SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

                 Quarterly Report under Section 13 or 15 (d) of
                       The Securities Exchange Act of 1934

For Quarter Ended:                                       Commission File Number
  July 14, 1999                                                   0-14370

                                  BUFFETS, INC.
             (Exact name of registrant as specified in its charter)

       Minnesota                                      41-1462294
(State of incorporation)                   (I.R.S. Employer Identification No.)


                   10260 Viking Drive, Eden Prairie, MN 55344
                    (Address of principal executive offices)

                                 (612) 942-9760
                         (Registrant's telephone number)

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.


                YES  X                                      NO
                    ----                                       ----

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

         Class                                  Outstanding as of August 27,1999
         -----                                  ----------- -- -- --------------
Common Stock, $.01 par value                            42,120,329 shares



                                        1

<PAGE>


                         BUFFETS, INC. AND SUBSIDIARIES


                                      INDEX


                                                                        Page No.
                                                                        --------

 PART I.    FINANCIAL INFORMATION

 Item 1.    Consolidated Financial Statements:

            Consolidated Balance Sheets-
            December 30, 1998 and July 14, 1999........................... 3

            Consolidated  Statements of Operations-  Twenty-Eight  Weeks
            ended July 15, 1998 and July 14, 1999 and Twelve Weeks ended
            July 15, 1998 and July 14, 1999 .............................. 4

            Consolidated Statements of Cash Flows-
            Twenty-Eight Weeks ended July 15, 1998
            and July 14, 1999............................................. 5

            Notes to Consolidated Financial
            Statement .................................................... 6

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

 PART II.   OTHER INFORMATION ............................................26





                                        2

<PAGE>



Part I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS

                         BUFFETS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
<TABLE>

                                                                  DECEMBER 30,    JULY 14,
                                                                     1998           1999
                                                                  -----------     -------
                    (in thousands, except par value amounts)
                                     ASSETS
CURRENT ASSETS:
<S>                                                                 <C>          <C>
   Cash and cash equivalents .....................................  $ 94,058     $ 97,350
   Receivable from landlords .....................................     2,772        1,125
   Inventory......................................................     4,645        4,163
  Prepaid rents...................................................     1,321        1,770
  Other current assets ...........................................     2,789        3,043
   Refundable income taxes........................................     3,057
  Deferred income taxes ..........................................    13,302       14,593
                                                                    --------      -------
      TOTAL CURRENT ASSETS .......................................   121,944      122,044

PROPERTY AND EQUIPMENT:
   Land...........................................................    15,688       16,590
   Building.......................................................    33,256       34,590
   Equipment .....................................................   265,230      273,481
   Leasehold improvements ........................................   225,764      232,500
                                                                    --------     --------
                                                                     539,938      557,161
   Less accumulated depreciation and amortization ................   205,356      223,476
                                                                    --------     --------
                                                                     334,582      333,685

GOODWILL, net of accumulated amortization of $2,424 and
   $2,828, respectively ..........................................     8,507        9,148
OTHER ASSETS .....................................................     1,816        6,584
                                                                    --------     --------
                                                                    $466,849     $471,461
                                                                    ========     ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable ..............................................  $ 32,436     $ 31,369
   Accrued payroll and related benefits ..........................    18,291       21,183
   Accrued rents .................................................    18,076       18,091
   Accrued sales taxes ...........................................     3,835        5,660
   Accrued insurance..............................................     6,592        6,375
   Accrued store closing costs....................................     6,197        5,752
   Other accrued expenses ........................................     6,168        7,986
   Income taxes payable...........................................                  4,002
   Current portion of capital leases..............................     2,116        1,661
                                                                    --------      -------
      TOTAL CURRENT LIABILITIES ..................................    93,711      102,079

LONG-TERM DEBT ...................................................    41,465       41,465
LONG-TERM PORTION OF CAPITAL LEASES...............................       824
MINORITY INTEREST.................................................                    271
DEFERRED INCOME ..................................................                     73
DEFERRED INCOME TAXES ............................................    31,124       33,554

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
   Preferred stock, $.01 par value; authorized 5,000 shares;
      none issued and outstanding
   Common stock, $.01 par value; authorized 60,000 shares;
      issued and outstanding 45,021 and
      42,266 shares, respectively ................................       450          423
   Additional paid-in capital ....................................   119,792      112,652
   Retained earnings .............................................   179,483      180,944
                                                                    --------     --------
      TOTAL STOCKHOLDERS' EQUITY .................................   299,725      294,019
                                                                    --------     --------
                                                                    $466,849     $471,461
                                                                    ========     ========
                 See Notes to Consolidated Financial Statements.

</TABLE>
                                        3

<PAGE>





                         BUFFETS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)

<TABLE>
                                       TWENTY-EIGHT WEEKS ENDED      TWELVE WEEKS ENDED
                                       ------------------------      ------------------
                                          JULY 15,    JULY 14,       JULY 15,   JULY 14,
                                           1998        1999           1998       1999
                                          -------     -------        -------    -------
                                               (in thousands, except per share amount)

<S>                                       <C>         <C>           <C>        <C>
RESTAURANT SALES........................  $461,408    $500,875      $204,579   $223,037

RESTAURANT COSTS:
         Food costs ....................   150,029     159,533        65,473     69,492
         Labor costs ...................   138,689     155,076        60,178     68,050
         Direct and occupancy costs        106,838     112,930        46,966     49,763
                                          --------    --------      --------   --------
         Total restaurant costs ........   395,556     427,539       172,617    187,305
                                          --------    --------      --------   --------

RESTAURANT PROFITS .....................    65,852      73,336        31,962     35,732

SELLING, GENERAL AND
         ADMINISTRATIVE EXPENSES........    31,455      37,885        13,562     16,141
OTHER SITE CLOSING COSTS                       200       1,148                      819
                                          --------    --------      --------   --------
                                            34,197      34,303        18,400     18,772

OTHER INCOME ...........................       697       1,683           453        744
                                          --------    --------      --------   --------
EARNINGS BEFORE INCOME TAXES ...........    34,894      35,986        18,853     19,516

INCOME TAXES ...........................    13,435      13,675         7,259      7,415
                                          --------    --------      --------   --------

NET EARNINGS ...........................  $ 21,459    $ 22,311      $ 11,594   $ 12,101
                                          ========    ========      ========   ========


EARNINGS PER SHARE:
         Basic..........................      $.47       $.51           $.25       $.28
                                          ========   ========       ========   ========
         Diluted........................      $.45       $.49           $.24       $.27
                                          ========   ========       ========   ========

WEIGHTED AVERAGE COMMON SHARES
ASSUMED OUTSTANDING:
         Basic..........................    45,471     43,499         45,567     42,514
         Diluted........................    49,972     47,362         50,506     46,437

</TABLE>

                 See Notes to Consolidated Financial Statements.


                                        4

<PAGE>

                         BUFFETS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
                                                                                Twenty-Eight Weeks Ended
                                                                                ------------------------
                                                                                JULY 15,        JULY 14,
                                                                                 1998            1999
                                                                                -------        --------
                                                                                    (in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                             <C>              <C>
            Net earnings ..................................................     $21,459          $22,311
            Adjustments to reconcile net earnings
               to net cash provided by operating activities:
              Depreciation and amortization ...............................      22,499           23,429
               Impairment of assets and site closing costs.................         200            1,148
              Tax benefit from early disposition of
                 common stock..............................................         557               29
              Deferred income..............................................        (212)              73
              Deferred income taxes .......................................        (517)           1,139
              Changes in assets and liabilities net of acquisitions:
                 Inventory ................................................       1,036              535
                 Other current assets .....................................      (1,940)            (623)
                 Refundable income taxes...................................       1,313            3,057
                 Other assets .............................................          95              (14)
                 Accounts payable .........................................      (1,669)          (1,366)
                 Accrued payroll and related benefits .....................       2,170            2,872
                 Accrued store closing costs...............................        (291)            (645)
                 Other accrued expenses ...................................       5,106            3,283
                 Income taxes payable .....................................      10,729            4,002
                                                                                -------          -------

                 Total adjustments ........................................      39,076           36,919
                                                                                -------          -------

                 Net cash provided by operating activities.................      60,535           59,230

CASH FLOWS FROM INVESTING ACTIVITIES:
            Capital expenditures, net of retirements ......................     (20,358)         (22,037)
            Purchase of eleven restaurants.................................      (5,557)
            Purchase of restaurant concepts and two locations..............                       (6,742)
            Cash received from landlords ..................................       1,127            2,166
                                                                                -------          -------

                 Net cash used in investing activities ....................     (24,788)         (26,613)

CASH FLOWS FROM FINANCING ACTIVITIES:
            Proceeds from exercise of employee stock options...............       2,534              253
            Repurchase of common stock.....................................                      (28,299)
            Payments on capital leases.....................................      (1,334)          (1,279)
                                                                                -------          -------

                 Net cash provided by (used in)
                  financing activities ....................................       1,200          (29,325)
                                                                                -------         --------

NET INCREASE IN CASH AND CASH EQUIVALENTS .................................      36,947            3,292

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ............................      43,030           94,058
                                                                                -------          -------

CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................     $79,977          $97,350
                                                                                =======          =======

Supplemental disclosures of cash flow information:

Cash paid during the period for:
            Interest (net of capitalized interest of $149
               and $167 in 1998 and 1999, respectively)....................     $ 1,846          $ 1,583
            Income taxes ..................................................       1,353            5,448
</TABLE>
                 See Notes to Consolidated Financial Statements.

                                        5

<PAGE>


                         BUFFETS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   In the  opinion of  Management,  the  accompanying  unaudited  consolidated
     financial  statements  contain all adjustments  (consisting  only of normal
     recurring  adjustments)  necessary to present fairly the financial position
     of Buffets,  Inc. and  subsidiaries  as of July 14, 1999 and the results of
     operations  for the twelve  weeks ended July 15, 1998 and July 14, 1999 and
     the results of operations and cash flows for the  twenty-eight  weeks ended
     July 15, 1998 and July 14, 1999.

2.   These  statements   should  be  read  in  conjunction  with  the  Notes  to
     Consolidated  Financial Statements contained in the Company's Annual Report
     on Form  10-K  for the  fiscal  year  ended  December  30,  1998  and  with
     Management's  Discussion and Analysis of Financial Condition and Results of
     Operations appearing on pages 7 through 26 of this quarterly report.

3.   On April 7, 1999, the Company acquired a 80% interest in Tahoe Joe's, Inc.,
     an operator of the two restaurant  Tahoe Joe's Famous  Steakhouse  concept,
     for approximately $6.7 million, net of liabilities and cash acquired.

4.   On July 14,  1999,  the Company  extended  the  expiration  date of its $50
     million  unsecured  revolving  line of credit to June 30, 2002.  On July 1,
     2002,  providing  no  default  or  event of  default  has  occurred  and is
     continuing, the line of credit is convertible,  at the Company's option, to
     a three  year term loan,  maturing  at July 1, 2005.  Among  other  things,
     pursuant  to the  agreement  with the  lender,  the  Company is required to
     maintain  specified  levels  of  net  worth,  is  limited  in  net  capital
     expenditures to $90 million in any fiscal year, is required to meet various
     financial performance criteria,  and is restricted from declaring or paying
     cash dividends to shareholders  without lender's approval.  Quarterly,  the
     Company is required to pay a  commitment  fee equal to 3/16 of 1% per annum
     on the unused base commitment  amount of the revolving line of credit,  $20
     million,  and 1/20 of 1% per annum on the unused reserve  commitment amount
     of $30 million.

5.   Basic  earnings  per share  are  computed  by  dividing  net  income by the
     weighted average number of common shares outstanding.  Diluted earnings per
     share  assumes  conversion  of  convertible  subordinated  notes  as of the
     beginning  of the year and  exercise of stock  options  using the  treasury
     stock  method,  if  dilutive.  The  following  is a  reconciliation  of the
     numerators and denominators used to calculate diluted earnings per share:

<TABLE>
                                   Twenty-Eight  Twenty-Eight   Twelve      Twelve
                                   Weeks Ended   Weeks Ended  Weeks Ended  Weeks Ended
                                     July 15,      July 14,     July 15,    July 14,
                                       1998         1999         1998        1999
                                   -----------   -----------  -----------  -----------
<S>                                   <C>           <C>         <C>         <C>
Net earnings .......................  $21,459       $22,311     $11,594     $12,101
Interest on convertible
 subordinated notes (after tax).....      962           970         412         415
                                      -------       -------     -------     -------

Income available to common
 shareholders and assumed
 conversion ........................  $22,421       $23,281     $12,006     $12,516
                                      =======       =======     =======     =======

Weighted average common
 shares outstanding.................   45,471        43,499      45,567      42,514
Dilutive effect of:
 Convertible subordinated notes.....    3,556         3,553       3,556       3,553
 Stock options......................      945           310       1,383         370
                                      -------       -------     -------     -------
Common shares assuming dilution.....   49,972        47,362      50,506      46,437
                                      =======       =======     =======     =======
</TABLE>

                                        6

<PAGE>



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

     The Company  operates on a fifty-two or fifty-three week fiscal year, which
ends on the Wednesday  nearest December 31. The Company's first quarter consists
of sixteen  weeks;  all other  quarters are  comprised of twelve  weeks.  When a
fifty-three week year occurs,  the Company's fourth quarter consists of thirteen
weeks.

RESULTS OF OPERATIONS

TWELVE WEEKS ENDED JULY 14, 1999
--------------------------------

RESTAURANT  SALES.  Restaurant sales of $223.0 million during the second quarter
of 1999  represented  a 9.0%  increase  over  sales of  $204.6  million  for the
comparable period of 1998,  primarily due to sales generated by new restaurants,
and a comparable  restaurant sales increase of 1.9%. One new restaurants  opened
in the  second  quarter  of 1999 and  1998.  The total  number of  Company-owned
restaurants  at the end of the quarter was 387,  (253 Old  Country  Buffet,  121
HomeTown  Buffet,  8 Original  Roadhouse  Grill, 2 Tahoe Joe's  Steakhouse and 3
Country  Roadhouse Buffet & Grill),  compared to 376 restaurants open at the end
of the second  quarter of 1998.  Average  weekly  sales per  restaurant  for the
second  quarter of 1999 increased 2.9% to $47,902 from $46,532 in the comparable
period of 1998. The five new  restaurants  opened during 1999 generated  average
weekly sales of $66,570 during the second quarter. The Company's price increases
have been close to the inflation rate.

RESTAURANT  COSTS. As a percentage of restaurant  sales,  total restaurant costs
decreased  to 84.0% for the  second  quarter  of 1999 from  84.4% for the second
quarter of 1998.  Food costs as a percentage  of restaurant  sales  decreased to
31.2% from 32.0%, due primarily to a reduction in the cost of various  products;
and labor costs  increased  to 30.5% from 29.4%,  due  primarily to increases in
hourly employee  labor.  Direct and occupancy costs decreased as a percentage of
restaurant  sales to 22.3% in 1999  from  23.0%  in 1998,  due to  decreases  in
various restaurant costs.

SELLING,   GENERAL   AND   ADMINISTRATIVE   EXPENSES.   Selling,   general   and
administrative expenses as a percentage of restaurant sales increased to 7.2% in
the  second  quarter  of 1999  from 6.6% in the  second  quarter  of 1998.  Such
expenses  in  absolute  terms  increased  19.0% to $16.1  million for the second
quarter of 1999 from $13.6 million for the comparable period of 1998,  primarily
due to a increase in advertising expense in the 1999 quarter.  Advertising costs
as a percentage of sales were 2.4% in 1999 compared to 2.1%

                                        7

<PAGE>

in 1998. The Company is anticipating  increasing its marketing  spending in 1999
to  approximately  $23.3  million  which  included the  development  of four new
television commercials which started airing in March of 1999.

SITE CLOSING COSTS. The Company closed four  underperforming  restaurants during
the quarter,  including our PIZZAPLAY joint venture, which generated a charge of
$819,000 for the quarter.

INCOME  TAXES.  Income taxes were 38.0% of earnings  before income taxes for the
1999 quarter and 38.5% in the 1998 quarter.

TWENTY-EIGHT WEEKS ENDED JULY 14, 1999
--------------------------------------

RESTAURANT  SALES. For the first  twenty-eight  weeks of 1999,  restaurant sales
increased 8.6% to $500.9  million from $461.4 million in 1998,  primarily due to
sales generated by new restaurants, and comparable sales increased by 1.5%. Five
new  restaurants  opened  in the  first  half of 1999,  compared  to  seven  new
restaurants  opened in the first  half of 1998.  The  average  weekly  sales per
restaurant in the 1999 period increased by 1.8% to $46,128 from $45,312 in 1998.

RESTAURANT  COSTS.  Restaurant  costs for the first  twenty-eight  weeks in 1999
increased to $427.5  million  from $395.6  million in 1998.  As a percentage  of
restaurant  sales,  the 1999 period  costs were 85.4% and the 1998 period  costs
were 85.7%. Food costs decreased to 31.9% from 32.5% for the comparable periods;
and labor costs increased to 31.0% from 30.1% for the comparable periods. Direct
and occupancy costs decreased to 22.5% in the first  twenty-eight  weeks of 1999
from  23.1% in the  comparable  period  in 1998,  due to  decreases  in  various
restaurant costs.

SELLING,  GENERAL AND ADMINISTRATIVE  EXPENSES. For the first twenty-eight weeks
of 1999, selling, general and administrative expenses increased to $37.9 million
from $31.5  million in 1998.  This  increase was  primarily due to a increase in
advertising  expense in 1999.  As a percentage  of sales,  selling,  general and
administrative  expenses  increased  to 7.5% in the 1999 period from 6.8% in the
1998 period.  This increase was  primarily  attributable  to higher  advertising
costs,  which for the first  twenty-eight  weeks of 1999 were 2.4% of restaurant
sales compared to 1.9% in the comparable 1998 period.

INCOME  TAXES.  Income taxes were 38.0% of earnings  before income taxes for the
1999 period and 38.5% for the 1998 period.



                                        8

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     The Company's  restaurants  generate cash  immediately  through sales.  The
majority  of new  restaurants  are  profitable  within  the first  period  after
opening.  The  Company  does not have  significant  assets  in the form of trade
receivables or inventory,  and often receives several weeks of trade credit from
food  and  supply  purveyors;   therefore,  the  Company's  operations  generate
substantial cash which is available to fund new  restaurants.  The investment of
cash flow from  operations in restaurant  property and equipment may result in a
"working capital deficit" (current liabilities  exceeding current assets) which,
to  a  considerable  extent,   represents  interest-free  financing  from  trade
creditors that the Company intends to continue to utilize.

     The Company  currently has an unsecured  revolving  line of credit of up to
$50 million with interest payable at the option of the Company at the applicable
"eurodollar rate", "certificate of deposit rate", or the "reference rate" of the
bank at the time of the  advance.  On October 1, 1998,  the Company  amended the
agreement  to reduce the  commitment  fee to .1875% per annum on the unused base
commitment  amount,  $20  million,  and .05% per  annum  on the  unused  reserve
commitment  amount,  $30  million.  On July 14, 1999,  the Company  extended the
agreement  for three  years.  On July 1, 2002,  providing no default or event of
default has occurred and is continuing,  the line of credit is  convertible,  at
the Company's option, to a three-year term loan, maturing on July 1, 2005. As of
and for the  twenty-eight  weeks  ended  July 15,  1998 and July 14,  1999,  the
Company had no borrowings outstanding under this credit line.

     In 1995, HomeTown Buffet issued $41.5 million in aggregate principal amount
of 7.0%  subordinated  convertible  notes due on December 1, 2002. The notes are
convertible  into shares of the Company's  common stock at a conversion price of
$11.67,  subject  to  adjustment  under  certain  conditions,  at any time until
maturity.  The notes are  subordinated  in right of payment to all  existing and
future senior indebtedness of the Company.  The notes became redeemable in whole
or in part,  at the option of the Company,  at any time on or after  December 2,
1998.  During  1998,  $35,000 of the notes were  converted  into 3,000 shares of
common stock at the discretion of the debtholder.

     The Company continues to require substantial amounts of capital to fund its
growth.  The Company currently expects to open a total of approximately 15 to 16
new  restaurants  in 1999 with  three new  Original  Roadhouse  Grills and three
buffet   restaurants   already  opened  at  August  25,  1999.  The  restaurants
constructed in

                                        9

<PAGE>

1999 will primarily be freestanding restaurants,  including five to six Original
Roadhouse Grills. In addition to new construction, the Company has converted one
prior Country  Harvest Buffet  Restaurant to an Original  Roadhouse  Grill,  and
converted one Old Country Buffet  restaurant to a Country  Roadhouse  Buffet and
Grill during 1999.

     On  May  12,  1998,  the  Company's  Board  of  Directors   authorized  the
expenditure of up to $40 million for the purchase of  outstanding  shares of the
Company's  common stock, to be effected from time to time in transactions on the
Nasdaq  National  Market or otherwise.  On June 3, 1999, the Company's  Board of
Directors  authorized the expenditure of up to an additional $40 million for the
purchase of  outstanding  shares of the Company's  common stock,  to be effected
from time to time in  transactions  on the Nasdaq  National Market or otherwise.
During the second quarter,  the Company  repurchased  $6.3 million of its common
stock (620,000  shares at an average price of $10.24).  As of July 14, 1999, the
Company had repurchased a total of 3,546,000  shares at an average of $10.92 per
share or $38.7 million. Since July 14, 1999 the Company has purchased a total of
$2.8 million of its common stock (240,000 shares at an average price of $11.65).

     On April 7, 1999, the Company acquired an 80% interest in Tahoe Joe's Inc.,
an operator of the two restaurant  Tahoe Joe's Famous  Steakhouse  concept,  for
approximately $6.7 million, net of liabilities and cash acquired.

     The Company  expects to spend $8 to $10 million in various  remodeling  and
improvement costs in 1999 at existing buffet restaurant facilities. In addition,
the Company  periodically  evaluates the purchase of existing restaurants and/or
restaurant concepts.

     The Company also expects to spend $9.0 to $10.0 million  during 1999 on its
new corporate  office  location in Eagan,  Minnesota  with the  completion  date
scheduled for the first quarter of 2000.

     The Company has traditionally located its restaurants within or adjacent to
strip  or  neighborhood  shopping  centers  in  principally  leased  facilities.
However, depending upon the availability of suitable mall locations, or in order
to  obtain  optimal  locations  within  particular  markets,  the  Company  also
purchases or ground-leases land on which it constructs freestanding restaurants.
It is  anticipated  that  all the  restaurants  to be  opened  in  1999  will be
freestanding units. The capital expenditure required for a freestanding location
can be over  100%  greater  than for a mall  location.  If the  Company  further
pursues development of

                                       10

<PAGE>



freestanding locations, the cost per location and related cash requirements will
increase  substantially  over the Company's  historical costs of development and
will not be offset by landlord contributions that typically have been associated
with in-line mall locations.

     Sources of capital for  restaurants  to be opened or  converted in 1999 and
early 2000 are anticipated to be funds from existing cash and cash  equivalents,
cash provided by  operations,  credit  received from trade  suppliers,  landlord
contributions for leasehold improvements and current bank financing. The Company
believes  that these  sources  will be  adequate to finance  operations  and the
additional  restaurants  and  conversions  included in the Company's  restaurant
development plans for 1999 and early 2000.  However, in order to remain prepared
for further  significant  growth in future  years,  the Company will continue to
evaluate its financing  needs and seek additional  funding if  appropriate.  The
Company has not paid any cash dividends on its common stock and, pursuant to its
credit agreement,  is restricted from declaring or paying cash dividends without
the approval of the Company's lender.

NON-PERFORMING RESTAURANTS

     The Company evaluates impairment of individual  restaurants whenever events
or changes in circumstances indicate the carrying amount of a restaurant may not
be  recoverable.  If  individual  restaurant  sales  during the year do not meet
management's  expectations  it is  reasonably  possible,  although not currently
quantifiable,  that the Company will incur impairment  charges.  The Company has
reviewed all  underperforming  locations  and is  considering  options for these
locations including expanding  advertising or conversion to a different brand or
concept.

FORWARD-LOOKING INFORMATION

     This Form 10-Q,  together  with the  Company's  Form 10-K and other ongoing
securities  filings,  press  releases,  conference  calls and  discussions  with
securities analysts, and other communications  contains certain  forward-looking
statements that involve risks and uncertainties.  These statements relate to the
Company's  future  plans,   objectives,   expectations  and  intentions.   These
statements  may be  identified  by the  Company  through  use of  words  such as
"expects,"  "anticipates,"  "intends,"  "plans"  and  similar  expressions.  The
Company's  actual results could differ  materially from those disclosed in these
statements,  to various  factors,  including  the following  "RISK  FACTORS" and
factors set forth elsewhere in this Form 10-Q. The Company assumes no obligation
to publicly  release the results of any revision or updates to forward-

<PAGE>

looking   statements  or  these  risk  factors  to  reflect   future  events  or
unanticipated occurrences.

       RISK FACTORS

     Current  and  prospective   shareholders   should  carefully  consider  the
following risk factors before trading in the Company's securities.  This list of
risk factors is not exclusive.  If any of the following  risks  actually  occur,
they could have a material negative effect on the Company's business,  financial
condition,  operating  results or cash flows. This could cause the trading price
of the Company's  securities to decline,  and security  holders may lose part or
all of their investment in the Company.

       RISKS ASSOCIATED WITH NEW DEVELOPMENT

     The Company has historically added restaurants each year either through new
construction, acquisition, or both. It currently expects that this practice will
continue  in  1999  to the  extent  described  above  in the  section  captioned
"Liquidity  and  Capital  Resources"  and in the  Company's  10-K  Report  dated
December 30, 1998 in the section captioned "Restaurant Development".  However, a
large number of variables affect restaurant  development and the Company can not
predict with  certainty the ultimate level of restaurant  additions,  if any, in
any particular  fiscal year.  This is due to the unique aspects  associated with
development  transactions,  such as the date sites become  available,  the speed
with  which the  Company  can  obtain  required  permits,  the  availability  of
construction  labor and materials,  and how quickly the new  restaurants  can be
staffed.  These  factors also make it difficult to predict when new  restaurants
will open and produce revenue.

     Variables influencing new restaurant additions include the level of success
in identifying  suitable  locations and the negotiation of acceptable leases and
land  purchases.  This may become more  difficult as  competition  heightens for
optimal  sites.  Other  variables  include,  but are  not  limited  to,  general
competitive factors,  land covenants restricting the Company's use of sites, and
signage restrictions imposed by land owners or governmental entities.

     Traditionally,  the  Company  has used  cash flow  from  operations  as its
primary funding for restaurant additions. The Company cannot guarantee that this
source of capital will be sufficient to attain the desired development levels if
adverse  changes  occur  affecting  revenues,  profitability  or cash  flow from
operations. Reductions in landlord contributions towards construction costs

                                       11

<PAGE>

would also reduce the capital  available for development.  The Company's ability
to purchase  (rather  than build)  additional  restaurants  also  depends on the
factors  described in this  section,  as well as other  factors.  These  factors
include the Company's  ability to convert  purchased  restaurants  to one of the
Company's existing  restaurant concepts and to integrate them into the Company's
business or, alternatively,  to successfully operate the acquired business using
its existing format.

     Acquisitions  involve a number of risks  that  could  adversely  affect the
Company's operating results,  including the diversion of management's attention,
the assimilation of the operations and personnel of the acquired companies,  the
amortization  of  acquired  intangible  assets  and  the  potential  loss of key
employees.  No assurances can be given that any acquisition or investment by the
Company will not  materially  and adversely  affect the Company or that any such
acquisition will enhance the Company's business.  If the Company ever determines
to make major  acquisitions  of other  businesses or assets,  the Company may be
required  to sell  additional  equity or debt  securities  or obtain  additional
credit  facilities.  The sales, if any, of additional equity or convertible debt
securities could result in additional dilution to the Company's stockholders.

       RESTAURANT OPERATIONAL RISKS

     The Company's restaurant  operations are affected by changes in the cost of
food and labor and its ability to  anticipate  such changes.  Operations  depend
upon  the  complete  and  timely  delivery  of food  and  non-food  items to the
restaurants.   Consequently,   interruptions  in  the  flow  of  such  products,
variations  in product  specifications,  changes in  product  costs and  similar
factors can have a material impact on the Company's results.

     In  recent  years,   other  reputable  food  service  companies  have  been
materially and adversely impacted by food-borne illness incidents. Some of these
incidents involved third party food suppliers and transporters  outside of their
reasonable control.  The Company has rigorous internal  standards,  training and
other  programs to attempt to minimize the risk of these  occurrences.  However,
the Company  cannot  guarantee  that these  efforts  will be fully  effective in
preventing  all  food-borne  illnesses.   New  illnesses  resistant  to  current
precautions may also develop in the future.

     The  Company  also  shares  a risk  common  to all  multi-unit  foodservice
businesses.  Specifically,  one or more  instances  of  food-borne  illness in a
Company or franchised restaurant, poor

                                       12

<PAGE>



health  inspection  scores,  or negative  publicity can have a material negative
impact extending far beyond the restaurant involved to affect some or all of the
Company's  other  foodservice  operations.  This risk exists even if it is later
determined  that  the  incidents  were  wrongly   attributed  to  the  Company's
restaurants, or that the negative publicity was false or misleading.

     The Company's buffet  restaurants  utilize a service format that is heavily
dependent  upon  self-service  by its  customers.  Any  development  that  would
materially impede or prohibit the Company's continued use of a self service food
service approach would have a material  adverse impact on the Company's  primary
business.

     The Company has from time to time pursued various  research and development
concepts.  These have related to its core buffet restaurant  business as well as
its non-buffet  restaurant business.  These are undertaken on a trial basis only
and the  opening of such  restaurants  does not  necessarily  indicate  that the
Company will expand the concepts.

     The Company has achieved  considerable  success with  television  marketing
programs in recent years. Marketing programs are generally most effective in the
period  immediately  following their introduction when they initiate trial usage
by new customers.  The Company's current television marketing programs have been
active in certain markets for over a year. It is therefore  possible that future
advertising in these markets will be less successful than when the programs were
first aired. The final level of television advertising expenditures in 1999 will
depend on the  effectiveness  of the  commercials,  the availability and cost of
advertising air time, and changes in the Company's marketing priorities.

     The  Company  periodically  reviews  the  operating  results of  individual
restaurants  to determine if impairment  charges on  underperforming  assets are
necessary,  and the need for restaurant closings, and it is reasonable to expect
that such actions will be required  from time to time in the future.  Impairment
charges  reduce the profits of the  Company.  They are  required  by  accounting
principles  when an asset,  such as a  restaurant,  performs  so poorly that the
Company  determines that the asset is worth less than its value as stated in the
Company's accounting records.

     The Company's sales volumes fluctuate seasonally,  and are generally higher
in the summer months and lower in the winter months overall.

     The  Company  has  not  experienced  a  significant   overall  impact  from
inflation. If operating expenses increase due to inflation,

                                       13

<PAGE>

the  Company  recovers  increased  costs by  increasing  menu  prices.  However,
competition  may limit or prohibit such  increases,  as discussed in the section
below entitled "COMPETITIVE RISKS."

     Previous  results at the Company's  restaurants  and at the Company overall
may not be  indicative of future  performance,  as a result of any or all of the
risk factors discussed in the various sections in this report 10-K incorporating
the words "RISK FACTORS."

       HUMAN RESOURCE RELATED RISKS

     The Company  operates in the service  industry and is  extremely  dependent
upon the availability of qualified restaurant  personnel.  Availability of staff
varies widely from location to location.  Difficulty in recruiting and retaining
personnel can increase the cost of restaurant  operations and temporarily  delay
the openings of new restaurants.  It can also cause higher employee  turnover in
the affected  restaurants.  Additionally,  competition  for qualified  employees
exerts  pressure  on wages paid to attract  qualified  personnel,  resulting  in
higher labor costs, together with greater expense to recruit and train them.

     The  operation of buffet style  restaurants  is materially  different  than
certain  other  restaurant  concepts.  Consequently,  the retention of executive
management that is familiar with the Company's core business is important to the
Company's  continuing  success.  The departure of multiple executives in a short
period of time could have an adverse impact on the Company's business.

     Various  employment  related legal risks also exist, which are discussed in
more detail in the sections below entitled  "REGULATORY FACTORS" and "LITIGATION
RISKS."

       RISKS ASSOCIATED WITH NON-COMPANY OWNED RESTAURANT OPERATIONS

     The  Company  is  limited  in the  manner  in  which  it can  regulate  its
franchised  restaurants,  especially  in real-time.  If a franchised  restaurant
fails to meet the Company's franchisor  operating  standards,  the Company's own
restaurants  could be adversely  affected due to customer  confusion or negative
publicity.  A similar risk exists with respect to totally unrelated  foodservice
businesses if customers  mistakenly associate such unrelated businesses with the
Company's own operations.

       RISKS ASSOCIATED WITH GENERAL CONDITIONS

     The confidence of consumers generally, together with changes

                                       14

<PAGE>

in consumer preferences, can have a significant impact on the Company's results.
Positive  or  negative  trends in weather  condition  can have an  exceptionally
strong  influence on the  Company's  business.  This effect is heightened by the
fact that most of the Company's restaurants are in geographic areas experiencing
extremes in weather.  The Company's success also depends to a significant extent
on  factors  affecting  discretionary  consumer  spending,   including  economic
conditions,  disposable consumer income and consumer confidence. Adverse changes
in these  factors  could  reduce  guest  traffic or impose  practical  limits on
pricing,  either  of which  could  materially  adversely  affect  the  Company's
business, financial condition, operating results or cash flows.

       COMPETITIVE RISKS

     The  Company  operates  in  a  highly  competitive  industry.   Competitive
pressures  may have the affect of  limiting  the  Company's  ability to increase
prices, with consequent  pressure on operating earnings.  This environment makes
it more  difficult  for the Company to continue to provide high  service  levels
while maintaining the Company's reputation for superior value, without adversely
affecting operating margins.

       REGULATORY FACTORS

     The Company is subject to  extensive  government  regulation  at a federal,
state and  local  government  level.  These  include,  but are not  limited  to,
regulations  relating  to the  sale  of food  (and  alcoholic  beverages  in the
Company's full service  restaurants).  In the past, the Company has been able to
obtain and maintain  necessary  governmental  licenses,  permits and  approvals.
However,  difficulty or failure in obtaining  them in the future could result in
delaying or canceling  the opening of new  restaurants.  Local  authorities  may
suspend or deny renewal of the Company's governmental licenses if they determine
that the  Company's  conduct does not meet the  standards  for initial  grant or
renewal.  Although the Company has satisfied governmental licensing requirements
for its existing  restaurants,  the Company cannot be sure that these  approvals
will be forthcoming at future locations. This risk would be even higher if there
was a major change in the licensing  requirements  affecting the Company's types
of restaurants.

     The Company is also subject to certain  states'  "dram shop"  statutes with
respect to its restaurants that serve alcohol.  These statutes generally provide
a person injured by an intoxicated  person the right to recover  damages from an
establishment  that served alcoholic  beverages to the intoxicated  person.  The
Company

                                       15

<PAGE>



carries liquor liability coverage as part of its existing  comprehensive general
liability  insurance.  If the Company were to significantly expand the number of
restaurants  serving alcohol,  an adverse trend in alcohol related  judgments in
excess of the Company's insurance  coverage,  or the Company's failure to obtain
and maintain  insurance  coverage,  could  materially  and adversely  affect the
Company.

     Various federal and state labor laws govern the Company's relationship with
its  employees  and affect  operating  costs.  These laws  include  minimum wage
requirements,  overtime,  unemployment tax rates,  workers'  compensation rates,
citizenship    requirements    and   sales   taxes.    Significant    additional
government-imposed  increases in the following areas could materially  adversely
affect the Company's business,  financial  condition,  operating results or cash
flow:
              *       minimum wages
              *       mandated health benefits
              *       paid leaves of absence
              *       increased tax reporting
              *       revisions in the tax payment requirements for
                      employees who receive gratuities

     The Federal Americans with Disabilities Act prohibits discrimination on the
basis of  disability  in  public  accommodations  and  employment.  The  Company
believes  that its  restaurants  are designed to be  accessible to the disabled.
However,  mandated  modifications to the Company's  facilities to make different
accommodations  for  disabled  persons  could  result in material  unanticipated
expense.

     The Company is subject to federal,  state and local laws,  regulations  and
ordinances  that (i)  govern  activities  or  operations  that may have  adverse
environmental  effects, such as discharges to air and water, as well as handling
and disposal practices for solid and hazardous wastes, and (ii) impose liability
for the costs of cleaning up, and certain damages  resulting from, sites of past
spills, disposals or other releases of hazardous materials resulting from, sites
of past spills,  disposals or other releases of hazardous  materials  (together,
"Environmental  Laws"). In particular under applicable  Environmental  Laws, the
Company may be responsible for remediation of  environmental  conditions and may
be subject to  associated  liabilities  (including  liabilities  resulting  from
lawsuits brought by private litigants)  relating to its restaurants and the land
on which its restaurants  are located,  regardless of whether the Company leases
or owns the  restaurants  or land in question  and  regardless  of whether  such
environmental conditions were created by the Company or by a prior owner or

                                       16

<PAGE>



tenant.  There can be no assurance  that  environmental  conditions  relating to
prior,  existing  or future  restaurants  or  restaurant  sites  will not have a
material adverse affect on the Company.

                      LITIGATION RISKS

     The Company is from time to time the subject of  complaints  or  litigation
from guests alleging illness, injury or other loss associated with the Company's
restaurants.  Adverse publicity  resulting from these allegations may materially
adversely  affect the Company and the  Company's  restaurants.  This may be true
whether or not the allegations are valid or the Company is liable.  In addition,
employee   claims   against  the   Company   based  on,   among  other   things,
discrimination,  harassment  or wrongful  termination  may divert the  Company's
financial and management  resources that would  otherwise be used to benefit the
future performance of the Company's operations.  The Company has been subject to
these  employee  claims  from time to time,  and a  significant  increase in the
number of these claims or successful  claims could  materially  adversely affect
the Company's business,  financial  condition,  operating results or cash flows.
The Company is currently  defending a lawsuit based on alleged violations of the
securities laws by the Company.  See "LEGAL  PROCEEDINGS" below for a discussion
of this lawsuit and the related risks.

                      RISKS ASSOCIATED WITH THE YEAR 2000 ISSUE

YEAR 2000 ISSUE OVERVIEW

     The "Year 2000  Issue" is a term used to  describe  the  inability  of some
computer  hardware and software to operate  properly as the date January 1, 2000
approaches,  and  beyond.  Year  2000  Issues  can  arise in  unexpected  areas.
Traditional computer hardware and software and information  technology ("IT") is
not the only  technology  at risk.  For  example,  things such as employee  time
clocks,  cash  registers,  and  food  ordering  systems,  as well as many  other
technologies  sometimes  referred  to as  non-IT  systems  ("non-IT"),  could be
impacted.  Unless stated to the contrary, for purposes of this Year 2000 Update,
the term  "System(s)"  shall be  interpreted  as broadly as  possible to include
every IT and non-IT system,  including computer,  hardware,  software,  process,
system,  application  or technology  that has the  potential of being  adversely
affected by the Year 2000 Issue.

     The Year 2000 Issue is centered on whether Systems will properly  recognize
date-sensitive information. Many Systems are coded to accept only two digit date
data. As the year 2000 nears,  Systems  processing date information will need to
accept four digit

                                       17

<PAGE>



entries to distinguish years beginning with "19" from those beginning with "20."
The  inability  to  recognize  or properly  treat dates may cause  Systems to be
unable to process financial, operational, and other information, or may generate
inaccurate results.

     Because of the peculiarities of individual Systems, the Year 2000 Issue may
have an effect both before and after January 1, 2000. It is not a problem unique
to the  "snapshot"  of time on New  Year's  Day 2000.  To the  contrary,  merely
because a System  works  properly  on  January  1, 2000 does not mean that it is
immune from date related  failures on other dates including,  for example,  leap
year's day and others.

     Recent  press  treatment  of the Year  2000  Issue has  suggested  that the
general population may dramatically  change their buying practices and lifestyle
as the new  millennium  approaches.  Significant  negative  changes in  consumer
buying patterns could  materially  adversely  affect the Company's  business and
financial  results,  whether  related to the Year 2000 Issue or  otherwise,  and
regardless   of  whether  such  patterns  have  any  bearing  on  the  Company's
assessments  and efforts  with  respect to the Year 2000 Issue.  Conversely,  if
consumers  choose to dine away from home more frequently as a consequence of the
Year 2000 Issue or otherwise,  the Company's  business could be enhanced.  It is
presently  impossible  to assess how,  and when,  the public will respond to the
Year 2000 Issue or the extent,  if any, that consumer  reactions will impact the
Company's business.

     The  Company has taken,  and will  continue  to take,  actions  intended to
minimize  the  impact of the Year  2000  Issue,  although  it is  impossible  to
eliminate these risks entirely. Unfortunately,  there is no single test that can
be used to  conclusively  determine  whether Systems are immune to the Year 2000
Issue.  To the  contrary,  new Year 2000 risks are  regularly  identified by the
technology  community.  Also impeding Year 2000 Issue testing is the high degree
of integration  between various Systems and the  impracticality or impossibility
of  conducting  full-scale  live  testing.  Consequently,  interrelated  Systems
believed  secure in a test  environment  could  conceivably  fail when operating
together under realistic workloads.

                      PREEXISTING SYSTEMS UPGRADES

     The Company's major  information  Systems at its corporate office have been
largely  upgraded or replaced in the ordinary  course of business  over the past
four years.  The Year 2000 Issue was one of the many factors  considered  in the
selection and implementation of these Systems enhancements.

                                       18

<PAGE>



     Following the  Company's  merger with  HomeTown  Buffet,  Inc. in September
1996, the Finance,  Accounting,  and Information Services Departments  evaluated
the  adequacy  of their  existing  Systems in the  context of current and future
needs. A subsequent upgrade program was undertaken to increase  processing speed
of these systems and to handle  capacity to handle future Company  growth.  This
program eventually entailed the replacement of the central computers running the
Company's accounting software,  as well as changes in those computers' operating
system,  including  extensive  revisions to the financial  accounting  software.
These  upgrades  were  conducted in the ordinary  course of business and are not
included  in the  costs  discussed  below.  However,  the  improvements  had the
incidental  benefit of assisting with Year 2000 Issue readiness.  The accounting
Systems upgrade project was finalized in November, 1998.

     The  Company  also  undertook  a program  to  replace  all of its  existing
corporate personal computers in response to a broad-based independent consulting
study of the Information  Services  Department.  Although the personal  computer
upgrade was motivated by the desire to bring the equipment to a uniform standard
and to enhance  performance,  a number of the older computers were not Year 2000
Issue  compliant.  Consequently,  the  cost  of the  personal  computer  upgrade
program,  including  associated  software,  installation  contractor  costs, and
end-user  training,  is included in the "Y2K Project Cost" table.  Substantially
all of the  corporate  office  personal  computers  were upgraded or replaced in
1998,  while personal  computer  upgrades at the Company's  restaurant were 100%
complete as of June, 1999.

                      THE COMPANY'S Y2K PROJECT

     The Company's project to address the Year 2000 Issue involves three phases;
inventory,   assessment,   and  remediation/testing   (collectively,   the  "Y2K
Project").  The status of these three  phases,  and best  current  estimates  of
completion, are shown in the table below captioned "Y2K PROJECT SCHEDULING".

     The  previously  described  upgrades to the  Company's  accounting  Systems
delayed the  implementation  of the second two phases of the Y2K  Project  since
such  efforts  would  have  been  needlessly   expended  on  Systems  bound  for
replacement.  Following  the late  1998  completion  of the  accounting  Systems
upgrade,  the Company  engaged a full time on-site  consultant to act as project
manager  overseeing the Y2K Project in conjunction with a Y2K Steering Committee
acting under the direction of the Executive Committee.  The use of a third party
for this purpose is also intended to maintain an independent  perspective on the
Company's efforts relative to Year 2000 Issue readiness.

                                       19

<PAGE>
                  Y2K PROJECT SCHEDULING AS OF AUGUST 30, 1999
                  --------------------------------------------

   Activity                     Start Date       End Date      % Complete
   --------                     ----------      ----------     ----------
Inventory phase                 03/13/1997      05/02/1998       100%
Assessment phase                02/05/1999      07/15/1999       100%
Remediation/testing phase       03/30/1999      10/16/1999        30%

     During the course of the remediation/testing  phase of the Y2K Project, the
Company is  attempting  to utilize a  bottom-to-top  approach of  entering  data
through  simulated  store  level  Systems,  pass  the  data to the  headquarters
financial  accounting  Systems,  manipulate that data at headquarters  and enter
other financial information through the Accounting,  Human Resources,  and other
departments,  and generate reports through the Information  Services Department.
In this  way,  the  Company  intends  to  exercise  many  representative  System
components to test overall Year 2000 Issue  readiness.  The  remediation/testing
program  will  test  many  non-IT  Systems  including  restaurant  point-of-sale
systems, time clocks, credit card equipment,  environmental  controls,  security
systems,  and telephone systems.  It is presently  anticipated that at least ten
restaurants will be utilized in the user test in a simulated  setting.  Although
the Company  believes that the simulation will yield  sufficient  information to
gauge Year 2000 Issue readiness,  full load testing in a real environment (which
is presently  deemed  impractical  without  materially  disrupting  or degrading
current operations) could reveal unexpected problems.

     During the course of the  remediation  and testing phase it was  determined
that certain  additional  upgrades to the  Company's  accounting  software  were
necessary to maintain  vendor support and to block the entry of incomplete  date
information.  The  implementation  of this  upgrade  has had a cost  and  timing
consequence that is reflected in the tables included in this section for testing
purposes.  Actual  implementation  of these  upgrades is  currently  expected in
December, 1999.

     Since unanticipated  expenses may arise over the course of the Y2K Project,
the  Company is unable to project  with  accuracy  the total  expected  costs to
achieve Year 2000 Issue readiness.  With this caution,  however, the Company has
attempted to estimate  such costs in the following  table.  The Company does not
allocate  the  value  of  time  expended  by  corporate  office  personnel  when
considering Y2K Project costs,  and no special  account has been  established to
track Y2K Project costs  generally.  The estimated costs during 1999 to complete
the  assessment  and the testing phases are estimated to be 18% of the Company's
1999  Information  Services $4.8 million budget.  The costs of the Company's Y2K
Project are being funded with cash flows from operations. The Company's

                                       20

<PAGE>



expenditures  for the Y2K Project  during the preceding  two fiscal  years,  and
project cash  expenditures  for 1999, are shown for  comparison  purposes in the
following table.

                               Y2K PROJECT COSTS*
                               ------------------

                                            Through
  Cash                                     August 25,   Remaining
Expenditures            1997       1998      1999          1999        1997-99
------------          -------    -------   ---------    ---------     ---------

Consultant Fees**     $183,000  $ 19,000  $  572,000     $287,000    $1,061,000
Hardware Upgrades            0   419,000   1,044,000       22,000     1,485,000
Software Upgrades            0   269,000     280,000       24,000       573,000
                                                                     -----------

Currently Expected Total Y2K Project Costs, 1997-1999:                $3,119,000
                                                                      ==========

Notes:
  *       Of the $3,119,000 total expected Y2K Project costs,  $2,196,000 or 70%
          relates to personal computer upgrades conducted in the ordinary course
          of business  that are  included in the table  merely  because of their
          ancillary   benefit  of  assisting  with  Year  2000  Issue  readiness
          (consisting  of  $722,000  for  installation,   training  and  related
          consulting  fees,  $911,000  for hardware  upgrades,  and $563,000 for
          software).

  **      Various  consultants  have been engaged to  supplement  the  Company's
          internal efforts on the Y2K Project.  The first was engaged in 1997 to
          address the inventory phase. The costs shown for 1997 were principally
          related to a general  overview of the Company's  Information  Services
          Department rather than the Year 2000 issue specifically, but are shown
          lacking further cost segregation.

                            YEAR 2000 ISSUE RISKS AND CONTINGENCY PLANS

     The Company is dependent on computer  processing in its business activities
and the Year 2000 Issue creates risk for the Company from unforseen  problems in
the  Company's  Systems  and from  third  parties  with  whom the  Company  does
business.

                                     INTERNAL YEAR 2000 RISKS

     Risks of  Systems  failure at the  restaurant  level  include,  but are not
limited  to, the  following  examples.  The failure of  automated  environmental
controls  at a  Company  restaurant  could  result  in  inhospitable  conditions
requiring temporary closure. The failure of cash register systems or credit card
processing terminals would force reversion to manual sales tracking methods that
could

                                       21

<PAGE>



slow both the  throughput of guests,  and in the instance of credit  cards,  the
recognition of income.  The failure of personal  computers in a restaurant could
prevent  the daily  polling  of store  financial  information  by the  corporate
headquarters,   to  account  for  store  results,  cash  deposits,  and  payroll
processing. Since these computers are also used to order food from suppliers and
analyze  food and labor  costs,  store  management  could be forced to revert to
manual methods that are less effective or efficient and which could increase the
cost of food and labor. Telecommunication failures could result in loss of sales
due to customer inability to reach the stores, as well as make the communication
of store results impossible.

     Risks of  Systems  failure  at the  corporate  level  include,  but are not
limited to, the following examples.  There may be temporary inability to conduct
normal accounting and financial functions due to incomplete store data or due to
System aberrations or failures at the Company headquarters.  The absence of data
normally utilized by management in the supervision of the Company's  restaurants
could make such oversight  difficult and less effective,  increasing costs until
the data is restored. Telecommunications risks would parallel those at the store
level. A coordinated computer,  software and telecommunication System is used to
sweep cash from local  depositories  into central  accounts.  The failure of any
element of this System could cause  interruptions in the availability of cash to
meet Company  liabilities.  Similar  risks exist with  respect to an  integrated
payroll  system  consolidating  store and corporate  data and passing it on to a
third party payroll contractor. The Y2K Project is very labor dependent, both in
terms of internal human resources in the Information Services Department as well
as with key  outside  vendors.  Recent  staffing  shortages  in the  Information
Services Department may impede completion of the  remediation/testing  phases of
the Y2K plan  although  the  Company  currently  believes  that  these  resource
requirements can be filled by outside consultants.  The Y2K Project has resulted
in the  rescheduling of certain IT projects of lesser  priority,  although it is
not anticipated  that this  re-prioritization  will alone  adversely  affect the
Company's financial condition or results of operations.

                                     EXTERNAL YEAR 2000 RISKS

     It is conceivable  that the Company's Year 2000 Issue risks arise more from
external  factors  than they do from  internal  sources.  This is because of the
Company's heavy reliance on vendors to supply the key items necessary to run its
restaurants. Unfortunately, the Company has little, if any, control over many of
these external  parties and is unlikely to obtain  adequate  levels of assurance
that they have prepared sufficiently to be ready for the Year 2000 Issue.

                                       22

<PAGE>



     For a  restaurant  to be  able to  generate  revenue,  it must be open  for
business during its normal operating hours,  staffed,  lit, heated, and supplied
with  foodstuffs  and other  supplies  necessary  to serve its guests.  External
factors that could prevent these things from occurring include, by example:  the
inability  to open  due to lack of power or  utilities;  lack of food and  other
supplies due to service interruptions  involving suppliers or distributors;  and
inability  to access the  restaurants  due to  malfunctioning  security  systems
controlled by others or other facilities related impediments.

     At a corporate level, third parties are relied upon extensively for certain
services,  particularly in the Payroll and Information Services Departments. For
example,  a  failure  of the  payroll  vendor  to supply  payroll  checks  would
interrupt the flow of compensation to employees which could jeopardize  staffing
throughout the  organization.  It currently  appears unlikely that the Company's
external payroll services vendor will have undertaken  significant testing prior
to January 1, 2000 utilizing data and systems unique to the Company.

     Common  external  risks  to both the  Company's  corporate  and  restaurant
operations  include  interruptions  in  utilities to the  Company's  facilities,
whether related to electrical,  natural gas,  water,  sewer,  waste removal,  or
telephone or data transmission services.

     The  Company  has sent 70  letters  to vendors  of  critical  IT  services,
significant  food and material  vendors,  and  utilities,  among  others,  in an
attempt to obtain  certifications  of their  readiness  with respect to the Year
2000  Issue.  To  date,  seven  of the  letters,  or 10%,  have  been  returned.
Substantially complete  certifications have been received from only three of the
19 most  significant  suppliers of key  software  and hardware at the  corporate
office. The utility and  telecommunication  firms have been quite conditional in
their  expressions  of  Year  2000  Issue  readiness,  typically  linking  their
readiness  to  the  preparedness  of  unrelated  parties  (for  example,   other
contributors to the national power grid). Consequently,  the responses are given
little weight.  Of the Company's primary food  distributors,  it has received 20
certifications out of 52 initial requests sent to date.

     While the Company  will  continue to seek vendor  readiness  certifications
relative to the Year 2000 Issue, it is expected that many companies will fail to
provide  such  documentation,  whether due to liability  concerns or  otherwise.
Consequently,  the Company is taking this factor into account, wherever possible
when formulating its various contingency plans.

                                       23

<PAGE>



                                     MAGNITUDE OF YEAR 2000 ISSUE RISKS

     Any  individual  risk listed above,  if experienced on a broad enough scale
and of lengthy  duration,  could have a material adverse effect on the Company's
results of operations,  liquidity,  and financial condition.  This makes it very
difficult to  accurately  anticipate a worst case scenario  resulting  from Year
2000 Issue Risks since more than one risk factor  could  exist.  Subject to this
proviso,  the Company  anticipates  that the worst case Year 2000 Issue scenario
would  involve the  closure for a material  period of time of most or all of the
Company's  restaurants  due to  national  utility  interruptions,  coupled  with
adverse changes in customer spending patterns. The most likely risk scenario may
instead be more  localized  closures  of  individual  restaurants,  or groups of
restaurants  in a particular  city,  due to utility  interruption  or failure to
receive  necessary food and other supplies.  The Company  believes that its core
business  - the  operation  of  principally  buffet  style  restaurants,  may be
somewhat less  vulnerable to Year 2000 Issues than entities more dependent on IT
and non-IT  systems,  such as processor  dependent  manufacturers  or technology
driven firms.  So long as the  restaurants can be kept open to the public in the
manner they are accustomed,  the failure of Systems associated with "back of the
house" activities, such as administrative and corporate office functions, should
have modest effects on "front of the house" revenue producing activities.

                            CONTINGENCY PLANS

     Contingency  Plans for the Year 2000 Issue are being  developed  as part of
the third phase of the Y2K Project,  remediation/testing.  These plans are being
developed  for every  department  in the Company and address  both  internal and
external  Year 2000 Issue risks.  The most  critical of these plans,  related to
restaurant  operations,  was  completed  on May 31, 1999 and drafts of all other
contingency  plans were prepared in June,  1999. For sake of  illustration,  the
restaurant   operations   contingency  plan  includes  procedures  for  manually
recording and reporting sales  transactions,  it addresses supply shortages from
key  distributors,  and  delineates  various  other  contingency  items.  It  is
anticipated  that the  remainder of the  contingency  plans will be finalized in
September,  1999. Due to the evolving nature of the Year 2000 Issue risks, it is
expected that the Company's contingency plans will be revised over time.

     The  Company's  risk  assessment  of the  Year  2000  Issue is based on the
Company's  current  knowledge,  and  could in  hindsight  prove  incomplete  and
possibly  overstate  or  understate  the  actual  risk's  faced by the  Company.
Similarly,  the  ability of the  Company  to address  the Year 2000 Issue in the
manner and within the cost

                                       24

<PAGE>



estimates  described  above could be  adversely  affected  by negative  findings
arising  during the course of testing  systems  and  implementing  solutions  or
contingency plans.

                   RISKS ASSOCIATED WITH PURCHASING, OWNING, OR SELLING THE
COMPANY'S SECURITIES

     The Company's  securities  currently  trade publicly on the NASDAQ National
Market. The market price of the Company's  securities  fluctuate  significantly.
These price  changes do not  necessarily  correlate  to movements in the overall
stock market.  The stock market has from time to time experienced  extreme price
and volume  fluctuations,  which has often been unrelated or disproportionate to
the operating performance of particular companies.  Fluctuations or decreases in
the trading price of the Company's  securities may adversely  affect the ability
of security  holders to trade in the  Company's  securities.  In addition,  such
fluctuations  could  adversely  affect the  Company's  ability to raise  capital
through future equity financings should the Company determine at some point that
it is in its best interest to do so.

PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings

          The Company is involved in various legal actions arising in the normal
          course of business.  Management  is of the opinion that their  outcome
          will not  have a  significant  effect  on the  Company's  consolidated
          financial statements.

          The Company  and seven of its  present  and/or  former  directors  and
          executive officers have been named as defendants in a Corrected, Third
          Amended,  Consolidated  Class Action Complaint (the "third complaint")
          brought on behalf of a class of all  purchasers of common stock of the
          Company  from  October 26, 1993  through  October 25, 1994 (the "class
          period")  in the United  States  District  Court for the  District  of
          Minnesota.  The  third  complaint  alleges  that the  defendants  made
          misrepresentations  and  omissions  of material  fact during the class
          period  with  respect  to  the  Company's  operations  and  restaurant
          development  activities,  as a  result  of  which  the  price  of  the
          Company's stock allegedly was  artificially  inflated during the class
          period.  The third complaint  further alleges that certain  defendants
          made sales of common  stock of the  Company  during  the class  period
          while in  possession  of material  undisclosed  information  about the
          Company's operations and restaurant development

                                       25

<PAGE>



          activities.  Plaintiffs  allege that the defendants'  conduct violated
          the Securities  Exchange Act of 1934 and seek damages of approximately
          $90 million and an award of attorneys fees, costs and expenses.

          The  defendants  have  answered  the  third  complaint,   denying  all
          liability and raising various affirmative defenses. Discovery has been
          taken and was  substantially  completed as of February  26,  1999.  By
          Order  entered on June 17, 1999,  as amended by Order dated August 18,
          1999, the District Court certified the proposed plaintiff class.

          Management  of the  Company  continues  to believe  that the action is
          without  merit and is vigorously  defending  it. On May 28, 1999,  the
          defendants  served  their  motion for summary  judgment on all claims.
          Plaintiffs  also  moved for  partial  summary  judgement  against  the
          Company and Mr. Hatlen for a portion of class period. The motions have
          not yet been scheduled for hearing.  The defendants  have given notice
          of the  plaintiffs'  claim to its  insurance  carrier.  The  insurance
          company is  reimbursing  the  defendants for a portion of the costs of
          defense  under a reservation  of rights.  Although the outcome of this
          proceeding   cannot  be  predicted  with   certainty,   the  Company's
          management  believes that while the outcome may have a material effect
          on earnings in a  particular  period,  the  probability  of a material
          effect on the  financial  condition  of the  Company,  not  covered by
          insurance, is slight.

 Item 2.  Changes in Securities

          None

 Item 3.  Defaults upon Senior Securities

          None

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

          The Annual Meeting of  Shareholders of the Company was held on May 11,
          1999. At the meeting the number of directors of the Company was set at
          six,  six  directors  were elected and the  appointment  of Deloitte &
          Touche LLP as the Company's  independent auditors for the current year
          was approved, by the following votes:


                                       26

<PAGE>



          Election of Directors       FOR         WITHHOLD     NONVOTES
          ---------------------    ----------     --------     --------
          Walter R. Barry, Jr.     33,119,243      523,599        0
          Marvin W. Goldstein      33,119,543      523,299        0
          Roe H. Hatlen            33,119,343      523,499        0
          Alan S. McDowell         33,114,278      528,564        0
          C. Dennis Scott          33,112,704      530,138        0
          Michael T. Sweeney       33,119,543      523,299        0


                                       FOR       AGAINST    ABSTAIN    NONVOTES
                                    ----------   -------    -------    --------
          Approval of auditors      33,192,662   19,334     430,846       0

 Item 5.  Other Information

          None

 Item 6.  Exhibits and reports on Form 8-K

          a)    Exhibits
                3(a)        Composite Amended and Restated Articles of
                            Incorporation (1)
                3(b)        By-laws of the Company (2)
                4(a)        Form of Rights Agreement, dated as of October 24,
                            1995 between the Company and the  American  Stock
                            Transfer and Trust Company, as Rights Agent (3)
                10(a)       Fifth Amendment dated April 30, 1999 to Second
                            Amended and Restated Credit Agreement by and
                            between the Company and USBank National
                            Association
                10(b)       Sixth Amendment dated July 14, 1999 to Second
                            Amended and Restated Credit Agreement by and
                            between the Company and USBank National
                            Association
                27          Financial Data Schedule


          b)    Reports on 8-K

                None

(1)  Incorporated by reference to Exhibit 4.1 to Registration  Statement on Form
     S-3 dated June 2, 1993 (Registration No. 33- 63694).
(2)  Incorporated by reference to Exhibit 3(b) to Annual Report on Form 10-K for
     the fiscal year ended December 29, 1993.
(3)  Incorporated  by reference to Exhibit 1 to Report on Form 8-K dated October
     24, 1995.



                                       27

<PAGE>



                                   SIGNATURES



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



                                  BUFFETS, INC.
                                  (Registrant)


August 30, 1999

                                  /s/ Roe H. Hatlen
                                  -----------------------------
                                  Roe H. Hatlen
                                  Chairman of the Board,
                                  Chief Executive Officer
                                  (Principal Executive Officer)



                                  /s/ Clark C. Grant
                                  -----------------------------
                                  Clark C. Grant
                                  Senior Vice President of
                                  Finance and Treasurer
                                  (Principal Financial Officer)







<PAGE>




                                  EXHIBIT INDEX


Exhibits                                                         Page
--------                                                         ----

3(a)       Composite Amended and Restated
           Articles of Incorporation................   Incorporated by Reference

3(b)       By-laws of the Company...................   Incorporated by Reference

4(a)       Form of Rights  Agreement, dated  as of
           October  24, 1995 between the Company and
           the American Stock Transfer and Trust
           Company, as Rights Agent.................   Incorporated by Reference

10(a)      Fifth  Amendment dated April 30, 1999 to
           Second Amended and Restated Credit
           Agreement by and between the Company
           and USBank National Association..........        Filed Electronically

10(b)      Sixth Amendment dated July 14,  1999 to
           Second Amended and Restated Credit
           Agreement by and between the Company
           and USBank National Association..........        Filed Electronically

27         Financial Data Schedule..................        Filed Electronically


-------------------


<PAGE>