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UNITED STATES SECURITIES AND
EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-QSB

| |       |                                                                                   
| | ----- | ----------------------------------------------------------------------------------
| | [X]   | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 
| |       |                                                                                   
| |       | For the quarterly period ended September 30, 2002                                 
| |       |                                                                                   
| |       | OR                                                                                
| |       |                                                                                   
| | [   ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
| |       |                                                                                   
| |       | For the transition period from  to                                                

Commission file number:           33-77510-C

CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III

(Exact name of registrant as specified in its charter)


Delaware
(State or other jurisdiction of incorporation or organization)

38-3160141
(IRS Employer Identification Number)

24 Frank Lloyd Wright Drive, Lobby L, 4th Floor
P.O. Box 544, Ann Arbor, Michigan 48106-0544
(Address of principal executive offices, including zip code)

(734) 994-5505
(Issuers telephone number)

Not Applicable
(Former name, former address and former fiscal year, if changed since last year)

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 such shorter period that the registrant
was required to file such reports), and (2) has been subject to filing
requirements for the past 90 days. Yes X No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court: Not applicable

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuers classes of
common equity, as of the latest practicable date: Not applicable

Transitional Small Business Disclosure Format (check one) Yes  No X





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TABLE OF CONTENTS



|                                                                                              |                                                                                         |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                                                               
|Item 1. Financial Statements                                                                 
|                                                                                              | Balance Sheets, September 30, 2002 and December 31, 2001                               
|                                                                                              | Statement of Operations for the three and nine months ended September 30, 2002 and 2001
|                                                                                              | Statement of Changes in Partners Capital for the nine months ended September 30, 2002 
|                                                                                              | Statement of Cash Flows for the nine months ended September 30, 2002 and 2001          
|                                                                                              | Notes to Financial Statements                                                          
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|Item 3. Controls and Procedures                                                              
|PART II  OTHER INFORMATION                                                                  
|                                                                                              | Other Information                                                                      
|SIGNATURES                                                                                   
|CERTIFICATIONS                                                                               
|10-Q EXHIBIT INDEX                                                                           
|Certification of CEO Pursuant to Section 906                                                 



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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III

Index to Form 10-QSB

|           |  |                                                                                       |  |                                                                                         |      |  |       | 
|---------- |  | ------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------- | ---- |  | ----- | 
|Item No.   |  |                                                                                       |  | Page                                                                                   
|           |  |                                                                                       |  |                                                                                        
|PART I     |  | FINANCIAL INFORMATION                                                                 |  |                                                                                         |      | 
|           |  |                                                                                       |  |                                                                                         |      |  |       | 
|Item 1.    |  | Financial Statements:                                                                 |  |                                                                                         |      | 
|           |  |                                                                                       |  |                                                                                         |      |  |       | 
|           |  |                                                                                       |  | Balance Sheets, September 30, 2002 and December 31, 2001                                |      |  | 3     | 
|           |  |                                                                                       |  |                                                                                         |      |  |       | 
|           |  |                                                                                       |  | Statement of Operations for the three and nine months
ended September 30, 2002 and 2001 |      |  | 4     | 
|           |  |                                                                                       |  |                                                                                         |      |  |       | 
|           |  |                                                                                       |  | Statement of Changes in Partners Capital for the nine months
ended September 30, 2002  |      |  | 5     | 
|           |  |                                                                                       |  |                                                                                         |      |  |       | 
|           |  |                                                                                       |  | Statement of Cash Flows for the nine months
ended September 30, 2002 and 2001           |      |  | 6     | 
|           |  |                                                                                       |  |                                                                                         |      |  |       | 
|           |  |                                                                                       |  | Notes to Financial Statements                                                           |      |  | 78   | 
|           |  |                                                                                       |  |                                                                                         |      |  |       | 
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations |  |                                                                                         | 910 | 
|           |  |                                                                                       |  |                                                                                         |      |  |       | 
|Item
3.    |  | Controls
and Procedures                                                               |  |                                                                                         | 11   | 
|           |  |                                                                                       |  |                                                                                         |      |  |       | 
|PART II    |  | OTHER INFORMATION                                                                     |  |                                                                                         |      | 
|           |  |                                                                                       |  | Other Information                                                                       |      |  | 1213 | 
|           |  |                                                                                       |  |                                                                                         |      |  |       | 
|SIGNATURES |  |                                                                                       |  |                                                                                         | 14   | 

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Captec Franchise Capital Partners L.P. III

Balance Sheet

|                                     |                                       |                                         |                                   |            |            |               |            |              |            |  |  | 
|------------------------------------ | ------------------------------------- | --------------------------------------- | --------------------------------- | ---------- | ---------- | ------------- | ---------- | ------------ | ---------- |  |  | 
|                                     |                                       |                                         |                                   |            |            | (Unaudited)   |            |              |            | 
|                                     |                                       |                                         |                                   |            |            | September 30, |            | December 31,
|                                     |                                       |                                         |                                   |            |            | 2002          |            | 2001        
|                                     |                                       |                                         |                                   |            |            |               |            |             
|                                     |                                       |                                         |                                   | Assets     |            |               |            |              |            |  |  | 
|Cash and cash equivalents            |                                       | $                                       | 464,741                           |            |            | $             | 781,658    |             
|Restricted cash                      |                                       |                                         | 462,986                           |            |            |               | 387,302    |             
|Investment in property under leases: |                                       |                                         |                                   |            |            |               |            |             
|                                     | Operating leases, net                 |                                         |                                   | 17,355,478 |            |               |            | 17,565,762   |           
|                                     | Financing leases, net                 |                                         |                                   | 876,862    |            |               |            | 1,111,307    |           
|                                     | Impaired financing leases, net        |                                         |                                   | 12,693     |            |               |            | 48,693       |           
|Accounts receivable                  |                                       |                                         | 41,580                            |            |            |               | 60,401     |             
|Unbilled rent, net                   |                                       |                                         | 1,285,288                         |            |            |               | 1,190,584  |             
|Due from related parties             |                                       |                                         | 9,721                             |            |            |               | 5,524      |             
|Deferred financing costs, net        |                                       |                                         | 298,693                           |            |            |               | 334,536    |             
|                                     |                                       |                                         |                                   |            |            |               |            |             
|                                     |                                       | Total assets                            |                                   | $          | 20,808,042 |               |            | $            | 21,485,767 | 
|                                     |                                       |                                         |                                   |            |            |               |            |             
|                                     |                                       |                                         | Liabilities and Partners Capital |            |            |               |            |              |            |  | 
|Liabilities:                         |                                       |                                         |                                   |            |            |               |            |             
|                                     | Notes payable                         |                                         | $                                 | 7,910,297  |            |               | $          | 8,042,570    |           
|                                     | Accounts payable and accrued expenses |                                         |                                   | 113,821    |            |               |            | 161,935      |           
|                                     | Due to related parties                |                                         |                                   | 807        |            |               |            | 15,026       |           
|                                     | Security deposits held on leases      |                                         |                                   | 31,960     |            |               |            | 45,607       |           
|                                     |                                       |                                         |                                   |            |            |               |            |             
|                                     |                                       | Total liabilities                       |                                   |            | 8,056,885  |               |            |              | 8,265,138  | 
|                                     |                                       |                                         |                                   |            |            |               |            |             
|Partners capital:                   |                                       |                                         |                                   |            |            |               |            |             
|Limited partners capital            |                                       |                                         | 12,709,830                        |            |            |               | 13,188,343 |             
|General partners capital            |                                       |                                         | 41,327                            |            |            |               | 32,286     |             
|                                     |                                       |                                         |                                   |            |            |               |            |             
|                                     |                                       | Total partners capital                 |                                   |            | 12,751,157 |               |            |              | 13,220,629 | 
|                                     |                                       |                                         |                                   |            |            |               |            |             
|                                     |                                       | Total liabilities and partners capital |                                   | $          | 20,808,042 |               |            | $            | 21,485,767 | 
|                                     |                                       |                                         |                                   |            |            |               |            |             

The accompanying notes are an integral part of the financial statements.

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Captec Franchise Capital Partners L.P. III
Statement of Operations
(Unaudited)

|                                                                 |                                         |                                    |         |                    |         |                   |         |         |         |      |         |           |           |   |         |           |           |  
|---------------------------------------------------------------- | --------------------------------------- | ---------------------------------- | ------- | ------------------ | ------- | ----------------- | ------- | ------- | ------- | ---- | ------- | --------- | --------- | - | ------- | --------- | --------- | -
|                                                                 |                                         |                                    |         | Three months ended |         | Nine months ended
|                                                                 |                                         |                                    |         | September 30,      |         | September 30,    
|                                                                 |                                         |                                    |         |                    |         |                  
|                                                                 |                                         |                                    |         | 2002               |         | 2001              |         | 2002    |         | 2001
|                                                                 |                                         |                                    |         |                    |         |                   |         |         |         |     
|Operating revenue:                                               |                                         |                                    |         |                    |         |                   |         |         |         |      |         |           |           |   |         |          
|                                                                 | Rental income                           |                                    | $       | 550,166            |         |                   | $       | 546,900 |         |      | $       | 1,654,439 |           |   | $       | 1,628,887 |          
|                                                                 | Finance income                          |                                    |         | 17,296             |         |                   |         | 28,325  |         |      |         | 56,506    |           |   |         | 96,496    |          
|                                                                 |                                         |                                    |         |                    |         |                   |         |         |         |      |         |           |           |   |         |          
|                                                                 |                                         | Total operating revenue            |         |                    | 567,462 |                   |         |         | 575,225 |      |         |           | 1,710,945 |   |         |           | 1,725,383 |  
|Operating costs and expenses:                                    |                                         |                                    |         |                    |         |                   |         |         |         |      |         |           |           |   |         |          
|                                                                 | Interest expense                        |                                    |         | 178,417            |         |                   |         | 185,133 |         |      |         | 538,047   |           |   |         | 551,757   |          
|                                                                 | Depreciation                            |                                    |         | 70,095             |         |                   |         | 73,737  |         |      |         | 210,284   |           |   |         | 221,210   |          
|                                                                 | General and administrative              |                                    |         | 28,109             |         |                   |         | 28,879  |         |      |         | 76,088    |           |   |         | 69,845    |          
|                                                                 | Provision for unbilled rent             |                                    |         |                   |         |                   |         |        |         |      |         |          |           |   |         | 92,908    |          
|                                                                 | Provision for impaired financing leases |                                    |         |                   |         |                   |         |        |         |      |         | 36,000    |           |   |         | 77,000    |          
|                                                                 |                                         |                                    |         |                    |         |                   |         |         |         |      |         |           |           |   |         |          
|                                                                 |                                         | Total operating costs and expenses |         |                    | 276,621 |                   |         |         | 287,749 |      |         |           | 860,419   |   |         |           | 1,012,720 |  
|                                                                 |                                         |                                    |         |                    |         |                   |         |         |         |      |         |           |           |   |         |          
|                                                                 |                                         | Income from operations             |         |                    | 290,841 |                   |         |         | 287,476 |      |         |           | 850,526   |   |         |           | 712,663   |  
|Other income (expense):                                          |                                         |                                    |         |                    |         |                   |         |         |         |      |         |           |           |   |         |          
|                                                                 | Interest and other income               |                                    |         | 4,445              |         |                   |         | 3,550   |         |      |         | 10,715    |           |   |         | 8,075     |          
|                                                                 | Gain (loss) on sale of equipment        |                                    |         |                   |         |                   |         |        |         |      |         | 42,874    |           |   |         | (18,271   | )        
|                                                                 |                                         |                                    |         |                    |         |                   |         |         |         |      |         |           |           |   |         |          
|                                                                 |                                         | Total other income (expense)       |         |                    | 4,445   |                   |         |         | 3,550   |      |         |           | 53,589    |   |         |           | (10,196   | )
|                                                                 |                                         |                                    |         |                    |         |                   |         |         |         |      |         |           |           |   |         |          
|Net income                                                       |                                         |                                    | 295,286 |                    |         |                   | 291,026 |         |         |      | 904,115 |           |           |   | 702,467 |          
|Net income allocable to general partner                          |                                         |                                    | 2,953   |                    |         |                   | 2,910   |         |         |      | 9,041   |           |           |   | 7,025   |          
|                                                                 |                                         |                                    |         |                    |         |                   |         |         |         |      |         |           |           |   |         |          
|Net income allocable to limited partners                         |                                         | $                                  | 292,333 |                    |         | $                 | 288,116 |         |         | $    | 895,074 |           |           | $ | 695,442 |          
|                                                                 |                                         |                                    |         |                    |         |                   |         |         |         |      |         |           |           |   |         |          
|Net income per limited partnership unit                          |                                         | $                                  | 14.78   |                    |         | $                 | 14.52   |         |         | $    | 45.26   |           |           | $ | 35.05   |          
|                                                                 |                                         |                                    |         |                    |         |                   |         |         |         |      |         |           |           |   |         |          
|Weighted average number of limited partnership
units outstanding |                                         |                                    | 19,776  |                    |         |                   | 19,842  |         |         |      | 19,776  |           |           |   | 19,842  |          

The accompanying notes are an integral part of the financial statements.

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Captec Franchise Capital Partners L.P. III
Statement of Changes in Partners Capital
for the nine months ended September 30, 2002
(Unaudited)

|                                  |  |           |        |           |  |           |            |           |  |   |        |  |  |   |            |  
|--------------------------------- |  | --------- | ------ | --------- |  | --------- | ---------- | --------- |  | - | ------ |  |  | - | ---------- | -
|                                  |  | Limited   |        | Limited   |  | General   |            | Total    
|                                  |  | Partners' |        | Partners' |  | Partner's |            | Partners'
|                                  |  | Units     |        | Accounts  |  | Accounts  |            | Capital  
|                                  |  |           |        |           |  |           |            |          
|Balance, December 31, 2001        |  |           | 19,776 |           |  | $         | 13,188,344 |           |  | $ | 32,286 |  |  | $ | 13,220,630 |  
|Distributions  ($69.46 per unit) |  |           |       |           |  |           | (1,373,588 | )         |  |   |       |  |  |   | (1,373,588 | )
|Net income                        |  |           |       |           |  |           | 895,074    |           |  |   | 9,041  |  |  |   | 904,115    |  
|                                  |  |           |        |           |  |           |            |           |  |   |        |  |  |   |            |  
|Balance, September 30, 2002       |  |           | 19,776 |           |  | $         | 12,709,830 |           |  | $ | 41,327 |  |  | $ | 12,751,157 |  
|                                  |  |           |        |           |  |           |            |           |  |   |        |  |  |   |            |  

The accompanying notes are an integral part of the financial statements.

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Captec Franchise Capital Partners L.P. III
Statement of Cash Flows
for the nine months ended September 30, 2002 and 2001
(Unaudited)

|                                                     |                                        |                                                              |            |            |         |      |            |            |         |  
|---------------------------------------------------- | -------------------------------------- | ------------------------------------------------------------ | ---------- | ---------- | ------- | ---- | ---------- | ---------- | ------- | -
|                                                     |                                        |                                                              |            | 2002       |         | 2001
|                                                     |                                        |                                                              |            |            |         |     
|Cash flows from operating activities:                |                                        |                                                              |            |            |         |      |            |           
|                                                     | Net Income                             |                                                              | $          | 904,115    |         |      | $          | 702,467    |        
|                                                     | Adjustments to net income:             |                                                              |            |            |         |      |            |            |        
|                                                     |                                        | Depreciation                                                 |            |            | 210,284 |      |            |            | 221,210 |  
|                                                     |                                        | Amortization of debt issuance costs                          |            |            | 35,843  |      |            |            | 35,843  |  
|                                                     |                                        | (Gain) loss on sale of equipment                             |            |            | (42,874 | )    |            |            | 18,271  |  
|                                                     |                                        | Provision for credit losses                                  |            |            | 36,000  |      |            |            | 77,000  |  
|                                                     |                                        | Increase in unbilled rent                                    |            |            | (94,704 | )    |            |            | (60,425 | )
|                                                     |                                        | Decrease (increase) in accounts receivable                   |            |            | 18,821  |      |            |            | (3,228  | )
|                                                     |                                        | (Decrease) increase in accounts payable and accrued expenses |            |            | (48,114 | )    |            |            | 57,539  |  
|                                                     |                                        | Increase in restricted cash                                  |            |            | (75,684 | )    |            |            | (92,944 | )
|                                                     |                                        | Increase in due from related parties                         |            |            | (4,197  | )    |            |            | (5,524  | )
|                                                     |                                        | (Decrease) increase in due to related parties                |            |            | (14,219 | )    |            |            | 151,054 |  
|                                                     |                                        | Decrease in security deposits                                |            |            | (13,647 | )    |            |            |        |  
|                                                     |                                        |                                                              |            |            |         |      |            |           
|Net cash provided by operating activities            |                                        |                                                              | 911,624    |            |         |      | 1,101,263  |           
|                                                     |                                        |                                                              |            |            |         |      |            |           
|Cash flows from investing activities:                |                                        |                                                              |            |            |         |      |            |           
|                                                     | Proceeds from sale of equipment        |                                                              |            | 85,550     |         |      |            | 267,745    |        
|                                                     | Principal payments on financing leases |                                                              |            | 191,770    |         |      |            | 183,883    |        
|                                                     |                                        |                                                              |            |            |         |      |            |           
|Net cash provided by investing activities            |                                        |                                                              | 277,320    |            |         |      | 451,628    |           
|                                                     |                                        |                                                              |            |            |         |      |            |           
|Cash flows from financing activities:                |                                        |                                                              |            |            |         |      |            |           
|                                                     | Repayments of notes payable            |                                                              |            | (132,273   | )       |      |            | (88,543    | )      
|                                                     | Distributions to limited partners      |                                                              |            | (1,373,588 | )       |      |            | (1,374,443 | )      
|                                                     | Distributions to general partner       |                                                              |            |           |         |      |            |           |        
|                                                     |                                        |                                                              |            |            |         |      |            |           
|Net cash used in financing activities                |                                        |                                                              | (1,505,861 | )          |         |      | (1,462,986 | )         
|                                                     |                                        |                                                              |            |            |         |      |            |           
|Net (decrease) increase in cash and cash equivalents |                                        |                                                              | (316,917   | )          |         |      | 89,905     |           
|Cash and cash equivalents, beginning of period       |                                        |                                                              | 781,658    |            |         |      | 95,992     |           
|                                                     |                                        |                                                              |            |            |         |      |            |           
|Cash and cash equivalents, end of period             |                                        | $                                                            | 464,741    |            |         | $    | 185,897    |           
|                                                     |                                        |                                                              |            |            |         |      |            |           

The accompanying notes are an integral part of the financial statements.

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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
NOTES TO FINANCIAL STATEMENTS



|1. |  | THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING PRINCIPLES:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Captec Franchise Capital Partners L.P. III (the Partnership), a
Delaware limited partnership, was formed on February 18, 1994 for the
purpose of acquiring income-producing commercial real properties and
equipment leased on a triple net basis, primarily to operators of
national and regional franchised businesses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |  | The general partners upon formation of the Partnership were Captec
Franchise Capital Corporation III (the Corporation), a wholly owned
subsidiary of Captec Financial Group, Inc. (Captec), an affiliate and
Patrick L. Beach, the Chairman of the Board of Directors, President and
Chief Executive Officer of the Corporation and Captec. In August 1998,
the general partnership interests of the Partnership were acquired by
Captec Net Lease Realty, Inc., an affiliate. In December 2001, Captec Net
Lease Realty, Inc. merged with and into Commercial Net Lease Realty, Inc.
In connection with the merger, Commercial Net Lease agreed to sell and
assign its general partnership interest in the Partnership to GP3 Asset
Acquisition, LLC, which is wholly-owned by Mr. Beach and is an affiliate
of Captec. The Limited Partners have consented to the transfer of the
general partner interest. In accordance with the terms of an agreement
with Commercial Net Lease, immediately upon the closing of the merger and
until such time as the consent of the Partnerships secured lender is
obtained, GP3 Asset Acquisition has assumed all of the General Partners
obligations and liabilities prescribed under the terms of the Partnership
Agreement.
|  
|   |  | The Partnership commenced a public offering of 20,000 limited partnership
interests (units), priced at $1,000 per unit, on August 12, 1994. The
Partnership commenced operations on January 24, 1995. In August 1996, the
Partnership had accepted subscriptions for all 20,000 units. During 1997,
the Partnership repurchased 37 units for $31,450, or approximately $850
per unit. In 1999 the Partnership repurchased a total of 79 units for
$59,625, or approximately $755 per unit. During 2000 the Partnership
repurchased a total of 42 units for $28,432, or approximately $677 per
unit. In 2001 the Partnership repurchased a total of 66 units for
$42,839, or approximately $649 per unit. At September 30, 2002, the
Partnership had 19,776 units issued and outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   |  | Allocation of profits, losses and cash distributions from operations and
cash distributions from sale or refinancing are made pursuant to the
terms of the Partnership Agreement. Profits and losses from operations
are allocated among the limited partners based upon the number of units
owned.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |  | The balance sheet of the Partnership as of September 30, 2002, the
statements of operations and cash flows for the periods ending September
30, 2002 and September 30, 2001 and the statement of changes in partners
capital for the period ending September 30, 2002 have not been audited.
In the opinion of management, these unaudited financial statements
contain all adjustments necessary to present fairly the financial
position and results of operations and cash flows of the Partnership for
the periods then ended. Results of operations for the interim periods
are not necessarily indicative of results for the full year. These
unaudited financial statements should be read in conjunction with the
financial statements and notes thereto included in the Partnerships
annual report on Form 10-KSB for the year ended December 31, 2001 filed
with the United States Securities and Exchange Commission on March 29,
2002.                                                                                                                                                                                                                                                                                                                        

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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
NOTES TO FINANCIAL STATEMENTS



|2. |  | LAND AND BUILDING SUBJECT TO OPERATING LEASES:                                                
|-- |  | ----------------------------------------------------------------------------------------------
|  
|   |  | The net investment in operating leases as of September 30, 2002 is
comprised of the following:

|                              |  |   |            |  
|----------------------------- |  | - | ---------- | -
|Land                          |  | $ | 7,695.896  |  
|Building and improvements     |  |   | 11,214,344 |  
|                              |  |   |            |  
|                              |  |   | 18,910,240 |  
|Less accumulated depreciation |  |   | (1,554,762 | )
|                              |  |   |            |  
|Total                         |  | $ | 17,355,478 |  
|                              |  |   |            |  



|3. |  | NET INVESTMENT IN FINANCING LEASES:                                                           
|-- |  | ----------------------------------------------------------------------------------------------
|  
|   |  | The net investment in financing leases as of September 30, 2002 is comprised of the following:

|                                      |  |   |           |  
|------------------------------------- |  | - | --------- | -
|Minimum lease payments to be received |  | $ | 982,443   |  
|Estimated residual value              |  |   | 48,736    |  
|                                      |  |   |           |  
|Gross investment in financing leases  |  |   | 1,031,179 |  
|Less unearned income                  |  |   | (149,692  | )
|Less direct origination costs         |  |   | (4,625    | )
|                                      |  |   |           |  
|Net investment in financing leases    |  | $ | 876,862   |  
|                                      |  |   |           |  



|4. |  | NOTES PAYABLE:                                                                                                                                                                                                                      
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In November 1998, the Partnership entered into a $6.2 million term note.
The note has a ten-year term, is collateralized by certain properties
subject to operating leases, and bears interest at a rate of 8.37% per
annum.        
|  
|   |  | In March 1999, the Partnership entered into an additional $2.0 million
term note. The note has a ten-year term, is collateralized by certain
properties subject to operating leases, and bears interest at a rate of
8.5% per annum.
|  
|   |  | Debt issuance costs of approximately $477,909 in the aggregate were
incurred in connection with the issuance of the notes, and are being
amortized using the straight-line method over the ten-year term.                           

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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
PART I  FINANCIAL INFORMATION




ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report or Form 10-Q contains forward-looking statements which
represent the Partnerships beliefs or expectations with respect to matters,
which may arise in the future. Any statements in this Form 10-Q which are not
statements of historical fact may be deemed to be forward-looking statements.
When used in this discussion, words such as intends, anticipates,
expects, will, could, estimate and similar expressions are intended to
identify forward-looking statements. Such statements are subject to certain
risks and uncertainties, which could cause actual results to differ materially
from those, described herein. Such risks and uncertainties, some of which are
beyond the Partnerships control, include the following: (i) tenant defaults
in making rent payments, (ii) a fire or other casualty may interrupt the cash
flow stream from a property, (iii) properties may not be able to be leased at
the assumed rental rates, (iv) unexpected expenses may be incurred and (v)
properties may not be able to be sold at the presently anticipated prices
and/or times.

As a result of these and other factors, the Partnership may experience material
fluctuations in future operating results on a quarterly or annual basis, which
could materially and adversely affect its business, financial condition and
operating results. Undue reliance should not be placed on these forward-looking
statements which speak only as of the date hereof. The Partnership undertakes
no obligation to publicly release the results of any revisions to these
forward-looking statements which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2002.During the three months ended
September 30, 2002 total operating revenue was approximately $567,000, nearly
unchanged as compared to $575,000 for the three months ended September 30,
2001.

Operating expenses decreased 3.9% to approximately $277,000 for the three
months ended September 30, 2002 as compared to approximately $288,000 for the
three months ended September 30, 2001. The decrease is primarily due to a
decline in tax payments for the impaired Boston Market property that occurred
in 2001.

Other income for the three months ended September 30, 2002 was approximately
$4,000, relatively unchanged as compared to the three months ended September
30, 2001.

As a result of the foregoing, the Partnerships net income remained nearly
unchanged at approximately $295,000 for the three months ended September 30,
2002 as compared to approximately $291,000 for the three months ended September
30, 2001.

Nine Months Ended September 30, 2002.During the nine months ended September
30, 2002 total operating revenue was approximately $1,711,000, nearly unchanged
as compared to $1,725,000 for the nine months ended September 30, 2001. Rental
revenue from operating leases for the nine months ended September 30, 2002
increased 1.6% to approximately $1,654,000, as compared to $1,629,000 for the
nine months ended September 30, 2001. The increase in rental income is the
result of rent escalations since the prior year period attributed to changes in
the Consumer Price Index. Such rent escalations are in addition to any fixed,
contractual rental increases that are recognized as rental income on a
straight-line basis over the term of each lease. Earned income from financing
leases for the nine months ended September 30,

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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
PART I  FINANCIAL INFORMATION

2002 decreased 41.4% to approximately $57,000 as compared to approximately
$96,000 for the nine months ended September 30, 2001 as a result of the
amortization of principal balances on the finance leases.

Operating expenses decreased 15.0% to approximately $860,000 for the nine
months ended September 30, 2002, as compared to approximately $1,013,000 for
the nine months ended September 30, 2001. The decrease is principally due to a
decline of approximately $134,000 in non-recurring charges related to reserves
for defaults on operating and financing leases that occurred in 2001.

Other income for the nine months ended September 30, 2002 was approximately
$54,000 as compared to other expense of approximately $10,000 for the nine
months ended September 30, 2001. The other income for the nine months ended
September 30, 2002 is primarily due to a gain on the disposition of an
equipment lease in April 2002. The other expense during the nine months ended
September 30, 2001 is primarily due to a loss on the sale of equipment.

As a result of the foregoing, the Partnerships net income increased 28.7% to
approximately $904,000 for the nine months ended September 30, 2002 as compared
to approximately $702,000 for the nine months ended September 30, 2001.

Distributions.The Partnership announced third quarter distributions of
$340,000, of which $294,000 was distributed to Limited Partners on October 15,
2002. The balance of $46,000 was distributed to those partners who elected to
receive distributions on a monthly basis on August 15, 2002 and September 13,
2002.

LIQUIDITY AND CAPITAL COMMITMENTS

The Partnership commenced an offering of up to 20,000 limited partnership units
registered under the Securities Act of 1933, as amended, by means of a
registration statement that was declared effective by the Securities and
Exchange Commission on August 12, 1994. The offering reached final funding on
August 12, 1996 with subscriptions for the entire offering of 20,000 units.
Net proceeds after offering expenses were approximately $17.4 million.

In November 1998, the Partnership entered into a $6.2 million term note. The
Partnership entered into an additional $2.0 million term note in March 1999.
Proceeds from the notes were used to acquire additional properties. The notes
each have a ten-year term, are collateralized by certain properties subject to
operating leases, and bear interest at rates ranging from 8.37 % to 8.5% per
annum. Debt issuance costs of approximately $478,000 in the aggregate incurred
in connection with the issuance of the notes are being amortized into interest
expense over the life of the notes using the straight-line method.

At September 30, 2002, the Partnership had a portfolio of 14 properties located
in 10 states, with a total cost basis of $18.9 million and 7 performing
equipment leases with an original investment of $2.0 million. The partnership
also has a net investment of approximately $13,000 in one repossessed equipment
package, which amount is net of an allowance for losses of approximately
$169,000.

The Partnership expects that only limited amounts of liquid assets will be
required for existing properties and equipment since its property and equipment
leases require lessees to pay all taxes, assessments, maintenance, repairs and
casualty and other insurance premiums thereby minimizing the Partnerships
operating expenses and capital requirements. The Partnership management expects
that the cash flow to be generated by the Partnerships properties and
equipment will provide adequate liquidity and capital resources to pay
operating expenses and provide distributions to limited partners.

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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
PART I  FINANCIAL INFORMATION




ITEM 3. CONTROLS AND PROCEDURES

Mr. Beach, acting in his capacity as
the principal executive officer of GP3 Asset Acquisition, is
ultimately responsible for the disclosure controls and procedures of
the Partnership. Disclosure controls and procedures are established
and maintained by the Partnership to ensure that information required
to be disclosed by the Partnership in the reports that it files or
submits pursuant to the Securities Exchange Act of 1934, as amended
(the Act), is recorded, processed, summarized and
reported within the time periods specified in the Commissions
rules and forms. Mr. Beach has evaluated the effectiveness of the
Partnerships disclosure controls and procedures as of a date
within 90 days prior to the filing date of this report (the
Evaluation Date), and has determined that the
Partnerships disclosure controls and procedures effectively
communicate the information required to be disclosed by the
Partnership in the reports it files or submits under the Act in a
manner that allows timely decisions regarding such required
disclosure.

There have been no significant changes
in the Partnerships internal controls or in other factors that
could significantly affect these controls subsequent to the
Evaluation Date, including, but not limited to, any corrective
actions with regard to significant deficiencies and material
weaknesses.

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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
PART II  OTHER INFORMATION

ITEM 1.         LEGAL PROCEEDINGS.  None.

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.

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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
PART II  OTHER INFORMATION

ITEM 6.         EXHIBITS AND REPORTS ON FORM 8-K

| |  |                                                                                   |  |                                                                                                                                                                                                                        
| |  | --------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (a)  The following exhibits are included herein or incorporated by reference:    
| |  |                                                                                   |  |                                                                                                                                                                                                                        
| |  | Number                                                                            |  | Exhibit                                                                                                                                                                                                                
| |  |                                                                                   |  |                                                                                                                                                                                                                        
| |  | 4.1                                                                               |  | Amended Agreement of Limited Partnership of Registrant.
(Incorporated by reference to the corresponding exhibit in the
Registrants Form 10-K for the year ended December 31, 1998)                                    
| |  |                                                                                   |  |                                                                                                                                                                                                                        
| |  | 10.1                                                                              |  | Promissory Note dated November 28, 1998 between Registrant
and National Realty Funding L.C. (Incorporated by reference to the
corresponding exhibit in the Registrants Form 10-K for the year
ended December 31, 1998)
| |  |                                                                                   |  |                                                                                                                                                                                                                        
| |  | 10.2                                                                              |  | Promissory Note dated March 31, 1999 between Registrant and
National Realty Funding L.C. (Incorporated by reference to the
corresponding exhibit in the Registrants Form 10-QSB for the
quarter ended March 31, 1999) 
| |  |                                                                                   |  |                                                                                                                                                                                                                        
| |  | 99.1                                                                              |  | Certification of CEO Pursuant to Section 906.                                                                                                                                                                          
| |  |                                                                                   |  |                                                                                                                                                                                                                        
| |  | (b)  Reports on Form 8-K:                                                        
| |  |                                                                                   |  |                                                                                                                                                                                                                        
| |  | There were no reports filed on Form 8-K for the quarter ended September 30, 2002.

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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.

| |  |                                            |  |                            
| |  | ------------------------------------------ |  | ---------------------------
| |  | CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
| |  |                                            |  |                            
| |  | By:                                        |  | GP3 Asset Acquisition, LLC 
| |  |                                            |  | Its Manager                
| |  |                                            |  |                            
| |  | By:                                        |  | /s/ Patrick L. Beach       
| |  |                                            |  |                            
| |  |                                            |  | Patrick L Beach
Sole Member
| |  |                                            |  |                            
| |  | Date:                                      |  | November 14, 2002          

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CERTIFICATIONS

I, Patrick L. Beach, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Captec Franchise
Capital Partners L.P. III;

2.     Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and





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6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:   November 14, 2002      By:  Patrick L. Beach

|                                      | 
|------------------------------------- | 
|President, GP3 Asset Acquisition, LLC | 
|                                      | 
|/s/ Patrick L. Beach                  | 
|                                      | 
|(Signature and Title)                 | 

The foregoing
certification is a required Section 302(a) of the Sarbanes-Oxley
Act of 2002 and amended Rules 13a-14 and 15d-14 of the
Securities Exchange Act of 1934, which state that the working of such
certification may not be changed in any respect, even if such change
would appear inconsequential in nature. GP3 Asset Acquisition, LLC is
a single member limited liability company, the sole member of which
is a limited liability company of which Patrick L. Beach is the sole
and managing member. As a result, neither the Partnership or GP3
Asset Acquisition, LLC has a board of directors or audit committee
and Patrick L. Beach is only certifying officer and is ultimately
responsible for establishing and maintaining the registrants
disclosure controls





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10-Q EXHIBIT INDEX

|            |  |                                                                                                                         |  |  |  | 
|----------- |  | ----------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|EXHIBIT NO. |  | DESCRIPTION                                                                                                             |  |  |  | 
|            |  |                                                                                                                         |  |  |  | 
|EX-99.1     |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.