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 July 4, 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 August 6, 1999
              Common Stock          13,412,675 shares



                               TACO CABANA, INC.

                                     INDEX


                                                          Page
                                                         Number

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

  Condensed Consolidated Balance Sheets at July 4, 1999
    and January 3, 1999                                     2

  Condensed Consolidated Statements of Operations
    for the Thirteen Weeks Ended July 4, 1999 and
    June 28, 1998                                           3

  Condensed Consolidated Statements of Operations
    for the Twenty-Six Weeks Ended July 4, 1999 and
    June 28, 1998                                           4

  Condensed Consolidated Statements of Cash Flows
    for the Twenty-Six Weeks Ended July 4, 1999 and
    June 28, 1998                                           5

  Notes to Condensed Consolidated Financial Statements      6


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

Item 3.  Quantitative and Qualitative Disclosures
  About Market Risk                                        17

PART II.  OTHER INFORMATION

Items 1 through 5 have been omitted since the registrant has no reportable
  events in relation to the items

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

Signature                                                  19














                                       1



                               TACO CABANA, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)
                                           January 3,     July 4,
                                              1999         1999
                                           ----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................. $   719,000 $ 1,199,000
Receivables, net..........................     438,000     368,000
Inventory.................................   2,273,000   2,320,000
Prepaid expenses..........................   3,128,000   3,213,000
Federal income taxes receivable...........     200,000     200,000
                                           ----------- -----------
Total current assets......................   6,758,000   7,300,000

PROPERTY AND EQUIPMENT, net...............  72,250,000  78,490,000
NOTES RECEIVABLE..........................     258,000     291,000
INTANGIBLE ASSETS, net....................  10,724,000  10,432,000
OTHER ASSETS..............................     212,000     248,000
                                           ----------- -----------
TOTAL..................................... $90,202,000 $96,761,000
                                           =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................... $ 5,362,000 $ 4,312,000
Accrued liabilities.......................   5,265,000   6,235,000
Current maturities of long-term debt and
  capital leases..........................   5,704,000   3,946,000
Line of credit............................   3,550,000   2,320,000
                                           ----------- -----------
Total current liabilities.................  19,881,000  16,813,000

LONG-TERM OBLIGATIONS, net of current maturities:

Capital leases............................   2,140,000   2,024,000
Long-term debt............................  18,930,000  22,807,000
                                           ----------- -----------
Total long-term obligations...............  21,070,000  24,831,000

ACQUISITION AND CLOSED RESTAURANT
  LIABILITIES.............................   7,713,000   6,550,000
DEFERRED LEASE PAYMENTS...................     761,000     748,000
STOCKHOLDERS' EQUITY:
Common stock..............................     159,000     134,000
Additional paid-in capital................  98,056,000  84,607,000
Retained deficit.......................... (43,544,000)(36,922,000)
Treasury stock, at cost (2,576,937 shares
at January 3, 1999)....................... (13,894,000)          -
                                           ----------- -----------
  Total stockholders' equity..............  40,777,000  47,819,000
                                           ----------- -----------
TOTAL..................................... $90,202,000 $96,761,000
                                           =========== ===========
See Notes to Condensed Consolidated Financial Statements.


                                       2


                               TACO CABANA, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                  (UNAUDITED)


                                         For the Thirteen Weeks Ended
                                         ----------------------------
                                             June 28,     July 4,
                                               1998        1999
                                            ----------- -----------
REVENUES:
Restaurant sales..........................  $36,206,000 $41,321,000
Franchise fees and royalty income.........       86,000      96,000
                                            ----------- -----------
Total revenues............................   36,292,000  41,417,000
                                            ----------- -----------
COSTS AND EXPENSES:
Restaurant cost of sales..................   10,829,000  12,509,000
Labor.....................................    9,738,000  11,413,000
Occupancy.................................    1,958,000   2,063,000
Other restaurant operating costs..........    6,093,000   6,649,000
General and administrative................    1,954,000   1,911,000
Depreciation, amortization and restaurant
  opening costs...........................    1,974,000   2,450,000
                                            ----------- -----------
Total costs and expenses..................   32,546,000  36,995,000
                                            ----------- -----------
INCOME FROM OPERATIONS....................    3,746,000   4,422,000
                                            ----------- -----------
INTEREST EXPENSE, NET.....................     (449,000)   (565,000)
                                            ----------- -----------
INCOME BEFORE INCOME TAXES................    3,297,000   3,857,000

INCOME TAX EXPENSE........................            -           -
                                            ----------- -----------
NET INCOME................................  $ 3,297,000 $ 3,857,000
                                            =========== ===========
BASIC EARNINGS PER SHARE..................  $      0.22 $      0.29
                                            =========== ===========
BASIC WEIGHTED SHARES OUTSTANDING.........   14,768,266  13,393,833
                                            =========== ===========
DILUTED EARNINGS PER SHARE................  $      0.22  $     0.28
                                            =========== ===========
DILUTED WEIGHTED SHARES OUTSTANDING.......   15,091,502  13,804,626
                                            =========== ===========



           See Notes to Condensed Consolidated Financial Statements.









                                       3


                               TACO CABANA, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                  (UNAUDITED)


                                        For the Twenty-Six Weeks Ended
                                        ------------------------------
                                             June 28,     July 4,
                                               1998        1999
                                            ----------- ----------
REVENUES:
Restaurant sales..........................  $68,528,000 $78,158,000
Franchise fees and royalty income.........      171,000     170,000
                                            ----------- -----------
Total revenues............................   68,699,000  78,328,000
                                            ----------- -----------
COSTS AND EXPENSES:
Restaurant cost of sales..................   20,621,000  23,436,000
Labor.....................................   18,410,000  21,541,000
Occupancy.................................    3,865,000   4,073,000
Other restaurant operating costs..........   12,095,000  12,900,000
General and administrative................    3,867,000   3,961,000
Depreciation, amortization and restaurant
  opening costs...........................    3,842,000   4,679,000
                                            ----------- -----------
Total costs and expenses..................   62,700,000  70,590,000
                                            ----------- -----------
INCOME FROM OPERATIONS....................    5,999,000   7,738,000
                                            ----------- -----------
INTEREST EXPENSE, NET.....................     (845,000) (1,116,000)
                                            ----------- -----------
INCOME BEFORE INCOME TAXES................    5,154,000   6,622,000

INCOME TAX EXPENSE........................            -           -
                                            ----------- -----------
NET INCOME................................  $ 5,154,000 $ 6,622,000
                                            =========== ===========
BASIC EARNINGS PER SHARE..................  $      0.35 $      0.50
                                            =========== ===========
BASIC WEIGHTED SHARES OUTSTANDING.........   14,797,202  13,372,337
                                            =========== ===========
DILUTED EARNINGS PER SHARE................  $      0.34 $      0.48
                                            =========== ===========
DILUTED WEIGHTED SHARES OUTSTANDING.......   15,069,175  13,759,132
                                            =========== ===========



           See Notes to Condensed Consolidated Financial Statements.









                                       4


                               TACO CABANA, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (UNAUDITED)

                                        For the Twenty-Six Weeks Ended
                                        ------------------------------
                                              June 28,     July 4,
                                                1998         1999
                                            ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................  $ 5,154,000 $ 6,622,000
Adjustments to reconcile net income to net
  cash provided by operating activities:
    Depreciation and amortization.........    3,445,000   4,235,000
    Capitalized interest..................      (77,000)    (85,000)
    Changes in operating working
    capital items.........................   (1,692,000) (1,007,000)
                                            ----------- -----------
Net cash provided by operating activities.    6,830,000   9,765,000
                                            ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........  (12,209,000)(10,937,000)
Proceeds from the sale of property
  and equipment...........................    1,955,000     459,000
                                            ----------- -----------
Net cash used for investing activities....  (10,254,000)(10,478,000)
                                            ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable
  and draws on line of credit.............    6,685,000   8,404,000
Principal payments under long-term debt and
  line of credit..........................   (1,378,000) (7,528,000)
Principal payments under capital leases...      (92,000)   (103,000)
Purchase of treasury stock................   (1,653,000)          -
Exercise of stock options.................      208,000     420,000
                                            ----------- -----------
Net cash provided by financing activities.    3,770,000   1,193,000
                                            ----------- -----------
NET INCREASE IN CASH......................      346,000     480,000

CASH AND CASH EQUIVALENTS,
  beginning of period.....................      339,000     719,000
                                            ----------- -----------
CASH AND CASH EQUIVALENTS, end of period..  $   685,000 $ 1,199,000
                                            =========== ===========



           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. Since  the
inception of the stock purchase program, the Company has repurchased a  total
of 2,585,000 shares at an aggregate  cost of $13.9 million. During the  first
quarter of  1999,  the Company  retired  all of  the  common shares  held  in
treasury. The cost of the reacquired shares  in excess of par value has  been
charged to additional paid in capital. 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         26 Weeks Ended
                             ----------------------- ------------------------
                                June 28,  July 4,      June 28,     July 4,
                                 1998      1999          1998      1999

Numerator for basic and diluted earnings
per share - net income.....   $3,297,000  $3,857,000  $5,154,000   $6,622,000

Denominator:
  Denominator for basic earnings per share:
    Weighted-average shares   14,768,266  13,393,833  14,797,202   13,372,337

  Effect of dilutive securities:
    Employee stock options.      323,236     410,793     271,973      386,795
                              ----------  ----------  ----------   ----------
Denominator for diluted earnings per share:
  Adjusted weighted-average and assumed
  conversions..............   15,091,502  13,804,626  15,069,175   13,759,132
                              ==========  ==========  ==========   ==========

Basic earnings per share...   $     0.22  $     0.29  $     0.35   $     0.50
                              ==========  ==========  ==========   ==========
Diluted earnings per share.   $     0.22  $     0.28  $     0.34   $     0.48
                              ==========  ==========  ==========   ==========



4.   Supplemental Disclosure of Cash Flow Information


                                       Twenty-Six Weeks Ended
                                      ------------------------
                                       June 28,      July 4,
                                         1998         1999
                                      -----------  -----------
                                      (Unaudited)  (Unaudited)

    Cash paid for interest .........   $ 810,000  $ 1,097,000
    Interest capitalized on
    construction costs .............      77,000       85,000




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 August 6, 1999, the Company  had
107 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  twenty-six weeks  ended July  4, 1999,  the Company  opened six  and
closed two Company-owned restaurants.  Subsequent  to July 4, 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    26 Weeks Ended
                             ----------------  -----------------
                             June 28, July 4,  June 28,  July 4,
                               1998    1999      1998     1999
                             -------- -------  -------- --------
Operating Statement Data:
REVENUES:
  Restaurant sales.........    99.8%    99.8%     99.8%    99.8%
  Franchise fees and
  royalty income...........     0.2      0.2       0.2      0.2
                              -----    -----     -----    -----
  Total revenues...........   100.0%   100.0%    100.0%   100.0%
                              =====    =====     =====    =====
COSTS AND EXPENSES:
  Restaurant cost of sales (1) 29.9%    30.3%     30.1%    30.0%
  Labor (1)................    26.9     27.6      26.9     27.6
  Occupancy (1)............     5.4      5.0       5.6      5.2
  Other restaurant operating
  costs (1)................    16.8     16.1      17.6     16.5
  General and administrative    5.4      4.6       5.6      5.1
  Depreciation, amortization and
    restaurant opening costs    5.4      5.9       5.6      6.0
                              -----    -----     -----    -----
INCOME FROM OPERATIONS.....    10.3     10.7       8.7      9.9

INTEREST EXPENSE, net......    (1.2)    (1.4)     (1.2)    (1.4)
                              -----    -----     -----    -----
INCOME BEFORE
  INCOME TAXES.............     9.1      9.3       7.5      8.5

INCOME TAX EXPENSE.........       -        -         -        -
                              -----    -----     -----    -----
NET INCOME.................     9.1%     9.3%      7.5%     8.5%
                              =====    =====     =====    =====
Restaurant Data:
Company-owned restaurants:
  Beginning of period......     99      103        98      102
  Opened...................      3        4         6        6
  Closed...................     (1)      (1)       (3)      (2)
                               ---      ---       ---      ---
  End of period............    101      106       101      106

Franchised (2) and joint-venture
  owned restaurants:.......     10       10        10       10
                               ---      ---       ---      ---
Total restaurants:.........    111      116       111      116
                               ===      ===       ===      ===
(1)      Percentage is calculated based upon restaurant sales.
(2)      Excludes Two Pesos licensed restaurants.







                                       9


The Thirteen Weeks Ended July 4, 1999 Compared to the Thirteen Weeks Ended June
28, 1998

Restaurant Sales.  Restaurant sales increased by $5.1 million, or 14%, to  $41.3
million for the second quarter of 1999 from $36.2 million for the second quarter
in 1998.  The increase is  due 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 4.7%.  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, a  price
increase of approximately 2%  and the continued opening  of higher than  average
volume restaurants.  Sales from restaurants opened after June 28, 1998 accounted
for an increase of $3.9 million. This  increase was offset by sales of  $765,000
from restaurants which were closed after June 28, 1998.

Restaurant Cost of Sales.  Restaurant cost of sales, calculated as a  percentage
of restaurant sales, increased to 30.3% in the second quarter of 1999 from 29.9%
for the second quarter  of 1998. The increase  was due primarily to  anticipated
seasonal changes in  the product mix.   Management expects  cost of  sales as  a
percentage of restaurant 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
27.6% during the second quarter of 1999 from 26.9% 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  percentage to  be flat  to
slightly up compared to the prior year for the remainder of 1999.

Occupancy.  Occupancy costs increased by  $105,000 during the second quarter  of
1999 compared to the second quarter of 1998.   The increase is primarily due  to
the opening  of new  restaurants during  1999.   As a  percentage of  restaurant
sales, occupancy costs decreased to 5.0% in the second quarter of 1999  compared
to 5.4% in the second quarter of 1998.  Management expects the dollar amount  to
increase in 1999 due to new openings, although it should continue to decrease as
a percentage of sales.

Other Restaurant Operating Costs.  Other restaurant operating costs increased to
$6.6 million in  the second  quarter of  1999 compared  to $6.1  million in  the
second quarter of 1998.  As a percentage of  restaurant sales, other  restaurant
operating costs decreased to  16.1% for the second  quarter of 1999 compared  to
16.8% for the second quarter of 1998.  The decrease as a percentage of sales  is
primarily due to leverage from higher 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.

General and  Administrative.    General and  administrative  expenses  decreased
$43,000 during the  second quarter  of 1999 compared  to the  second quarter  of
1998. As a percentage of sales, general and administrative expenses decreased to
4.6% for the second quarter of 1999 compared to 5.4% 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.



                                       10


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

                                       Thirteen Weeks Ended
                                     -----------------------
                                       June 28,     July 4,
                                         1998         1999
                                     ----------- ------------
                                     (Unaudited)  (Unaudited)

    Depreciation of property and
    equipment .......................$ 1,632,000  $ 2,032,000
    Amortization of intangible
    assets ..........................    146,000      147,000
    Restaurant opening costs ........    196,000      271,000


Depreciation expense increased by  $400,000 for the quarter  ended July 4,  1999
compared to  the quarter  ended June  28, 1998.   The  increase was  due to  the
addition of  new  restaurants  as well  as  continued  capital  improvements  to
existing restaurants.   Restaurants opened after  March 29,  1998 accounted  for
$182,000 of the increase.  Restaurant opening costs increased by $75,000  during
the second quarter of 1999 compared to the same period in 1998, primarily due to
the opening of four Company owned restaurants during the second quarter of  1999
compared to three openings during second quarter 1998.

Interest Expense,  net.    Interest expense,  net  of  interest  capitalized  on
construction costs, increased  to $565,000 in  the second quarter  of 1999  from
$449,000 in the  second quarter  of 1998, primarily  as a  result of  additional
borrowings under the Company's debt facilities.  The Company capitalized $23,000
of interest related to  new restaurant construction in  the most recent  quarter
compared to $25,000 during the second quarter of 1998.

Income Taxes.  Income tax expense  was zero for the  second 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 $3.9 million for the
second quarter of  1999 from  $3.3 million for  the same  period in  1998.   Net
income was 9.3% of  total revenues for  the second quarter  in 1999 compared  to
9.1% in the second quarter of  1998.  Diluted earnings  per share was $0.28  for
the second quarter of 1999 compared  to $0.22 in the same  period of 1998.   The
increase in earnings per share during the second quarter of fiscal 1999 compared
to the same quarter last  year is 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.

The Twenty-Six Weeks Ended July 4,  1999 Compared to the Twenty-Six Weeks  Ended
June 28, 1998

Restaurant Sales.  Restaurant sales increased by $9.6 million, or 14%, to  $78.2
million for the twenty-six weeks ended July  4, 1999 from $68.5 million for  the
comparable period in  1998.   The increase is  due 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  5.5%. 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, a price increase of approximately 2% and the continued  opening
of higher than average volume restaurants.  Sales from restaurants opened  after
June 28,  1998 accounted  for an  increase of  $5.5 million.  This increase  was

                                       11


offset by sales from restaurants which were  closed after June 28, 1998 of  $1.4
million.

Restaurant Cost of Sales.  Restaurant cost of sales, calculated as a  percentage
of restaurant sales, decreased to 30.0%  during the twenty-six weeks ended  July
4, 1999 from 30.1% for same  period in 1998. The  decrease was due primarily  to
continued improvements  in  the  management  of  food  costs  through  utilizing
increased controls  and  improved  purchasing programs,  offset  by  anticipated
seasonal changes in  the product mix.   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
27.6% for the  twenty-six weeks  ended July 4,  1999   from 26.9%  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
percentage to be flat to slightly up for the remainder of 1999.

Occupancy.  Occupancy costs  increased by $208,000  during the twenty-six  weeks
ended July  4, 1999  compared to  the same  period  in 1998.   The  increase  is
primarily due to the opening of  new restaurants. As a percentage of  restaurant
sales, occupancy costs decreased to 5.2% for the twenty-six weeks ended July  4,
1999 compared to 5.6% for the same period in 1998. Management expects the dollar
amount to  increase  due to  new  openings but  to  continue to  decrease  as  a
percentage of sales.

Other Restaurant Operating Costs.  Other restaurant operating costs increased to
$12.9 million  in the  twenty-six weeks  ended July  4, 1999  compared to  $12.1
million in the same period of 1998.  As a percentage of restaurant sales,  other
restaurant operating costs  decreased to 16.5%  for the  twenty-six weeks  ended
July 4, 1999 compared to 17.6% for the same period  in 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.

General and Administrative.   General and  administrative expenses increased  to
$4.0 million for the twenty-six  weeks ended July 4,  1999 from $3.9 million  in
the  comparable  period  of  1998.  As  a  percentage  of  sales,  general   and
administrative expenses decreased to 5.1% for the twenty-six weeks ended July 4,
1999 compared to  5.6% for the  same period in  1998.   Management expects  this
amount to  continue  to decrease,  as  a  percentage of  sales,  throughout  the
remainder of 1999.














                                       12


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

                                      Twenty-Six Weeks Ended
                                     ------------------------
                                       June 28,     July 4,
                                         1998         1999
                                     ----------- ------------
                                     (Unaudited)  (Unaudited)

    Depreciation of property and
    equipment .......................$ 3,163,000  $ 3,943,000
    Amortization of intangible
    assets ..........................    283,000      293,000
    Restaurant opening costs ........    396,000      443,000


Depreciation expense increased by $780,000 for  the twenty-six weeks ended  July
4, 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
$357,000 of the increase.

Interest Expense,  net.    Interest expense,  net  of  interest  capitalized  on
construction costs, increased to $1.1 million during the twenty-six weeks  ended
July 4, 1999 from $845,000 in the same period of 1998, primarily as a result  of
additional borrowings  under the  Company's debt  facilities. In  addition,  the
Company capitalized $85,000 of interest  related to new restaurant  construction
during the twenty-six weeks  ended July 4, 1999  compared to $77,000 during  the
same period in 1998.

Income Taxes.  Income tax expense was  zero for the twenty-six weeks ended  July
4, 1999 and for  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 $6.6 million for the
twenty-six weeks ended July  4, 1999 from  $5.2 million for  the same period  in
1998.  Net income was 8.5% of total revenues for the twenty-six weeks ended July
4, 1999 compared to 7.5% in the same period of 1998.  Diluted earnings per share
was $0.48 for the twenty-six weeks ended July  4, 1999 compared to $0.34 in  the
same period of 1998.  The increase  in earnings per share during the  twenty-six
weeks ended July 4, 1999 compared to the same period last year is 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.

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.






                                       13


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 August 3, 1999, the Company has substantially completed the remediation of
the identified  systems  and  expects to  complete  software  reprogramming  and
replacement no later than October  1, 1999.  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  has
been completed and  letters have  been mailed  requesting information  regarding
each parties'  Year  2000  compliance  status.  Additionally,  the  Company  has
identified and met with key suppliers and distributors and discussed their  Year
2000 readiness.  The Company is currently developing contingency plans for third
party business partners that  appear to have  substantial Year 2000  operational
risks, which may include the change of some suppliers to minimize such risks.

Costs.  The Company will use 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.







                                       14


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 August  6,  1999, the  aggregate  outstanding
balance under these commitments was $27.1 million.

Net cash provided by  operating activities was $9.8  million for the  twenty-six
weeks ended July 4, 1999, and $6.8  million for the twenty-six weeks ended  June
28, 1998.

Net cash used in investing activities was $10.5 million for the twenty-six weeks
ended July 4, 1999 representing primarily capital expenditures of $10.9  million
for  the  construction   of  new  restaurants   and  improvements  to   existing
restaurants.   This was  offset by  the sale  of assets  generating $459,000  in
proceeds.   This  compares  to $10.3  million  in  net cash  used  in  investing
activities for the twenty-six weeks ended June 28, 1998, representing  primarily
capital expenditures for the construction of new restaurants and improvements to
existing restaurants, offset by  the sale of assets  generating $2.0 million  in
proceeds.

Net cash provided by  financing activities was $1.2  million for the  twenty-six
weeks ended July  4, 1999 representing  primarily net draws  from the  Company's
debt facilities.    This  compares to  $3.8  million  in net  cash  provided  by
financing activities for the twenty-six weeks  ended June 28, 1998  representing
primarily net draws on the Company's debt facilities, offset by the purchase  of
$1.7 million in treasury stock.












                                       15


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  $398,000  during  the
twenty-six weeks ended July 4, 1999.  During the twenty-six weeks ended July  4,
1999, the  Company sold  one  property relating  to  the special  charges  which
resulted in proceeds  of $459,000, and  approximated the carrying  value of  the
assets sold.   The Company currently  has two closed  restaurant properties  for
sale which  were covered  by the  special charges.   Although  there can  be  no
assurance of  the particular  price at  which such  property will  be sold,  the
Company expects to receive  funds equal to  or in excess  of the carrying  value
upon the actual disposition of the  property.  In addition, certain  acquisition
and accrued liabilities  related to the  Two Pesos acquisition  were reduced  by
payments of approximately  $139,000 during the  twenty-six weeks  ended July  4,
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 1999  including
the planned  opening of  ten restaurants,  seven of  which have  been opened  at
August 6, 1999,  and the  reimaging of  30 restaurants,  21 of  which have  been
reimaged to date.   Total capital  expenditures related to  new restaurants  are
estimated  to  be  $12.0  to  $15.0  million.    The  total  for  other  capital
expenditures, including the cost of the  reimagings, is estimated to be $6.0  to
$8.0 million.  Total capital expenditures  for 1999 are expected to  approximate
$18.0 to $23.0 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, 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  business
risks and changes in circumstances, and actual results and outcomes will 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;  actions of  our
customers and competitors; state and federal environmental, economic, safety and
other policies and regulations, any changes therein, 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 undertakes no obligation  to
publicly release  the  result  of any  revisions  to  any  such  forward-looking
statements that may be  made to reflect events  or circumstances after the  date
hereof or to reflect the occurrence of unanticipated events.

           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.   The aggregate balance outstanding of  these
notes and the  line of  credit as  of August  6, 1999  was $27.1  million.   The
Company also has a  note payable which bears  interest at the  prime rate.   The
outstanding balance of  this note as  of August 6,  1999 was  $1.1 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 August 6, 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.

                        EXHIBITS AND REPORTS ON FORM 8-K

The Company has filed the following exhibits with the report:

     27.  Financial Data Schedule

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: August 18, 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