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

                                FORM 10-K

  |X| Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934

            For the fiscal year ended December 31, 1998, or

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

      For the transition period from _______________ to _______________

                         Commission File No. 1-9510

                              FFP PARTNERS, L.P.
          (Exact name of registrant as specified in its charter)

            Delaware                                75-2147570
 (State or other jurisdiction of                 (I.R.S. employer
 incorporation or organization)               identification number)

               2801 Glenda Avenue; Fort Worth, Texas 76117-4391
       (Address of principal executive office, including zip code)

                               817/838-4700
           (Registrant's telephone number, including area code)


   Securities registered pursuant to            Section 12(b) of the Act
        Title of Each Class           Name of Each Exchange on Which Registered

          Class A Units of                   American Stock Exchange
   Limited Partnership Interests

        Unit Purchase Rights                 American Stock Exchange

   Securities registered pursuant to Section 12(g) of the Act
                                    None

   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 by check mark if disclosure of  delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

   The  aggregate  market value of Class A Units held by  non-affiliates  of the
registrant at March 31, 1999, was $2,222,000.  For purposes of this computation,
all officers,  directors,  and  beneficial  owners of 10% or more of the Class A
Units of the registrant are deemed to be affiliates.  Such determination  should
not be deemed an admission that such officers,  directors, and beneficial owners
are affiliates.

                         Class A Units 2,234,262
          (Number of units outstanding as of March 31, 1999)


<PAGE>
                                  Index

                                                                Page
Part I
   Item 1.  Business                                               1
   Item 2.  Properties                                             6
   Item 3.  Legal Proceedings                                      7
   Item 4.  Submission of Matters to a Vote of Security Holders    7

Part II
   Item 5.  Market for the Registrant's Units and Related
              Security Holder Matters                              8
   Item 6.  Selected Financial and Operating Data                 10
   Item 7.  Management's Discussion and Analysis of Financial
              Condition and Results of Operations                 10
   Item 7A. Quantitative and Qualitative Disclosures About
              Market Risk                                         15
   Item 8.  Financial Statements and Supplementary Data           15
   Item 9.  Changes in and Disagreements with Accountants on
              Accounting and Financial Disclosure                 15

Part III
   Item 10. Directors and Executive Officers of the Registrant    16
   Item 11. Executive Compensation                                19
   Item 12. Security Ownership of Certain Beneficial Owners
              and Management                                      20
   Item 13. Certain Relationships and Related Transactions        21

Part IV
   Item 14. Exhibits, Financial Statements, Schedules and
              Reports on Form 8-K                                 23
Signatures                                                        25


<PAGE>
                                  PART I

Item 1.  Business

General Background

   FFP Partners,  L.P. (the "Company") is a Delaware limited  partnership  whose
sole general  partner is FFP Real Estate Trust,  a Texas real estate  investment
trust, and whose Class A Units of limited partnership interest ("Limited Partner
Units") are listed for trading on the American  Stock Exchange  (trading  symbol
"FFP").  {See Item 5. Market for the  Registrant's  Units and  Related  Security
Holder Matters.}

   The Company was formed in December 1986, pursuant to the Agreement of Limited
Partnership of FFP Partners,  L.P. (the "Partnership  Agreement").  FFP Partners
Management  Company,  Inc.  ("FFPMC")  served as the sole general partner of the
Company from its formation until the Company was  restructured in December 1997.
Since then, FFP Real Estate Trust has served as the Company's  general  partner.
In May 1987, the Company purchased convenience stores, truck stops, other retail
motor fuel  outlets,  and ancillary  businesses  from  affiliates of FFPMC.  The
purchase of these  outlets  was  completed  in  conjunction  with the  Company's
initial public offering of Limited Partner Units.  The senior  executives of the
Company had owned and managed these operations prior to their acquisition by the
Company, and, through its subsidiaries, the Company owned and operated them, and
other businesses, until December 1997.

   On December 28, 1997, the Company completed a restructuring by which the real
estate used in the aforementioned  retail operations was retained by the Company
while its convenience  store,  truck stop, other retail motor fuel outlets,  and
other  businesses  were  transferred  to  FFP  Marketing  Company,   Inc.  ("FFP
Marketing"),  in exchange for all the common stock of FFP Marketing.  The common
stock of FFP Marketing was then  distributed to the partners of the Company such
that the limited  partners  received  one share of common stock for each Limited
Partner Unit and the general partner  received common stock in proportion to its
former ownership persentage.

   The real estate  retained by the Company in the December  1997  restructuring
was contributed at that time to FFP Properties, L.P. ("FFP Properties"), a newly
formed  Texas  limited  partnership,  in exchange  for the  general  partnership
interest in FFP Properties.  As a result,  the Company now serves as the general
partner, and owns 60%, of FFP Properties.  The limited partnership  interests in
the Company that were held by John H. Harvison, the Chairman and Chief Executive
Officer of FFPMC, members of his family, and corporations, partnerships, trusts,
and  other  business  entities   affiliated  with  him  or  his  family  members
(collectively, the "Harvison Family") were exchanged for economically equivalent
limited  partnership  interests  in FFP  Properties.  As a result,  the Harvison
Family owns a 40% limited partnership  interest in FFP Properties.  In addition,
FFP Real Estate Trust, a newly formed Texas real estate investment trust that is
wholly owned by FFPMC, became the general partner of the Company on December 28,
1997.

   By virtue of the 1997  restructuring,  all of the Company's  non-real  estate
operating activities were transferred to FFP Marketing,  and the business of the
Company now solely consists of the ownership and rental of real estate.

   Unless the  context  requires  otherwise,  references  herein to the  Company
include its subsidiary, FFP Properties, and its general partner, FFP Real Estate
Trust. References to FFP Marketing include its subsidiaries.

   The Company maintains its principal  executive offices at 2801 Glenda Avenue,
Fort Worth,  Texas  76117-4391;  its  telephone  number is (817)  838-4700.  The
Company's Internet web site address is http://www.ffplp.com.

Business Strategy

   The Company intends to pursue the following business strategy:

      1.    own its current portfolio of improved real properties,

      2.    collect rental income from those properties,

      3.    build  equity  in  the properties through debt retirement and 
            possible appreciation,

      4.    refinance its current long-term debt to affiliate with longer term
            fixed rate financing with a third party, and,

      5.    where acceptable deal terms, occupancy and financing are available,
            expand its real estate holdings through the acquisition of other
            real estate properties.

   Such  additional  properties  will most likely include retail sites leased to
FFP Marketing for convenience stores, truck stops,  fast-food  restaurants,  and
other retail outlets.  Any additional real estate acquired by the Company may be
used for other purposes and may be leased to other tenants. Although the Company
will consider  investments in any type of real estate,  it is  anticipated  that
most initial  investments  will be in convenience  store locations since most of
the Company's  contacts are in that  industry,  and the Company  believes it has
considerable  knowledge of the economics of those operations.  In addition,  the
Company  expects that most real estate  acquired will be in smaller  communities
and towns. The Company believes that the larger real estate owners and financing
for pad retail sites and other real estate  concentrate  on larger  metropolitan
areas.  Consequently,  the  Company  believes  it can  obtain  better  yields on
investments in smaller towns since there is less  competition from other sources
of financing.

   The Company  may or may not pursue  conversion  to a real  estate  investment
trust for federal  income tax purposes.  There is no assurance  that the Company
will decide to convert into a real estate investment  trust.  Under two possible
scenarios,  if a conversion  occurs  through either a "merger" or an "exchange",
the Company's unitholders would receive shares of FFP Real Estate Trust in place
of their limited partnership units of the Company, and the FFP Real Estate Trust
shares would be listed on a securities exchange.

   The  Company  has not yet  made a  decision  to seek a tax  ruling  from  the
Internal Revenue Service ("IRS") regarding a conversion.  If the Company decides
to pursue a  conversion  and obtains a favorable  tax ruling from the IRS that a
merger of the Company and its general partner,  FFP Real Estate Trust,  would be
tax-free to the Company's  unitholders,  then the merger  alternative would most
likely be used. Under the merger  alternative,  the Company would be merged into
its general  partner,  FFP Real Estate  Trust,  with the  Company's  unitholders
receiving  shares or units of FFP Real Estate  Trust in exchange for their units
of the Company.

   If the  Company  decides  to  pursue a  conversion  but is unable to obtain a
favorable ruling from the IRS on the merger  alternative,  then it could convert
to a real estate  investment  trust under the  exchange  alternative.  Under the
exchange  alternative,  the  Company's  unitholders  would  be  prohibited  from
transferring  their  units to a third  party  but would be able to  require  the
Company's  general  partner to redeem  their units either for shares of FFP Real
Estate Trust or for cash. FFP Real Estate Trust, not the Company's  unitholders,
would determine  whether to redeem the Company's units for shares or cash. It is
expected that such a redemption would be made in exchange for shares or units of
FFP Real Estate Trust.

   The Company has no present  intention to seek a revenue  ruling from the IRS.
If one is  sought,  there  can be no  assurance  whether  or when the IRS  would
respond favorably to the request.

Competition

   Numerous  entities  and  individuals,  many of which have  greater  financial
resources  than the Company,  compete with the Company in acquiring  real estate
for convenience stores, truck stops, and other retail activities. These entities
may be able to  accept  more or  less  risk  than  the  Company  is  willing  to
undertake.  Competition  will affect the bargaining power of property owners who
sell,  buy or  lease  their  properties,  may  reduce  the  number  of  suitable
investment  opportunities  available to the Company,  and may decrease the yield
achievable on any real estate owned or purchased by the Company.

Employees

   Through 1998 and at March 31, 1999, FFP Real Estate Trust, general partner of
the Company,  had two executive  officers,  both of whom hold similar  positions
with FFP  Marketing.  FFP Real  Estate  Trust has entered  into a  reimbursement
agreement with FFP Marketing pursuant to which the Company pays FFP Marketing an
annual lump sum of $200,000 for administrative and other indirect costs provided
to the Company  and  reimburses  FFP  Marketing  for all of direct  costs of the
Company. Neither FFP Real Estate Trust nor the Company have any other employees.

Government Regulation -- Environmental Regulation

   Substantially  all the  properties  leased by the  Company  to FFP  Marketing
contain underground  storage tanks used for motor fuel storage.  The underground
storage tanks are owned and operated by FFP Marketing,  which is responsible for
compliance with all  environmental  laws,  rules and regulations  regarding such
tanks.  If for any  reason  FFP  Marketing  is unable or  unwilling  to take all
actions that may be required under current or future  environmental  laws, rules
or regulations  regarding  underground  storage tanks or other  activities,  the
Company could be required to take such actions and be responsible for violations
of such environmental laws, rules or regulations.

   The Company may acquire  additional  properties  that will also be subject to
environmental  regulations,  either  because they will also contain  underground
storage tanks or for other  reasons.  The Company  intends to structure  similar
leases  with  the  operators  of such  properties  so that the  lessees  will be
responsible for compliance with such environmental regulations.

Federal Income Tax Law

   As a publicly  traded  partnership,  the Company pays no federal  income tax.
Rather,  the income or loss of the Company is  allocated  to its  partners to be
included in their respective tax returns,  subject to special rules for publicly
traded  partnerships.  Investors  should note that (i) the passive loss rules of
the  Internal  Revenue  Code  are  applied  separately  with  respect  to  items
attributable  to each  publicly  traded  partnership,  and (ii) net income  from
publicly traded partnerships is not treated as passive income.

   If in the future  the  Company  becomes a real  estate  investment  trust for
federal income tax purpose {see Business Strategy},  its earnings will no longer
be  allocated  to its  partners,  but it will not,  as an entity,  generally  be
subject to federal  income  tax.  However,  it will be  required  to comply with
various complex requirements which limit the nature of its assets and sources of
its income.  In  addition,  it will be required  to  distribute  annually to its
shareholders  at least 95% of its real estate  investment  trust taxable income.
Differences in timing  between the actual receipt of income,  the actual payment
of deductible  expenses in arriving at taxable income, the creation of reserves,
and required  debt  amortization  payments  could  require the Company to borrow
funds to meet the 95% distribution  requirement even if management believed that
the then prevailing  market conditions were not favorable for such borrowings or
that  the   borrowings   were  not   advisable   in  the  absence  of  such  tax
considerations.

Forward-Looking Statements

   This annual report on Form 10-K contains certain "forward-looking" statements
as such term is defined in the U.S. Private Securities  Litigation Reform Act of
1995, and  information  relating to the Company and its subsidiary that is based
on the beliefs of management and assumptions  made by and information  currently
available to management. The Company is relying upon the "safe harbor" contained
in Section 27A of such act in making such forward-looking statements. Certain of
the statements made in this report are forward-looking statements that involve a
number  of  risks  and  uncertainties.   Statements  that  should  generally  be
considered  forward-looking  include, but are not limited to, those that contain
the words "estimate,"  "anticipate," "in the opinion of management," "believes,"
and  similar  phrases.  Although  the  Company  believes  that the  expectations
reflected  in  such   forward-looking   statements  are  based  upon  reasonable
assumptions, the Company's actual results could differ materially from those set
forth in the  forward-looking  statements.  Among the  factors  that could cause
actual results to differ  materially  from the  forward-looking  statements made
include the following: changes in real estate conditions, including rental rates
and the  construction  or availability  of competing  properties;  the financial
strength,  cash  flow,  liquidity  and other  relevant  business  aspects of FFP
Marketing,  the  primary  tenant of the  Company's  properties;  changes  in the
industries  in  which  FFP  Marketing  competes;  changes  in  general  economic
conditions;  the ability of management to identify  acquisition  and  investment
opportunities meeting the Company's investment objectives; the timely leasing of
unoccupied  properties;  timely re-leasing of currently occupied properties upon
expiration  of the  current  leases or the default of the  current  tenant;  the
Company's ability to generate funds sufficient to meet its debt service payments
and other  operating  expenses;  the  inability  of the  Company to control  the
management  and  operation  of its tenant and the  businesses  conducted  on the
Company's  properties;  financing risks,  including the availability of funds to
service or refinance  existing  debt and to finance  acquisitions  of additional
property,  changes in interest rates associated with its variable rate debt; the
possibility that the Company's  existing debt at year end 1998 (which requires a
so-called  "balloon" payment of principal in November 2000) may be refinanced at
a higher  interest rate or on other terms less  favorable to the Company than at
present;  the  existence of complex tax  regulations  relating to the  Company's
status as a  publicly-traded  real estate  partnership and, if achieved,  to its
status as a real estate  investment  trust and the adverse  consequences  of the
failure to qualify as such;  and other risks  detailed  from time to time in the
Company's  filings  with the  Securities  and Exchange  Commission.  Given these
uncertainties,  readers  are  cautioned  not  to  place  undue  reliance  on the
forward-looking  statements.  The Company  undertakes  no obligation to publicly
release the results of any revisions to these  forward-looking  statements  that
may be made to reflect any future events or circumstances.

   Should one or more of these risks or uncertainties materialize, or should any
underlying  assumptions  prove  incorrect,  actual  results or outcomes may vary
materially from those  described  herein as  anticipated,  believed,  estimated,
expected, or intended.



Item 2. Properties.

   The Company owns  approximately  208 parcels of improved  real estate.  Those
properties  include the ownership of 78 parcels of land with  buildings  located
thereon and 105 parcels  with  buildings  only  located on land that is owned by
affiliates of FFP Marketing or the Harvison Family. Other properties included in
the total are  insignificant.  The Company's  real  properties  are  principally
located in small cities and towns. The table below shows the states in which the
Company's  properties are located and the uses of those  properties at March 31,
1999:

                                                     Vacant
                Convenience    Gasoline     Truck     and
                   Stores       Outlets     Stops    Other      Total

Texas                 76          63          6       12         157
Oklahoma               0           4          0        0           4
Louisiana             14           3          0        0          17
Missouri               9           1          0        5          15
Illinois               0           0          0        1           1
Mississippi            5           1          0        1           7
Kentucky               1           0          1        0           2
New Mexico             0           0          2        1           3
Tennessee              1           1          0        0           2
Totals               106          73          9       20         208

   Substantially  all of the real  property  owned by the  Company is  currently
leased to FFP  Marketing  under long term "triple net" leases and is used by FFP
Marketing in the operation of  convenience  stores and truck stops.  Under these
"triple  net" leases,  the tenant (FFP  Marketing),  and not the  landlord  (the
Company),  pays all real estate taxes,  insurance  and  operating  costs for the
properties.

   The Company's  leases to FFP Marketing  covering the 78 properties  where the
Company owns both the land and building  generally  expire in December 2002 plus
two  five-year  renewal  periods at the sole option of FFP  Marketing.  If these
leases are renewed in 2002 and 2007, which is expected,  the rent payable to the
Company will be adjusted by the change in the consumer  price index from January
1, 1998,  to the date of each such renewal.  The Company's  ownership in the 105
buildings  leased to FFP  Marketing  is subject to a  preexisting  ground  lease
between FFP  Marketing,  as lessee,  and the  Harvison  Family,  as lessor.  The
Company's ownership interest in these buildings terminates concurrently with the
end of the  underlying  ground  lease  (generally,  May 2007) and will  continue
beyond that date if the  underlying  ground lease is renewed.  The lessors under
the ground  leases  have  indicated  to the  Company  that they do not intend to
extend the ground leases past the lease termination date in 2007.

   The Company's rental rates for all of the real estate leased to FFP Marketing
were  determined by the Company based on its knowledge of the properties and the
general  experience of its management in acting as lessor and lessee for similar
properties.  The Company believes that the rental rates paid by FFP Marketing to
the Company are a fair rental value.  Neither the Company nor FFP Marketing have
engaged a third party advisor or referred to any third party surveys or analyses
of rental rates in making this determination.


Item 3.  Legal Proceedings.

   None.


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

   None.

<PAGE>

                                     PART II


Item 5.  Market for the Registrant's Units and Related Security Holder Matters.

   The  Limited  Partner  Units are listed for  trading  on the  American  Stock
Exchange  (trading  symbol "FFP").  At April 5, 1999,  there were 152 holders of
record of the Limited  Partner  Units,  and the last reported sales price of the
Units was $1.00 per Unit. {See Item 12. Security Ownership of Certain Beneficial
Owners and Management.}

   The following table sets forth the range of high and low sales prices for the
Limited Partner Units as reported on the American Stock Exchange for the periods
indicated:

                                      High          Low
                                           Dollars
1999
First Quarter                         1-1/4         5/8

1998
First Quarter                         3-5/8         5/8
Second Quarter                        1-5/8       1-1/4
Third Quarter                         1-1/2         3/4
Fourth Quarter                            1         1/2

1997
First Quarter                         5-13/16     4-1/4
Second Quarter                        5-1/8       3-9/16
Third Quarter                         4-15/16     3-3/8
Fourth Quarter                        4-1/4       3-1/16

   The  price  of the  Limited  Partner  Units in 1998  and  1999  reflects  the
restructuring  of the Company on December  28, 1997,  discussed  earlier in this
report,  and the  related  change at that  time in the  Company's  business  and
distribution  of FFP Marketing  common stock to the Company's  unitholders as of
that date.

   No distributions were made to partners in 1998 or 1997. The Board of Trustees
of FFP  Real  Estate  Trust,  the  general  partner  of  the  Company,  has  not
established a  distribution  policy,  and management  does not  anticipate  that
distributions  will be paid in the foreseeable  future unless the Company's long
term debt is  refinanced  in a manner that causes the Company to incur  positive
cash  flow in excess of its debt  service  payments.  Although  the  Company  is
presently pursuing long term refinancing of its long term debt, no assurance can
be  given  that  such  refinancing  will be  obtained,  that  the  terms of that
refinancing  would  allow the  payment of a  distribution,  or that the Board of
Trustees  will decide to make a  distribution.  The amount of any  distributions
that the Company may pay is subject to limitations in its loan  agreements  with
its lender,  which generally prohibits the payment of distributions in an amount
which would cause the Company to be unable to meet its  financial  covenants  to
such lender.  Distributions  in the future will be dependent  upon the Company's
earnings and cash flow, expenditures to acquire additional real estate, and debt
service  requirements.  {See Item 7.  Management's  Discussion  and  Analysis of
Financial Condition and Results of Operations, Liquidity and Capital Resources.}

   In 1989, the Company entered into a Rights  Agreement and distributed  Rights
to purchase Limited Partner Units under certain  circumstances to the holders of
its Limited Partner Units ("Unitholders").  Initially,  the Rights were attached
to all Unit Certificates  representing  Units then outstanding,  and no separate
Rights  Certificates  were distributed.  Under the Rights Agreement,  the Rights
were  to  separate  from  the  Limited  Partner  Units  and  be  distributed  to
Unitholders  if any  public  announcement  was made  that a  person  or group of
affiliated  or  associated  persons (an  "Acquiring  Person") had  acquired,  or
obtained  a right to  acquire,  beneficial  ownership  of 20% or more of Limited
Partner Units. In August 1994, a group of Unitholders announced that they had an
informal understanding that they would vote their Limited Partner Units together
as a block.  The agreement  related to Limited  Partner  units that  constituted
approximately 25% of the Limited Partner Units then outstanding.  Therefore, the
Rights became  exercisable  on October 7, 1994, the record date for the issuance
of the Rights Certificates (the "Distribution Date").

   The Rights currently  represent the right to purchase a Rights Unit (which is
substantially equivalent to a Class A Unit) of the Company at a price of $20 per
Unit.  However, if any person acquires 30% or more of the Limited Partner Units,
then each holder of a Right, other than an Acquiring Person, will have the right
to receive,  upon  exercise,  Rights Units (or in certain  circumstances,  other
property)  having a value of $40 per Unit.  The Rights will expire on August 13,
1999, and do not have any voting rights or rights to cash distributions.

   In the December 1997 restructuring,  the Partnership's  partnership agreement
was  amended to  prohibit  any person  from owning more than 4.9% of the Limited
Partner Units. The amended agreement provides that any transfer  thereafter that
would result in a person owning more than this amount will be null and void, and
the units that were to be  transferred  will become  "Excess  Units," which will
have no voting or distribution rights and will be held in escrow by the Company.
<PAGE>

Item 6.  Selected Financial and Operating Data.

                                               1998        1997
                                                (In thousands)

Total rental revenues                        $2,660          $0

Depreciation and amortization                 1,203           0
Interest expense                              1,336           0
Net loss                                       (179)          0
Net loss per share                            (0.08)       0.00

Long-term debt reduction                      1,292           0

Real property                               $27,258     $27,517
Accumulated depreciation                    (10,574)     (9,374)
Real property, net                          $16,684     $18,143

Current installments of long-term debt       $1,291      $1,208
Accrued expenses                                 39           0
Long-term debt, excluding current 
  installments                               13,355      14,730
Total debt                                  $14,685     $15,938



Item 7.  Management's Discussion and Analysis of Financial Condition and 
         Results of Operations.

General

   This discussion should be read in conjunction with the selected financial and
operating data, the description of the Company's  business  operations,  and the
financial  statements and related notes and schedules included elsewhere in this
Annual Report on Form 10-K. {See Item 1. Business - Forward-Looking Statements.}

   The primary  tenant of the  Company's  properties is FFP  Marketing,  and the
business and affairs of the Company are managed by individuals  who are employed
by FFP Marketing.  This discussion should be read in conjunction with the Annual
Report on Form 10-K of FFP  Marketing  for its fiscal  year ended  December  27,
1998.  The failure for any reason by FFP Marketing to pay rent to the Company is
a material risk factor regarding an investment in the Limited Partner Units.

   At the  close of its  fiscal  year  1997,  the  Company  and its  assets  and
businesses were  restructured as follows:  the Company  retained all of the real
property  used in its former  retail  operations  and  entered  into  long-term,
triple-net leases of that real property with FFP Marketing, and all of its other
assets  and  businesses  were  transferred  to FFP  Marketing.  In  addition  to
retaining  the real estate  referred  to above,  the  Company  retained  certain
liabilities,  principally  bank debt and other debt  secured by the real  estate
retained by it. All other liabilities (including trade accounts payable, accrued
expenses,  money orders payable,  deferred income taxes,  and obligations  under
capital leases) were transferred to FFP Marketing.

   Accordingly,  the Company's  business  since the December 1997  restructuring
consists of the leasing and  management of its current real estate  holdings and
the possible acquisition,  leasing and management of additional real properties.
All  operations,  assets,  and  businesses  of the Company prior to 1998 are not
comparable to the  operations,  assets,  and businesses of the Company after the
December 1997 restructuring.

1998 Operations

   In 1998,  the  Company  completed  its  first  year of  operations  after the
December 1997 restructuring.  The Company incurred a net loss of $179,000. Total
revenues were  $2,730,000,  almost all of which was rental income  received from
FFP Marketing.

   Interest  expense of $1,336,000 was incurred on long-term  debt. In addition,
the Company also built equity in its real estate  properties by making principal
payments of  $1,292,000  in reduction of its long-term  debt.  Depreciation  and
amortization  expense  for  1998  was  $1,203,000.  General  and  administrative
expenses were  $451,000 in 1998,  including  the overhead  reimbursement  fee of
$200,000 paid to FFP Marketing.

   Cash flows  provided by operating  activities  of  $1,024,000  and  investing
activities of $268,000 were utilized in repaying indebtedness.

Inflation

   The  Company's  real  property  leases with FFP  Marketing  provide  that the
Company's rent income will increase every five years, assuming that those leases
are renewed at that time,  as a result of increases in the consumer  price index
during the prior five-year  period.  Otherwise,  the Company believes  inflation
will not have a material effect on operating results.

Liquidity and Capital Resources

   The Company has contracted  with FFP Marketing to provide all cash management
services  on behalf of the  Company.  Effective  June  1998,  the  Company,  FFP
Marketing  and FFP  Marketing's  primary  bank lender  reached an  agreement  to
restructure the revolving  credit  facility and term loan due to the lender.  In
connection  with the  restructuring  of the Company in December  1997,  both the
Company and FFP Marketing  retained the liability for this debt as both entities
were primary  obligors on the loans. In accordance with the June 1998 agreement,
the  lender  made a loan  to FFP  Marketing,  FFP  Marketing  made a loan to the
Company,  and the Company  repaid the balance of its debt to the lender,  all of
which  was done  effective  on June 28,  1998.  This  transaction  included  the
execution of a promissory  note by the Company  payable to FFP  Marketing in the
original  principal  amount of $14,773,000 (the then current balance on the debt
due to the  lender),  which was  recorded  by the  Company  as notes  payable to
affiliate, and the Company was released by the lender from all obligations under
the Loan and Security Agreement.  At December 31, 1998, the Company was indebted
to FFP Marketing in the amount of $14,201,000.

   The interest  rate and repayment  terms of the Company's  debt payable to FFP
Marketing  mirror the terms of FFP Marketing's  debt to its lender,  including a
maturity  date of  November  2000.  The revised  agreement  with the lender also
required that the loan be secured by real estate owned by the Company, which was
pledged to FFP Marketing and then also pledged by FFP Marketing to its lender as
additional  collateral  on its debt to the  lender.  The Company  makes  monthly
principal  payments to FFP  Marketing of $95,000  plus  accrued  interest on the
unpaid  balance at a rate equal to the bank's prime rate.  All proceeds  paid by
the  Company to FFP  Marketing  on this loan are  required  to be applied to the
balance of FFP Marketing's debt to the lender.

   The Company has other notes  payable which bear interest at 6% to 10% and are
due in monthly or annual  installments  through 2012.  Such notes are secured by
real property and had aggregate balances of $445,000 at December 31, 1998.

   In February 1999, the Company purchased 14 additional  improved real property
from a third  party on which 12  convenience  stores  and two  truck  stops  are
operational.  The Company  immediately  leased the  properties  to FFP Marketing
under 20-year leases. The Company's rental income from FFP Marketing under those
leases equals $99,000 per month and equals the Company's  monthly  principal and
interest  payments  payable  under its  acquisition  debt.  Such rent amount was
established by related parties, but management believes that such rent amount is
consistent with market rates; however, no assurance can be given to that effect.
The leases are "triple net" leases,  under which FFP  Marketing  pays all taxes,
insurance,  and  operating  costs,  and provide for an increase in rent payments
after  each  five-year  period  during  the term of the  leases  based  upon any
increase in the consumer price index.

   The Company incurred  long-term  acquisition  debt in the original  principal
amount of $9,550,000 in connection with its February 1999 acquisition. That debt
is fully amortizable over 15 years with equal, monthly payments of principal and
interest.  FFP  Marketing  also agreed to guarantee  the  Company's  acquisition
indebtedness because the amount of FFP Marketing's monthly lease payments to the
Company equals the Company's monthly debt payments.

   The Company is currently seeking funds from a third party lender to refinance
its long-term  indebtedness.  Such refinancing is expected to provide for equal,
monthly principal and interest payments over a 20-year  amortization  period. In
April 1999, the Company executed a letter of intent with a third party lender to
provide  such  financing.  However,  the Company has not yet  received a binding
commitment  to  refinance  its current  debt or to fund the  acquisition  of any
additional properties.

"Year 2000" Computer Issues

   The Year 2000 issue ("Y2K") is the result of computer software programs being
coded to use two digits rather than four to define the applicable  year. Some of
computer  programs  that have  date-sensitive  coding may recognize a date using
"00" as the year 1900 rather than the year 2000.  This  coding  could  result in
system failures or miscalculations, causing disruptions of operations.

   The  Company  relies on FFP  Marketing  for its  information  technology  and
computerization  and obtains  those,  in part, in exchange for the payment of an
annual overhead reimbursement fee. As a result, the Y2K risks of the Company are
the same as those of FFP Marketing.  The following is FFP Marketing's assessment
of its 2K status.

   FFP Marketing has  approached  the Y2K issue in phases.  A Y2K project office
manager,  together with strong support from management,  has designed a Y2K work
plan  that is  currently  being  implemented.  The Y2K work plan  includes:  (1)
identifying  and  inventorying  all Year 2000  tasks and  items;  (2)  assigning
priorities to all tasks and items; (3) remediation of information systems ("IS")
application code,  testing and  reintegration to production,  as well as testing
all replaced systems software and  non-remediated  applications;  (4) contacting
third-party  vendors to verify their compliance and perform  selected  interface
tests with major vendors;  (5) determining FFP Marketing's Y2K  responsibilities
to  its   subsidiaries  and  affiliates;   and  (6)   establishing   contingency
alternatives assuming worst-case scenarios.

   FFP  Marketing  continues  to progress  favorably  in its  completion  of the
various tasks and target dates  identified  in the Y2K work plan.  FFP Marketing
believes it has identified  and  prioritized  all major  Y2K-related  items.  In
addition, many non-IS, merchandise,  equipment, financial institution, insurance
and public utility vendors are being contacted,  inquiring as to their readiness
and the  readiness  of their  respective  vendors.  FFP  Marketing  will perform
follow-up  efforts with the above vendors as required.  Testing  compliance with
major  vendors  is  now  being  planned.  The  following  reflects  management's
assessment  of FFP  Marketing's  Y2K state of  readiness  at the end of its 1998
fiscal year:

                                           Estimated  Estimated
                                          Percentage  Completion
                                           Completed     Date
Phase
Internal   IS  and  Non-IS   systems  and
  equipment:
     Awareness                                90%      Dec 1999
     Assessment                               80%      Jun 1999
     Remediation                              60%      Sep 1999
     Testing                                  20%      Oct 1999
     Contingency planning                     20%      Sep 1999
Suppliers, customers and third  party providers:
     Awareness-identify companies             70%      May 1999
     Assessment  questionnaire completed by
           major suppliers                    30%      Aug 1999
     Assessment  review  with third party  
           providers                          30%      Aug 1999
     Review contractual commitments           10%      Jul 1999
     Risk assessment                          10%      Jun 1999
     Contingency planning                     10%      Sep 1999
     Testing as applicable                    10%      Sep 1999

   FFP  Marketing's  estimates are judgmental and subject to error.  It believes
that work should be significantly finished at the estimated completion date, but
FFP   Marketing   will  continue  to  reevaluate   awareness,   send   follow-up
questionnaires and update contingency plans as considered necessary.

   FFP  Marketing   estimates   that  the  cost  of  the  Y2K  project  will  be
approximately  $500,000 to  $750,000,  of which about  one-half  will be capital
costs.  FFP Marketing has indicated  that it does not intend to pass through any
Y2K costs to the Company. The costs incurred to date approximate $200,000,  with
the remaining cost for outside consultants,  software and hardware  applications
to be funded through  operating cash flow. This estimate  includes costs related
to the upgrade and/or  replacement of computer  software and hardware;  costs of
remediated code testing and test result  verification;  and the reintegration to
production of all remediated  applications.  In addition,  the costs include the
testing of applications and software currently  certified as Y2K compliant.  FFP
Marketing  does not  separately  track the internal  costs  incurred for the Y2K
project,  which are primarily  the related  payroll costs for the IS and various
user personnel participating in the project.

   Due to the general uncertainty inherent in the Y2K process,  primarily due to
issues  surrounding  the Y2K readiness of third-party  suppliers and vendors,  a
reasonable  worst-case  scenario is difficult  to  determine  at this time.  FFP
Marketing  does  not  anticipate  more  than  temporary   isolated   disruptions
attributed to Y2K issues to affect either FFP Marketing or its primary  vendors.
FFP  Marketing is  concentrating  on four  critical  business  areas in order to
identify,  evaluate and  determine the scenarios  requiring the  development  of
contingency plans: (1) merchandise  ordering and receipt, (2) petroleum products
ordering and receipt,  (3)  disruption  of power at retail  sites,  and (4) cash
collection and disbursement systems. To the extent vendors are unable to deliver
products  due to their own Year 2000  issues,  FFP  Marketing  believes  it will
generally have alternative  sources for comparable  products and does not expect
to experience any material business  disruptions.  Although considered unlikely,
the failure of public  utility  companies to provide  telephone  and  electrical
service  could have material  consequences.  Contingency  planning  efforts will
escalate as FFP Marketing  continues to receive and evaluate  responses from all
of its primary  merchandise  vendors and service  providers.  These  contingency
plans are scheduled to be complete by September 1999.

   The costs of the Y2K  project  and the date on which FFP  Marketing  plans to
complete the Y2K modifications  are based on management's best estimates,  which
were derived  utilizing  numerous  assumptions  of future  events  including the
continued availability of certain resources,  third-party modification plans and
other factors. As a result, there can be no assurance that these forward-looking
estimates will be achieved and the actual costs.  Vendor compliance could differ
materially from FFP Marketing's  current  expectations  and result in a material
financial risk. In addition,  while FFP Marketing is making significant  efforts
in  addressing  all  anticipated  Y2K risks  within its  control,  this event is
unprecedented.  Consequently,  there can be no assurance that the Y2K issue will
not have a  material  adverse  impact on its own or on the  Company's  operating
results and financial condition.


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

   The Company is subject to a market risk  related to variable  interest  rates
because the interest  expense on its  long-term  debt  payable to FFP  Marketing
equals the prime rate of interest, which is subject to change.


Item 8.  Financial Statements and Supplementary Data.

   The financial statements begin on page F-1.


Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure.

   Not applicable.

<PAGE>

                                PART III


Item 10.  Directors and Executive Officers of the Registrant.

General Partner

   FFP Real  Estate  Trust is a Texas real  estate  investment  trust  formed in
December 1997. To date, its only  activities have been to serve as the Company's
sole  general  partner and to manage its affairs and  business.  FFP Real Estate
Trust succeeded FFP Partners Management Company,  Inc., as the Company's general
partner in conjunction with the December 1997 restructuring of the Company.  The
holders of Limited Partner Units have no power, as limited partners,  to direct,
or participate in the control of, the business of the Company.

Management of the General Partner

   The names, ages, positions, and business experience of the executive officers
and trust  managers  of FFP Real  Estate  Trust on December  31,  1998,  were as
follows:

          Name             Age              Position

John H. Harvison           65          Chairman of the Board of Trust
                                            Managers, President, and
                                            Chief Executive Officer
Craig T. Scott             52          Vice President - Finance,
                                            General Counsel, Secretary,
                                            Treasurer and Chief Financial
                                            Officer
Robert E. Garrison, II     57          Trust Manager
  [1][2]
Joseph F. Leonardo [1]     52          Trust Manager
J. D. St.Clair             64          Trust Manager
Randall W. Harvison        41          Trust Manager

[1] Member of Audit Committee
[2] Mr.  Garrison  resigned  from the Board on February 23, 1999. No
    replacement  has yet been made.

   John H. Harvison has been Chairman of the Board of Trust Managers of FFP Real
Estate Trust since  December 1997. He was Chairman of the Board of the Company's
former general partner since the commencement of the Company's operations in May
1987. Mr. Harvison is also the Chairman of the Board and Chief Executive Officer
of FFP  Marketing,  which leases all of the real property  owned by the Company.
Mr. Harvison is a founder and an executive officer of each of the companies from
which the Company initially acquired the retail outlets that were transferred to
FFP Marketing in the December  1997  restructuring  of the Company.  He has been
active in the retail gasoline  business since 1958 and in the convenience  store
business  since  1973.  In  addition,  he  has  been  involved  in  real  estate
development,   oil  and  gas  exploration  and  production,  the  ownership  and
management of an oil refinery and other personal  investments.  In January 1995,
Mr.  Harvison  consented  to the entry of a cease and desist order by the United
States Office of Thrift Supervision that, among other things, prohibits him from
participating  in any manner in the conduct of the affairs of federally  insured
depository institutions. This Order was issued in connection with Mr. Harvison's
ownership in a federal savings bank and transactions  between him (and companies
in which he had an ownership  interest) and that  institution.  In consenting to
the issuance of the Order,  Mr.  Harvison  did not admit any of the  allegations
against him and  consented to the issuance of the Order solely to avoid the cost
and  distraction  that would be caused by  prolonged  litigation  to contest the
positions taken by the Office of Thrift Supervision.  Mr. Harvison is the father
of Randall W. Harvison, who is also a Trust Manager of the General Partner.

   Craig T. Scott has been Vice President-Finance,  General Counsel,  Secretary,
Treasurer  and Chief  Financial  Officer of FFP Real Estate Trust since  October
1998. He is employed with similar titles by FFP Marketing and its  subsidiaries.
From October 1996 until September 1998, Mr. Scott was an self-employed  attorney
engaged in the  private  practice  of law in Dallas and  McKinney,  Texas.  From
December 1991 until October 1996, he was employed by Box Energy  Corporation  as
an  attorney  and from  July  1993  until  October  1996 as its  Executive  Vice
President.  Prior to joining such company,  Mr. Scott engaged in the practice of
law for seven  years  with large law firms in Dallas,  Texas;  practiced  law in
McKinney, Texas for four years; and was the president and co-owner of an oil and
gas exploration company for two years. Mr. Scott was previously employed for six
years by Arthur Andersen & Co., an international public accounting firm. He is a
member of the State Bar of Texas,  the American  Institute  of Certified  Public
Accountants and the Texas Society of CPAs.

   Robert E.  Garrison,  II,  was a director  of the  Company's  former  general
partner from May 1987 until the December 1997  restructuring of the Company.  He
was elected to the Board of Trust  Managers of FFP Real Estate Trust in December
1997 and serves as such until his  resignation  from the Board on  February  23,
1999, due to added  responsibilities as President and Chief Executive Officer at
Pinnacle Global Group,  Inc. Mr. Garrison had been a managing partner of Harris,
Webb & Garrison,  a regional merchant and investment bank, and also Chairman and
Chief  Executive  Officer of Pinnacle  Management & Trust Co., a state chartered
independent trust company. From October 1992 through February 1994, Mr. Garrison
was Chairman of  Healthcare  Capital  Group,  Inc., a regional  investment  bank
focusing on the health care industry.  From April 1991 through October 1992, Mr.
Garrison was Chairman  and Chief  Executive  Officer of Med Center Bank & Trust,
one of the leading  independent banks in Houston,  Texas. Mr. Garrison served as
President of Iroquois Brands,  Ltd. ("IBL"), a manufacturer of material handling
and  construction  equipment,  pharmaceutical  and personal care  products,  and
operator of  convenience  stores and retail fuel  outlets in the United  Kingdom
from 1989 until  September  1990.  From 1982 through  March 1989,  Mr.  Garrison
served as  Executive  Vice  President  and  director of Lovett  Mitchell  Webb &
Garrison, Inc. ("LMW&G"),  one of the representatives of the underwriters in the
initial  public  offering  of the  Company  in May 1987,  where he  managed  the
Investment  Research and Investment  Banking Division,  and Boettcher & Company,
Inc.,  which acquired LMW&G in September  1987.  From 1971 to 1982, Mr. Garrison
was First Vice  President  and Director of  Institutional  Research at Underwood
Neuhaus & Co. From 1969 to 1971,  Mr.  Garrison  was Vice  President  of BDSI, a
venture capital subsidiary of General Electric.

   Joseph F.  Leonardo  has been a Trust  Manager of FFP Real Estate Trust since
December  1997.  Since August 1992,  Mr.  Leonardo has been  President and Chief
Executive Officer of Leonardo  Management  Corporation,  which provide strategic
planning, market positioning, and other sales and marketing consulting services.
Mr.  Leonardo  also  operates   Convenience   Directions  which  publishes  Info
Marketing,  a convenience store industry  newsletter.  Prior to forming Leonardo
Management,  Mr.  Leonardo  served in various  executive  positions with several
convenience store operators.

   J. D. St.Clair was a director of the Company's  former  general  partner from
May 1987 until the December 1997 restructuring. He has served as a Trust Manager
of FFP Real Estate Trust since December 1997. Mr. St.Clair is also a director of
FFP Marketing and has been Vice  President-Fuel  Supply and  Distribution of FFP
Marketing, and its predecessor, since May 1987. Mr. St.Clair is a founder and an
executive  officer of several of the companies from which the Company  initially
acquired  the retail  outlets  that were  transferred  to FFP  Marketing  in the
December  1997  restructuring.  He has  been  involved  in the  retail  gasoline
marketing and convenience store business since 1971. Prior to 1971, Mr. St.Clair
performed  operations  research and system analysis for Bell  Helicopter,  Inc.,
from 1967 to 1971; for the National  Aeronautics and Space  Administration  from
1962 to 1967; and Western Electric Company from 1957 to 1962.

   Randall W.  Harvison  has served as a Trust  Manager of FFP Real Estate Trust
since  December  1997. He is an attorney and has been engaged in a solo practice
in Fort Worth,  Texas, since 1994. Since 1987, Mr. Harvsion was also employed by
a  subsidiary  of FFP  Marketing  and of  various  companies  controlled  by the
Harvison  Family that are engaged in real estate  investment  and management and
other investment activities. Randall W. Harvison is the son of John H. Harvison,
the Chairman of the Board of Trust Managers.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

   Regulations issued under the Securities  Exchange Act of 1934 require certain
persons to report their holdings of the Company's  Class A to the Securities and
Exchange Commission and to the Company. To the best of the Company's  knowledge,
based upon copies of reports and other representations  provided to the Company,
all 1998 reports  required  under Section 16 of the  Securities  Exchange Act of
1934 were filed in a timely  manner  except that a report has not yet been filed
for the month of October to report the purchase of 5,000  Limited  Partner Units
by J.D. St. Clair.


Item 11.  Executive Compensation.

   Each Trust  Manager of FFP Real  Estate who is not an officer or  employee of
the FFP Real Estate  receives an annual  retainer of $4,000 plus $1,000 for each
Board  meeting,  or  committee  meeting  not  held in  conjunction  with a Board
meeting,  which he  attends  and $500 for  each  telephone  meeting  in which he
participates.  Each Trust  Manager is also  reimbursed  for expenses  related to
attendance at Board meetings.

   In addition,  non-employee  Trust Managers are generally  granted  options to
acquire 25,000 Limited  Partner Units at the fair market value of the underlying
units on the date of grant.  The  options  become  exercisable  with  respect to
one-third  of the  units  covered  thereby  on  each  of the  anniversary  dates
following  the grant and expire ten years after grant.  In the event of a change
in control of the Company, any unexercisable  portion of the options will become
immediately  exercisable.  Upon exercise, the option price may be paid, in whole
or in part, in Limited Partner Units owned by the Trust Manager.

   Trust Managers who are officers or employees of FFP Real Estate Trust receive
no additional compensation for attendance at Board or committee meetings.

   Neither the Company nor FFP Real  Estate  Trust,  the general  partner of the
Company,  paid any  salary or bonus  (cash or  non-cash)  to any person in 1998.
Accordingly, there were no "Named Executive Officers" of the Company in 1998.

   The  Company  and FFP  Marketing  are  parties to a  reimbursement  agreement
pursuant to which the Company  reimburses  FFP Marketing for all direct costs of
the  Company  (such as costs to prepare the  Company's  annual  partnership  tax
returns,  annual  audit  fees,  etc.) and an agreed  upon  lump sum  amount  for
indirect  overhead  costs  allocable  to  the  Company.  The  reimbursement  for
officers'  compensation  costs incurred by FFP Marketing in connection  with the
Company's  activities is determined by the amount of time  management  and other
personnel spend on activities of the Company compared to the amount of time they
spend on  activities  of FFP  Marketing.  Since  FFP Real  Estate  Trust's  only
activity is to serve as the general partner of the Company, all of its costs and
expenses will be borne by the Company.  The indirect cost  reimbursement paid by
the Company to FFP Marketing for 1998 was $200,000.

   Options  Exercised during Fiscal 1998 and Fiscal Year End Option Values.  All
options held by directors,  officers,  and employees to acquire  Limited Partner
Units of the Company that were  outstanding  at the  completion  of the December
1997 restructuring of the Company were divided into separate options to purchase
Limited  Partner Units of the Company and a like number of FFP Marketing  common
shares. The exercise price for the then existing options for the Company's units
was divided  between the two new options in  proportion  to the average  closing
price on the American Stock Exchange of the Company's  Limited Partner Units and
shares  of FFP  Marketing's  common  stock  during  the first  month of  trading
following completion of the restructuring.

<PAGE>
Item 12.  Security Ownership of Certain Beneficial Owners and Management.

Limited Partner Units

   The following  table sets forth as of March 31, 1999,  information  regarding
the only persons known by the Company to own, directly or indirectly,  more than
5% of its Limited Partner Units:

                                           Amount and     
                                           Nature of  
       Name and Address                    Beneficial        Percent
      of Beneficial Owner                  Ownership      of Class

Edmund & Mary Shea Real Property Trust    126,700 units      5.7%
Edmund H. Shea, Jr., Trustee              Direct
655 Brea Canyon Road     
P. O. Box 489
Walnut, California  91789-0489

   The following table sets forth as of March 31, 1999, information with respect
to the  Limited  Partner  Units  beneficially  owned by all Trust  Managers  and
executive  officers  of FFP Real  Estate  Trust  (such  information  is based on
ownership reported to the Company by such persons):

                                 Amount and Nature of         Percent
    Name of Beneficial Owner     Beneficial Ownership [1]    of Class [1]

John H. Harvison, Chairman and          40,000 [2]              1.8%
  President
Craig T. Scott, Vice President               0 [3]              0.0%
Robert E. Garrison, II, Trust Manager        0 [4]              0.0%
Joseph F. Leonardo, Trust Manager            0 [5]              0.0%
J.D. St.Clair, Trust Manager            42,400 [6]              1.9%
Randall W. Harvison, Trust Manager           0 [5]              0.0%
All directors and executive
  officers as a group (6 persons)       82,400                  3.7%

[1]  Based on 2,234,262 Limited Partner Units outstanding at March 31, 1999,
     plus any Limited Partner Units that an individual has the right to acquire
     within 60 days pursuant to the exercise of options.  Options are deemed to
     be outstanding for the purpose of computing the percentage ownership of
     such individual but are not deemed to be outstanding for the purpose of
     computing the percentage ownership of any other person or group shown in
     the table.
[2]  Consists of  options to acquire 40,000 units.
[3]  Excludes options to acquire 30,000 units not exercisable within 60 days.
[4]  Mr. Garrison resigned as a Trust Manager on February 23, 1999.
[5]  Excludes options to acquire 25,000 units not exercisable within 60 days.
[6]  Includes 12,400 units held directly and options to acquire 30,000 units.

General Partner

   FFP Real Estate  Trust has been sole  general  partner of the  Company  since
December 1997 and, as such,  makes all decisions  relating to the  management of
the Company. FFP Partners Management Company, a Delaware corporation  indirectly
owned by John H.  Harvison  and  members of his  immediate  family,  is the sole
shareholder of FFP Real Estate Trust.


Item 13.  Certain Relationships and Related Transactions.

Related Transactions

   The  Company  and FFP  Marketing  are  parties to a  reimbursement  agreement
pursuant to which the Company  reimburses  FFP Marketing for all direct costs of
the  Company  (such as costs to prepare the  Company's  annual  partnership  tax
returns,  annual  audit  fees,  etc.) and an agreed  upon  lump sum  amount  for
indirect  overhead  costs  allocable  to  the  Company.  The  reimbursement  for
officers'  compensation  costs incurred by FFP Marketing in connection  with the
Company's  activities is determined by the amount of time  management  and other
personnel spend on activities of the Company compared to the amount of time they
spend on  activities  of FFP  Marketing.  Since  FFP Real  Estate  Trust's  only
activity is to serve as the general partner of the Company, all of its costs and
expenses will be borne by the Company.  The indirect cost  reimbursement paid by
the Company to FFP Marketing for 1998 was $200,000.

   After the December 1997 restructuring of the Company and until June 1998, the
Company and FFP Marketing were jointly liable on substantially all the debt that
was transferred to the Company in the restructuring. In June 1998, that debt was
restructured  such that the Company was released  from the liability to the bank
lender but is now liable to FFP  Marketing.  During  1998,  the Company paid FFP
Marketing $693,000 in interest expense on that indebtedness.  The balance due on
Company's notes payable to affiliate at December 31, 1998, was $14,201,000.

   FFP Marketing  leases  buildings or land and buildings for some of its retail
outlets from the Company. John H. Harvison, Chairman and Chief Executive Officer
of FFP Marketing,  and Craig T. Scott, Vice President - Finance, General Counsel
and Chief Financial  Officer of FFP Marketing,  hold similar  positions with the
Company. In addition, companies owned directly or indirectly by Mr. Harvison and
members of his immediate family and/or other members of the senior management of
FFP Marketing hold corresponding  ownership interests in the Company. The leases
on these properties were entered into in conjunction  with the  restructuring of
the Company  that was  completed in December  1997 in which the non-real  estate
assets and businesses of the Company were transferred to FFP Marketing while the
real estate used in the retail operations was retained by the Company. The lease
rates for the locations were established based on knowledge of the properties by
the management of the Company and FFP Marketing and their general  experience in
acting as lessor  and lessee  for  similar  properties.  The  management  of FFP
Marketing believes that the lease rates are comparable to lease rates that could
be entered into with  unrelated  third parties.  However,  FFP Marketing did not
engage any third party  advisors or refer to any third party surveys or analyses
of rental rates in making this  determination.  FFP Marketing paid $2,628,000 in
lease payments to the Company for these properties during 1998.

   Prior to the December 1997  restructuring  of FFP  Partners,  the Company was
managed by its former general partner, which made determinations with respect to
costs  incurred by it (whether  directly or indirectly  through its  affiliates)
that were reimbursed by the Company.  The Company  reimbursed the former general
partner  and  any  of  its  affiliates  for  direct  and  indirect  general  and
administrative  costs,   principally   officers'   compensation  and  associated
expenses, related to the business of the Company. The reimbursement was based on
the time  devoted by  employees  to the  Company's  business  or upon such other
reasonable basis as was determined by the former general partner.

<PAGE>

                                 PART IV


Item 14.  Exhibits, Financial Statements, Schedules and Reports on Form 8-K.

   (a) The  following  documents are filed as part of this Annual Report on Form
10-K:

   (1)  Financial  Statements.  See Index to  Financial  Statements  on page F-1
hereof.

   (2)  Financial  Statement  Schedules.  No Financial  Statement  Schedules are
included because they are either not required,  not applicable,  or the required
information  is  included  in the  consolidated  financial  statements  or notes
thereto.

   (3) Exhibits.

               3.1  Amended  and  Restated  Certificate  of Limited
                      Partnership  of FFP  Partners,  L.P. {1 - Ex.
                      3.7}
               4.1  Amended  and  Restated   Agreement  of  Limited
                      Partnership of FFP Partners,  L.P., dated May
                      21, 1987,  as amended by the First  Amendment
                      to Amended and Restated  Agreement of Limited
                      Partnership  dated  August 14,  1989,  and by
                      the Second  Amendment to Amended and Restated
                      Agreement of Limited  Partnership  dated July
                      12, 1991.  {2 - Ex 4.1}
               4.2  Third   Amendment   to  Amended  and   Restated
                      Agreement  of  Limited   Partnership  of  FFP
                      Partners,  L.P.,  dated  as of  December  28,
                      1997.  {4}
               4.3  Rights  Agreement  dated as of August 14, 1989,
                      between the  Company and NCNB Texas  National
                      Bank, as Rights Agent.  {3 - Ex. 1}
              10.1  Nonqualified Unit Option Plan of FFP Partners,
                      L.P. {1 - Ex. 10.2}
              10.2  Form   of   Lease    Agreement    between   FFP
                      Properties,    L.P.,    and   FFP   Operating
                      Partners, L.P. {4}
              10.3  Form of Building  Lease  Agreement  between FFP
                      Properties,    L.P.,    and   FFP   Operating
                      Partners, L.P. {4}
              10.4  Loan  Agreement  among FFP Partners,  L.P., FFP
                      Operating   Partners,   L.P.,  Direct  Fuels,
                      L.P., and HSBC Business  Loans,  Inc.,  dated
                      October 31, 1997.  {4}
              21.1  Subsidiary of the Registrant.  {5}
              23.1  Consent of KPMG LLP. {5}
                27  Financial data schedule. {5}
-------------------
               {1}  Included as the indicated exhibit in the
                        Partnership's Registration Statement on
                        Form S-1 (Registration No. 33-12882) dated
                        May 14, 1987, and incorporated herein by
                        reference.
               {2}  Included as the indicated exhibit in the
                        Partnership's Annual Report on Form 10-K
                        for the fiscal year ended December 27,
                        1992, and incorporated herein by reference.
               {3}  Included as the indicated exhibit in the
                        Partnership's registration statement on
                        Form 8-A dated as of August 29, 1989, and
                        incorporated herein by reference.
               {4}  Included as the indicated exhibit in the
                        Partnership's Annual Report on Form 10-K
                        for the fiscal year ended December 28,
                        1997, and incorporated herein by reference.
               {5}  Included herewith.

   (b) No reports on Form 8-K were filed  during the last  quarter of the period
covered by this Annual Report on Form 10-K.


<PAGE>


                                 SIGNATURES

   Pursuant to the  requirements  of Section 13 or 15(d) of the  Securities  and
Exchange Act of 1934,  the Registrant has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:  April 15, 1999                          FFP Partners, L.P.
                                                (Registrant)

                                                By:  FFP Real Estate Trust
                                                     General Partner

                                                By: /s/ John H. Harvison
                                                   John H. Harvison
                                                   President

  Pursuant to the  requirements  of the Securities  Exchange Act of 1934,  this
Annual  Report has been signed below by the  following  persons on behalf of the
Registrant in the capacities indicated as of April 15, 1999.

/s/ John H. Harvison              President and Chief Executive
---------------------------------   Officer  and Trust Manager of FFP
John H. Harvison                    Real Estate Trust (Principal
                                    executive officer)

/s/ Craig T. Scott                Vice President - Finance,
---------------------------------   Secretary, Treasurer, General
Craig T. Scott                      Counsel and Chief Financial
                                    Officer of FFP Real Estate Trust
                                    (Principal financial and
                                    accounting officer)

--------------------------------- Trust Manager of FFP Real Estate Trust
Joseph F. Leonardo

/s/ J. D. St.Clair                Trust Manager of FFP Real Estate Trust
--------------------------------- 
J. D. St.Clair

/s/ Randall W. Harvison           Trust Manager of FFP Real Estate Trust
--------------------------------- 
Randall W. Harvison

<PAGE>


Item 8.  Index to Financial Statements


                                                                 Page
                                                                Number

Independent Auditors' Report                                     F-2
Consolidated Balance Sheets as of December 31, 1998              F-3
     and December 28, 1997
Consolidated Statement of Operations for the Period              F-4
     Ended December 31, 1998
Consolidated Statement of Partners' Capital for the Period       F-5
     Ended December 31, 1998
Consolidated Statement of Cash Flows for the Period              F-6
     Ended December 31, 1998
Notes to Consolidated Financial Statements                       F-7



<PAGE>



                                Independent Auditors' Report



The Partners
FFP Partners, L.P.:

   We have audited the  accompanying  consolidated  financial  statements of FFP
Partners, L.P. (a Delaware limited partnership) and its subsidiary, as listed in
the  accompanying  index.  These  consolidated   financial  statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

   We  conducted  our audits in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

   In our  opinion,  the  consolidated  financial  statements  referred to above
present  fairly,  in  all  material  respects,  the  financial  position  of FFP
Partners, L.P. and its subsidiary as of December 31, 1998 and December 28, 1997,
and the results of their  operations  and their cash flows for the period  ended
December 31, 1998, in conformity with generally accepted accounting principles.



                                         KPMG  LLP


Fort Worth, Texas
March 30, 1999


<PAGE>

                          FFP PARTNERS L.P. AND SUBSIDIARY
                            Consolidated Balance Sheets
                     December 31, 1998 and December 28, 1997
                                 (In thousands)

                                                           1998        1997
                       Assets

Current assets
   Prepaid expenses                                         $26        $196

Real property
    Land and improvements                                 5,929       6,026
    Buildings                                            21,329      21,491
                                                         27,258      27,517
    Accumulated depreciation                            (10,574)     (9,374)
                                                         16,684      18,143
Notes receivable                                             44           0
Other assets, net                                            50           0

      Total assets                                      $16,804     $18,339

         Liabilities and Partners' Capital

Current liabilities
   Current installments of long-term debt                  $148      $1,208
   Current installments of notes payable to
      affiliate                                           1,143           0
   Accrued expenses                                          39           0
        Total current liabilities                         1,330       1,208

Long-term debt, excluding current installments              297      14,730
Notes payable to affiliate, excluding current
      installments                                       13,058           0
        Total liabilities                                14,685      15,938

Minority interest in subsidiary                             857         960

Commitments and contingencies

Partners' capital
    Limited partners' capital                             1,242       1,418
    General partner's capital                                20          23
         Total partners' capital                          1,262       1,441

      Total liabilities and partners' capital           $16,804     $18,339


         See accompanying Notes to Consolidated Financial Statements.
<PAGE>

                      FFP PARTNERS, L.P. AND SUBSIDIARY
                    Consolidated Statement of Operations
                        Period Ended December 31, 1998
                      (In thousands, except per unit)


                                                             1998
Revenues
   Rental income                                           $2,660
   Gain on sale of property                                    56
   Interest and other income                                   14
       Total revenues                                       2,730

Expenses
   General and administrative expenses                        473
   Depreciation and amortization                            1,203
   Interest expense                                         1,336
        Total expenses                                      3,012

Net loss before minority interest in subsidiary              (282)

    Minority interest in subsidiary                           103

 Net loss                                                   $(179)

Net loss per unit
   Basic                                                   $(0.08)
   Diluted                                                  (0.08)

Weighted average number of units outstanding
   Basic                                                    2,272
   Diluted                                                  2,272




         See accompanying Notes to Consolidated Financial Statements.

<PAGE>

                      FFP PARTNERS, L.P. AND SUBSIDIARY
                 Consolidated Statement of Partners' Capital
                        Period Ended December 31, 1998
                               (In thousands)



                                   Limited     General
                                  Partners     Partner        Total

Balance, December 28, 1997         $1,418        $23         $1,441

Net loss                             (176)        (3)          (179)

Balance, December 31, 1998         $1,242        $20         $1,262



        See accompanying Notes to Consolidated Financial Statements.

<PAGE>

                       FFP PARTNERS, L.P. AND SUBSIDIARY  
                     Consolidated Statement of Cash Flows
                         Period Ended December 31, 1998
                                (In thousands)

                                                             1998
Cash flows from operating activities
   Net loss                                                 $(179)
   Adjustments to reconcile net loss to net cash
       provided by operating activities -
          Depreciation and amortization                     1,203
          Gain on sales of real property                      (56)
          Minority interest in subsidiary                    (103)
          Changes in operating assets and liabilities -
                Decrease in prepaid expenses                  170
                Increase in other assets                      (50)
                Increase in accrued expenses                   39
   Net cash provided by operating activities                1,024

Cash flows from investing activities
   Purchases of land and building                             (96)
   Proceeds from the sale of real property                    408
   Increase in notes receivable                               (44)
   Net cash provided by investing activities                  268

Cash flows from financing activities
   Payments on long-term debt                             (15,493)
   Proceeds from long-term debt to affiliate               14,773
   Payments on long-term debt to affiliate                   (572)
   Net cash used by financing activities                   (1,292)

Net increase/(decrease) in cash                                 0

Cash at beginning of year                                       0
                                                    
Cash at end of year                                            $0
                                                    

Supplemental Disclosure of Cash Flow Information:
   Cash paid for interest during 1998 was approximately $1,300.


     See accompanying Notes to Consolidated Financial Statements.

<PAGE>

                    FFP PARTNERS, L.P. AND SUBSIDIARY
                  Notes to Consolidated Financial Statements
                   December 31, 1998 and December 28, 1997


1.  Basis of Presentation

(a)  Organization of Company

   These Consolidated Financial Statements include the assets, liabilities,  and
results of operations of FFP Partners,  L.P. (the "Company"),  and its 60%-owned
subsidiary, FFP Properties, L.P. ("FFP Properties").

   The  Company  is a  Delaware  limited  partnership  formed in  December  1986
pursuant to the  Agreement of Limited  Partnership  of FFP  Partners,  L.P. (the
"Partnership  Agreement"),  with FFP Partners Management Company, Inc. ("FFPMC")
as its initial general partner.  In May 1987, the Company purchased  convenience
stores,  truck stops, other retail motor fuel outlets,  and ancillary businesses
from  affiliates  of its general  partner.  The  purchase  of those  outlets was
completed in conjunction  with the Company's  initial public offering of Class A
Units of limited  partnership  interest.  Through its subsidiaries,  the Company
owned and operated these outlets, and other businesses, until December 1997.

   In December 1997, the Company  completed an  organizational  restructuring by
which the real estate used in the aforementioned  retail operations was retained
by the Company while the convenience  store, truck stop, other retail motor fuel
outlets,  and other  businesses it conducted  were  transferred to FFP Marketing
Company,  Inc., a Texas corporation ("FFP  Marketing"),  in exchange for all the
common  stock of FFP  Marketing.  The  common  stock of FFP  Marketing  was then
distributed on a one-for-one  basis to the general partner and limited  partners
of the Company.  The assets and  liabilities  in the  accompanying  consolidated
balance  sheet of the Company  have been  reflected at the  historical  carrying
values of the predecessor  entity prior to the  restructuring.  Accordingly,  no
gain  or  loss  was   recognized   as  a  result  of  the  1997   organizational
restructuring.

   Also in that December 1997  restructuring,  the Company  distributed the real
estate it retained to FFP Properties,  a newly formed Texas limited partnership,
in exchange for the general partnership interest in FFP Properties.  The limited
partnership interests in the Company held by John H. Harvison,  the Chairman and
Chief  Executive  Officer of FFPMC,  members of his  family,  and  corporations,
partnerships,  trusts,  and other business  entities  affiliated with him or his
family  members  (collectively,   the  "Harvison  Family")  were  exchanged  for
economically  equivalent  limited  partnership  interests in FFP Properties.  In
addition,  FFP Real Estate  Trust,  a newly formed Texas real estate  investment
trust that is wholly owned by FFPMC, then became the sole general partner of the
Company.

   By virtue  of this  restructuring,  all of the  operating  activities  of the
Company were  transferred to FFP Marketing,  and there is no comparative  income
data for the Company for the prior periods.

   The Company owns the real estate and conducts its rental  activities  through
FFP  Properties,  its operating  subsidiary.  The Company owns a 60% partnership
interest  in FFP  Properties  and  serves as its sole  general  partner.  In the
consolidated  financial  statements  of the Company,  the  minority  interest in
subsidiary  represents the Harvison Family's 40% limited partnership interest in
FFP Properties.

(b)  Consolidation

   The consolidated financial statements include the accounts of the Company and
its  majority  owned  subsidiary.  All  significant  intercompany  accounts  and
transactions are eliminated in the consolidated financial statements.

(c)  Change in Fiscal Year

   Prior to the  restructuring  of the Company on December 28, 1997, the Company
prepared its  financial  statements on the basis of a fiscal year which ended on
the last Sunday in December. However, in connection with the restructuring,  the
Company changed its fiscal year to coincide with the calendar year. Accordingly,
the accompanying  consolidated financial statements for the year period December
31,  1998,  include  the 12 months  then ended plus the  three-day  period  from
December 29, 1997 through December 31, 1997. The effect of including these three
additional days in the  consolidated  financial  statements for the period ended
December 31, 1998, is immaterial.


2.  Significant Accounting Polices

(a)  Real Property

   Real  property is stated at cost,  which may differ  from fair market  value.
Depreciation is provided on the  straight-line  method over the estimated useful
lives of the respective assets, which range from five to 20 years.

(b)  Fair Value of Financial Instruments

   The carrying value of notes receivable approximates fair value because of the
short  maturity  of the  instrument.  The  carrying  amount of notes  payable to
affiliate  approximates fair value because the interest rate on such obligations
varies with the prime rate. The carrying  value of long-term  debt  approximates
fair value because the fixed rate on such debt is not materially  different from
the current rates available to the Company.

(c)  Notes Receivable

   The Company  evaluates the  collectibility  of notes receivable in accordance
with the provisions of Statement of Financial Accounting Standards, ("SFAS") No.
114,  "Accounting by Creditors for Impairment of Loans",  as amended by SFAS No.
118,  "Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures."  At December 31, 1998, no notes  receivable  were determined to be
impaired.


(d)  Units Issued and Outstanding

   The equity interests in the Company are comprised of Class A Units of Limited
Partnership interest and units representing the general partner interest.  These
units issued and  outstanding at December 31, 1998, and December 28, 1997,  were
as follows:

                                1998        1997
      Limited partners       2,234,262   2,234,262
      General partner           37,416      37,416

   The Company's limited partner units are traded on the American Stock Exchange
under the "FFP" trading symbol.  The general partner units are owned by its sole
general partner, FFP Real Estate Trust.

(e)  Use of Estimates

   The use of  estimates  is  required  to prepare  the  Company's  consolidated
financial   statements  in  conformity   with  generally   accepted   accounting
principles.  Although  management  believes that such estimates are  reasonable,
actual results could differ from the estimates.

(f)  Impairment of Long-Lived Assets

   The Company  reviews  long-lived  assets for  impairment  whenever  events or
changes in  circumstances  indicate that the carrying amount of an asset may not
be  recoverable.  Recoverability  of assets to be held and used is measured by a
comparison  of the  carrying  amount of such  assets to  future  net cash  flows
expected to be  generated  by the assets.  If such assets are  considered  to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets.

(g)  Rental Revenue

   The Company recognizes rental revenues when earned.

(h)  Unit Option Plan

   The  Company  accounts  for its  unit  option  plan in  accordance  with  the
provisions of Accounting Principles Board ("APB") Option No. 25, "Accounting for
Stock Issued to Employees," and related  interpretations.  As such, compensation
expense  would be recorded  only if the current  market price of the  underlying
unit on the date of the grant of the option  exceeded the exercise  price of the
option.   The  Company  adopted  SFAS  No.  123,   "Accounting  for  Stock-Based
Compensation,"  which permits  entities  either to (i) recognize as expense over
the  vesting  period  the fair  value of all  stock-based  awards on the date of
grant,  or (ii)  continue  to apply the  provisions  of APB  Opinion  No. 25 and
provide  proforma  net income and earnings  per share  disclosures  for employee
option  grants  made in 1995 and  subsequent  years as if the  fair-value  based
method defined in SFAS No. 123 had been applied.  The Company elected the second
alternative (See Note 5).

(i)  Income Taxes

   As a publicly  traded  partnership,  the Company pays no federal  income tax.
Rather,  the income or loss of the Company is  allocated  to its  partners to be
included in their respective tax returns.  Special tax rules for publicly traded
partnership The net difference between the tax bases and the reported amounts of
assets and liabilities at December 31, 1998, and Decemer 28, 1997, is $5,277,000
and $4,923,000, respectively.

(j)  Reporting of Comprehensive Income

   As of December  29,  1997,  the  Company  adopted  SFAS No.  130,  "Reporting
Comprehensive Income," which requires the presentation of "comprehensive income"
in  financial  statements.  Comprehensive  income  includes  net  income and all
revenues,  expenses,  gains,  and losses that are  recorded  directly to equity.
Because the Company does not have any such items that are  recorded  directly to
equity,  comprehensive  income and net income are  identical.  Accordingly,  the
effect  of the  adoption  of  SFAS  No.  130  has  no  effect  on the  Company's
consolidated financial statements.

(k)  Segment Information

   As of December 29, 1997, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related  Information," which establishes standards
for  reporting  information  about  a  company's  operating  segments.  It  also
establishes  standards for related disclosures  regarding products and services,
geographic areas and major customers. The Company operates in a single operating
segment,   the  ownership   and  rental  of  real  estate.   The  Company  earns
substantially all of its rental income from a single entity, FFP Marketing.


3.  Notes Payable and Long-Term Debt

   Effective June 1998, the Company,  FFP Marketing and FFP Marketing's  primary
bank lender reached an agreement to restructure  the revolving  credit  facility
and term loan due to the lender.  In connection  with the  restructuring  of the
Company in  December  1997,  both the  Company and FFP  Marketing  retained  the
liability for this debt as both entities were primary  obligors on the loans. In
accordance  with  the  June  1998  agreement,  the  lender  made a  loan  to FFP
Marketing,  FFP Marketing made a loan to the Company, and the Company repaid the
balance of its debt to the lender,  all of which was done  effective on June 28,
1998.  This  transaction  included the  execution  of a  promissory  note by the
Company payable to FFP Marketing in the original principal amount of $14,773,000
(the then current balance on the debt due to the lender),  which was recorded by
the Company as notes payable to  affiliate,  and the Company was released by the
lender from all obligations under the Loan and Security  Agreement.  At December
31,  1998,  the  Company  was  indebted  to  FFP  Marketing  in  the  amount  of
$14,201,000.

   The interest  rate and repayment  terms of the Company's  note payable to FFP
Marketing  mirror the terms of FFP Marketing's  debt to its lender,  including a
maturity  date of  November  2000.  The revised  agreement  with the lender also
required that the loan be secured by real estate owned by the Company, which was
pledged to FFP Marketing and then also pledged by FFP Marketing to its lender as
additional  collateral  on its debt to the  lender.  The Company  makes  monthly
principal  payments to FFP  Marketing of $95,000  plus  accrued  interest on the
unpaid  balance at a rate equal to the bank's prime rate.  All proceeds  paid by
the  Company to FFP  Marketing  on this loan are  required  to be applied to the
balance of FFP Marketing's debt to the lender.

   The Company has other notes  payable which bear interest at 6% to 10% and are
due in monthly or annual  installments  through 2012.  Such notes are secured by
real property and had aggregate balances of $445,000 at December 31, 1998.

   The aggregate  fixed  maturities of long-term debt for each of the five years
subsequent to 1998 are as follows:

                                  (In thousands)

                1999                    1,291
                2000                   13,110
                2001                       45
                2002                       42
                2003                       41
                Thereafter                117
                                      $14,646

4.  Loss Per Unit

   The following  table  reconciles the  denominator  in the  calculation of the
basic and diluted loss per unit for partnership units in 1998:

                                                  (In thousands)

    Weighted average number of units outstanding       2,272
    Effect of dilutive options                          0
    Weighted average number of units outstanding
          assuming dilution                            2,272

   Options to purchase  295,999  units were not included in the  computation  of
diluted  loss per unit for 1998  because to do so would have been  antidilutive.
Such options could potentially dilute basic income per unit in the future.


5.  Nonqualified Unit Option Plan

   The  Company has  previously  granted  and has  outstanding  at year end 1998
nonqualified options to acquire 295,999 Class A Units. Such options were granted
under its Nonqualified  Unit Option Plan and a Nonqualified Unit Option Plan for
Nonexecutive  Employees.  The Nonqualified Unit Option plan has terminated,  but
another plan with the same terms was adopted by the Company.  Options for 37,998
units are  available  for grant  under the  Nonqualified  Unit  Option  Plan for
Nonexecutive  Employees.  A summary  of  activity  under the unit  option  plans
follows:

                                                                     Weighted
                                             Limited     Exercise     Average
                                            Partner        Price     Exercise
                                              Units        Range       Price

Options outstanding, December 28, 1997       241,999   $1.211-$2.261   $1.410
  Options granted during year                 80,000     0.75-1.0625    0.946
  Options expired or terminated during year  (26,000)       1.211       1.211
  Options exercised during year                    0
Options outstanding, December 31, 1998       295,999    $0.75-2.261    $1.302

Options exercisable, December 31, 1998       202,665   $1.211-2.261    $1.438


   All options to acquire Class A Units of the Company that were  outstanding at
the  completion of the December 1997  restructuring  of the Company were divided
into separate options to purchase Class A Units of the Company and a like number
of FFP Marketing common shares. The exercise price for the then existing options
for Company  units was divided  between the two new options in proportion to the
closing  price on the American  Stock  Exchange of the Company Class A Units and
FFP Marketing  common shares.  The adjusted  exercise prices of the unit options
outstanding at December 31, 1998, are as follows:


                 Exercise     Options      Options
                 Price     Outstanding   Exercisable

                $0.7500       30,000            0
                 1.0625       50,000            0
                 1.2110      139,333      139,333
                 1.2520        6,666        6,666
                 1.3930       20,000        6,666
                 1.9380       25,000       25,000
                 2.2610       25,000       25,000
                             295,999      202,665

   The weighted average exercise price of outstanding options under the plans at
year end was $1.302 unit with a remaining contractual life of 5.0 years.

   The per share  weighted-average  fair  value of  options  granted in 1998 and
1997, estimated using the Black Scholes option-pricing model, and the underlying
assumptions used are:

                                  Underlying Assumptions
                           -------------------------------------------
                Estimated             Risk-Free                 Expected
   Year           Fair     Dividend   Interest     Expected      Option
 Granted         Value      Yield      Rate       Volatility     Life

  1998          $0.73       0.0%       6.00%         53%        7 years 
  1997           0.91       0.0%       6.40%         58%        7 years

   The Company  applies APB Opinion No. 25 in  accounting  for its option plans.
Accordingly,  no  compensation  cost related to the plans has been recognized in
the consolidated financial statements.  Had the Company determined  compensation
under SFAS No. 123,  the  Company's  net loss would have been reduced to the pro
forma amounts indicated below:


                                      1998
                                 (In thousands, except
                                 per unit information)
Net loss
   As reported                       $(179)
   Pro forma                          (213)
Net loss per share
   As reported
      Basic                         $(0.08)
      Diluted                        (0.08)
   Pro forma
      Basic                          (0.10)
      Diluted                        (0.10)

   Pro  forma  net  loss  reflects  only  options  granted  subsequent  to 1994.
Therefore,  the full impact of calculating  compensation  cost for stock options
under SFAS No. 123 is not reflected in the pro forma net loss amounts  presented
above  because  compensation  cost  for  options  granted  prior  to 1995 is not
considered.


6.  Unit Purchase Rights and Transfer Restrictions

   In August 1989, the Company  entered into a Rights  Agreement and distributed
the right to its unitholders to purchase Rights Units (substantially  equivalent
to Class A Units)  under  certain  circumstances.  Initially,  the  Rights  were
attached to all unit  certificates  representing  units then  outstanding and no
separate Rights Certificates were distributed.  Under the Rights Agreement,  the
Rights  were to  separate  from the  units  and be  distributed  to  unitholders
following  a public  announcement  that a  person  or  group  of  affiliated  or
associated persons (an "Acquiring Person") had acquired,  or obtained a right to
acquire,  beneficial ownership of 20% or more of the Partnership's Class A Units
or all classes of outstanding  units.  On August 8, 1994, a group of unitholders
announced  that they had an  informal  understanding  that they would vote their
units  together  as  a  block.  The  agreement  related  to  units  constituting
approximately 25% of the Class A Units then outstanding.  Therefore,  the Rights
became  exercisable  on October 7, 1994, the record date for the issuance of the
Rights Certificates (the "Distribution Date").

   The Rights currently  represent the right to purchase a Rights Unit (which is
substantially  equivalent to a Class A Unit) of the Company at a price of $20.00
per Unit. However,  the Rights Agreement  provides,  among other things, that if
any  person  acquires  30% or more of the  Class A Units  or of all  classes  of
outstanding  Units, then each holder of a Right, other than an Acquiring Person,
will have the right to  receive,  upon  exercise,  Rights  Units (or in  certain
circumstances,  other  property)  having a value of $40.00 per Unit.  The Rights
will expire on August 13, 1999,  and do not have any voting  rights or rights to
cash distributions.

   In the December 1997 restructuring,  the Partnership's  partnership agreement
was  amended to  prohibit  any person  from owning more than 4.9% of the Class A
Units. The amended  agreement  provides that any transfer that would result in a
person  owning more than this  amount will be null and void,  and the units that
were to be transferred  will become "Excess Units," which will have no voting or
dividend rights and will be held in escrow by the Company.


7.  Leases

   Substantially  all  real  property  owned by the  Company  is  leased  to FFP
Marketing  under operating  leases which generally  expire in 2002 and 2007 plus
two five-year  renewal  periods at the sole option of FFP Marketing.  The leases
provide for an increase in rent payments  after each five-year  renewal  period,
based upon any increase in the  consumers  price  index.  The leases are "triple
net" leases, under which FFP Marketing pays all taxes, insurance,  and operating
costs.  Annual  minimum  rent under  these  leases is  approximately  $2,600,000
through 2002.

   The Company  leases two types of properties to FFP  Marketing:  parcels where
the land and  building  are owned by the  Company,  and  parcels  where only the
building is owned by the Company but is subject to a superior ground lease which
extends  until 2007 (the  "Building  Only  Properties").  Under the terms of the
deeds by which the Company acquired the Building Only Properties,  the Company's
ownership of the Building Only  Properties will terminate upon the expiration of
the ground  leases.  The lessors under those ground leases have indicated to the
Company that they do not intend to extend the ground  leases past 2007. In 1998,
$795,000  of  the  Company's  rental  income  was  derived  from  Building  Only
Properties,  and the remaining  $1,833,000 was derived from  properties in which
the Company owns the land and building.


8.  Related Party Transactions

   The chief executive officer, vice  president-finance,  secretary,  treasurer,
general  counsel  and chief  financial  officer of the  Company's  sole  general
partner,  FFP Real Estate Trust, hold similar  positions with FFP Marketing.  In
addition, entities owned directly or indirectly by the Company's chief executive
officer,  members  of his  immediate  family,  and other  members  of the senior
management  of the Company have in the past,  and intend to do so in the future,
engaged in transactions with the Company.  Although such related parties believe
that such transactions have been fair and reasonable to the Company and on terms
no less  favorable  to the Company than could be obtained  from an  unaffiliated
party in an arms' length transaction, no assurance can be given to that effect.

   The Company leases its real  properties  principally  to FFP  Marketing.  The
Company's management believes that the lease rates are comparable to leases that
could be entered into with unrelated  third  parties.  Since these leases became
effective  concurrently  with the close of 1997, no lease payments were received
by the Company  during its 1997 year. The Company  received  $2,628,000 in lease
payments from FFP Marketing for these  properties  during 1998. The Company paid
$693,000 in interest to FFP Marketing related to the note payable to affiliate.


9.  Subsequent Event

   In  February  1999,  the  Company  purchased  14  additional   improved  real
properties from a third party on which 12 convenience stores and two truck stops
are operational.  The Company immediately leased the properties to FFP Marketing
under 20-year leases. The Company's rental income from FFP Marketing under those
leases equals $99,000 per month and equals the Company's  monthly  principal and
interest  payments  payable under its  acquisition  debt. The leases are "triple
net" leases, under which FFP Marketing pays all taxes, insurance,  and operating
costs,  and provide for an increase in rent payments after each five-year period
during the term of the leases  based upon any  increase  in the  consumer  price
index.

   The Company incurred  long-term  acquisition  debt in the original  principal
amount of  $9,550,000,  which is fully  amortizable  over 15 years  with  equal,
monthly  payments  of  principal  and  interest.  FFP  Marketing  also agreed to
guarantee  the  Company's  acquisition  indebtedness  because  the amount of FFP
Marketing's  monthly lease payments to the Company equals the Company's  monthly
debt payments.