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
  April 21, 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 June 1, 1999
        -----                                    ----------- -- -- ------- ----
Common Stock, $.01 par value                            42,653,407 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 April 21, 1999......................       3

           Consolidated Statements of Operations-
           Sixteen Weeks ended April 22, 1998
           and April 21, 1999........................................       4

           Consolidated Statements of Cash Flows-
           Sixteen Weeks ended April 22, 1998 and
           April 21, 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)

                                                      DECEMBER 30,     APRIL 21,
                                                         1998            1999
                                                      -----------      --------
                    (in thousands, except per share amounts)

                                     ASSETS
CURRENT ASSETS:
   Cash and cash equivalents..........................  $ 94,058        $86,490
   Receivable from landlords..........................     2,772            823
   Inventory..........................................     4,645          4,202
   Prepaid rents......................................     1,321          1,007
   Other current assets...............................     2,789          3,250
   Refundable income taxes............................     3,057            391
   Deferred income taxes..............................    13,302         14,008
                                                        --------        -------
      TOTAL CURRENT ASSETS............................   121,944        110,171

PROPERTY AND EQUIPMENT:
   Land...............................................    15,688         15,675
   Buildings..........................................    33,256         33,619
   Equipment..........................................   265,230        270,913
   Leasehold improvements.............................   225,764        230,727
                                                        --------       --------
                                                         539,938        550,934
   Less accumulated depreciation and amortization.....   205,356        217,184
                                                        --------       --------
                                                         334,582        333,750
GOODWILL, net of accumulated amortization of $2,424
 and $2,600, respectively.............................     8,507          9,360
OTHER ASSETS..........................................     1,816          6,652
                                                        --------       --------
                                                        $466,849       $459,933
                                                        ========       ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable...................................  $ 32,436       $ 31,292
   Accrued payroll and related benefits...............    18,291         20,498
   Accrued rents......................................    18,076         17,354
   Accrued sales taxes................................     3,835          5,000
   Accrued insurance..................................     6,592          6,614
   Accrued store closing costs........................     6,197          5,826
   Other accrued expenses.............................     6,168          8,434
   Current portion of capital leases..................     2,116          1,833
                                                        --------       --------
      TOTAL CURRENT LIABILITIES.......................    93,711         96,851

LONG-TERM DEBT........................................    41,465         41,465
LONG-TERM PORTION OF CAPITAL LEASES...................       824            352
DEFERRED INCOME.......................................                      110
DEFERRED INCOME TAXES.................................    31,124         32,808
MINORITY INTEREST.....................................                      260

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
      42,864 shares, respectively.....................       450            429
   Additional paid-in capital.........................   119,792        114,125
   Retained earnings..................................   179,483        173,533
                                                        --------       --------
      TOTAL STOCKHOLDERS' EQUITY......................   299,725        288,087
                                                        --------       --------
                                                        $466,849       $459,933
                                                        ========       ========

                 See Notes to Consolidated Financial Statements.


                                        3

<PAGE>

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


                                              SIXTEEN WEEKS ENDED
                                           --------------------------
                                           APRIL 22,         APRIL 21,
                                             1998              1999
                                           --------          --------
                    (in thousands, except per share amounts)

RESTAURANT SALES .....................     $256,829          $277,838

RESTAURANT COSTS:
    Food costs .......................       84,556            90,041
    Labor costs ......................       78,511            87,026
    Direct and occupancy costs .......       59,872            63,167
                                           --------          --------
      Total restaurant costs .........      222,939           240,234
                                           --------          --------

RESTAURANT PROFITS ...................       33,890            37,604

SELLING, GENERAL AND
 ADMINISTRATIVE EXPENSES .............       17,893            21,744
OTHER SITE CLOSING COSTS..............          200               329
                                           --------          --------
                                             15,797            15,531

OTHER INCOME .........................          244               939
                                           --------          --------

EARNINGS BEFORE INCOME TAXES .........       16,041            16,470
INCOME TAXES .........................        6,176             6,260
                                           --------          --------

NET EARNINGS .........................     $  9,865          $ 10,210
                                           ========          ========

EARNINGS PER SHARE:
    Basic.............................         $.22              $.23
                                           ========          ========
    Diluted...........................         $.21              $.22
                                           ========          ========

WEIGHTED AVERAGE COMMON SHARES
ASSUMED OUTSTANDING:
    Basic.............................       45,399            44,238
    Diluted...........................       49,572            48,056


                 See Notes to Consolidated Financial Statements.



                                        4

<PAGE>



                         BUFFETS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                   SIXTEEN WEEKS ENDED
                                                                 ------------------------
                                                                 APRIL 22,       APRIL 21,
                                                                   1998            1999
                                                                 --------        --------
                                                                     (in thousands)
<S>                                                               <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings................................................    $ 9,865        $ 10,210
  Adjustments to reconcile net earnings
      to net cash provided by operating activities:
          Depreciation and amortization ......................     12,744          13,321
          Impairment of assets and site closing costs.........        200             329
          Tax benefit from early disposition of common stock .        125               7
          Deferred income.....................................       (121)            110
          Deferred income taxes ..............................       (410)            978
  Changes in assets and liabilities:
          Inventory ..........................................        918             496
          Other current assets ...............................       (889)            (67)
          Refundable income taxes.............................      1,313           2,666
          Other assets .......................................         39              (1)
          Accounts payable ...................................     (2,337)         (1,443)
          Accrued payroll and related benefits ...............      2,312           2,187
          Accrued store closing costs ........................       (677)           (471)
          Other accrued expenses .............................      3,686           2,573
          Income taxes currently payable .....................      4,132
                                                                  -------        --------

             Total adjustments................................     21,035          20,685
                                                                  -------        --------

             Net cash provided by operating activities........     30,900          30,895

CASH FLOWS FROM INVESTING ACTIVITIES:
       Capital expenditures ..................................    (13,509)        (11,110)
       Purchase of restaurant concept and two locations.......                     (6,742)
       Cash received from landlords ..........................        176           1,999
                                                                  -------        --------
             Net cash used in investing activities............    (13,333)        (15,853)

CASH FLOWS FROM FINANCING ACTIVITIES:
       Payments of capital leases.............................       (778)           (755)
       Proceeds from exercise of employees' stock options ....        653              98
       Repurchase of common stock.............................                    (21,953)
                                                                  -------        --------
             Net cash used in financing activities............       (125)        (22,610)
                                                                  -------        --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..........     17,442          (7,568)

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

CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................    $60,472        $ 86,490
                                                                  =======        ========

Supplemental disclosures of cash flow information:

Cash paid during the period for:
       Interest (net of capitalized interest of $99 and
       $93 in 1998 and 1999, respectively)....................    $   285        $    935
       Income taxes ..........................................      1,016           2,609

</TABLE>


                 See Notes to Consolidated Financial Statements.

                                        5

<PAGE>


                         BUFFETS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.    In the opinion of  Management,  the  accompanying  unaudited  consolidated
      financial  statements contain all adjustments  necessary to present fairly
      the financial  position of Buffets,  Inc. and subsidiaries as of April 21,
      1999 and the results of  operations  and cash flows for the sixteen  weeks
      ended April 22, 1998 and April 21, 1999.

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

                                             Sixteen       Sixteen
                                            Weeks Ended   Weeks Ended
                                             April 22,     April 21,
                                               1998          1999
                                            -----------   ------------
      Net earnings ........................   $ 9,865       $10,210
      Interest on convertible
       subordinated notes (after tax)......       552           555
                                              -------       -------

      Income available to common
       shareholders and assumed
       conversion..........................   $10,417       $10,765
                                              =======       =======

      Weighted average common
       shares outstanding..................    45,399        44,238
      Dilutive effect of:
       Convertible subordinated notes......     3,556         3,554
       Stock options.......................       617           264
                                              -------       -------
      Common shares assuming dilution......    49,572        48,056
                                              =======       =======



                                        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

SIXTEEN WEEKS ENDED APRIL 21, 1999

     RESTAURANT  SALES.  Restaurant  sales of $277.8  million  during  the first
sixteen weeks of 1999  represented a 8.2% increase over sales of $256.8  million
for the comparable period of 1998, due to sales generated by new restaurants and
a comparable  restaurant  sales increase of .8%. Four new restaurants  opened, a
80% interest in two  restaurants  was acquired and one restaurant  closed in the
first quarter of 1999, bringing the total number of Company-owned restaurants to
391 at the  end of  the  quarter  (257  Old  Country  Buffets(R),  121  HomeTown
Buffets(R),  seven The  Original  Roadhouse  Grills(SM),  two Tahoe Joe's Famous
Steakhouse(R)  [80%  interest by HomeTown  Buffet,  Inc.,  20% interest by David
Fansler],  two  Country  Roadhouse  Buffet  &  Grill(SM),  one  Country  Harvest
Buffet(TM) and one  PIZZAPLAY(SM)),  compared to 364 restaurants open at the end
of the comparable 1998 period. Average weekly sales per restaurant for the first
sixteen weeks of 1999  increased  .9% to $44,798 from $44,386 in the  comparable
period of 1998.  New  restaurants  opened during the quarter  generated  average
weekly sales well above the Company's first quarter  average.  Comparable  sales
per  restaurant  were up .8% for the  comparable  periods.  The Company's  price
increases have been close to the inflation rate.

     RESTAURANT  COSTS. As a percentage of restaurant  sales,  total  restaurant
costs  decreased to 86.5% for the first sixteen weeks of 1999 from 86.8% for the
first  sixteen weeks of 1998.  Food costs as a percentage  of  restaurant  sales
decreased to 32.4% from 32.9%, primarily due to decreases in various grocery and
meat  products.  Labor  costs  increased  to  31.3% in 1999  from  30.6% in 1998
primarily  due to an  increase  in hourly  wages.  Direct  and  occupancy  costs
decreased as a percentage  of sales to 22.8% in 1999 from 23.3% in 1998,  due to
lower depreciation and insurance costs.

     SELLING,  GENERAL  AND  ADMINISTRATIVE   EXPENSES.   Selling,  general  and
administrative  expenses as a  percentage  of  restaurant  sales,  inclusive  of
marketing, increased to 7.8% in the first sixteen weeks of 1999 from 7.0% in the
first sixteen weeks of 1998.

                                        7

<PAGE>

Such  expenses  in  absolute  terms were  higher at $21.7  million for the first
sixteen  weeks of 1999 from  $17.9  million  in the  comparable  period of 1998,
primarily as a result of increases in  advertising in 1999 compared to the first
quarter of 1998 which had no advertising in February 1998.  Advertising costs as
a percentage of restaurant sales were 2.5% in 1999 compared to 1.7% in 1998. The
Company  is   anticipating   increasing  its  marketing   spending  in  1999  to
approximately   $23.3  million  which  includes  the  development  of  four  new
television commercials which started airing in March of 1999.

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

     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,  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 and for the years ended  December 31, 1997 and December 30,
1998, 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

                                        8

<PAGE>

redeemable in whole or in part, at the option of the Company,  at any time on or
after  December 2, 1998.  During 1998,  $35,000 of the notes were converted into
3,000 shares of common stock at the discretion of the debtholder.

     The Company continues to require substantial amounts of capital to fund its
growth.  The Company currently expects to open a total of approximately 15 to 18
new  restaurants  with  two new  Original  Roadhouse  Grills  and  three  buffet
restaurants  already opened at May 17, 1999. The new restaurants  will primarily
be freestanding  restaurants,  including five to seven Original Roadhouse Grills
and one new Tahoe Joe's. In addition to new construction, the Company intends to
convert one prior Country  Harvest  Buffet  Restaurant to an Original  Roadhouse
Grill, and to convert 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.  During the first  quarter of 1999,  the
Company  repurchased  $22 million of its common  stock  (2,170,000  shares at an
average price of $10.12). Subsequent to the quarter end, the Company repurchased
$5.7 million of its common stock (560,000 shares at an average price of $10.23).
As of June 3, 1999, the Company had  repurchased a total of 3,486,000  shares at
an average of $10.94 per share or $38.1 million.

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

     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.

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

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



                                        9

<PAGE>

     The Company has traditionally located its restaurants within or adjacent to
strip  or  neighborhood  shopping  centers  in  principally  leased  facilities.
However, depending upon the availability of suitable mall locations, or in order
to  obtain  optimal  locations  within  particular  markets,  the  Company  also
purchases or ground-leases land on which it constructs freestanding restaurants.
It is anticipated  that all but one of 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 and expected future bank
financing.  The Company  believes that these sources will be adequate to finance
operations  and the  additional  restaurants  and  conversions  included  in the
Company's  restaurant  development  plans for 1999 and early 2000.  However,  in
order to remain  prepared for further  significant  growth in future years,  the
Company  will  continue  to evaluate  its  financing  needs and seek  additional
funding if  appropriate.  The  Company  has not paid any cash  dividends  on its
common stock and, pursuant to its credit agreement, is restricted from declaring
or paying cash dividends without the approval of the Company's lender.

NON-PERFORMING RESTAURANTS

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

FORWARD-LOOKING INFORMATION

     This Form 10-Q,  together  with the  Company's  Form 10-K and other ongoing
securities  filings,  press  releases,  conference  calls and  discussions  with
securities analysts, and other communications  contains certain  forward-looking
statements that involve risks and uncertainties.  These statements relate to the
Company's future

                                       10

<PAGE>

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
"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

                                       11

<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.



                                       12

<PAGE>

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

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

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

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

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

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



                                       13

<PAGE>

     The  Company  has  not  experienced  a  significant   overall  impact  from
inflation. If operating 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 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.




                                       14

<PAGE>

                  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 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

                                       15

<PAGE>

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:  * 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

                                       16

<PAGE>

relating to prior,  existing or future  restaurants or restaurant sites will not
have a material adverse affect on the Company.

                  LITIGATION RISKS

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

                  RISKS ASSOCIATED WITH THE YEAR 2000 ISSUE

                           YEAR 2000 ISSUE OVERVIEW

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

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

                                       17

<PAGE>

operational, and other information, or may generate inaccurate results.

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

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

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

                           PREEXISTING SYSTEMS UPGRADES

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

     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

                                       18

<PAGE>

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

     The  Company  also  undertook  a program  to  replace  all of its  existing
corporate personal computers in response to a broad-based independent consulting
study of the Information  Services  Department.  Although the personal  computer
upgrade was motivated by the desire to bring the equipment to a uniform standard
and to enhance  performance,  a number of the older computers were not Year 2000
Issue  compliant.  Consequently,  the  cost  of the  personal  computer  upgrade
program,  including  associated  software,  installation  contractor  costs, and
end-user  training,  is included in the "Y2K  Project  Cost" table shown  below.
Substantially  all of the corporate  office personal  computers were upgraded or
replaced in 1998, while personal computer  upgrades at the Company's  restaurant
were 93% complete as of May 30, 1999.

                           THE COMPANY'S Y2K PROJECT

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

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


                                       19

<PAGE>

                    Y2K PROJECT SCHEDULING AS OF MAY 17, 1999
                    -----------------------------------------

   Activity                      Start Date          End Date       % Complete
   --------                      ----------         ----------      ----------
Inventory phase                  03/13/1997         05/02/1998        100%
Assessment phase                 02/05/1999         07/15/1999         43%
Remediation/testing phase        03/30/1999         09/30/1999         19%

     During the course of the remediation/testing  phase of the Y2K Project, the
Company is  attempting  to utilize a  bottom-to-top  approach of  entering  data
through  simulated  store  level  Systems,  pass  the  data to the  headquarters
financial  accounting  Systems,  manipulate that data at headquarters  and enter
other financial information through the Accounting,  Human Resources,  and other
departments,  and generate reports through the Information  Services Department.
In this  way,  the  Company  intends  to  exercise  many  representative  System
components to test overall Year 2000 Issue  readiness.  The  remediation/testing
program  will  test  many  non-IT  Systems  including  restaurant  point-of-sale
systems, time clocks, credit card equipment,  environmental  controls,  security
systems, and telephone systems. It is presently  anticipated that at least eight
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.

     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 table shown below.  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 15% of the Company's
1999  Information  Services $4.8 million budget.  The costs of the Company's Y2K
Project are being funded with cash flows from operations.  The Company's overall
Information Services Department expenditures for the preceding two fiscal years,
and project cash expenditures for 1999, are also shown for comparison purposes.


                                       20

<PAGE>

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

                                             Through
   Cash                                       May 17,     Remaining
Expenditures            1997        1998       1999         1999        1997-99
------------         --------     -------    --------     ---------    ---------

Consultant Fees**    $183,000          $0    $224,000      $474,000   $  881,000
Hardware Upgrades           0     392,000     840,000       262,000    1,494,000
Software Upgrades           0     125,000     384,000        54,000      563,000
                                                                      ----------

Currently Expected Total Y2K Project Costs, 1997-1999:                $2,938,000
                                                                      ==========

Notes:
  *      Of the $2,938,000  total expected Y2K Project costs,  $2,196,000 or 75%
         relates to personal computer upgrades  conducted in the ordinary course
         of  business  that are  included in the table  merely  because of their
         ancillary   benefit  of  assisting  with  Year  2000  Issue   readiness
         (consisting  of  $722,000  for   installation,   training  and  related
         consulting  fees,  $911,000  for  hardware  upgrades,  and $563,000 for
         software).

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

                           YEAR 2000 ISSUE RISKS AND CONTINGENCY PLANS

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

                                    INTERNAL YEAR 2000 RISKS

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

                                       21

<PAGE>

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   assessment   and
remediation/testing  phases  of the Y2K  plan  although  the  Company  currently
believes that these resource  requirements can be filled by outside consultants.
The Y2K  Project  has  resulted  in the  rescheduling  of certain IT projects of
lesser priority, although it is not anticipated that this re-prioritization will
alone  adversely  affect  the  Company's   financial  condition  or  results  of
operations.

                                    EXTERNAL YEAR 2000 RISKS

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

     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

                                       22

<PAGE>

due to lack of  power  or  utilities;  lack of food and  other  supplies  due to
service  interruptions  involving  suppliers or  distributors;  and inability to
access the  restaurants due to  malfunctioning  security  systems  controlled by
others or other facilities related impediments.

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

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

     The  Company  has sent 70  letters  to vendors  of  critical  IT  services,
significant  food and material  vendors,  and  utilities,  among  others,  in an
attempt to obtain  certifications  of their  readiness  with respect to the Year
2000  Issue.  To  date,  seven  of the  letters,  or 10%,  have  been  returned.
Substantially complete  certifications have been received from only three of the
19 most  significant  suppliers of key  software  and hardware at the  corporate
office. The utility and  telecommunication  firms have been quite conditional in
their  expressions  of  Year  2000  Issue  readiness,  typically  linking  their
readiness  to  the  preparedness  of  unrelated  parties  (for  example,   other
contributors to the national power grid). Consequently,  the responses are given
little weight. Of the Company's primary food distributors,  it has received four
certifications out of 41 initial requests sent to date.

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

                                    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

                                       23

<PAGE>

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

                           CONTINGENCY PLANS

     Contingency  Plans for the Year 2000 Issue are being  developed  as part of
the third phase of the Y2K Project,  remediation/testing.  These plans are being
developed  for every  department  in the Company and address  both  internal and
external  Year 2000 Issue risks.  The most  critical of these plans,  related to
restaurant operations,  was completed on May 31, 1999. For sake of illustration,
this  plan  has   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 completed by July 31, 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

                                       24

<PAGE>

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 putative class
                  of all  purchasers of common stock of the Company from October
                  26, 1993 through  October 25, 1994 (the "class period") in the
                  United  States  District  Court for the District of Minnesota.
                  The  third   complaint   alleges  that  the  defendants   made
                  misrepresentations  and  omissions of material fact during the
                  class  period with  respect to the  Company's  operations  and
                  restaurant  development  activities,  as a result of which the
                  price  of  the  Company's  stock  allegedly  was  artificially
                  inflated during the class period.  The third complaint further
                  alleges that certain  defendants made sales of common stock of
                  the Company  during the class  period while in  possession  of
                  material   undisclosed   information   about   the   Company's
                  operations  and   restaurant   development   activities.   The
                  Plaintiff  alleges 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.

                  By Memorandum  Opinion and Order filed on January 6, 1998, the
                  District  Court denied the  defendants'  motion to dismiss the
                  third complaint.



                                       25

<PAGE>

                  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.  Plaintiffs have moved for class certification,  but
                  the  District  Court  has  taken   plaintiffs'   motion  under
                  advisement and no plaintiff class has been certified.

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

 Item 2.          Changes in Securities

                  None

 Item 3.          Defaults upon Senior Securities

                  None

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

                  None

 Item 5.          Other Information

                  None

 Item 6.          Exhibits and reports on Form 8-K
           a)     Exhibits
                  3(a)        Composite Amended and Restated Articles of
                              Incorporation (1)
                  3(b)        By-laws of the Company (2)
                  4(a)        Form of Rights Agreement,  dated as of October 24,
                              1995  between the Company and the  American  Stock
                              Transfer and Trust Company, as Rights Agent (3)
                  27          Financial Data Schedule

                                       26

<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.

                                       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)



Date:  June 4, 1999





                                               /s/ Roe H. Hatlen
                                               ----------------------------
                                               Roe H. Hatlen
                                               Chairman of the Board and
                                               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
           --------                                         ----

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

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

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

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


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