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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-QSB



X IN BALLOT BOX         QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

|                               |  |               
|------------------------------ |  | --------------
|For the quarterly period ended |  | March 31, 2002
|                               |  |               

OR

OPEN BALLOT BOX        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 FloorP.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 IN BALLOT BOX    
 No     OPEN BALLOT BOX

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    X OPEN BALLOT BOX    
No    X IN BALLOT BOX





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TABLE OF CONTENTS



|                                                                                              |                                                                                     |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION Item 1. Financial Statements:                                 
|Item 1. Financial Statements:                                                                
|                                                                                              | Balance Sheets, March 31, 2002 and December 31, 2001                               
|                                                                                              | Statement of Operations for the three months ended March 31, 2002 and 2001         
|                                                                                              | Statement of Changes in Partners Capital for the three months ended March 31, 2002
|                                                                                              | Statement of Cash Flows for the three months ended March 31, 2002 and 2001         
|                                                                                              | Notes to Financial Statements                                                      
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|PART II  OTHER INFORMATION                                                                  
|                                                                                              | Other Information                                                                  
|SIGNATURES                                                                                   



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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, March 31, 2002 and December 31, 2001                                  |  | 3      
|           |  |                                                                                       |  |        
|           |  | Statement of Operations for the three months
ended March 31, 2002 and 2001            |  | 4      
|           |  |                                                                                       |  |        
|           |  | Statement of Changes in Partners Capital for the three months
ended March 31, 2002   |  | 5      
|           |  |                                                                                       |  |        
|           |  | Statement of Cash Flows for the three months
ended March 31, 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 
|           |  |                                                                                       |  |        
|PART II    |  | OTHER INFORMATION
Other Information                                                   |  | 11  12
|          
|SIGNATURES |  |                                                                                       |  | 13     

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Captec Franchise Capital Partners L.P. III
Balance Sheets

|                                   |                                       |                                         |                                   |            |            |             |            |            |              |  |  | 
|---------------------------------- | ------------------------------------- | --------------------------------------- | --------------------------------- | ---------- | ---------- | ----------- | ---------- | ---------- | ------------ |  |  | 
|                                   |                                       |                                         |                                   |            |            | March 31,   |            |            | December 31, | 
|                                   |                                       |                                         |                                   |            |            | 2002        |            |            | 2001         | 
|                                   |                                       |                                         |                                   |            |            |            
|                                   |                                       |                                         |                                   |            |            | (Unaudited) |            |            |              | 
|                                  
|                                   |                                       |                                         |                                   | Assets     |            |             |            |            |              |  |  | 
|Cash and cash equivalents          |                                       | $                                       | 373,427                           |            |            | $           | 781,658    |           
|Restricted cash                    |                                       |                                         | 434,282                           |            |            |             | 387,302    |           
|Investment in leases:              |                                       |                                         |                                   |            |            |             |            |           
|                                   | Operating leases, net                 |                                         |                                   | 17,495,667 |            |             |            | 17,565,762 |             
|                                   | Financing leases, net                 |                                         |                                   | 1,048,945  |            |             |            | 1,111,307  |             
|                                   | Impaired financing leases, net        |                                         |                                   | 12,693     |            |             |            | 48,693     |             
|Accounts receivable                |                                       |                                         | 69,164                            |            |            |             | 60,401     |           
|Unbilled rent, net                 |                                       |                                         | 1,223,656                         |            |            |             | 1,190,584  |           
|Due from related parties           |                                       |                                         | 9,033                             |            |            |             | 5,524      |           
|Deferred financing costs, net      |                                       |                                         | 322,589                           |            |            |             | 334,536    |           
|                                   |                                       |                                         |                                   |            |            |            
|                                   |                                       |                                         |                                   |            |            |             |            |           
|                                   |                                       | Total assets                            |                                   | $          | 20,989,456 |             |            | $          | 21,485,767   | 
|                                   |                                       |                                         |                                   |            |            |            
|                                   |                                       |                                         |                                   |            |            |             |            |           
|                                   |                                       |                                         | Liabilities and Partners Capital |            |            |             |            |            |              |  | 
|Liabilities:                       |                                       |                                         |                                   |            |            |             |            |           
|                                   | Notes payable                         |                                         | $                                 | 7,999,398  |            |             | $          | 8,042,570  |             
|                                   | Accounts payable and accrued expenses |                                         |                                   | 143,921    |            |             |            | 161,935    |             
|                                   | Due to related parties                |                                         |                                   | 2,176      |            |             |            | 15,026     |             
|                                   | Security deposits held on leases      |                                         |                                   | 45,607     |            |             |            | 45,607     |             
|                                   |                                       |                                         |                                   |            |            |            
|                                   |                                       |                                         |                                   |            |            |             |            |           
|                                   |                                       | Total liabilities                       |                                   |            | 8,191,102  |             |            |            | 8,265,138    | 
|                                   |                                       |                                         |                                   |            |            |            
|                                   |                                       |                                         |                                   |            |            |             |            |           
|Partners capital:                 |                                       |                                         |                                   |            |            |             |            |           
|Limited partners capital accounts |                                       |                                         | 12,763,386                        |            |            |             | 13,188,343 |           
|General partners capital accounts |                                       |                                         | 34,968                            |            |            |             | 32,286     |           
|                                   |                                       |                                         |                                   |            |            |            
|                                   |                                       |                                         |                                   |            |            |             |            |           
|                                   |                                       | Total partners capital                 |                                   |            | 12,798,354 |             |            |            | 13,220,629   | 
|                                   |                                       |                                         |                                   |            |            |            
|                                   |                                       |                                         |                                   |            |            |             |            |           
|                                   |                                       | Total liabilities and partners capital |                                   | $          | 20,989,456 |             |            | $          | 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
for the three months ended March 31, 2002 and 2001
(Unaudited)

|                                                                 |                                         |                                    |         |         |         |   |         |         |         | 
|---------------------------------------------------------------- | --------------------------------------- | ---------------------------------- | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                                 |                                         |                                    |         | 2002    |         |   | 2001    |        
|                                                                 |                                         |                                    |         |         |         |   |         |        
|Operating revenue:                                               |                                         |                                    |         |         |         |   |         |        
|                                                                 | Rental income                           |                                    | $       | 552,796 |         |   | $       | 540,993 |        
|                                                                 | Finance income                          |                                    |         | 20,369  |         |   |         | 36,969  |        
|                                                                 |                                         |                                    |         |         |         |   |        
|                                                                 |                                         |                                    |         |         |         |   |         |        
|                                                                 |                                         | Total operating revenue            |         |         | 573,165 |   |         |         | 577,962 | 
|                                                                 |                                         |                                    |         |         |         |   |         |        
|Operating costs and expenses:                                    |                                         |                                    |         |         |         |   |         |        
|                                                                 | Interest expense                        |                                    |         | 180,275 |         |   |         | 183,631 |        
|                                                                 | Depreciation                            |                                    |         | 70,095  |         |   |         | 73,737  |        
|                                                                 | General and administrative              |                                    |         | 19,513  |         |   |         | 16,888  |        
|                                                                 | Provision for unbilled rent             |                                    |         |        |         |   |         | 92,908  |        
|                                                                 | Provision for impaired financing leases |                                    |         | 36,000  |         |   |         | 77,000  |        
|                                                                 |                                         |                                    |         |         |         |   |        
|                                                                 |                                         |                                    |         |         |         |   |         |        
|                                                                 |                                         | Total operating costs and expenses |         |         | 305,883 |   |         |         | 444,164 | 
|                                                                 |                                         |                                    |         |         |         |   |        
|                                                                 |                                         |                                    |         |         |         |   |         |        
|                                                                 |                                         | Income from operations             |         |         | 267,282 |   |         |         | 133,798 | 
|                                                                 |                                         |                                    |         |         |         |   |         |        
|Other income (expense):                                          |                                         |                                    |         |         |         |   |         |        
|                                                                 | Gain on sale of equipment               |                                    |         |        |         |   |         | 9,086   |        
|                                                                 | Interest and other income               |                                    |         |        |         |   |         | 1,733   |        
|                                                                 | Other                                   |                                    |         | 887     |         |   |         |        |        
|                                                                 |                                         |                                    |         |         |         |   |        
|                                                                 |                                         | Total other income (expense)       |         |         | 887     |   |         |         | 10,819  | 
|                                                                 |                                         |                                    |         |         |         |   |        
|                                                                 |                                         |                                    |         |         |         |   |         |        
|Net income                                                       |                                         |                                    | 268,169 |         |         |   | 144,617 |        
|                                                                 |                                         |                                    |         |         |         |   |         |        
|Net income allocable to general partner                          |                                         |                                    | 2,682   |         |         |   | 1,446   |        
|                                                                 |                                         |                                    |         |         |         |   |        
|                                                                 |                                         |                                    |         |         |         |   |         |        
|Net income allocable to limited partners                         |                                         | $                                  | 265,487 |         |         | $ | 143,171 |        
|                                                                 |                                         |                                    |         |         |         |   |        
|                                                                 |                                         |                                    |         |         |         |   |         |        
|Net income per limited partnership unit                          |                                         | $                                  | 13.42   |         |         | $ | 7.22    |        
|                                                                 |                                         |                                    |         |         |         |   |        
|                                                                 |                                         |                                    |         |         |         |   |         |        
|Weighted average number of limited partnership
units outstanding |                                         |                                    | 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 three months ended March 31, 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  ($34.91 per unit) |  |           |        |  |           |   | (690,446   | )         |  |   |          |  |  |   | (690,446   | )
|                                  |  |           |        |  |           |   |            |           |  |   |           |  |  |   |            |  
|Net income                        |  |           |       |  |           |   | 265,487    |           |  |   | 2,682     |  |  |   | 268,169    |  
|                                  |  |           |        |  |           |   |            |           |  |   |           | 
|                                  |  |           |        |  |           |   |            |           |  |   |           |  |  |   |            |  
|Balance, March 31, 2002           |  |           | 19,776 |  |           | $ | 12,763,386 |           |  | $ | 34,968    |  |  | $ | 12,798,354 |  
|                                  |  |           |        |  |           |   |            |           |  |   |           | 

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 three months ended March 31, 2002 and 2001
(Unaudited)

|                                                     |                                        |                                                              |          |          |         |   |          |          |         |  
|---------------------------------------------------- | -------------------------------------- | ------------------------------------------------------------ | -------- | -------- | ------- | - | -------- | -------- | ------- | -
|                                                     |                                        |                                                              |          | 2002     |         |   | 2001     |         
|                                                     |                                        |                                                              |          |          |         |   |          |         
|Cash flows from operating activities:                |                                        |                                                              |          |          |         |   |          |         
|                                                     | Net Income                             |                                                              | $        | 268,169  |         |   | $        | 144,617  |        
|                                                     | Adjustments to net income:             |                                                              |          |          |         |   |          |          |        
|                                                     |                                        | Depreciation                                                 |          |          | 70,095  |   |          |          | 73,737  |  
|                                                     |                                        | Amortization of debt issuance costs                          |          |          | 11,948  |   |          |          | 11,948  |  
|                                                     |                                        | Gain on sale of equipment                                    |          |          |        |   |          |          | (9,085  | )
|                                                     |                                        | Provision for credit losses                                  |          |          | 36,000  |   |          |          | 77,000  |  
|                                                     |                                        | (Increase) decrease in unbilled rent                         |          |          | (33,072 | ) |          |          | 37,016  |  
|                                                     |                                        | (Increase) decrease in accounts receivable                   |          |          | (8,763  | ) |          |          | 4,289   |  
|                                                     |                                        | (Decrease) increase in accounts payable and accrued expenses |          |          | (18,013 | ) |          |          | 24,381  |  
|                                                     |                                        | Increase in restricted cash                                  |          |          | (46,980 | ) |          |          | (32,551 | )
|                                                     |                                        | Increase in due from related parties                         |          |          | (3,509  | ) |          |          | (1,533  | )
|                                                     |                                        | Decrease in due to related parties                           |          |          | (12,850 | ) |          |          | (7      | )
|                                                     |                                        |                                                              |          |          |         |   |         
|                                                     |                                        |                                                              |          |          |         |   |          |         
|Net cash provided by operating activities            |                                        |                                                              | 263,025  |          |         |   | 329,812  |         
|                                                     |                                        |                                                              |          |          |         |   |         
|                                                     |                                        |                                                              |          |          |         |   |          |         
|Cash flows from investing activities:                |                                        |                                                              |          |          |         |   |          |         
|                                                     | Proceeds from sale of equipment        |                                                              |          |         |         |   |          | 267,745  |        
|                                                     | Principal payments on financing leases |                                                              |          | 62,362   |         |   |          | 74,344   |        
|                                                     |                                        |                                                              |          |          |         |   |         
|Net cash provided by investing activities            |                                        |                                                              | 62,362   |          |         |   | 342,089  |         
|                                                     |                                        |                                                              |          |          |         |   |         
|Cash flows from financing activities:                |                                        |                                                              |          |          |         |   |          |         
|                                                     | Repayments of notes payable            |                                                              |          | (43,172  | )       |   |          | (10,192  | )      
|                                                     | Distributions to limited partners      |                                                              |          | (690,446 | )       |   |          | (448,189 | )      
|                                                     | Distributions to general partner       |                                                              |          |         |         |   |          |         |        
|                                                     |                                        |                                                              |          |          |         |   |         
|                                                     |                                        |                                                              |          |          |         |   |          |         
|Net cash used in financing activities                |                                        |                                                              | (733,618 | )        |         |   | (458,381 | )       
|                                                     |                                        |                                                              |          |          |         |   |         
|                                                     |                                        |                                                              |          |          |         |   |          |         
|Net (decrease) increase in cash and cash equivalents |                                        |                                                              | (408,231 | )        |         |   | 213,520  |         
|                                                     |                                        |                                                              |          |          |         |   |          |         
|Cash and cash equivalents, beginning of period       |                                        |                                                              | 781,658  |          |         |   | 95,992   |         
|                                                     |                                        |                                                              |          |          |         |   |         
|                                                     |                                        |                                                              |          |          |         |   |          |         
|Cash and cash equivalents, end of period             |                                        | $                                                            | 373,427  |          |         | $ | 309,512  |         
|                                                     |                                        |                                                              |          |          |         |   |         

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) 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 interest of the Partnership was acquired by Captec
Net Lease Realty, Inc., an affiliate of Captec. 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 and the consent of the Partnerships
secured lender is pending. In accordance with the terms of an agreement
with Commercial Net Lease, immediately upon the closing of the merger and
until such time as lender consent is obtained, GP3 Asset Acquisition has
assumed all of the General Partners 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. 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. The repurchase of the units was completed
pursuant to the terms of the Repurchase Plan set forth in the
Partnerships Prospectus. At March 31, 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 March 31, 2002, the
statements of operations and cash flows for the periods ending March 31,
2002 and March 31, 2001 and the statement of changes in partners capital
for the period ending March 31, 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 March 31, 2002 is comprised
of the following:

|                              |  |   |            |  
|----------------------------- |  | - | ---------- | -
|Land                          |  | $ | 7,695,896  |  
|Building and improvements     |  |   | 11,214,344 |  
|                              |  |   |           
|                              |  |   | 18,910,240 |  
|Less accumulated depreciation |  |   | (1,414,573 | )
|                              |  |   |           
|Total                         |  | $ | 17,495,667 |  
|                              |  |   |           



|3. |  | NET INVESTMENT IN FINANCING LEASES:                                                       
|-- |  | ------------------------------------------------------------------------------------------
|  
|   |  | The net investment in financing leases as of March 31, 2002 is comprised
of the following:

|                                      |  |   |           |  
|------------------------------------- |  | - | --------- | -
|Minimum lease payments to be received |  | $ | 1,148,034 |  
|Estimated residual value              |  |   | 89,678    |  
|                                      |  |   |          
|Gross investment in financing leases  |  |   | 1,237,712 |  
|Less unearned income                  |  |   | (163,708  | )
|Less direct origination costs         |  |   | (25,059   | )
|                                      |  |   |          
|Net investment in financing leases    |  | $ | 1,048,945 |  
|                                      |  |   |          



|4. |  | NOTES PAYABLE:                                                                                                                                                                                                                    
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In November 1998, the Partnership entered into a $6.2 million term note.
The note has a ten-year term, is collaterized 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 collaterized 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 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
arising in the future. Any statements on the Form 10-Q which are not statements
of historical fact may be deemed to be forward-looking statements. When used in
this discussion, the 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
projected. Such risks and uncertainties, some of which are beyond the
Partnerships control, include the following: (i) a tenant may default in
making rent payments, (ii) a fire or other casualty may interrupt the cash flow
stream from a property, (iii) the properties may not be able to be leased at
the assumed rental rates, (iv) unexpected expenses may be incurred in the
ownership of the properties, and (v) properties may not be able to be sold at
the presently anticipated prices and 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 March 31, 2002.During the three months ended March 31,
2002 total operating revenue was approximately $573,000, nearly unchanged as
compared to $578,000 for the three months ended March 31, 2001.

Operating expenses decreased 31.1% to approximately $306,000 for the three
months ended March 31, 2002, as compared to approximately $444,000 for the
three months ended March 31, 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 three months ended March 31, 2002 declined by
approximately $10,000 as compared with the same period in 2001, principally due
to the fact that there were no asset sales in the 2002 period. There was a
gain of approximately $9,000 in the 2001 quarter from the sale of equipment.

As a result of the foregoing, the Partnerships net income increased 85.4% to
approximately $268,000 for the three months ended March 31, 2002 as compared to
approximately $145,000 for the three months ended March 31, 2001.

Distributions.The Partnership announced first quarter distributions of
$340,000 of which $298,000 was distributed to its Limited Partners on April 15,
2002. The balance of $42,000 was distributed to those partners who elected to
receive distributions on a monthly basis on February 15, 2002 and March 15,
2002.

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

LIQUIDITY AND CAPITAL COMMITMENTS

The Partnership commenced the offering of up to 20,000 limited partnership
units registered under the Securities Act of 1933, as amended, by means of a
registration statement which 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
have a ten-year term, are collaterized 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 March 31, 2002, the Partnership had a
portfolio of 14 properties located in 10 states, with a cost basis of
19.0 million, 8 performing equipment leases with an original
investment of $2.3 million and two repossessed equipment packages
related to defaulted equipment contracts. The Partnerships
investment in repossessed equipment packages is approximately
$13,000, which is net of an allowance of approximately $445,000.

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 and assessments, maintenance and
repairs and insurance premiums, including casualty insurance thereby minimizing
the Partnerships operating expenses and capital requirements. The general
partner 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 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.Captec Net Lease merged with and into Commercial Net
Lease effective on December 1, 2001. In connection with the merger, Commercial
Net Lease agreed to sell and assign its general partnership interest in the
Partnership to GP3 Asset Acquisition. In order to complete this transaction, the consent of
a majority in interest of
the Limited Partners and the Partnerships lender is required. Effective
January 15, 2002, the requisite Limited Partner consents to the transfer of the
general partnership interest to GP3 Asset Acquisition were obtained and the
consent solicitation was closed. Lender consent is still pending.

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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      |  | Agreement of Limited Partnership of Registrant. (Incorporated by reference
from Exhibit B of the final Prospectus dated August 12,
1994, as supplemented and filed with the Securities and
Exchange Commission, SEC File No. 33-77510C)                                                     
|      
|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   |  | Pages 12-16 of the final Prospectus dated August 12, 1994, as
supplemented. (Incorporated by reference from the final Prospectus
filed with the Securities and Exchange Commission pursuant to Rule
424(b) promulgated under the Securities Act of 1933, as amended.
SEC File No. 33-77510C)



| |                         
| | ------------------------
| | (b) Reports on Form 8-K:

There were no reports filed on Form 8-K for the quarter ended March 31,
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. BeachPatrick L Beach
Sole Member                                      
|
| | Date: | May 13, 2002                                                                         

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