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
 October 7, 1998                                       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 November 9,1998
Common Stock, $.01 par value                           44,997,364 shares




                                        1

<PAGE>







                         BUFFETS, INC. AND SUBSIDIARIES


                                      INDEX
                                      -----

                                                                       Page No.
                                                                       --------

 PART I.          FINANCIAL INFORMATION

 Item 1.          Consolidated Financial Statements:

                  Consolidated Balance Sheets-
                  December 31, 1997 and October 7, 1998 ................... 3

                  Consolidated  Statements  of  Operations-
                  Forty  Weeks  ended October 8, 1997 and
                  October 7, 1998 and  Twelve  Weeks  ended
                  October 8, 1997 and October 7, 1998 ......................4

                  Consolidated Statements of Cash Flows-
                  Forty Weeks ended October 8, 1997
                  and October 7, 1998 ..................................... 5

                  Notes to Consolidated Financial
                  Statements .............................................. 6

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

 PART II.         OTHER INFORMATION ....................................... 14







                                        2

<PAGE>



Part I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS

                         BUFFETS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
<TABLE>
                                                             DECEMBER 31,   OCTOBER 7,
                                                                1997          1998   
                                                             ------------   ----------
                    (in thousands, except par value amounts)

                                     ASSETS
CURRENT ASSETS:
<S>                                                            <C>           <C>    
    Cash and cash equivalents ................................ $ 43,030      $86,468
    Receivable from landlords ................................    1,430        1,310
    Inventory.................................................    4,934        3,959
    Prepaid rents.............................................                 2,207
    Other current assets......................................    1,986        1,834
    Refundable income taxes...................................    1,313        5,774
    Deferred income taxes.....................................   12,418       14,037
                                                               --------      -------
       TOTAL CURRENT ASSETS...................................   65,111      115,589

PROPERTY AND EQUIPMENT:
    Land......................................................   15,688       15,690
    Buildings.................................................   31,773       32,735
    Equipment.................................................  246,006      260,511
    Leasehold improvements....................................  203,874      218,585
                                                               --------     --------
                                                                497,341      527,521
    Less accumulated depreciation and amortization............  166,694      195,984
                                                               --------     --------
                                                                330,647      331,537

GOODWILL, net of accumulated amortization of $1,965 and
    $2,099, respectively......................................    5,624        8,824
OTHER ASSETS..................................................    2,194        1,882
                                                               --------     --------
                                                               $403,576     $457,832
                                                               ========     ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
    Accounts payable.........................................  $ 29,910     $ 29,351
    Accrued payroll and related benefits.....................    15,520       18,502
    Accrued rents............................................    15,640       17,174
    Accrued sales taxes......................................     3,393        4,769
    Accrued insurance........................................     5,561        6,861
    Accrued store closing costs..............................     7,955        6,482
    Other accrued expenses...................................     5,310        8,105
    Current portion of capital leases........................     2,239        2,001
                                                               --------     --------
       TOTAL CURRENT LIABILITIES.............................    85,528       93,245

LONG-TERM DEBT...............................................    41,500       41,500
LONG-TERM PORTION OF CAPITAL LEASES..........................     2,954        1,336
DEFERRED INCOME..............................................       212
DEFERRED INCOME TAXES........................................     6,695       29,880

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 45,371 and
     44,988 shares, respectively.............................       454          450
    Additional paid-in capital...............................   117,626      119,395
    Retained earnings........................................   148,607      172,026
                                                               --------     --------
       TOTAL STOCKHOLDERS' EQUITY ...........................   266,687      291,871
                                                               --------     --------
                                                               $403,576     $457,832
                                                               ========     ========

</TABLE>

                 See Notes to Consolidated Financial Statements.

                                        3

<PAGE>




                         BUFFETS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)

<TABLE>

                                          FORTY WEEKS ENDED       TWELVE WEEKS ENDED  
                                        ----------------------   ---------------------
                                        OCTOBER 8,  OCTOBER 7,   OCTOBER 8,  OCTOBER 7,
                                           1997       1998         1997        1998   
                                        ----------  ---------    ---------   ---------
                                          (in thousands, except per share amounts)

<S>                                      <C>         <C>         <C>         <C>     
RESTAURANT SALES .....................   $625,422    $668,536    $194,145    $207,128
RESTAURANT COSTS:
   Food costs ........................    212,609     215,511      65,078      65,482
   Labor costs .......................    186,325     201,353      56,412      62,664
   Direct and occupancy costs ........    151,867     154,741      47,148      47,903
                                         --------    --------    --------    --------
     Total restaurant costs ..........    550,801     571,605     168,638     176,049
                                         --------    --------    --------    --------

RESTAURANT PROFITS ...................     74,621      96,931      25,507      31,079

SELLING, GENERAL AND
   ADMINISTRATIVE EXPENSES ...........     36,301      46,472      12,190      15,017
OTHER SITE CLOSING COSTS..............                    200                        
                                         --------    --------    --------    --------
                                           38,320      50,259      13,317      16,062

OTHER (EXPENSE) INCOME, NET...........       (533)      1,395          99         698
                                         --------    --------    --------    --------
EARNINGS BEFORE INCOME TAXES..........     37,787      51,654      13,416      16,760

INCOME TAXES..........................     14,740      19,760       5,236       6,325
                                         --------    --------    --------    --------

NET EARNINGS..........................   $ 23,047    $ 31,894    $  8,180    $ 10,435
                                         ========    ========    ========    ========

EARNINGS PER SHARE:
   Basic..............................       $.51        $.70        $.18        $.23
                                         ========    ========    ========    ========
   Diluted............................       $.50        $.67        $.18        $.22
                                         ========    ========    ========    ========

WEIGHTED AVERAGE COMMON SHARES
ASSUMED OUTSTANDING:
   Basic..............................     45,225      45,448      45,276      45,393
   Diluted............................     49,133      49,977      49,380      49,987



</TABLE>

                 See Notes to Consolidated Financial Statements.



                                        4

<PAGE>



                         BUFFETS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                                            FORTY WEEKS ENDED 
                                                          ---------------------
                                                          OCTOBER 8,  OCTOBER 7,
                                                            1997        1998   
                                                          ---------   ---------
                                                              (in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net earnings ..........................................  $23,047    $31,894
   Adjustments to reconcile net earnings
    to net cash provided by operating activities:
      Depreciation and amortization ......................   31,575     32,198
      Impairment of assets and site closing costs.........                 200
      Tax benefit from early disposition of common stock..      263        841
      Deferred income.....................................     (103)      (212)
      Deferred income taxes ..............................    1,162     21,566
      Changes in assets and liabilities:
         Inventory .......................................     (308)     1,048
         Other current assets ............................    1,993     (2,055)
         Refundable income taxes..........................              (4,461)
         Other assets.....................................      (45)       432
         Accounts payable ................................   (2,621)      (792)
         Accrued payroll and related benefits ............      867      2,982
         Accrued store closing costs......................   (1,242)    (1,473)
         Other accrued expenses ..........................    5,308      6,988
         Income taxes payable ............................    2,575           
                                                            -------    -------

            Total adjustments ............................   39,424     57,262
                                                            -------    -------

            Net cash provided by operating activities.....   62,471     89,156

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures...................................  (37,217)   (32,530)
   Purchase of eleven restaurants.........................              (5,557)
   Cash received from landlords...........................    3,835      1,776
                                                            -------    -------

            Net cash used in investing activities ........  (33,382)   (36,311)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Purchase of common stock...............................             (10,440)
   Proceeds from exercise of employee stock options.......      842      2,889
   Payments on capital leases.............................   (1,659)    (1,856)
                                                            -------    -------

            Net cash used in financing activities.........     (817)    (9,407)
                                                            -------   --------

NET INCREASE IN CASH AND CASH EQUIVALENTS ................   28,272     43,438

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ...........   10,772     43,030
                                                            -------    -------

CASH AND CASH EQUIVALENTS AT END OF PERIOD ...............  $39,044    $86,468
                                                            =======    =======

Supplemental disclosures of cash flow information:

Cash paid during the period for:
   Interest (Net of capitalized interest of $215 and
    $222 in 1997 and 1998, respectively)..................  $ 2,214    $ 1,838
   Income taxes ..........................................   10,785      1,803



                 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 October 7,
          1998 and the results of operations  for the twelve weeks ended October
          8, 1997 and  October 7, 1998 and the  results of  operations  and cash
          flows for the forty weeks ended October 8, 1997 and October 7, 1998.

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  31, 1997 and
          with Management's  Discussion and Analysis of Financial  Condition and
          Results  of  Operations  appearing  on  pages  7  through  14 of  this
          quarterly report.

3.        Effective  January 1, 1998, the Company adopted Statement of Financial
          Accounting  Standards No. 130, "Reporting  Comprehensive  Income." For
          the  periods  presented,  comprehensive  income  is  the  same  as net
          earnings.

4.        On May 11,  1998,  the Company  reached an  agreement  in principle to
          purchase 11 Country  Harvest Buffet  restaurants  from Country Harvest
          Buffet  Restaurants,  Inc. of  Seattle,  Washington.  The  transaction
          closed on June 29, 1998, and became effective on June 30, 1998.

5.        Basic  earnings per share are computed by dividing net earnings 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>

                                        Forty         Forty        Twelve       Twelve
                                     Weeks Ended   Weeks Ended   Weeks Ended  Weeks Ended
                                      October 8,    October 7,    October 8,   October 7,
                                        1997           1998          1997        1998   
                                     -----------   -----------   -----------  -----------
<S>                                     <C>           <C>           <C>         <C>    
Net earnings ........................   $23,047       $31,894       $ 8,180     $10,435
Interest on convertible
 subordinated notes (after tax)......     1,375         1,380           412         414
                                        -------       -------       -------     -------

Income available to common
 shareholders and assumed
 conversion .........................   $24,422       $33,274       $ 8,592     $10,849
                                        =======       =======       =======     =======

Weighted average common
 shares outstanding..................    45,225        45,448        45,276      45,393
Dilutive effect of:
 Convertible subordinated notes......     3,556         3,556         3,556       3,556
 Stock options.......................       352           973           548       1,038
                                        -------       -------       -------     -------
Common shares assuming dilution......    49,133        49,977        49,380      49,987
                                        =======       =======       =======     =======
</TABLE>


6.        During the forty weeks ended  October 7, 1998,  the Company  purchased
          and retired 756,000 shares of Common Stock for $10.4 million.

                                        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 OCTOBER 7, 1998

RESTAURANT SALES. Restaurant sales of $207.1 million during the third quarter of
1998 represented a 6.7% increase over sales of $194.1 million for the comparable
period of 1997. The increase in sales is primarily due to sales generated by new
restaurants  and an increase in comparable  restaurant  sales of .9%.  Three new
restaurants opened in the third quarter of 1998 compared to two during the third
quarter of 1997,  bringing the total number of Company-owned  restaurants to 379
at the end of the quarter,  (249 Old Country Buffet(R),  118 HomeTown Buffet(R),
five Country Harvest Buffet(TM),  four Original Roadhouse Grill(SM), two Country
Roadhouse  Buffet  &  Grill(SM),   and  one  PIZZAPLAY(SM)),   compared  to  359
restaurants  open at the end of the third quarter of 1997.  Average weekly sales
per  restaurant  for the third  quarter of 1998  increased  .3% to $46,087  from
$45,972 in the comparable period of 1997. The ten new restaurants  opened during
1998 generated  average  weekly sales of $50,406  during the third quarter.  The
Company's price increases have been approximately comparable to inflation.

RESTAURANT  COSTS. As a percentage of restaurant  sales,  total restaurant costs
decreased  to 85.0%  for the  third  quarter  of 1998  from  86.9% for the third
quarter of 1997.  Food costs as a percentage  of restaurant  sales  decreased to
31.6% from 33.5% for the  comparable  prior-year  quarter,  due  primarily  to a
reduction in the cost of various  meat  products;  and labor costs  increased to
30.3% of sales from 29.1%, primarily due to an increase in compensation of store
level managers and hourly  employees.  Direct and occupancy costs decreased as a
percentage  of  restaurant  sales to 23.1% in 1998  from  24.3% in 1997,  due to
increases in various  restaurant  costs  offset by a claims  credit to insurance
expense due to lower than expected losses.

SELLING,   GENERAL   AND   ADMINISTRATIVE   EXPENSES.   Selling,   general   and
administrative expenses as a percentage of restaurant sales increased to 7.2% in
the third quarter of 1998 from 6.3% in the third quarter of 1997.  Such expenses
in absolute terms increased 23.2% to $15.0 million for the third quarter of 1998
from $12.2 million for the comparable  period of 1997. The increase is primarily
due to an increase in advertising  costs.  The Company is anticipating  doubling
its  marketing  spending in 1998 versus the prior year, to  approximately  $18.0
which would be approximately $4.6 million in the fourth quarter of 1998.

INCOME TAX EXPENSE.  The Company's  effective  income tax rate was 37.7% for the
third quarter of 1998 compared to 39.0% in the comparable quarter of 1997.

                                        7

<PAGE>

FORTY WEEKS ENDED OCTOBER 7, 1998

RESTAURANT SALES. For the first forty weeks of 1998,  restaurant sales increased
6.9% to $668.5 million from $625.4 million in the comparable period in 1997. The
increase in sales is primarily due to sales  generated by new restaurants and an
increase in comparable  sales of 2.5%.  The Company opened ten  restaurants  and
purchased 11 Country Harvest Buffet restaurants in the first forty weeks of 1998
as compared  to 15  restaurants  opening in the first  forty weeks of 1997.  The
average  weekly  sales per  restaurant  in the 1998 period  increased by 1.9% to
$45,549 from $44,693 in 1997.

RESTAURANT  COSTS.  Restaurant costs for the first forty weeks in 1998 increased
to $571.6  million from $550.8  million in the  comparable  period in 1997. As a
percentage  of restaurant  sales,  the 1998 period costs were 85.5% and the 1997
period  costs  were  88.1%.  Food  costs  decreased  to 32.2% from 34.0% for the
comparable  periods;  and labor costs increased to 30.1% from 29.8%.  Direct and
occupancy  costs  decreased to 23.2% in the first forty weeks of 1997 from 24.3%
in the comparable  period in 1997, due to increases in various  restaurant costs
including janitorial, repair and maintenance, and insurance expenses.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For the first forty weeks of 1998,
selling,  general and  administrative  expenses  increased to $46.5 million from
$36.3  million in 1997.  This  increase  was  primarily  due to an  increase  in
advertising  expense in 1998.  As a percentage  of sales,  selling,  general and
administrative  expenses  increased  to 7.0% in the 1998 period from 5.8% in the
1997  period.  Advertising  for  the  first  forty  weeks  of 1998  was  2.0% of
restaurant sales compared to 1.0% in the comparable 1997 period.

INCOME  TAXES.  Income taxes were 38.3% of earnings  before income taxes for the
1998 period compared to 39.0% in 1997.

LIQUIDITY AND CAPITAL  RESOURCES
     The Company's  restaurants  generate cash  immediately  through sales.  New
restaurants are generally profitable shortly 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,  currently $20 million, and .05% per annum on the
unused  reserve  commitment  amount,  currently  $30  million.  On July 1, 1999,
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, 2002.  As of October 7,  1998,  the  Company  had no
borrowings outstanding under this credit line.

                                        8

<PAGE>



     In 1995,  HomeTown Buffet,  Inc., a wholly-owned  subsidiary of the Company
("HomeTown"),  issued  $41.5  million  in  aggregate  principal  amount  of 7.0%
subordinated  convertible  notes due on  December  1, 2002.  Interest is payable
semi-annually  on June 1 and December 1,  commencing June 1, 1996. 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 are redeemable in whole or
in part, at the option of the Company, at any time on or after December 2, 1998.

     On  June  30,  1998  the  Company   completed  the  acquisition  of  eleven
restaurants  from  Country  Harvest  Buffet  Restaurants,  Inc.  The Company has
converted nine of the Country Harvest Buffet restaurants to the Company's buffet
style  restaurants  and is  currently  in the  process  of  converting  one more
location.  The last restaurant will be converted to an Original  Roadhouse Grill
in early 1999.

     The Company  currently  expects to open an additional eight new restaurants
in 1998, six Old Country Buffet and two Original  Roadhouse Grill,  with ten new
restaurants  already opened (excluding the Country Harvest Buffet  acquisitions)
and two conversions completed as of October 30, 1998.

     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.  As of October 30, 1998,  the Company had
repurchased 756,000 shares at an average of $13.81 per share or $10.4 million.

     The Company continues to require substantial amounts of capital to fund its
growth.  The Company expects to spend an aggregate of  approximately  $40 to $45
million  during 1998 on its  restaurants  being opened in 1998  depending on the
level of  contributions  obtained from landlords for leasehold  improvements and
the  amount  of land  purchased  for  freestanding  buildings,  and the start of
construction at a new corporate office located in Eagan, Minnesota. It will also
incur costs in remodeling and converting the 11 acquired  Country Harvest Buffet
restaurants. The Company anticipates that, as it further pursues the development
of freestanding  locations,  the cost per location and related cash requirements
will  increase  substantially  over prior years and that these costs will not be
offset by landlord  contributions that typically have been associated with strip
mall locations. The capital expenditure required for a freestanding location can
be over 100%  greater  than for a mall  location.  The  Company  estimates  that
approximately  40% of 1998 new locations will be freestanding  units, and of the
freestanding  restaurants virtually all will be ground leased rather than owned.
Sources of capital for  restaurant  development  projects are  anticipated to be
funds provided by operations,  credit  received from trade  suppliers,  landlord
contributions to leasehold improvements and current bank financing.  The Company
believes  that these  sources will be adequate to finance  operations,  purchase
shares of the Company's common stock, the additional  restaurants and restaurant
conversions included in the Company's restaurant  development plans for at least
through fiscal 1999, and finance the new corporate office

                                        9

<PAGE>


construction  subject to the factors  described  below in the section  captioned
"Forward-looking   Information."   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.

NON-PERFORMING  RESTAURANTS  
     The  Company  continuously  reviews its options  regarding  locations  that
perform below Company expectations. Depending on the unique characteristics of a
particular location,  and after taking into account the cost and appropriateness
of  the  various   corrective   actions,   the  options  may  include  expanding
advertising,  converting  the  restaurants to a different  brand or concept,  or
making other operational  changes.  In the event that the corrective  actions do
not prove successful in improving store  performance,  the Company evaluates the
impairment of the affected  restaurants;  particularly when events or changes in
circumstances   indicate  the  carrying  amount  of  a  restaurant  may  not  be
recoverable.  As of October 30, 1998, a number of the Company's restaurants were
being subjected to review related to impairment.  If individual restaurant sales
at these units during the fourth quarter do not meet management's  expectations,
it is reasonably  possible although not currently  quantifiable that the Company
will incur impairment charges.

YEAR 2000 UPDATE
     The  information  contained in the  following two Sections  comprising  the
"Year 2000 Update", is by necessity  forward-looking in nature and is subject to
the  cautions  set  forth  below  in  the  Section  captioned  "Forward  Looking
Statements".

     YEAR 2000  STATEMENT  
     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 equipment 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, could be impacted. For purposes of this Year
2000 Update, the term "System(s)" shall be interpreted as broadly as possible to
include every 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,  date  information  will need to accept four digit
entries to distinguish years beginning with "19" from those beginning with "20".
This  inability  to  recognize  or  properly  treat  dates may cause  Systems to
incorrectly process financial, operational, and other information.


                                       10

<PAGE>


     Because of the peculiarities of individual Systems, the Year 2000 Issue may
have an effect 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.

     YEAR 2000 READINESS DISCLOSURE
     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  identified by the  technology
community  regularly.  Also  impeding  Year 2000  testing is the high  degree of
integration between various Systems and the difficulty in conducting  full-scale
live  testing.  Consequently,  interrelated  Systems  believed  secure in a test
environment  could  conceivably  fail when operating  together  under  realistic
workloads.

     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.  The Company will
continue to invest in technology to  accommodate  the Company's  future  growth,
with such  improvements  intended to comply with Year 2000 Issues as a byproduct
of the upgrades.  The existing  corporate finance and accounting Systems utilize
date  information  independent  of the computer's  internal date system,  and is
initially believed to be Year 2000 compliant.

     In March of 1997, the Company  engaged a consultant to review the status of
its various  Systems.  The review  included  an  evaluation  of  possible  risks
associated  with the Year 2000  Issue.  However,  no direct  System  testing was
undertaken by the  consultant.  The Company is currently  implementing a testing
program of its various Systems which it expects to substantially complete by the
second quarter of 1999.  Testing will include,  but not be limited to, corporate
information systems,  restaurant point-of-sale systems, time clocks, credit card
equipment, environmental controls, security systems, and telephone systems.

     Until the Company  conducts System  testing,  it will be unable to quantify
the total expected cost  associated  with  achieving Year 2000 Issue  readiness.
Approximately  $880,000  has been spent  through  October  7, 1998  specifically
related to the Year 2000 Issue  readiness,  principally with respect to personal
computer and  timeclock  upgrades at the  Company's  restaurants  and  corporate
headquarters.  This  replacement  and upgrade  program is being conducted in the
ordinary  course of  business  but has the  secondary  benefit of  bringing  the
Company's  personal  computers and  timeclocks  into Year 2000 Issue  readiness.
Approximately $1,455,000 will be spent over the following three quarters for the
remaining  personal  computers  and  timeclocks.  This amount is included in the
operating budget for Fiscal Year 1999.

                                       11

<PAGE>



     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.  The failure of the Company's Systems and/or third party Systems could
have  a  material  adverse  effect  on  the  Company's  results  of  operations,
liquidity,  and financial condition.  Due to the general uncertainty inherent in
the Year 2000 Issue problem,  resulting in part from the uncertainty of the Year
2000 Issue  readiness of  third-party  suppliers and  customers,  the Company is
unable to  determine at this time  whether the  consequences  of Year 2000 Issue
failures  will have a material  impact on the  Company  results  of  operations,
liquidity, or financial condition.  The Company believes that some or all of its
restaurants may be temporarily  closed if third-party  suppliers of food produce
or energy are not Year 2000 Issue compliant.

     The Company is revising  its  existing  business  interruption  contingency
plans to address  internal and external  issues  specific to the Year 2000 Issue
problem to the extent practicable.  The Company believes,  however,  that due to
the widespread  nature of potential Year 2000 Issues,  the contingency  planning
process  is an ongoing  one which  will  require  modifications  as the  Company
obtains additional  information regarding the Company's internal Systems and the
status of the third party Year 2000 Issue readiness.

ACCOUNTING PRONOUNCEMENT
     In June 1997, the Financial  Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 131,  "Disclosures about Segments of
an  Enterprise  and Related  Information,"  which is  effective  for the Company
beginning  January 1, 1998.  SFAS No. 131 redefines  how operating  segments are
determined  and  requires  disclosures  of  certain  financial  and  descriptive
information about a company's operating  segments.  The adoption of SFAS No. 131
will  result in the Company  continuing  to operate in one  segment,  the casual
dining restaurant segment.

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative  Instruments and Hedging  Activities." This Statement
requires  companies  to record  derivatives  on the balance  sheet as assets and
liabilities,  measured at fair value.  Gains or losses resulting from changes in
the values of those  derivatives  would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting.  This Statement is
effective for fiscal years beginning after June 15, 1999, with earlier  adoption
encouraged.  The Company has not yet  determined  the effects  SFAS No. 133 will
have on its financial position or the results of its operations.

FORWARD-LOOKING INFORMATION
     Certain  statements in this  quarterly  report and in the  Company's  press
releases  and oral  statements  made by or with the  approval  of the  Company's
executive officers constitute or will constitute "forward-looking

                                       12

<PAGE>

statements." All forward-looking statements involve risks and uncertainties, and
actual  results may be materially  different.  The  following  factors are among
those that could cause the Company's  actual results to differ  materially  from
those set forth in such forward-looking statements.

     The ability of the Company to open new  restaurants  depends on a number of
factors,  including  its  ability  to  find  suitable  locations  and  negotiate
acceptable  leases and land  purchases,  its  ability  to  attract  and retain a
sufficient  number of  qualified  restaurant  managers and the  availability  of
capital.  The proportion of new restaurants  that will be  free-standing  units,
either owned or leased,  rather than strip mall  locations  will depend upon the
availability of suitable mall locations. The costs of restaurant development and
conversion  will  depend  upon the level of  contributions  from  landlords  for
leasehold  improvements,  the actual number of  free-standing  sites utilized in
such  development,  and whether such sites involve land  purchases,  the cost of
building supplies and general construction risks and costs.

     The likelihood and extent of restaurant remodeling and concept changes will
depend on the cost of such  projects,  the  expected  return,  and  management's
perception  of the need to make  improvements  or  changes  due to  competitive,
operational  and other  considerations.  With  respect to changes in  restaurant
concept,  the Company continues to refine its Country Roadhouse Buffet and Grill
prototypes  and is currently  uncertain  whether this, or other,  trial concepts
will serve as a long term conversion or development vehicle.

     The Company's ability to generate revenue as currently expected, unexpected
expenses  and  the  need  for  additional  funds  to  react  to  changes  in the
marketplace,  including  unexpected increases in personnel costs and food supply
costs,  may impact whether the Company has sufficient cash resources to fund its
restaurant  development and conversion  plans,  purchase shares of the Company's
common stock,  and finance the new corporate  office  construction  for 1998 and
1999.

     Other  factors  that could  cause  actual  results of the Company to differ
materially from those contained in any such  forward-looking  statements include
the success and timing of the  continuing  integration  of the operations of the
Company and HomeTown,  the number,  cost and success of restaurant  conversions,
changes in the cost and supply of food and  labor,  the impact of menu  changes,
the timing of television  advertising  planned for the remainder of 1998 and the
cost  and  effectiveness  of such  advertising  as well as the  Company's  other
marketing  programs,  general economic  conditions,  the actions of existing and
future  competitors,   weather  factors,   adverse  publicity   associated  with
unexpected food-borne  illnesses,  public health scores, or otherwise associated
with the Company's  restaurants (or third party restaurants where inferences are
improperly  drawn to the Company's  units),  other  unforseen  health and safety
developments regarding restaurant operations,  and regulatory  constraints.  The
Company assumes no obligation to publicly release the results of any revision or
updates  to  these  forward-looking  statements  to  reflect  future  events  or
unanticipated occurrences.

                                       13

<PAGE>

PART II.        OTHER INFORMATION

 Item 1.        Legal Proceedings

                               IN RE BUFFETS, INC. SECURITIES LITIGATION, United
                           States  District Court for the District of Minnesota,
                           Master No. 3-94-1447.  This action is a consolidation
                           of four  separate  lawsuits.  The first  lawsuit  was
                           commenced by ZSA Asset Allocation Fund and ZSA Equity
                           Fund  on or  about  November  7,  1994.  Three  other
                           substantially  similar  actions  were  filed  shortly
                           thereafter  by  alleged  shareholders  Marc  Kushner,
                           Trustee for Service Lamp Corp.  Profit  Sharing Plan,
                           Jerrine Fernandes,  and John J. Nuttall.  By Pretrial
                           Order No.  1,  entered  in early  January  1995,  the
                           District  Court  ordered  that the four  lawsuits  be
                           consolidated  into the single pending action and that
                           plaintiffs  serve  and  file a  Consolidated  Amended
                           Class Action Complaint (the  "Complaint"),  which was
                           served  on or  about  January  31,  1995.  The  Court
                           ordered the dismissal of the Complaint upon motion by
                           the  defendants,  but  granted  plaintiffs  leave  to
                           replead.   Plaintiffs  filed  their  Second  Amended,
                           Consolidated  Class  Action  Complaint  (the  "Second
                           Complaint") on December 11, 1995. Defendants moved to
                           dismiss the Second Complaint.  On September 11, 1996,
                           the District  Court  dismissed  the Second  Complaint
                           without  prejudice,   with  leave  to  plaintiffs  to
                           replead. On November 8, 1996,  plaintiffs filed their
                           Third Amended,  Consolidated  Class Action  Complaint
                           (the "Third Complaint").  Defendants moved to dismiss
                           the Third Complaint.  By Memorandum Opinion and Order
                           filed on January 6, 1998,  the District  Court denied
                           defendants'   motion  to  dismiss   the   plaintiff's
                           Corrected,  Third Amended,  Consolidated Class Action
                           Complaint.

                               The Third  Complaint  is against  the Company and
                           several  of  its  current  and  former  officers  and
                           directors. In the Third Complaint, plaintiffs seek to
                           represent a putative class  consisting of all persons
                           and  entities   (excluding   defendants  and  certain
                           others) who purchased  shares of the Company's Common
                           Stock during the period  commencing  October 26, 1993
                           and ending October 25, 1994 (the "Class Period"). 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

                                       14

<PAGE>



                           development  activities.  The Third Complaint alleges
                           that the defendants'  conduct violated the Securities
                           Exchange Act of 1934 and seeks  compensatory  damages
                           in an unspecified amount,  prejudgment interest,  and
                           an award of attorneys' fees, costs and expenses.

                               Management  of  the  Company  believes  that  the
                           action  is  without  merit and  intends  to defend it
                           vigorously.  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 outcome should not have a material  effect on the
                           financial condition of the Company.

 Item 2.        Changes in Securities

                           None

 Item 3.        Defaults upon Senior Securities

                           None

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

                           None

 Item 5.        Other Information

                           None

 Item 6.                   Exhibits and reports on Form 8-K

                           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(b)      Fourth Amendment dated October 1, 1998 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



                                       15

<PAGE>





(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.








                                       16

<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)


November 13, 1998

                                          /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)



                                       17

<PAGE>




                                  EXHIBIT INDEX


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

10(b)     Fourth Amendment dated October 1,
          1998 to Second Amended and Restated
          Credit Agreement by and between the
          Company and USBank National
          Association.....................................Filed Electronically


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