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


                               FORM 10-Q



(Mark One)

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

For the quarterly period ended October 3, 1999

                                   OR

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


                    Commission File Number:  0-20716



                           TACO CABANA, INC.
         (Exact name of registrant as specified in its charter)

            DELAWARE                       74-2201241
(State or other jurisdiction of         (I.R.S. Employer
 incorporation or organization)      Identification Number)

                       8918 Tesoro Dr., Suite 200
                       San Antonio, Texas   78217
                (Address of principal executive offices)

                             (210) 804-0990
          (Registrant's telephone number, including area code)





          Indicate by check mark whether the registrant (1) has
     filed all reports required to be filed by Section 13 or 15(d)
     of the Securities Exchange Act of 1934 during the preceding 12
     months (or for such shorter period that the registrant was
     required to file such reports), and (2) has been subject to
     such filing requirements for the past 90 days:

           Yes   X                         No

          Indicate the number of shares outstanding of each of the
     issuer's classes of common stock, as of the latest practicable
     date:


                 Class       Outstanding at November 5, 1999
              Common Stock          13,096,950 shares















                           TACO CABANA, INC.

                                 INDEX


                                                                 Page
                                                                Number

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

  Condensed Consolidated Balance Sheets at October 3, 1999
    and January 3, 1999                                            2

  Condensed Consolidated Statements of Operations for the Thirteen
    Weeks Ended October 3, 1999 and September 27, 1998             3

  Condensed Consolidated Statements of Operations for the Thirty-Nine
    Weeks Ended October 3, 1999 and September 27, 1998             4

  Condensed Consolidated Statements of Cash Flows for the Thirty-Nine
    Weeks Ended October 3, 1999 and September 27, 1998             5

  Notes to Condensed Consolidated Financial Statements           6-7


Item 2.  Management's Discussion and Analysis of Financial
  Condition and Results of Operations                           8-17


Item 3.  Quantitative and Qualitative Disclosures About
  Market Risk                                                     17


PART II.  OTHER INFORMATION

Items 1, 2, 3 and 5 have been omitted since the registrant has no
  reportable events in relation to these items

Item 4. Submission of Matters to a Vote of Security Holders       18

Item 6. Exhibits and Reports on Form 8-K                          18

Signature                                                         19








                                   1





                           TACO CABANA, INC.

                 CONDENSED CONSOLIDATED BALANCE SHEETS
                              (UNAUDITED)
                                               January 3,    October 3,
                                                  1999          1999
                                              -----------   ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................    $   719,000   $  1,637,000
Receivables, net..........................        438,000        503,000
Inventory.................................      2,273,000      2,375,000
Prepaid expenses..........................      3,128,000      3,309,000
Federal income taxes receivable...........        200,000        200,000
                                              -----------   ------------
Total current assets......................      6,758,000      8,024,000

PROPERTY AND EQUIPMENT, net...............     72,250,000     82,682,000
NOTES RECEIVABLE..........................        258,000        285,000
INTANGIBLE ASSETS, net....................     10,724,000     10,285,000
OTHER ASSETS..............................        212,000        268,000
                                              -----------   ------------
TOTAL.....................................    $90,202,000   $101,544,000
                                              ===========   ============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable..........................   $  5,362,000   $  4,469,000
Accrued liabilities.......................      5,265,000      6,376,000
Current maturities of long-term debt and
  capital leases..........................      5,704,000      3,119,000
Line of credit............................      3,550,000      2,155,000
                                              -----------   ------------
Total current liabilities.................     19,881,000     16,119,000

LONG-TERM OBLIGATIONS, net of current maturities:

Capital leases............................      2,140,000      1,963,000
Long-term debt............................     18,930,000     25,910,000
                                              -----------   ------------
Total long-term obligations...............     21,070,000     27,873,000

ACQUISITION AND CLOSED RESTAURANT LIABILITIES   7,713,000      6,773,000
DEFERRED LEASE PAYMENTS...................        761,000        781,000
STOCKHOLDERS' EQUITY:
Common stock..............................        159,000        134,000
Additional paid-in capital................     98,056,000     84,711,000
Retained deficit..........................    (43,544,000)   (33,268,000)
Treasury stock, at cost (2,576,937 shares
  at January 3, 1999 and 192,700 shares at
  October 3, 1999)........................    (13,894,000)    (1,579,000)
                                              -----------   ------------
  Total stockholders' equity..............     40,777,000     49,998,000
                                              -----------   ------------
TOTAL.....................................    $90,202,000   $101,544,000
                                              ===========   ============

         See Notes to Condensed Consolidated Financial Statements.


                                   2






                           TACO CABANA, INC.

            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                              (UNAUDITED)


                                          For the Thirteen Weeks Ended
                                          ----------------------------
                                              September 27, October 3,
                                                  1998        1999
                                              ------------  ----------
REVENUES:
Restaurant sales..........................   $36,176,000     $41,359,000
Franchise fees and royalty income.........        94,000          90,000
                                             -----------     -----------
Total revenues............................    36,270,000      41,449,000
                                             -----------     -----------
COSTS AND EXPENSES:
Restaurant cost of sales..................    11,102,000      12,539,000
Labor.....................................     9,599,000      11,245,000
Occupancy.................................     1,966,000       2,094,000
Other restaurant operating costs..........     6,259,000       6,953,000
General and administrative................     1,911,000       1,915,000
Depreciation, amortization and restaurant
opening costs.............................     1,995,000       2,462,000
                                             -----------     -----------
Total costs and expenses..................    32,832,000      37,208,000
                                             -----------     -----------
INCOME FROM OPERATIONS....................     3,438,000       4,241,000
                                             -----------     -----------
INTEREST EXPENSE, NET.....................      (543,000)       (586,000)
                                             -----------     -----------
INCOME BEFORE INCOME TAXES................     2,895,000       3,655,000

INCOME TAX EXPENSE........................             -               -
                                             -----------     -----------
NET INCOME................................   $ 2,895,000     $ 3,655,000
                                             ===========     ===========
BASIC EARNINGS PER SHARE..................   $      0.20     $      0.27
                                             ===========     ===========
BASIC WEIGHTED SHARES OUTSTANDING.........    14,186,259      13,392,151
                                             ===========     ===========
DILUTED EARNINGS PER SHARE.................  $      0.20     $      0.27
                                             ===========     ===========
DILUTED WEIGHTED SHARES OUTSTANDING........   14,305,200      13,776,090
                                             ===========     ===========

      See Notes to Condensed Consolidated Financial Statements.







                                   3




                           TACO CABANA, INC.

            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                              (UNAUDITED)


                                        For the Thirty-Nine Weeks Ended
                                        -------------------------------
                                              September 27,  October 3,
                                                  1998          1999
                                              -----------   -----------
REVENUES:
Restaurant sales..........................  $104,704,000    $119,516,000
Franchise fees and royalty income.........       265,000         260,000
                                            ------------    ------------
Total revenues............................   104,969,000     119,776,000
                                            ------------    ------------
COSTS AND EXPENSES:
Restaurant cost of sales..................    31,723,000      35,975,000
Labor.....................................    28,009,000      32,785,000
Occupancy.................................     5,830,000       6,167,000
Other restaurant operating costs..........    18,355,000      19,853,000
General and administrative................     5,777,000       5,876,000
Depreciation, amortization and restaurant
opening costs.............................     5,837,000       7,142,000
                                            ------------    ------------
Total costs and expenses..................    95,531,000     107,798,000
                                            ------------    ------------
INCOME FROM OPERATIONS....................     9,438,000      11,978,000
                                            ------------    ------------
INTEREST EXPENSE, NET.....................    (1,389,000)     (1,702,000)
                                            ------------    ------------
INCOME BEFORE FOR INCOME TAXES............     8,049,000      10,276,000

INCOME TAX EXPENSE........................             -               -
                                            ------------    ------------
NET INCOME...............................    $ 8,049,000     $10,276,000
                                            ============    ============
BASIC EARNINGS PER SHARE.................    $      0.55     $      0.77
                                            ============    ============
BASIC WEIGHTED SHARES OUTSTANDING.........    14,593,555      13,378,942
                                            ============    ============
DILUTED EARNINGS PER SHARE................   $      0.55     $      0.75
                                            ============    ============
DILUTED WEIGHTED SHARES OUTSTANDING.......    14,746,499      13,760,243
                                            ============    ============



       See Notes to Condensed Consolidated Financial Statements.







                                   4




                           TACO CABANA, INC.

            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                              (UNAUDITED)

                                         For the Thirty-Nine Weeks Ended
                                         -------------------------------
                                              September 27,  October 3,
                                                  1998          1999
                                              ------------  -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................    $8,049,000     $10,276,000
Adjustments to reconcile net income to net
  cash provided by operating activities:
    Depreciation and amortization.........     5,375,000       6,471,000
    Capitalized interest..................       (94,000)       (107,000)
    Changes in operating working
    capital items.........................    (2,568,000)     (1,202,000)
                                              ----------      ----------
Net cash provided by operating activities.    10,762,000      15,438,000
                                              ----------      ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........    (16,987,000)   (17,624,000)
Proceeds from the sale of property and
equipment.................................      3,195,000      1,337,000
                                               ----------     ----------
Net cash used for investing activities....    (13,792,000)   (16,287,000)
                                               ----------     ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable
  and draws on line of credit.............    11,130,000      11,404,000
Principal payments under long-term debt
and line of credit........................    (1,967,000)     (8,422,000)
Principal payments under capital leases...      (141,000)       (159,000)
Purchase of treasury stock................    (5,748,000)     (1,579,000)
Exercise of stock options.................       220,000         523,000
                                              ----------      ----------
Net cash provided by financing activities.     3,494,000       1,767,000
                                              ----------      ----------
NET INCREASE IN CASH......................       464,000         918,000

CASH AND CASH EQUIVALENTS, beginning of
period....................................       339,000         719,000
                                              ----------      ----------
CASH AND CASH EQUIVALENTS, end of period..    $  803,000      $1,637,000
                                              ==========      ==========


       See Notes to Condensed Consolidated Financial Statements.







                                   5




                           TACO CABANA, INC.

          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.  Basis of Presentation

Principles of Consolidation  - The consolidated  financial statements
include all  accounts  of  Taco  Cabana,  Inc. and  its  wholly-owned
subsidiaries (the  Company).   All significant  intercompany balances
and transactions have been eliminated.

The unaudited Condensed Consolidated Financial Statements include all
adjustments,  consisting   of  normal,   recurring  adjustments   and
accruals, which the Company considers necessary for fair presentation
of financial position and  the results of operations  for the periods
presented. Certain  information  and  footnote  disclosures  normally
included  in  financial   statements  prepared  in   accordance  with
generally accepted  accounting  principles  have  been  condensed  or
omitted.  The  interim  financial   statements  should  be   read  in
conjunction with the  Company's Annual  Report on  Form 10-K  for the
year ended January 3, 1999.

2.  Stockholders' Equity

The  Company's  Board  of  Directors  previously  approved  plans  to
repurchase up to a total of 4,000,000 shares of  the Company's Common
Stock.    Through  the  first  quarter  of  1999,   the  Company  had
repurchased 2,585,000 shares with an aggregate cost of $13.9 million.
During the first quarter of 1999, the Company retired all shares held
as treasury shares.   The  cost of retired  shares in  excess of  par
value has been charged to additional paid in capital.   Subsequent to
the first  quarter,  the Company  repurchased  an additional  192,700
shares at an  aggregate cost of  $1,579,000, which  as of  October 3,
1999 were held as  treasury stock.   The timing, price,  quantity and
manner of any  future purchases  will be  made at  the discretion  of
management and will depend upon market conditions.

3.  Earnings per Share

Basic earnings per share was computed by dividing income available to
common stockholders by the  weighted average number of  common shares
outstanding for  the reporting  period.   Diluted earnings  per share
reflects the  potential dilution  that could  occur if  securities or
other contracts  to issue  common stock  were exercised  or converted
into common stock.   Outstanding stock options issued  by the Company
represent the  only  dilutive effect  reflected  in diluted  weighted
average shares.









                                   6




The following table sets  forth the computation of  basic and diluted
earnings per share:

                                13 Weeks Ended          39 Weeks Ended
                         -----------------------   -----------------------
                         September 27, October 3,  September 27, October 3,
                              1998        1999         1998         1999
                           ----------   --------    -----------   --------
Numerator for basic and
diluted earnings per share:
Net income                 $2,895,000  $3,655,000   $8,049,000 $10,276,000

Denominator for basic
earnings per share:
  Weighted-average shares  14,186,259  13,392,151   14,593,555  13,378,942

Effect of dilutive securities:
  Employee stock options      118,941     383,939      152,944     381,301
                           ----------  ----------    ---------  ----------

Denominator for diluted earnings per share:
Adjusted weighted-average
  shares and assumed
  conversions              14,305,200  13,776,090    14,746,499 13,760,243
                           ==========  ==========    ========== ==========
Basic earnings per share   $     0.20  $     0.27    $     0.55 $     0.77
                           ==========  ==========    ========== ==========
Diluted earnings per share $     0.20  $     0.27    $     0.55 $     0.75
                           ==========  ==========    ========== ==========



4.   Supplemental Disclosure of Cash Flow Information


                                            Thirty-Nine Weeks Ended
                                          ---------------------------
                                        September 27,      October 3,
                                            1998              1999
                                        ------------      -----------
                                         (Unaudited)       (Unaudited)

    Cash paid for interest .........       $1,313,000      $1,656,000
    Interest capitalized on
    construction costs .............           94,000         107,000



5.   Supplemental Disclosure of Noncash Investing and Financing
     Activities

During 1999 assets having a net book value of $439,000 were disposed of
and charged to acquisition and closed restaurant liabilities.









                                   7




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


Introduction

The Company commenced operations in  1978 with the opening  of the first
Taco Cabana restaurant in San Antonio,  Texas.  As of  November 5, 1999,
the  Company  had  109  Company-owned  restaurants   and  10  franchised
restaurants.  The Company's revenues are derived primarily from sales by
Company-owned  restaurants,  with  franchise  fees  and  royalty  income
currently contributing less than 1% of total revenues.

During the thirty-nine weeks  ended October 3, 1999,  the Company opened
eight and closed two  Company-owned restaurants.  Subsequent  to October
3, 1999, the Company opened one restaurant.









































                                    8




The following table sets forth for the  periods indicated the percentage
relationship to total revenues,  unless otherwise indicated,  of certain
operating statement data. The  table also sets forth  certain restaurant
data for the periods indicated.


                            13 Weeks Ended           39 Weeks Ended
                       -----------------------   ----------------------
                        September 27,October 3, September 27,October 3,
                            1998        1999         1998      1999
                         ----------  --------    ----------- ---------
Operating Statement Data:
REVENUES:
  Restaurant sales.......    99.7%       99.8%       99.7%      99.8%
  Franchise fees and
  royalty income.........     0.3         0.2         0.3        0.2
                            -----       -----       -----      -----
  Total revenues.........   100.0%      100.0%      100.0%     100.0%
                            =====       =====       =====      =====
COSTS AND EXPENSES:
  Restaurant cost of
  sales (1)..............    30.7%       30.3%       30.3%      30.1%
  Labor (1)..............    26.5        27.2        26.8       27.4
  Occupancy (1)..........     5.4         5.1         5.6        5.2
  Other restaurant operating
  costs (1)..............    17.3        16.8        17.5       16.6
  General and administrative  5.3         4.6         5.5        4.9
  Depreciation, amortization and
    restaurant opening costs  5.5         5.9         5.6        6.0
                            -----       -----       -----      -----
INCOME FROM OPERATIONS...     9.5        10.2         9.0       10.0

INTEREST EXPENSE, net....    (1.5)       (1.4)       (1.3)      (1.4)
                            -----       -----       -----      -----
INCOME BEFORE
  INCOME TAXES...........     8.0         8.8         7.7        8.6

INCOME TAX EXPENSE.......       -           -           -          -
                            -----       -----       -----      -----
NET INCOME...............     8.0%        8.8%        7.7%       8.6%
                            =====       =====       =====      =====
Restaurant Data:

Company-owned restaurants:
  Beginning of period....     101         106          98        102
  Opened.................       1           2           7          8
  Closed.................      (1)          -          (4)        (2)
                            -----       -----       -----      -----
  End of period..........     101         108         101        108

Franchised (2) restaurants:    10          10          10         10
                            -----       -----       -----      -----
Total restaurants:.......     111         118         111        118
                            =====       =====       =====      =====

(1)      Percentage is calculated based upon restaurant sales.
(2)      Excludes Two Pesos licensed restaurants.


                                    9




The Thirteen Weeks Ended October 3, 1999 Compared to the Thirteen Weeks
Ended September 27, 1998

Restaurant Sales.  Restaurant  sales increased by $5.2  million, or 14%,
to $41.4 million for  the third quarter of  1999 from $36.2  million for
the third  quarter  of 1998.    The increase  was  due  primarily to  an
increase in  sales  at  existing  restaurants  and the  opening  of  new
restaurants.  Comparable store sales, defined as Taco Cabana restaurants
that have been open 18 months  or more at the beginning  of the quarter,
increased 5.2%.  Management  attributes the increase to  several factors
including a more consistent marketing program, a commitment to increased
staffing levels at existing restaurants, the ongoing reimage program and
a price increase  of approximately  2%.   Sales from  restaurants opened
after September 27, 1998 accounted for an increase of $3.4 million. This
increase was  partially offset  by sales  of  $563,000 from  restaurants
which were closed after September 27, 1998.

Restaurant Cost of  Sales.   Restaurant cost of  sales, calculated  as a
percentage of restaurant sales, decreased to 30.3% for the third quarter
of 1999 from 30.7% for the  third quarter of 1998. The  decrease was due
primarily to  continued improvements  in the  management  of food  costs
through utilizing increased controls, improved purchasing programs and a
year-over-year reduction in cheese costs.  Management expects this trend
to continue during the remainder of 1999.

Labor.  Labor  costs, calculated  as a  percentage of  restaurant sales,
increased to 27.2% during the third  quarter of 1999 from  26.5% for the
same period  in 1998.   The  increase is  primarily due  to management's
continued commitment  to  increased staffing  levels  at the  restaurant
level in  order to  provide a  consistent  guest experience  as well  as
higher than normal  labor costs at  newer restaurants.   New restaurants
generally have higher than normal labor costs for the  first four to six
months of operations.   Management expects the  trend in labor  costs to
continue during the remainder of 1999.

Occupancy.   Occupancy  costs increased  by  $128,000  during the  third
quarter of 1999 compared to the third quarter of 1998.   The increase is
primarily due  to  the  opening  of  new restaurants  in  1999.    As  a
percentage of restaurant sales, occupancy costs decreased to 5.1% in the
third quarter of  1999 compared to  5.4% in the  third quarter  of 1998.
Management expects  the dollar  amount to  increase, although  it should
continue to  show improvement  from the  prior year  as a  percentage of
sales for the remainder of 1999.

Other Restaurant  Operating  Costs.   Other  restaurant operating  costs
increased to $7.0 million in the third quarter of  1999 compared to $6.3
million in  the third  quarter of  1998. As  a percentage  of restaurant
sales, other restaurant operating costs decreased to 16.8% for the third
quarter of 1999 compared  to 17.3% for the  third quarter of 1998.   The
decrease as  a percentage  of sales  is primarily  due to  leverage from
higher than average sales, as the dollar amount  per store open remained
relatively flat.   Management  expects the  favorable  comparisons as  a
percentage of sales to continue for the remainder of 1999.



                                   10




General  and  Administrative.    General  and  administrative  expenses,
calculated as a  percentage of  sales, decreased to  4.6% for  the third
quarter of 1999 compared to 5.3% in the same period of 1998.  Management
expects this  dollar  amount to  remain  constant  or increase  slightly
during the remainder of 1999, although it should continue to decrease as
a percentage of sales.


Depreciation, Amortization and Restaurant Opening  Costs.  Depreciation,
amortization and restaurant opening costs consisted of the following:

                                             Thirteen Weeks Ended
                                        ----------------------------
                                        September 27,     October 3,
                                             1998            1999
                                        -------------    ------------
                                         (Unaudited)      (Unaudited)

    Depreciation of property and
    equipment .........................  $ 1,784,000      $ 2,089,000
    Amortization of intangible assets        146,000          146,000
    Restaurant opening costs ..........       65,000          227,000


Depreciation expense increased by $305,000 for the quarter ended October
3, 1999 compared to the quarter ended September 27,  1998.  The increase
was due to the addition of new restaurants as  well as continued capital
improvements  to  existing   restaurants.    Restaurants   opened  after
September 27, 1998 accounted  for $166,000 of the  increase.  Restaurant
opening costs increased  by $162,000  during the  third quarter  of 1999
compared to the same period in 1998, primarily due to the opening of two
Company owned restaurants during  the third quarter of  1999 compared to
one opening during the third quarter of 1998.

Interest Expense, net.  Interest expense, net of interest capitalized on
construction costs, increased to  $586,000 in the third  quarter of 1999
from $543,000 in  the third quarter  of 1998, primarily  as a  result of
additional  borrowings  under  the  Company's  debt  facilities.    This
increase is offset by lower interest rates in the  third quarter of 1999
compared to  the  same quarter  last  year.   In  addition, the  Company
capitalized $22,000 of interest  related to new  restaurant construction
in the most recent quarter compared to $17,000  during the third quarter
of 1998.

Income Taxes.  Income tax expense was zero for the third quarter of 1999
and 1998  due to  the recognition  of previously  reserved deferred  tax
assets.

Net Income and Earnings Per Share.  Net income increased to $3.7 million
for the third quarter of 1999  from $2.9 million for the  same period in
1998.  Net income  was 8.8% of total  revenues for the third  quarter of
1999 compared to 8.0%  in the third quarter  of 1998.   Diluted earnings
per share was $0.27 for the  third quarter of 1999 compared  to $0.20 in
the same period of 1998.  The increase in earnings  per share during the
third quarter of fiscal 1999 compared to the same  quarter last year was
due to  higher  sales  at  existing  restaurants,  the  opening  of  new
restaurants, continued  strong  cost controls  and  a  reduction in  the
number of shares outstanding.
                                   11







The Thirty-nine weeks Ended October 3, 1999  Compared to the Thirty-nine
weeks Ended September 27, 1998

Restaurant Sales.  Restaurant sales increased by  $14.8 million, or 14%,
to $119.5 million for the  thirty-nine weeks ended October  3, 1999 from
$104.7 million for the comparable period in 1998.   The increase was due
primarily to  an  increase  in sales  at  existing  restaurants and  the
opening of  higher than  average volume  restaurants.   Comparable store
sales, defined as Taco Cabana restaurants that have  been open 18 months
or more at  the beginning  of the quarter,  increased 5.4%.   Management
attributes the increase to  several factors including a  more consistent
marketing program, a commitment to increased staffing levels at existing
restaurants, the  ongoing  reimage  program  and  a  price  increase  of
approximately 2%.   Sales  from restaurants  opened after  September 27,
1998 accounted  for  an  increase of  $8.3  million.  This increase  was
partially offset  by  sales from  restaurants  which  were closed  after
September 27, 1998 of $1.6 million.

Restaurant Cost of  Sales.   Restaurant cost of  sales, calculated  as a
percentage of restaurant sales,  decreased to 30.1% for  the thirty-nine
weeks ended October 3, 1999 from 30.3% for the same  period in 1998. The
decrease was due primarily  to continued improvements in  the management
of food costs through utilizing increased  controls, improved purchasing
programs and  a year-over-year  reduction in  cheese costs.   Management
expects cost of sales, as a  percentage of sales,   to decrease compared
to the prior year for the remainder of 1999.

Labor.  Labor  costs, calculated  as a  percentage of  restaurant sales,
increased to 27.4% for the thirty-nine weeks ended  October 3, 1999 from
26.8% for the  same period in  1998.  The  increase is primarily  due to
management's continued commitment  to increased  staffing levels  at the
restaurant level in  order to provide  a consistent guest  experience as
well as  higher  than normal  labor  costs at  newer  restaurants.   New
restaurants generally have higher than normal labor  costs for the first
four to six months of operations. Management expects  the trend in labor
costs to continue during the remainder of 1999.

Occupancy.  Occupancy costs increased by $337,000 during the thirty-nine
weeks ended October 3, 1999 compared  to the same period in 1998.   As a
percentage of restaurant sales, occupancy costs decreased to 5.2% in the
thirty-nine weeks ended  October 3,  1999 compared to  5.6% in  the same
period of 1998.  Management expects the dollar amount to increase due to
new openings but continue to decrease as a percentage of sales.

Other Restaurant  Operating  Costs.   Other  restaurant operating  costs
increased to $19.9  million in  the thirty-nine  weeks ended  October 3,
1999 compared  to  $18.4  million in  the  same  period  of 1998.  As  a
percentage  of  restaurant  sales,  other   restaurant  operating  costs
decreased to  16.6% for  the  thirty-nine weeks  ended  October 3,  1999
compared to  17.5% for  the same  period  of 1998.   The  decrease as  a
percentage of  sales  is  primarily due  to  leverage  from higher  than
average sales along with a relatively flat dollar amount per store open.
Management expects the favorable comparisons as a percentage of sales to
continue during 1999.



                                   12




General  and  Administrative.    General  and  administrative  expenses,
calculated as a percentage of  sales, decreased to 4.9%  for the thirty-
nine weeks ended October 3, 1999 compared to 5.5% for the same period of
1998. Management  expects this  amount  to continue  to  decrease, as  a
percentage of sales, throughout the remainder of 1999.

Depreciation, Amortization and Restaurant Opening  Costs.  Depreciation,
amortization and restaurant opening costs consisted of the following:

                                             Thirty-nine weeks Ended
                                           --------------------------
                                          September 27,    October 3,
                                               1998           1999
                                           ------------    ----------
                                           (Unaudited)     (Unaudited)

    Depreciation of property and
    equipment .........................     $4,946,000    $ 6,032,000
    Amortization of intangible assets          429,000        439,000
    Restaurant opening costs ..........        462,000        671,000


Depreciation expense increased by $1.1 million for the thirty-nine weeks
ended October 3, 1999 compared to the same period in 1998.  The increase
was due to the addition of new restaurants as  well as continued capital
improvements on existing restaurants.  Restaurants  opened after January
1, 1998  accounted for  $727,000 of  the increase.   Restaurant  opening
costs increased by $209,000  during the thirty-nine weeks  ended October
3, 1999, compared to the same period in 1998. The increase was primarily
due to the  opening of  eight restaurants  during the  thirty-nine weeks
ended October 3, 1999 compared  to seven restaurants in  the same period
of 1998.

Interest Expense, net.  Interest expense, net of interest capitalized on
construction costs, increased to  $1.7 million in the  thirty-nine weeks
ended October 3,  1999 from  $1.4 million  in the  same period  of 1998,
primarily as a result of additional borrowings  under the Company's debt
facilities. In addition,  the Company  capitalized $107,000  of interest
related to  new  restaurant construction  during  the thirty-nine  weeks
ended October  3, 1999  compared to  $94,000 during  the same  period of
1998.

Income Taxes.   Income tax  expense was zero  for the  thirty-nine weeks
ended October 3, 1999 and the same period in 1998 due to the recognition
of previously reserved deferred tax assets.

Net Income  and  Earnings Per  Share.   Net  income  increased to  $10.3
million for  the  thirty-nine  weeks ended  October  3,  1999 from  $8.0
million for  the same  period in  1998.   Net income  was 8.6%  of total
revenues for the  thirty-nine weeks  ended October  3, 1999  compared to
7.7% in the same period of  1998.  Diluted earnings per  share was $0.75
for the thirty-nine weeks ended October 3, 1999 compared to $0.55 in the
same period of  1998.   The increase  in earnings  per share  during the
thirty-nine weeks ended October 3, 1999 compared to the same period last
year was due to higher sales at existing restaurants, the opening of new
restaurants, continued  strong  cost controls  and  a  reduction in  the
number of shares outstanding.


                                   13




Year 2000 Issue

Description.    The  Company  relies  to  a  large  extent  on  computer
technology to  carry  out  its  day-to-day  operations.   Many  software
products in the marketplace are only able to recognize  a two digit year
date and therefore  will recognize a  date using "00"  as the  year 1900
instead of the year  2000 ( the "Year 2000 Issue" ). This  problem could
result in  a system  failure or  miscalculations causing  disruptions of
operations, including,  among  other things,  a  temporary inability  to
process transactions or engage in similar normal business activities.

State Of Readiness.  The Company  has established a plan  to prepare its
systems for the Year 2000 Issue as well as to reasonably assure that its
critical business  partners  are  prepared.  To  date, the  Company  has
completed  its  assessment  of  all  internal   systems  that  could  be
significantly  affected  by  the   Year  2000  Issue.  Based   upon  its
assessment, the Company  determined that  it was  required to  modify or
replace portions of  its software  supporting Human  Resources, Payroll,
Accounting, Labor Analysis and the Point of Sale.   The Company believes
that with  modifications  or  replacements  of the  identified  software
programs, the  Year  2000  Issue can  be  mitigated.   However,  if  all
additional phases of the Year 2000  plan are not completed  on time, the
Year 2000 Issue could  have a material impact  on the operations  of the
Company.

As of November 5, 1999, the Company has completed software reprogramming
and replacement  of the  identified  systems.   Systems  continue to  be
tested for integration and will continue to be tested until December 31,
1999. Many  hardware  upgrades  were  made  as  part  of  the  Company's
continued efforts  to upgrade  its technology,  but no  further hardware
replacement has been identified as a  result of the Year  2000 Issue. As
such, the  Company  is not  currently  remediating additional  hardware.
However,  the  existence  of  embedded  technology  is  by  nature  more
difficult to identify.  While the Company  believes that all significant
systems are Year 2000  compliant, the Company plans  to continue testing
its operating equipment.

The Company has  deferred other information  technology projects  due to
the Year 2000 Issue. The deferral  of these projects is  not expected to
have a material effect on the Company's financial position or results of
operations.

Significant Third  Parties.    The  Company's  significant  third  party
business partners  consist of  suppliers, banks  and service  providers.
The Company has  significant system interfaces  with banks,  credit card
processors and tax filing services. An  initial inventory of significant
third party  business partners  and  an assessment  of  their Year  2000
compliance status  has  been completed.  Additionally,  the Company  has
identified and  met with  key suppliers  and distributors  and discussed
their Year 2000 readiness.  The Company  has developed contingency plans
for third party business  partners that appear to  have substantial Year
2000 operational risks.





                                   14




Costs.  The  Company has  used both internal  and external  resources to
reprogram,  or  replace,   and  test  software   for  Year   2000  Issue
modifications. The  total  cost  of  the  Year  2000  Issue  project  is
estimated to  be  approximately  $600,000,  of  which  the  Company  has
incurred $520,000 relating to the  purchase of new software.   The costs
relating to the  Year 2000  Issue are  being financed  through operating
cash  flows  and   borrowings  from   the  Company's   available  credit
facilities.  Of the total project cost, the  majority is attributable to
the purchase of new software, which has been capitalized.  The remaining
amount, which will be  expensed as incurred, is  not expected to  have a
material effect on the  results of operations.   To date, the  costs the
Company has incurred  and expensed  relating to  the assessment  of, and
preliminary efforts  in connection  with, its  Year 2000  Issue and  the
development of a remediation plan have not had a  material effect on the
results of operations.

Risks And Contingency  Plans.  Management  believes it has  an effective
plan in  place  to resolve  the  Year 2000  Issue  in  a timely  manner.
However, due  to  the  forward-looking  nature  and lack  of  historical
experience with  Year  2000  Issues, it  is  difficult  to predict  with
certainty what will happen  after December 31,  1999.  Despite  the Year
2000 remediation efforts  being made,  it is likely  that there  will be
disruptions and unexpected business problems during  the early months of
2000.  The  Company plans to  make diligent efforts  to assess  the Year
2000 readiness  of its  significant business  partners and  will develop
contingency plans  for  all  critical  systems  where  it  believes  its
exposure to  Year  2000 risk  is  the greatest.    However, despite  the
Company's efforts, it may encounter unanticipated  third party failures,
public infrastructure failures or a failure to successfully conclude its
remediation efforts as planned.  If the remaining Year  2000 plan is not
completed timely,  in  addition to  the  implications  noted above,  the
Company  may  be  required  to  utilize  manual  processing  of  certain
otherwise automated processes.  Any one of these unforeseen events could
have a material adverse  impact on the Company's  results of operations,
financial condition, or cash flows in 1999 and beyond.


Liquidity and Capital Resources

Historically, the Company has financed business and expansion activities
by  using  funds  generated  from  operating  activities,  build-to-suit
leases, equity financing, short  and long-term debt and  capital leases.
The  Company  maintains   credit  facilities  totaling   $40.0  million,
including a  $5.0 million  unsecured  revolving line  of  credit. As  of
November  5,  1999,  the  aggregate  outstanding   balance  under  these
commitments was $29.6 million.

Net cash  provided by  operating activities  was $15.4  million for  the
thirty-nine weeks  ended October  3,  1999, and  $10.8  million for  the
thirty-nine weeks ended September 27, 1998.

Net cash used for investing activities was $16.3 million for the thirty-
nine  weeks  ended  October  3,  1999   representing  primarily  capital
expenditures of $17.6  million for the  construction of  new restaurants
and improvements to existing restaurants.   This was offset  by the sale
of assets generating $1.3 million  in proceeds.  This  compares to $13.8
million in net  cash used for  investing activities for  the thirty-nine
weeks  ended   September  27,   1998,  representing   primarily  capital
expenditures for the construction of new restaurants and improvements to
existing restaurants,  offset  by the  sale  of  assets generating  $3.2
million in proceeds.


                                   15


Net cash  provided by  financing  activities was  $1.8  million for  the
thirty-nine weeks ended October 3, 1999 representing primarily net draws
from the  Company's  debt  facilities of  $3.0  million,  offset by  the
purchase of $1.6 million in treasury  stock.  This compares  to net cash
provided by financing activities of  $3.5 million in the  same period of
1998, representing net  draws on the  Company's debt facilities  of $9.2
million, offset by the purchase of $5.7 million in treasury stock.

The Company's Board of Directors previously approved plans to repurchase
up to a total of 4,000,000 shares of the Company's Common  Stock.  As of
November 5, 1999,  the Company  had repurchased  3,137,137 shares  at an
average cost of $5.96 per share.  The Company has funded the repurchases
primarily through available bank credit facilities.   The timing, price,
quantity and manner of future  purchases will be made  at the discretion
of management  and will  depend  upon market  conditions.   The  Company
intends to fund  the repurchase program  through available  credit under
its bank credit facilities and current cash flows from operations.

The special  charges recorded  in  1997 and  1995  included accruals  of
approximately $10.2  million  to  record  the  estimated  monthly  lease
payments, net  of expected  sublease receipts,  associated with  certain
restaurants which have been closed.  Cash  requirements for this accrual
were approximately $628,000 during  the thirty-nine weeks  ended October
3, 1999.    During the  thirty-nine  weeks ended  October  3, 1999,  the
Company sold properties relating  to the special charges  which resulted
in proceeds of  $1.3 million, which  approximated the carrying  value of
the  assets  sold.    In  addition,   certain  acquisition  and  accrued
liabilities related  to  the  Two  Pesos  acquisition  were  reduced  by
payments of approximately  $205,000 during  the thirty-nine  weeks ended
October 3, 1999.

The Company believes that  existing cash balances, funds  generated from
operations, its  ability  to  borrow,  and  the possible  use  of  lease
financing will be sufficient to meet  the Company's capital requirements
through 2000, including  the planned opening  of fifteen  restaurants in
2000, and the reimaging of fourteen restaurants during the first half of
the 2000  fiscal  year.    Total  capital expenditures  related  to  new
restaurants are estimated to be $19.0  to $22.0 million.   The total for
other capital  expenditures is  estimated to  be $4.0  to $6.0  million.
Total capital expenditures for 2000 are expected to approximate $23.0 to
$28.0 million.

Impact of Inflation

Although increases  in  labor,  food  or  other  operating  costs  could
adversely affect the Company's  operations, management does  not believe
that inflation  has  had  a material  adverse  effect  on the  Company's
operations to date.

Seasonality and Quarterly Results

The Company's  sales fluctuate  seasonally. Historically,  the Company's
highest sales and earnings  occur in the  second and third  quarters. In
addition, quarterly results  are affected by  the timing of  the opening
and closing of  stores. Therefore, quarterly  results cannot be  used to
indicate results for the entire year.



                                   16




Forward-Looking Statements

Statements in this quarterly report concerning Taco Cabana which are (a)
projections of  revenues,  costs, including  trends  in  cost of  sales,
operating costs,  labor and  general and  administrative costs  or other
financial items,  (b)  statements of  plans  and  objectives for  future
operations,  specifically   statements   regarding  planned   restaurant
openings and reimages as  well as share  repurchases and cash  flows (c)
statements  of  future  economic  performance,  or   (d)  statements  of
assumptions or  estimates  underlying or  supporting  the foregoing  are
forward-looking statements  within the  meaning of  Section  27A of  the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934.  The ultimate accuracy of forward-looking statements is subject to
a wide range of risks,  uncertainties and other factors  which may cause
actual  results  and   outcomes  to   differ,  often   materially,  from
expectations.   Any  number  of  important  factors could  cause  actual
results  to  differ  materially   from  those  in   the  forward-looking
statements herein, including  the following:   the timing and  extent of
changes in prices of commodities and supplies that the Company utilizes;
cost  and  availability   of  labor;  actions   of  our   customers  and
competitors; changes  in  state  and  federal  environmental,  economic,
safety and other  policies and regulations  and any legal  or regulatory
delays or  other  factors beyond  the  Company's  control; execution  of
planned capital  projects; weather  conditions  affecting the  Company's
operations; natural disasters affecting operations; and adverse rulings,
judgments, or settlements  in litigation  or other  legal matters.   The
Company disclaims any  intention or obligation  to update or  revise any
such forward-looking statements, whether as a result of new information,
future events or otherwise.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk from changes in interest rates on
debt and changes in commodity prices.

The Company's exposure to  interest rate risk currently  consists of its
notes payable and  outstanding line  of credit.   The Company  has notes
payable and a line  of credit which bear  interest at the lesser  of the
London Interbank  Offer Rate  plus  2.25% or  the  prime rate,  adjusted
quarterly.  The  aggregate balance  outstanding of  these notes  and the
line of credit as  of November 5, 1999  was $29.6 million.   The Company
also has a  note payable which  bears interest at  the prime rate.   The
outstanding balance  of  this  note as  of  November  5, 1999  was  $1.0
million. The impact  on the  Company's results of  operations of  a one-
point interest rate change  on the outstanding balances  under the notes
payable and line of credit as of November 5, 1999 would be immaterial.

The Company purchases certain commodities such  as beef, chicken, flour,
produce and dairy products.   These commodities are  generally purchased
based upon  market  prices established  with  vendors.   These  purchase
arrangements may contain contractual features that  limit the price paid
by establishing  price  floors  or  caps.   The  Company  does  not  use
financial instruments to hedge  commodity prices because  these purchase
arrangements help  control the  ultimate cost  and  any commodity  price
aberrations are generally short term in nature.


                                   17




This market risk discussion contains forward-looking statements.  Actual
results may differ  materially from this  discussion based  upon general
market conditions and changes in financial markets.

PART II

Items 1,  2, 3,  and 5  have been  omitted since  the registrant  has no
reportable events in relation to these items.

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

At the  annual meeting  of stockholders  held  on August  19, 1999,  the
Company's stockholders elected six directors.  There were no broker non-
votes. The votes were as follows:

                         For            Withheld
     Stephen V. Clark  11,404,472        111,056
     William J. Nimmo  11,402,441        113,087
     Richard Sherman   11,400,291        115,237
     Cecil Schenker    11,400,384        115,144
     Lionel Sosa       11,393,662        121,866
     Rod Sands         11,403,372        112,156

Item 6. Exhibits and Reports on Form 8-K

Exhibit 27  Financial Data Schedule. Filed with EDGAR version.

No reports on Form 8-K were filed during the period covered by this
report.



                                   18




Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


Dated: November 16, 1999      Taco Cabana, Inc.





                         /s/David G. Lloyd
                         David G. Lloyd
                         Senior Vice President, Chief Financial Officer,
                                   Secretary and Treasurer



                         Signing on behalf of the registrant and as the
                         principal financial and accounting officer
















                                   19