, 1998 in the arbitration in Atlanta, Georgia, with
respect to the Company's request for preliminary relief. On July 29, 1998, the
arbitrator entered an Order determining that the Company's request for
preliminary injunctive relief was subject to arbitration, that the arbitrator
had jurisdiction to decide that request and granting the Company's request for
preliminary relief by ordering Moo to sign on behalf of RTL Joint Venture an
assignment of the Ground Lease to the Company. This Order also directs the
Company to use its best efforts to cause the landlord to release Moo, Robert C.
Rosenblit, Maryellen Rosenblit and David C. Tuttleman from all liability under
the Ground Lease and the guaranty thereof and to indemnity Moo, Robert C.
Rosenblit, Maryellen Rosenblit and David C. Tuttleman against all liabilities
arising out of the Ground Lease or the guaranty thereof. If the Company does not
obtain a release from the landlord within 180 days following the date of the
Order, the Company must deposit $200,000 in escrow as collateral for this
indemnity. The Company must also make an accounting to Moo on a monthly basis of
the operations of the Bugaboo Creek Steak House restaurant operated on the
Ground Lease until further order of the arbitrator.



                                       15
<PAGE>   16


The Company denies any liability with respect to the claims of Moo in its
counterclaim against the Company. The Company intends to vigorously pursue its
interest in the New Castle County, Delaware restaurant and to vigorously defend
the counterclaim. This action is in its earliest stages and it is not possible
at this time to determine the outcome of the Delaware lawsuit, the arbitration
or the Georgia lawsuit or the effect of the resolution of these disputes on the
Company's financial position or operating results. Management believes that the
Company's position has merit in the resolution of these matters will not have a
material adverse effect on the Company's financial condition or results of
operations.


Item 6. Exhibits and Reports on Form 8-K

   (a) Exhibits Filed.

         10.1  -  Amended and Restated Credit Agreement dated as of August 26,
                  1998, by and among RARE Hospitality International, Inc., and
                  First Union National Bank as administrative agent and
                  BankBoston, N.A. and Fleet National Bank as Co- Agents.

         10.2  -  Pledge Agreement dated as of August 26, 1998, by Rare 
                  Hospitality International, Inc. in favor of First Union 
                  National Bank.

         27.1  -  Financial Data Schedules (for SEC use only)

         27.2  -  Financial Data Schedules (for SEC use only)

   (b) Reports filed on Form 8-K.
          None.




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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.




                                     RARE Hospitality International, Inc.






Date: November 12, 1998              /s/ W. Douglas Benn
     --------------------------      --------------------
                                     W. Douglas Benn
                                     Executive Vice President and
                                     Chief Financial Officer
                                     (Principal Financial
                                     Officer and Chief Accounting
                                     Officer, and a duly authorized 
                                     officer)



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