FORM 10-Q


                SECURITIES AND EXCHANGE COMMISSION
                     Washington, D. C.   20549


            Quarterly Report Under Section 13 or 15(d)
              of the Securities Exchange Act of 1934


       [X]     Quarterly report pursuant to Section 13 or 15(d) of the
               Securities Exchange Act of 1934

                                OR

       [  ]    Transition report pursuant to Section 13 or 15(d) of the
               Securities Exchange Act of 1934

          For the Quarter Ended    October  1,  1995    

                 Commission File Number  0-24822  



                  KAHLER  MANAGEMENT  CORPORATION       
      (Exact name of registrant as specified in its charter)

            Minnesota                               41-1781923         
  (State or other jurisdiction of       (I.R.S. Employer Identification No.)
   incorporation or organization)

  20 SW 2nd Avenue, Rochester, MN                             55902           
  (Address of principal executive offices)                  (Zip Code)

                            (507) 285-2700          
       (Registrant's telephone number, including area code)



  Indicate by check mark whether the registrant (2) 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      


  The number of shares outstanding of the Registrant's common stock as of
  October 1, 1995 was:

            Common Stock, $.10 par value  - 100 shares

<PAGE>

                  KAHLER  MANAGEMENT CORPORATION 
              INDEX TO QUARTERLY REPORT ON FORM 10-Q
                          October 1, 1995


                                                             PAGE
                                                            NUMBER

Index to Report . . . . . . . . . . . . . . . . . . . . . . .     1

Part 1.  Financial Information
    Balance Sheet -
      October 1, 1995 and January 1, 1995 . . . . . . . . . .     2

    Statements of Operations -
      Three and Nine Months Ended
      October 1, 1995 . . . . . . . . . . . . . . . . . . . .     3

    Statement of Cash Flows -
      Nine Months Ended
      October 1, 1995 . . . . . . . . . . . . . . . . . . . .     4

    Notes to Financial Statements . . . . . . . . . . . . . .     5  

    Management's Discussion and Analysis of
      Results of Operations and Financial Condition . . . . .     6

Part II.  Other Information
    Exhibits and Reports on Form 8-K. . . . . . . . . . . . .     7

Signatures. . . . . . . . . . . . . . . . . . . . . . . . . .     8
<PAGE>
<TABLE>
PART I.  FINANCIAL INFORMATION                                          Page 2

                    KAHLER MANAGEMENT CORPORATION
                            BALANCE SHEET
<CAPTION>
                                                       October 1,            January 1,
                                                         1995                   1995    

ASSETS

CURRENT ASSETS
<S>                                                 <C>  <C>              <C>  <C>
   Cash                                             $       25,229        $       22,552
   Trade receivables less allowance for doubtful 
     accounts of $7,580 and $3,000, respectively           168,159               182,926
   Inventories                                              40,738                51,193
   Prepaid expenses                                         58,489                17,392
     Total current assets                                  292,615               274,063

PROPERTY AND EQUIPMENT
   Buildings                                             2,500,000             2,500,000
   Equipment                                             1,017,341               919,478
     Total                                               3,517,341             3,419,478
     Less accumulated depreciation                         128,421                    - 
     Total property and equipment                        3,388,920             3,419,478

     TOTAL ASSETS                                   $    3,681,535        $    3,693,541

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES
   Accounts payable                                 $      137,522        $      147,754
   Accrued liabilities:
     Payroll and payroll related liabilities               147,361                91,586
     Sales and income tax                                  218,699                72,960
   Current portion of capital lease                          8,797                 8,797
   Obligations due to affiliate                          2,834,127             3,356,682
     Total current liabilities                           3,346,506             3,677,779

LONG-TERM CAPITAL LEASE OBLIGATION                           9,255                15,752

STOCKHOLDER'S EQUITY
   Common stock, par value $.10
     Authorized - 20,000,000 shares;
     Issued and outstanding - 100                               10                    10
   Additional paid-in capital                                    -                     - 
   Retained earnings                                       325,764                     - 
     Total stockholder's equity                            325,774                    10

     TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY     $    3,681,535        $    3,693,541


See Notes to Financial Statements
</TABLE>
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<TABLE>
PART I.  FINANCIAL INFORMATION                                          Page 3


                    KAHLER MANAGEMENT CORPORATION
                       STATEMENTS OF OPERATIONS

<CAPTION>
                                             Three Months                  Nine  Months  
                                                 Ended                        Ended      
                                            October 1, 1995               October 1, 1995
REVENUE
<S>                                          <C>  <C>                      <C>  <C>
   Rooms                                     $      810,521                $    2,587,854
   Food and beverage                                422,806                     1,374,276
   Telephone and other                               50,992                       151,470
     Total revenue                                1,284,319                     4,113,600


OPERATING COSTS AND EXPENSES
   Rooms                                            192,263                       592,417
   Food and beverage                                334,826                     1,079,862
   Utilities, maintenance, administrative,
     property taxes, insurance and other            493,752                     1,515,518
   Depreciation                                      23,421                       128,421
   
   Total operating costs and expenses             1,044,262                     3,316,218

GROSS OPERATING PROFIT                              240,057                       797,382

   Interest expense                                  61,350                       201,852
   Management fee                                    38,620                       123,408

INCOME FROM OPERATIONS BEFORE INCOME TAXES          140,087                       472,122

   Provision for income taxes                        43,427                       146,358

NET INCOME (Note 5)                          $       96,660                $      325,764

















See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
PART   I.  FINANCIAL INFORMATION                                        Page 4

                     KAHLER MANAGEMENT CORPORATION
                       STATEMENT OF CASH FLOWS

<CAPTION>
                                                         Nine  Months    
                                                             Ended   
                                                          October 1,     
                                                              1995   
 
OPERATIONS:
<S>                                                    <C>  <C>
   Net income                                          $      325,764
   Adjustments to reconcile net income to
   net cash provided by operating activities:
     Depreciation                                             128,421
   Change in current assets and current liabilities
     Receivables                                               14,767
     Inventories                                               10,455
     Prepaid expenses                                         (41,097)
     Accounts payable                                         (10,232)
     Accrued liabilities                                      201,514

       Net cash provided by operating activities              629,592

CASH FLOWS FROM INVESTING ACTIVITIES:
   Payments for property and equipment                        (97,863)
                                                                     
       Net cash used in investing activities                  (97,863)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments on obligations due to affiliate                  (522,555)
   Principal payments on capital lease obligation              (6,497)

       Net cash used in financing activities                 (529,052)

INCREASE IN CASH                                                2,677

CASH AT BEGINNING OF THE PERIOD                                22,552

CASH AT END OF THE PERIOD                              $       25,229












See Notes to Financial Statements
</TABLE>
<PAGE>
                                                           
PART I.  FINANCIAL INFORMATION                                          Page 5

                  KAHLER MANAGEMENT CORPORATION 
                  QUARTERLY REPORT ON FORM 10-Q
                        Nine Months Ended
                         October 1, 1995


NOTES TO FINANCIAL STATEMENTS

1. The accompanying unaudited financial statements have been prepared in
   accordance with generally accepted accounting principles for interim
   financial information and with the instructions to Form 10-Q and Rule 10-01
   of Regulation S-X.  They do not include all information and footnotes
   required by generally accepted accounting principles for complete financial
   statements.  However, except as disclosed herein, there has been no material
   change in the information disclosed in the notes to consolidated financial
   statements included in the Annual Report on Form 10-K of Kahler Management
   Corporation (the Company) for the year ended January 1, 1995.  In the opinion
   of management, all adjustments (consisting of normal recurring accruals) 
   considered necessary for a fair presentation have been included.  Operating
   results for the nine months ended October 1, 1995 are not necessarily
   indicative of the results that may be expected for the year ending December
   31, 1995.

2. All comparative data reflects application of consistent accounting principles
   and contains no prior period adjustments.

3. Supplemental disclosure of cash flow information.

 Cash paid for:
                                    Nine Months Ended
                                     October 1, 1995   
      Interest paid                    $ 201,852

4.  The Company is a wholly-owned subsidiary of Kahler Realty Corporation
    (Realty).  Realty continues to study the possibility of converting to a real
    estate investment trust simultaneously with a public offering of its common
    shares.  If this restructuring is successful, the Company would transfer the
    Green Oaks property to an affiliate of Realty and would receive a transfer
    of hotel management and other non-real estate related assets from Realty to
    enable Realty to separate its hotels from its hotel management operations
    and non-real estate businesses.  In addition, Realty would distribute by
    dividend approximately 90% of the common stock of the Company to Realty's
    shareholders.

5.  No income per common share is presented since the Company has only one
    shareholder, Realty.


<PAGE>                                                           
PART I.  FINANCIAL INFORMATION                                          Page 6

                  KAHLER MANAGEMENT CORPORATION 
                  QUARTERLY REPORT ON FORM 10-Q
                        Nine Months Ended
                         October 1, 1995


MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION

General

 The management's discussion and analysis of financial condition and results
 of operations set forth below follows the presentation of the Company's
 Statement of Operations.  This discussion should be read in conjunction with
 this statement and the other Financial Statements and Notes thereto appearing
 in this Form 10-Q.

 On December 31, 1994 the Company acquired the Green Oaks Inn and Conference
 Center.

 This hotel with 284 rooms is located in Fort Worth, Texas.  With 16
 conference rooms that can accommodate up to 1,000 persons, the hotel
 primarily seeks to attract conferences and group meetings as well as
 individual business travelers.  The hotel leases the site where it is located
 under a ground lease that expires December 2014.

 During the three and nine months ended October 1, 1995 the Company had total
 revenues of $1,284,319 and $4,113,600, respectively.  Room revenue for the
 same periods were $810,521 and $2,587,854, resulting from an average daily
 room rate of $49.44 and $50.75 and occupancy of 63.4% and 65.8%,
 respectively.  The revenue per available room was $31.36 and $33.38,
 respectively.  

 Food, beverage, telephone and other revenues were $473,798 and $1,525,746 for
 the three and nine months ended October 1, 1995.

 During the three and nine months ended October 1, 1995, the Company had total
 operating costs and expenses, prior to depreciation, of $1,020,841 and
 $3,187,797, respectively.  This resulted in a gross operating margin of 20.5%
 and 22.5% for the same periods.

 Interest expense relates primarily to the note payable to Realty which
 carries an interest rate equal to the prime lending rate.

 Management fees were $38,620 and $123,408 for the three and nine months ended
 October 1, 1995, respectively.  This represents an allocation of corporate
 expenses which is computed at 3% of total revenue and is paid to Realty.

 Provision for income tax represents the Company's estimated portion of the
 overall income tax cost for Realty and Realty's consolidated group.

 The Company had a net income for the three and nine months ended October 1,
  1995 of $96,660 and $325,764, respectively.
<PAGE>
PART I.  FINANCIAL INFORMATION                                          Page 7


                  KAHLER MANAGEMENT CORPORATION 
                  QUARTERLY REPORT ON FORM 10-Q
                        Nine Months Ended
                         October 1, 1995


Liquidity and Capital Resources

 Cash Flows

 Net cash provided by operating activities for the first nine months of 1995
 was $629,592.  The Company's operating income was the primary contributor to
 this source of cash.

 Financing

 The Company's primary source of financing is Realty, the Company's parent
 corporation.  The two companies have a lending arrangement whereby cash can
 be advanced or paid back on a daily basis as evidenced by a demand note
 between Realty and the Company.  Realty charges the Company an interest rate
 equal to the prime lending rate.  During the first nine months of 1995, the
 Company made payments on the note to Realty of $522,555.

 Other
 
 The Company is a wholly-owned subsidiary of Realty.  Realty  continues to
 study the possibility of converting to a real estate investment trust
 simultaneously with a public offering of its common shares.  If this
 restructuring is successful, the Company would transfer the Green Oaks
 property to an affiliate of Realty and would receive a transfer of hotel
 management and other non-real estate related assets from Realty to enable
 Realty to separate its hotels from its hotel management operations and non-real
 estate businesses.  In addition, Realty would distribute by dividend
 approximately 90% of the common stock of the Company to Realty's
 shareholders.

 Other

 The Company is in the discovery state of litigation with a telecommunications
 company relating to disputed unremitted telephone revenue and fees at the
 Company's hotel.  The Company has denied all claims and has made counter
 claims relating to breach of contract and intends to pursue all available
 alternatives.  The outcome of this dispute is uncertain.


PART II.  OTHER INFORMATION

 Item 6. Exhibits and Reports on Form 8-K

    (a)  Exhibits

         27   Financial Data Schedule
<PAGE>
                                                                        Page 8
                  KAHLER MANAGEMENT CORPORATION 
                  QUARTERLY REPORT ON FORM 10-Q
                        Nine Months Ended
                         October 1, 1995






                            SIGNATURE

 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 on November 14, 1995.




                  KAHLER MANAGEMENT CORPORATION




 
 

Dated: November 14, 1995                 Harold W. Milner            
                                         Harold W. Milner 
                                          President, CEO
 


Dated: November 14, 1995                 Paul R. Tieskoetter         
                                         Paul R. Tieskoetter
                                          Controller and Treasurer
                                          (principal financial and
                                           accounting officer)