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 6, 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 November 8, 1999
        -----                                ----------- -- -- ----------------
Common Stock, $.01 par value                          45,058,597 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 October 6, 1999 ...................   3

           Consolidated Statements of Operations-
           Forty Weeks ended October 7, 1998 and October 6, 1999
           and Twelve Weeks ended October 7, 1998 and
           October 6, 1999 .........................................   4

           Consolidated Statements of Cash Flows-
           Forty Weeks ended October 7, 1998
           and October 6, 1999 .....................................   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 .......................................   25







                                        2

<PAGE>


Part I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS

                         BUFFETS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                            DECEMBER 30,    OCTOBER 6,
                                                               1998           1999
                                                            ------------    ----------
                    (in thousands, except par value amounts)

                                     ASSETS
CURRENT ASSETS:
<S>                                                            <C>          <C>
    Cash and cash equivalents ...............................  $ 94,058     $ 92,359
    Receivable from landlords ...............................     2,772        1,042
    Inventory................................................     4,645        4,159
    Prepaid rents............................................     1,321        2,472
    Other current assets.....................................     2,789        5,844
    Refundable income taxes..................................     3,057
    Deferred income taxes....................................    13,302       14,849
                                                               --------      -------
       TOTAL CURRENT ASSETS..................................   121,944      120,725

PROPERTY AND EQUIPMENT:
    Land.....................................................    15,688       19,528
    Buildings................................................    33,256       37,377
    Equipment................................................   265,230      277,147
    Leasehold improvements...................................   225,764      239,330
                                                               --------     --------
                                                                539,938      573,382
    Less accumulated depreciation and amortization...........   205,356      232,087
                                                               --------     --------
                                                                334,582      341,295

GOODWILL, net of accumulated amortization of $2,424 and
    $2,902, respectively.....................................     8,507        9,091
OTHER ASSETS.................................................     1,816        6,401
                                                               --------     --------
                                                               $466,849     $477,512
                                                               ========     ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
    Accounts payable.........................................  $ 32,436     $ 29,548
    Accrued payroll and related benefits.....................    18,291       23,811
    Accrued rents............................................    18,076       18,967
    Accrued sales taxes......................................     3,835        5,003
    Accrued insurance........................................     6,592        6,549
    Accrued store closing costs..............................     6,197        5,526
    Other accrued expenses...................................     6,168        9,216
    Income taxes payable.....................................                  2,487
    Current portion of capital leases........................     2,116          957
                                                               --------     --------
       TOTAL CURRENT LIABILITIES.............................    93,711      102,064

LONG-TERM DEBT...............................................    41,465       41,465
LONG-TERM PORTION OF CAPITAL LEASES..........................       824
MINORITY INTEREST............................................                    271
DEFERRED INCOME..............................................                     37
DEFERRED INCOME TAXES........................................    31,124       30,797

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
     42,058 shares, respectively.............................       450          421
    Additional paid-in capital...............................   119,792      112,292
    Retained earnings........................................   179,483      190,165
                                                               --------     --------
       TOTAL STOCKHOLDERS' EQUITY ...........................   299,725      302,878
                                                               --------     --------
                                                               $466,849     $477,512
                                                               ========     ========
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                        3

<PAGE>



                         BUFFETS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)
<TABLE>
<CAPTION>


                                       FORTY WEEKS ENDED           TWELVE WEEKS ENDED
                                     -----------------------     -----------------------
                                     OCTOBER 7,    OCTOBER 6,    OCTOBER 7,    OCTOBER 6,
                                       1998          1999          1998          1999
                                     ---------     ---------     ---------     ---------

                                            (in thousands, except per share amounts)

<S>                                   <C>           <C>           <C>           <C>
RESTAURANT SALES ..................   $668,536      $723,595      $207,128      $222,720
RESTAURANT COSTS:
   Food costs .....................    215,511       228,503        65,482        68,970
   Labor costs ....................    201,353       224,088        62,664        69,012
   Direct and occupancy costs .....    154,741       163,159        47,903        50,229
                                      --------      --------      --------      --------
     Total restaurant costs .......    571,605       615,750       176,049       188,211
                                      --------      --------      --------      --------

RESTAURANT PROFITS ................     96,931       107,845        31,079        34,509

SELLING, GENERAL AND
   ADMINISTRATIVE EXPENSES ........     46,472        54,030        15,017        16,145
OTHER SITE CLOSING COSTS...........        200         1,966                        818
                                      --------      --------      --------      --------
                                        50,259        51,849        16,062        17,546

OTHER INCOME.......................      1,395         2,539           698           856
                                      --------      --------      --------      --------
EARNINGS BEFORE INCOME TAXES.......    51,654         54,388        16,760        18,402

INCOME TAXES.......................     19,760        20,700         6,325         7,025
                                      --------      --------      --------      --------

NET EARNINGS.......................   $ 31,894      $ 33,688      $ 10,435      $ 11,377
                                      ========      ========      ========      ========

EARNINGS PER SHARE:
   Basic...........................       $.70          $.78          $.23          $.27
                                      ========      ========      ========      ========
   Diluted.........................       $.67          $.75          $.22          $.26
                                      ========      ========      ========      ========

WEIGHTED AVERAGE COMMON SHARES
ASSUMED OUTSTANDING:
   Basic...........................     45,448        43,094        45,393        42,147
   Diluted.........................     49,977        47,003        49,987        46,165


</TABLE>

                 See Notes to Consolidated Financial Statements.

                                        4

<PAGE>



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

                                                            FORTY WEEKS ENDED
                                                         -----------------------
                                                         OCTOBER 7,   OCTOBER 6,
                                                           1998          1999
                                                         ---------     ---------
                                                              (in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net earnings ..........................................  $31,894     $33,688
   Adjustments to reconcile net earnings
    to net cash provided by operating activities:
      Depreciation and amortization ......................   32,198      33,296
      Impairment of assets and site closing costs.........      200       1,966
      Tax benefit from early disposition of common stock..      841          25
      Deferred income.....................................     (212)         37
      Deferred income taxes ..............................   21,566      (1,874)
      Changes in assets and liabilities:
         Inventory .......................................    1,048         539
         Other current assets ............................   (2,055)     (4,126)
         Refundable income taxes..........................   (4,461)      3,057
         Other assets.....................................      432         (59)
         Accounts payable ................................     (792)     (3,187)
         Accrued payroll and related benefits ............    2,982       5,500
         Accrued store closing costs......................   (1,473)       (871)
         Other accrued expenses ..........................    6,988       4,906
         Income taxes payable ............................                2,487
                                                            -------     -------

            Total adjustments ............................   57,262      41,696
                                                            -------     -------

            Net cash provided by operating activities.....   89,156      75,384

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures...................................  (32,530)    (40,058)
   Purchase of restaurants................................   (5,557)     (6,742)
   Cash received from landlords...........................    1,776       2,260
                                                            -------     -------

            Net cash used in investing activities ........  (36,311)    (44,540)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Purchase of common stock...............................  (10,440)    (31,096)
   Proceeds from exercise of employee stock options.......    2,889         536
   Payments on capital leases.............................   (1,856)     (1,983)
                                                            -------     -------

            Net cash used in financing activities.........   (9,407)    (32,543)
                                                           --------     -------

NET INCREASE IN CASH AND CASH EQUIVALENTS ................   43,438      (1,699)

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

CASH AND CASH EQUIVALENTS AT END OF PERIOD ...............  $86,468     $92,359
                                                            =======     =======

Supplemental disclosures of cash flow information:

Cash paid during the period for:
   Interest (net of capitalized interest of $222 and
    $288 in 1998 and 1999, respectively)..................  $ 1,838     $ 1,574
   Income taxes ..........................................    1,803      17,005





                 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 6, 1999 and the results of
     operations  for the twelve weeks ended  October 7, 1998 and October 6, 1999
     and the  results of  operations  and cash flows for the forty  weeks  ended
     October 7, 1998 and October 6, 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 25 of this quarterly report.

3.   On April 7, 1999,  the  Company  acquired an 80%  interest in Tahoe  Joe's,
     Inc., an operator of two restaurants and the 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  on 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.


                                        6

<PAGE>



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>
<CAPTION>
                                   Forty         Forty         Twelve        Twelve
                                 Weeks Ended   Weeks Ended   Weeks Ended   Weeks Ended
                                  October 7,    October 6,    October 7,    October 6,
                                    1998          1999          1998          1999
                                 -----------   -----------   -----------   ------------
<S>                                  <C>           <C>           <C>           <C>
Net earnings ....................    $31,894       $33,688       $10,435       $11,377
Interest on convertible
 subordinated notes (after tax)..      1,380         1,385           414           415
                                     -------       -------       -------       -------

Income available to common
 shareholders and assumed
 conversion .....................    $33,274       $35,073       $10,849       $11,792
                                     =======       =======       =======       =======

Weighted average common
 shares outstanding..............     45,448        43,094        45,393        42,147
Dilutive effect of:
 Convertible subordinated notes..      3,556         3,553         3,556         3,553
 Stock options...................        973           356         1,038           465
                                     -------       -------       -------       -------
Common shares assuming dilution..     49,977        47,003        49,987        46,165
                                     =======       =======       =======       =======

</TABLE>

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 6, 1999
----------------------------------

RESTAURANT SALES. Restaurant sales of $222.7 million during the third quarter of
1999 represented a 7.5% increase over sales of $207.1 million for the comparable
period of 1998. The increase in sales is primarily due to sales generated by new
restaurants  and an increase in  comparable  restaurant  sales of 2.5%.  Two new
restaurants  opened in the third  quarter of 1999  compared to three  during the
third quarter of 1998, bringing the total number of Company-owned restaurants to
387 at the  end of  the  quarter,  (250  Old  Country  Buffet(R),  123  HomeTown
Buffet(R),  nine Original Roadhouse Grill(SM),  three Country Roadhouse Buffet &
Grill(SM) and two Tahoe Joe's Famous Steakhouse(R)), compared to 379 restaurants
open  at the  end of the  third  quarter  of  1998.  Average  weekly  sales  per
restaurant  for the third quarter of 1999 increased 4.0% to $47,953 from $46,087
in

                                        7

<PAGE>



the  comparable  period of 1998.  The eight new  restaurants  opened during 1999
generated  average  weekly  sales of  $63,984  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 84.5%  for the  third  quarter  of 1999  from  85.0% for the third
quarter of 1998.  Food costs as a percentage  of restaurant  sales  decreased to
31.0% in 1999 from 31.6% for the comparable prior-year quarter, due primarily to
a reduction in the cost of various products;  and labor costs increased to 31.0%
of sales in 1999 from  30.3% of sales  for the  comparable  prior-year  quarter,
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  22.5%  in 1999  from  23.1% 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  remained flat at
approximately 7.2% for both comparable quarters. Such expenses in absolute terms
increased 7.5% to $16.1 million for the third quarter in 1999 from $15.0 million
for the comparable  period in 1998. The increase is primarily due to an increase
in advertising  costs and  additional  costs  associated  with the Company's Y2K
tests and  upgrades.  Advertising  costs as a percentage  of sales were 2.3% for
both comparable quarters.  The Company is anticipating  increasing its marketing
spending in 1999 to  approximately  $22.7 million which included the development
of our new television commercials which started airing in March of 1999.

SITE CLOSING COSTS. The Company closed one underperforming restaurant during the
quarter which generated a charge of $818,000.

INCOME TAX EXPENSE.  The Company's  effective  income tax rate was 38.2% for the
third quarter of 1999 compared to 37.7% in the comparable quarter of 1998.

FORTY WEEKS ENDED OCTOBER 6, 1999
---------------------------------

RESTAURANT SALES. For the first forty weeks of 1999,  restaurant sales increased
8.2% to $723.6 million from $668.5 million in the comparable period in 1998. The
increase in sales is primarily due to sales  generated by new restaurants and an
increase in comparable sales of 2.0%. Seven new restaurants  opened in the first
three  quarters  of 1999,  compared to ten new  restaurants  opened in the first
three  quarters of 1998.  The average  weekly sales per  restaurant  in the 1999
period increased by 2.5% to $46,674 from $45,549 in 1998.



                                        8

<PAGE>



RESTAURANT  COSTS.  Restaurant costs for the first forty weeks in 1999 increased
to $615.8  million from $571.6  million in the  comparable  period in 1998. As a
percentage  of restaurant  sales,  the 1999 period costs were 85.1% and the 1998
period  costs  were  85.5%.  Food  costs as a  percentage  of  restaurant  sales
decreased to 31.6% in 1999 from 32.2% for the  comparable  periods in 1998;  and
labor costs  increased to 31.0% of sales from 30.1% of sales for the  comparable
prior year period.  Direct and occupancy  costs  decreased to 22.5% in the first
forty  weeks  of 1999  from  23.2% in the  comparable  period  in  1998,  due to
decreases in various restaurant costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For the first forty weeks of 1999,
selling,  general and  administrative  expenses  increased to $54.0 million from
$46.5 million in 1998,  primarily due to an 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 7.0% in the 1998  period.  Advertising
for the first forty weeks of 1999 was 2.4% of restaurant  sales compared to 2.0%
in the comparable 1998 period.

SITE CLOSING COSTS. The Company closed six  underperforming  restaurants  during
the first forty weeks of 1999 which generated a charge of $1,966,000.

INCOME  TAXES.  Income taxes were 38.1% of earnings  before income taxes for the
1999 period compared to 38.3% in 1998.

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

                                        9

<PAGE>



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 forty weeks
ended  October 7, 1998 and  October  6,  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 14 to 17
new  restaurants  in 1999 with five  Original  Roadhouse  Grills  and six buffet
restaurants  already opened at October 28, 1999. The restaurants  constructed in
1999  will  primarily  be  freestanding  restaurants,   including  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 third  quarter,  the Company  repurchased  $2.8 million of its common
stock  (240,000  shares at an average price of $11.65).  As of October 28, 1999,
the Company had repurchased a total of 3,786,000  shares at an average of $10.97
per share or $41.7 million.

     On April 7, 1999, the Company acquired an 80% interest in Tahoe Joe's Inc.,
an operator of two  restaurants and the 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.



                                       10

<PAGE>


     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 essentially 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 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

                                       11

<PAGE>


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-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 10K 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

                                       12

<PAGE>

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  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 health  inspection  scores, or negative
publicity can have a material

                                       13

<PAGE>

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 believes it 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 or labor expenses increase due to inflation, 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

                                       14

<PAGE>



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 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

                                       15

<PAGE>


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 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:

                                       16

<PAGE>


     *      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
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

                                       17

<PAGE>



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 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

                                       18

<PAGE>



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.

     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 as well as improve capacity for 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  restaurants were 100%
complete as of June, 1999.

                                       19

<PAGE>



 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.

                  Y2K PROJECT SCHEDULING AS OF OCTOBER 16, 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          95%

     During the course of the remediation/testing  phase of the Y2K Project, the
Company  attempted 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.
All computer users in critical  applications  participated in a four month major
test, referred to as "User Validation Testing" from June 1999 to September 1999.
During the user validation testing the users conducted three kinds of tests, the
century  rollover test (December 1999 to January 2000),  leap year rollover test
(February  2000 to March 2000) and post century  rollover test (December 2000 to
January  2001).  In each of the above testing  cycles,  more than 100 tasks were
executed. Three date related problems were identified and the date problems were
corrected.  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.

                                       20

<PAGE>



     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 and the Year 2000 issue tested
systems 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 $5.2 million  projected  expenses.  The costs of the
Company's  Y2K Project are being  funded  with cash flows from  operations.  The
Company's  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                                     October 6,   Remaining
Expenditures           1997        1998      1999          1999       1997-99
------------         -------     -------   ----------    ---------   ---------

Consultant Fees**   $183,000    $ 19,000   $  831,000     $114,000   $1,147,000
Hardware Upgrades          0     419,000    1,057,000        4,000    1,480,000
Software Upgrades          0     269,000      280,000                   549,000
                                                                     ----------

Currently Expected Total Y2K Project Costs, 1997-2000:               $3,176,000
                                                                     ==========

Notes:
  *      Of the $3,176,000  total expected Y2K Project costs,  $2,196,000 or 64%
         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.


                                       21

<PAGE>

               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 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.

                                       22

<PAGE>



At this time,  the Company does not  anticipate  that there will be  significant
Information Services Department resources allocated to the Year 2000 Issue after
January 1, 2000, subject to the various  contingencies  described in this report
10-Q.  It instead  expects that  substantially  all of those  resources  will be
directed at pending and new technology  related projects,  including the move of
the Company's  headquarters to Eagan,  Minnesota which will involve  significant
technology enhancements,  and the possible replacement of the existing corporate
accounting and financial Systems in the ordinary course of business.

                    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. 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

                                       23

<PAGE>



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. The Company has forwarded a letter to five
primary distributors,  requesting them to furnish their contingency plan for the
January 2000 New Year weekend.

     While the Company  will  continue to seek vendor  readiness  certifications
relative to the Year 2000 Issue,  it is expected that most of the 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.

                         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 have been developed and are being
implemented as part of the third phase of the Y2K Project,  remediation/testing.
These plans  cover every  affected  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

                                       24

<PAGE>

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 early  November,  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 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,

                                       25

<PAGE>



                  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  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 respective  motions have been scheduled for
                  hearing on December 10, 1999. 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

                                       26

<PAGE>




 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)
                  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)


November 12, 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)



                                       28

<PAGE>


                                  EXHIBIT INDEX


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



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