SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934

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[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to S240.1a-11(c) or S240.1a-12

Taco Cabana, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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[X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
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pursuant to Exchange Act Rule 0-11: (set forth amount on which the
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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange
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Taco Cabana, Inc.
8918 Tesoro Dr., Suite 200
San Antonio, Texas 78217

Notice of Annual Meeting of Stockholders
August 19, 1999

TO THE STOCKHOLDERS OF
TACO CABANA, INC.:

Notice is hereby given that the Annual Meeting of Stockholders of Taco
Cabana, Inc., a Delaware corporation (the "Company"), will be held at the
Airport Hilton Hotel, 611 Northwest Loop 410, San Antonio, Texas, on
Thursday, August 19, 1999, at 10:00 a.m., Central Daylight Time for the
following purposes:

1.) To elect six directors.

2.) To transact such other business as may properly come before the
meeting or any adjournment thereof.

The Board of Directors has fixed the close of business on Thursday,
July 1, 1999 as the record date for the determination of stockholders
entitled to vote at the meeting.

We hope that you will be able to attend the meeting in person, but if
you are unable to do so, please fill in, sign and promptly mail back the
enclosed proxy form, using the return envelope provided. If for any reason
you should subsequently change your plans, you can of course revoke the
proxy at any time before it is actually voted.

BY ORDER OF THE BOARD OF DIRECTORS

David G. Lloyd
Secretary

San Antonio, Texas
July 13, 1999

TACO CABANA, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 19, 1999

THE MEETING

This Proxy Statement is furnished to the stockholders of Taco Cabana,
Inc., a Delaware corporation, in connection with the solicitation of proxies
by the Board of Directors of the Company for use at the Annual Meeting of
Stockholders to be held Thursday, August 19, 1999 (the "Meeting" ). This
Proxy Statement, the accompanying proxy, and the Company's Annual Report are
being sent or given to the stockholders of the Company on or about July 13,
1999.

The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of the Company's Common Stock is necessary to
constitute a quorum at the Meeting. Pursuant to applicable Delaware law,
only votes cast "for" a matter constitute affirmative votes. Votes
"withheld" or abstaining from voting are counted for quorum purposes, but
since they are not cast "for" a particular matter, they will have the same
effect as negative votes or votes "against" a particular matter. In deciding
all questions, a holder of Common Stock is entitled to one vote, in person
or by proxy, for each share held on the record date.

Proxies in the form enclosed will be voted at the Meeting, if properly
executed, returned to the Company prior to the Meeting and not revoked. A
proxy may be revoked at any time before it is voted by giving written notice
of revocation to the Secretary of the Company prior to the convening of the
Meeting, or by presenting another proxy card with a later date. If you
attend the Meeting and desire to vote in person, you may request that your
previously submitted proxy card not be used.

The record date for stockholders entitled to vote at the Meeting is
July 1, 1999. At the close of business on July 1, 1999, the Company had
issued and outstanding and entitled to vote at the Meeting 13,400,900 shares
of Common Stock. As of July 1, 1999, the directors and executive officers
of the Company owned a total of 94,880 shares of the Company's Common Stock,
or approximately 0.7% of the total number of shares outstanding and entitled
to vote at the Meeting.

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information concerning the
beneficial ownership of the Company's Common Stock as of June 1, 1999, by: (i)
each person known by the Company to be the beneficial owner of more than 5% of
its Common Stock, (ii) each executive officer of the Company, (iii) each
director of the Company, and (iv) all directors and officers as a group. Unless
otherwise indicated, each of the stockholders has sole voting and investment
power with respect to the shares beneficially owned.

Shares Beneficially Owned
Name Number Percent

Stephen V. Clark (1) 170,063 1.2%

David G. Lloyd (2) 86,000 *

Douglas Gammon (3) 30,000 *

Dennis Greenia (4) 15,000 *

William J. Nimmo (5) 11,817 *

Richard Sherman (6) 87,003 *

Cecil Schenker (7) 107,503 *

Lionel Sosa (8) 8,000 *

Rod Sands (9) 70,000 *

Massachusetts Financial
Services Co. (10) 1,199,301 8.6%

Dimensional Fund Advisors, Inc. (11) 982,764 7.1%

All directors and officers as
a group (9 persons) (12)585,386 4.2%
___________________________
* Less than 1%.

(1) Includes 160,000 shares subject to presently exercisable options (or
those exercisable within 60 days). Excludes 140,000 shares issuable
pursuant to options which are not currently exercisable (or exercisable
within 60 days).
(2) Includes 75,000 shares subject to presently exercisable options (or those
exercisable within 60 days). Excludes 75,000 shares issuable pursuant to
options which are not currently exercisable (or exercisable within 60
days).
(3) Includes 25,000 shares issuable pursuant to presently exercisable options
(or those exercisable within 60 days). Excludes 75,000 shares issuable
pursuant to options which are not currently exercisable (or exercisable
within 60 days).
(4) Represents shares subject to presently exercisable options (or those
exercisable within 60 days). Excludes 60,000 shares issuable pursuant to
options which are not currently exercisable (or exercisable within 60
days).
(5) Includes 8,000 shares issuable pursuant to presently exercisable options
(or those exercisable within 60 days). Excludes 18,000 shares issuable
pursuant to options which are not currently exercisable (or exercisable
within 60 days).
(6) Represents shares subject to presently exercisable options (or those
exercisable within 60 days). Excludes 6,000 shares issuable pursuant to
options which are not currently exercisable (or exercisable within 60
days).
(7) Represents shares subject to presently exercisable options (or those
exercisable within 60 days). Excludes 6,000 shares issuable pursuant to
options which are not currently exercisable (or exercisable within 60
days).
(8) Represents shares subject to presently exercisable options (or those
exercisable within 60 days). Excludes 18,000 shares issuable pursuant to
options which are not currently exercisable (or exercisable within 60
days).
(9) Includes 5,000 shares subject to presently exercisable options (or those
exercisable within 60 days). Excludes 18,000 shares issuable pursuant to
options which are not currently exercisable (or exercisable within 60
days).
(10) Based upon Schedule 13G, filed jointly in February 1996, and amended in
February 1999, indicating beneficial ownership as stated in the table,
and shared dispositive power as to all shares beneficially owned.
Included in the joint filing were Massachusetts Financial Services
Company ("MFS"), indicating beneficial ownership and sole dispositive
power of 1,199,301 shares and MFS Series Trust II - MFS Emerging Growth
Fund ("MEG"), indicating 770,000 shares beneficially owned by MFS as
well as MEG. Address: 500 Boylston Street, Boston, Massachusetts 02116.
(11) Based upon Schedule 13G, filed in February 1999, indicating beneficial
ownership, sole dispositive power and sole voting power as stated in the
table. Address: 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401.
(12) Includes 490,506 shares subject to presently exercisable options (or
those exercisable within 60 days). Excludes 416,000 shares issuable
pursuant to options which are not currently exercisable (or exercisable
within 60 days).

PROPOSAL 1
ELECTION OF DIRECTORS

At the Annual Meeting six directors are to be elected by plurality of the
votes cast by the holders of the shares of outstanding Common Stock of the
Company. Under applicable Delaware law, in tabulating the vote, broker
nonvotes will be disregarded and have no effect on the outcome of the vote.
Each outstanding share of Common Stock entitles the holder thereof to one
vote with respect to the election of the six director positions to be filled
at this meeting. The nominees for director are Stephen V. Clark, William J.
Nimmo, Richard Sherman, Cecil Schenker, Lionel Sosa and Rod Sands. All of
the nominees are presently directors of the Company. For information
concerning the backgrounds of such nominees, see "Directors and Executive
Officers" on page 5.

The enclosed Proxy, if properly signed and returned will be voted FOR the
election of these six nominees unless authority to vote is withheld. The
Board of Directors has no reason to believe that any of such nominees will
be unable to serve if elected. In the event any of such nominees become
unavailable for election, votes will be cast, pursuant to authority granted
by the enclosed Proxy, for such substitute nominee as may be designated by
the Board of Directors. All directors will hold office until the next annual
meeting of stockholders and until their successors have been duly elected
and qualified, unless prior to such meeting a director resigns or his
directorship otherwise becomes vacant.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
ELECTION OF THE DIRECTOR NOMINEES.

Directors and Executive Officers

The directors and executive officers of the Company and their respective
ages are as follows:

Name Age Position

Stephen V. Clark 45 Chief Executive Officer,
President and Director
Douglas Gammon 52 Senior Vice President - Human
Resources and People
Development
Dennis Greenia 49 Senior Vice President Marketing
David G. Lloyd 36 Senior Vice President - Finance,
Chief Financial Officer
Secretary and Treasurer
William J. Nimmo 45 Director
Rod Sands 51 Director
Cecil Schenker 56 Director
Richard Sherman 55 Director
Lionel Sosa 60 Director

Mr. Clark has served as the Company's Chief Executive Officer since
November 1996, and as the President, Chief Operating Officer, and as a Director
since April 1995. Prior to that, Mr. Clark was with Church's Chicken, a
division of America's Favorite Chicken, for seventeen years with his final
title having been Senior Vice President and Concept General Manager. He also
served on the executive committee of America's Favorite Chicken and was on the
Board of Directors of Church's Operators Purchasing Association. In his final
position with America's Favorite Chicken, Mr. Clark was primarily responsible
for the day-to-day operations of over 1100 company-owned and franchised units
with aggregate sales volume in excess of $600 million.

Mr. Gammon joined the Company in March 1997 as Senior Vice President,
Human Resources and People Development. From December 1989 to March 1997, Mr.
Gammon served as Vice President of Human Resources at Marriott International
which has over 15,000 employees in 50 states. Mr. Gammon has over 18 years of
experience in the human resources field as well as over six years experience in
restaurant operations. He was the past President for the Council of Hotel and
Restaurant Trainers.

Mr. Greenia joined the Company in July 1998 as Senior Vice President -
Marketing. From January 1989 to July 1998, Mr. Greenia served as President of
the Merrill Group, a marketing consulting firm in Atlanta GA., whose clients
included the Coca-Cola Company, Dominos Pizza, Bally's Total Fitness and
Hardee's Foods. Mr. Greenia has over 19 years experience both nationally and
internationally in the food service industry holding positions with Burger King
Corporation, J. Walter Thompson Advertising and Coca Cola USA. Mr. Greenia is
currently also a majority partner in Mobile Media Network of Atlanta, Inc.

Mr. Lloyd joined the Company in October 1994 as Vice President - Finance,
Chief Financial Officer, Secretary and Treasurer and was promoted to Senior
Vice President in May 1996. From August 1985 to October 1994, Mr. Lloyd served
in various capacities with Deloitte & Touche (the Company's independent
auditors), with his last position being Senior Audit Manager. Mr. Lloyd is a
certified public accountant.

Mr. Nimmo has served as a director of the Company since November 1991.
Since May 1997, Mr. Nimmo has been a Partner with Halpern, Denny & Co., a
venture capital firm in Boston, Massachusetts. Prior to that, Mr. Nimmo served
as Managing Director of Cornerstone Equity Investors, Inc., and its predecessor
firm, Prudential Equity Investors, Inc., since September 1989.

Mr. Sands has been a director of the Company since February 1998. Since
July 1997, Mr. Sands has served as the Managing Director of Silver Venture
Capital Management, a private equity investment fund. From August 1992 to July
1997, Mr. Sands served as the President and Chief Operating Officer of Pace
Foods, a food manufacturer with revenues in excess of $200 million. Mr. Sands
currently serves on the board of directors of Orval Kent Holdings, Packaged
Ice, Inc., Texas Commerce Bank/Chase-San Antonio and Benefit Planners, Inc. He
is also a member of St. Mary's University Business Advisory Board.

Mr. Schenker has been a director of the Company since January 1992. Mr.
Schenker is a corporate securities attorney and is the managing partner of the
San Antonio, Texas office of the law firm of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., of which Mr. Schenker has been a partner through his professional
corporation since January of 1984. Akin, Gump, Strauss, Hauer & Feld, L.L.P.
has regularly performed legal services for the Company. Mr. Schenker is also a
director of LOT$OFF Corporation, formerly 50-Off Stores, Inc.

Mr. Sherman has been a director of the Company since November 1991. Mr.
Sherman is a private investor and retail consultant. Mr. Sherman served as
President and Chief Executive Officer of Rally's, Inc. from September 1987 to
January 1991. From August 1989 to January 1991, he also served as Chairman of
the Board of Rally's, Inc. Mr. Sherman currently serves as a member of the
Board of Trustees of Paul Quinn College in Dallas, Texas and as a director of
Reed's Jewelers, Inc., Papa John's International, Inc., and PJ America, Inc.

Mr. Sosa has been a director of the Company since August 1997. Mr. Sosa
has served as the Chief Executive Officer of KJS Marketing Agency since January
1996. From 1994 to 1996 he served as Chairman of DMB&B/Americas, a network of
advertising agencies in the U.S. and Latin America. In 1980 Mr. Sosa founded
the agency of Sosa, Bromley, Aguilar, Noble & Associates, an advertising agency
specializing in Hispanic marketing in the U.S. Mr. Sosa sold Sosa, Bromley,
Aguilar, Noble & Associates in 1994. Mr. Sosa is currently a Director of the
Children's Television Workshop Network.

The Board of Directors has a compensation and stock option committee which
currently consists of William J. Nimmo, Richard Sherman, Lionel Sosa and Rod
Sands. The Board of Directors also has an audit committee which currently
consists of William J. Nimmo, Richard Sherman, Lionel Sosa, Cecil Schenker and
Rod Sands. The Board of Directors does not currently have a nominating
committee. All directors serve for a term of one year and until their
successors are duly elected. Each director who is not also an employee of the
Company receives an annual retainer of $25,000, and an attendance fee of $2,500
per Board meeting. All non-employee directors are reimbursed for their
expenses. The Board of Directors met four times during 1998. Each incumbent
director attended at least 75% of the aggregate number of Board meetings and
meetings of Board committees of which he was a member held during 1998.

The compensation and stock option committee monitors and makes
recommendations to the Board with respect to compensation programs for officers
and directors and administers the Company's Stock Option Plan. The compensation
and stock option committee met two times during 1998.

The audit committee considers the adequacy of the internal controls of the
Company and the objectivity of financial reporting; meets with the independent
certified public accountants and appropriate Company financial personnel about
these matters; and recommends to the Board the appointment of the independent
certified public accountants. The audit committee met two times in 1998.

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

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act" ) requires each director and executive officer of the Company,
and each person who owns more than 10% of a registered class of the Company's
equity securities to file by specific dates with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of change in
ownership of Common Stock and other equity securities of the Company.
Officers, directors and 10% stockholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file. The
Company is required to report in this report any failure of its directors and
executive officers to file by the relevant due date any of these reports during
the Company's fiscal year.

To the Company's knowledge, all Section 16(a) filing requirements
applicable to the Company's officers, directors, and 10% stockholders were
complied with, except for one late filing each as to a Form 4 for Lionel Sosa
and Rod Sands.

EXECUTIVE COMPENSATION

Executive compensation is set at levels which are sufficiently competitive
with companies of similar size and type to permit the Company to attract and
retain the best possible individuals. Compensation is structured to provide
incentives for executive officer performance that results in continuing
improvements in the Company's financial results, over both the short term
and the long term. Compensation is also designed to align the interests of
the Company's executives and its stockholders by providing for payment of a
significant portion of incentive compensation in the form of stock options.
Moreover, each executive officer's compensation is based upon both
individual and Company performance.

As may be seen from the Summary Compensation Table included on page 9, the
compensation of executive officers consists of three principal parts, each
of which is reviewed regularly by the committee.

Salaries shown in the Summary Compensation Table represent the fixed
portion of compensation for executive officers for the year. Changes in
salary depend upon Company as well as individual performance.

The bonuses shown in the Summary Compensation Table are paid in cash to
executive officers and depend upon the financial and strategic
accomplishments of the Company. The Committee also has discretion to modify
the bonus based upon individual performance, including the individual's
progress in implementing the Company's goals.

The third principal component of compensation arises from the Company's
grant of stock options to executive officers (the Company's Stock Option
Plan actually covers several levels of employees). The Committee sets the
number of options to be granted based on a variety of factors, including,
principally, salary grade, Company and individual performance and individual
levels of stock ownership. All options under the Plan are granted at fair
market value, and therefore any value which ultimately accrues to executive
officers is based entirely on the Company's performance, as perceived by
investors who establish the price for the Company's Common Stock.

A written employment agreement served as the principal basis of Mr.
Clark's compensation during 1998. During 1998 Mr. Clark's annual salary was
adjusted to reflect his responsibilities, experience, his individual
performance and important contributions to the Company. In addition, Mr.
Clark received a bonus of $163,846 and options to purchase 100,000 shares of
the Company's common stock. The Compensation Committee noted the increase
in the Company's earnings per share and improved operations of the Company.

Respectfully submitted,
THE COMPENSATION AND STOCK OPTION COMMITTEE
Richard Sherman, William J. Nimmo, Lionel Sosa, Rod Sands

Summary Compensation Table. The following table sets forth certain
information concerning the compensation earned during the Company's last three
fiscal years by the Company's Chief Executive Officer and the Company's other
executive officers (collectively the "named executive officers"):

Summary Compensation Table

Annual Compensation Long-Term Compensation
------------------------------- ---------------------------------
Awards Payouts
------------------------ -------
Other Securites
Annual Restricted Underlying All Other
Compen- Stock Options/ LTIP Compen-
Name and Principal Fiscal Salary Bonus sation Award(s) SARs Payouts sation
Position Year ($) ($) ($)(1) ($) (#) ($) ($)

Stephen V.Clark, 1998 281,882 163,846 - - 100,000 - -
Chief Executive Officer, 1997 255,420 - - - - - -
President, Chief 1996 233,404 - - - - - -
Operating Officer

David G. Lloyd, 1998 157,004 61,845 - - 50,000 - -
Senior Vice President, 1997 143,528 - - - - - -
Chief Financial Officer, 1996 135,138 - - - - - -
Secretary and Treasurer

Douglas Gammon 1998 142,469 53,577 38,393(3) - 25,000 - -
Senior Vice President - 1997 113,820(2) - 55,135(3) - 75,000 - -
Human Resources and
People Development

Dennis Greenia 1998 61,060(4) 26,000 - - 75,000 - -
Senior Vice President-
Marketing

James A. Eliasberg 1998 204,256(5) - - - - - -
Senior Vice President - 1997 191,877 - - - - - -
and General Counsel 1996 189,235 - - - - - -

- - - -----------------

(1)Certain of the Company's executive officers receive personal benefits in
addition to salary; however, the Company has concluded that the aggregate
amounts of such personal benefits do not exceed the lesser of $50,000 or 10%
of annual salary and bonus reported for any named executive officer.
(2)Mr. Gammon joined the Company in March 1997.
(3)Represents relocation expense reimbursements.
(4)Mr. Greenia joined the Company in July 1998.
(5)Mr. Eliasberg served as Senior Vice President and General Counsel until
September 1998.

Stock Option Plans and Directors' Options

Under the Taco Cabana, Inc. 1990 Stock Option Plan (the "1990 Option
Plan"), amended in August 1992, and the 1994 Stock Option Plan (the "1994
Option Plan"), amended in August 1997, options to purchase up to 1,500,000
and 1,250,000 shares, respectively, of Common Stock may be granted to
employees, outside directors and consultants and advisers of the Company or any
subsidiary corporation or entity. The stock is intended to permit the Company
to retain and attract qualified individuals who will contribute to its overall
success. Shares that by reason of the expiration of an option (other than by
reason of exercise) or which are no longer subject to purchase pursuant to an
option granted under an Option Plan may be reoptioned thereunder. The 1990 and
1994 Option Plans are administered by a committee of outside directors (the
"Committee" ). The Committee sets specific terms and conditions of options
granted under the 1990 and 1994 Option Plans and administers the 1990 and 1994
Option Plans, as well as the Company's other employee benefit plans which may
be in effect from time to time. The Committee currently consists of William
J. Nimmo, Lionel Sosa, Richard Sherman and Rod Sands.

The Company's employees are eligible to receive either incentive stock
options or nonqualified stock options or a combination of both, as the
Committee determines. Non-employee participants may be granted only
nonqualified stock options. Stock options may be granted for a term not to
exceed ten years (five years with respect to a holder of 10% or more of the
Company's shares in the case of an incentive stock option) and are not
transferable other than by will or the laws of descent and distribution. Each
option may be exercised within the term of the option pursuant to which it is
granted (so long as the optionee, if an employee, continues to be employed by
the Company). In addition, an incentive option may be exercised within 90 days
after the termination of employment of the optionee (subject to any limitations
in the particular option), within one year after termination in case of
termination because of disability, or throughout the term of the option in the
event of the optionee's death, to the extent in each case the option was
exercisable at the termination date. A nonqualified stock option may be
exercised for such period, but not later than the expiration date, after
termination of employment, disability or death, as may be specified in the
particular option.

The exercise price of all incentive stock options must be at least equal
to the fair market value of the Common Stock on the date of grant, or 110% of
fair market value with respect to any incentive stock option issued to a holder
of 10% or more of the Company's shares. Stock options may be exercised by
payment in cash of the exercise price with respect to each share to be
purchased, by delivering Common Stock of the Company already owned by such
optionee with a market value equal to the exercise price, or by a method in
which a concurrent sale of the acquired stock is arranged, with the exercise
price payable in cash from such sale proceeds.

The 1994 Option Plan provides that each outside director will
automatically receive a grant of 3,000 nonqualified stock options each year on
the fifth business day following the first public release of the Company's
audited earnings report on results of operations for the preceding fiscal year.
Each such option will become exercisable in whole or in part on the first
anniversary of the award through the balance of its ten-year term. Subject to
availability of shares allocated to the 1994 Option Plan and not already
reserved for other outstanding stock options, outside directors who join the
Board in the future will in addition receive an initial grant of options for
20,000 shares, which will become exercisable in five equal increments beginning
on the first anniversary of the award and on each of the next four succeeding
anniversary dates. Such options will be exercisable for a term of ten years.
Such options will be awarded upon their appointment or election to the Board.
Options, once granted and to the extent exercisable, will remain exercisable
throughout their term, regardless of whether the holder continues as a
director. The exercise price of the options is equal to 100% of the fair
market value of a share of Common Stock at the time of grant.

The 1990 Option Plan will terminate on October 14, 2000. The 1994 Option
Plan will terminate on October 17, 2004. The Board of Directors may, however,
terminate the 1990 and 1994 Option Plans at any time prior to such respective
dates. Termination of the 1990 and 1994 Option Plans will not alter or impair,
without the consent of the optionee, any of the rights or obligations pursuant
to any option granted under the Option Plans.

As of June 1, 1999, options for 465,592 shares of common stock had been
granted under the 1990 Option Plan and were outstanding, with a weighted
average exercise price of $6.06 per share, and no additional shares were
available for issuance upon exercise of options which may be granted in the
future. As of June 1, 1999, options for 1,034,408 shares had been exercised.

As of June 1, 1999, options for 1,072,417 shares of common stock had been
granted under the 1994 Option Plan and were outstanding, with a weighted
average exercise price of $5.37 per share, and 177,583 additional shares were
available for issuance upon exercise of options which may be granted in the
future. As of June 1, 1999, 150,884 options had been exercised.

Stock Option Grant Table. The following table sets forth certain
information concerning options granted to the named executive officers during
the Company's fiscal year ended January 3, 1999:

Option Grants in Last Fiscal Year

Percent Potential Realizable
Total Value at Assumed
Options Annual Rates of
Granted to Exercise Stock Price
Options Employees or Appreciation
Granted in Base for Option Term (2)
#(1) Fiscal Price Expiration --------------------
Name (3) Year ($/Sh) Date 5% ($) 10% ($)
- - - ----------------------------------------------------------------------------
Stephen 100,000 21% 6.125 4/24/2008 385,198 976,167
V. Clark
David G. 50,000 10% 6.1875 6/09/2008 194,564 493,064
Lloyd
Douglas 25,000 5% 6.125 11/16/2008 96,299 244,042
Gammon
Dennis 75,000 16% 6.25 7/26/2008 294,794 747,067
Greenia
James A. - - - - - -
Eliasberg
- - - ----------------------------------------------------------------------------

(1) All such stock options were granted for the number of shares indicated at
an exercise price equal to the fair market value of the Common Stock on
the date of grant as determined by the Company's Board of Directors. All
such stock options noted above were granted 10 years prior to the noted
expiration date. The options become exercisable beginning one year
after the date of grant in five equal annual installments. The Company's
current Option Plans do not make provision for the award of stock
appreciation rights ("SARs") and the Company has no SARs currently
outstanding.
(2) As required by rules of the Securities and Exchange Commission ("SEC"),
potential values stated are based on the assumption that the Company's
Common Stock will appreciate in value from the date of grant to the end of
the option term (ten years from the date of grant) at annualized rates of
5% and 10% (total appreciation of approximately 63% and 159%),
respectively, and therefore are not intended to forecast possible future
appreciation, if any, in the price of the Common Stock.
(3) Upon occurrence of a change of control of Taco Cabana, as defined in the
related Stock Option Agreements, all outstanding options, to the extent
not exercisable, will immediately become exercisable.

Stock Option Exercises and Holdings Table. The following table provides
information concerning the exercise of options and value of unexercised options
held by the named executive officers at January 3, 1999:

Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values

Shares Number of
Acquired Unexercised
on Value Options Value of Unexercised
Exercise Realize at Fiscal Year In-the-Money Options
Name (#) ($) End (#) at Fiscal Year End ($)(1)
- - - -----------------------------------------------------------------------------
Exercis- Unexercis- Exercis- Unexercis-
able able able Able
- - - -----------------------------------------------------------------------------
Stephen V. - - 120,000 180,000 315,000 372,500
Clark
David G. - - 65,000 85,000 84,375 134,375
Lloyd
Douglas - - 15,000 85,000 41,250 205,625
Gammon
Dennia - - - 75,000 - 112,500
Greenia
James A. - - - - - -
Eliasberg (2)
- - - -----------------------------------------------------------------------------
(1)Values stated are based on the last sale price of $7.75 per share of the
Company's Common Stock on the NASDAQ National Market System on December 31,
1998, the last trading day of the fiscal year, and equal the aggregate
amount by which the market value of the option shares exceeds the exercise
price of such options at the end of the fiscal year.
(2)Mr. Eliasberg served as Senior Vice President and General Counsel until
September 1998.

Compensation Committee Interlocks and Insider Participation

None.

STOCK PERFORMANCE GRAPH

Comparison of Five Year-Cumulatvie Total Returns
Performance Graph for
Taco Cabana, Inc.

(GRAPH APPEARS HERE)

Measurement NASDAQ
Period Stock NASDAQ Stocks
(Fiscal Year Taco Cabana, Market (SIC 5800-5899 US Companies)
Covered) Inc. (US Companies) Eating and drinking places
- - - -------------- ------------ -------------- ---------------------------
12/30/1994 50.7 97.8 72.2
12/29/1995 28.2 138.3 87.9
12/27/1996 41.2 170.2 85.4
12/26/1997 26.1 200.7 72.6
12/31/1998 43.7 293.8 66.8

Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day,
the preceding trading day is used.
D. The index level for all series was set to $100.00 on 12/31/1993.

INDEPENDENT ACCOUNTANTS

The financial statements and schedules of the Company as of January 3,
1999 and for the year then ended were audited by Deloitte & Touche LLP. It
is anticipated that if the nominees are elected as directors, the new Board
of Directors will reappoint such firm as independent certified public
accountants for the current fiscal year. A representative of Deloitte &
Touche LLP will be present at the Meeting, will have an opportunity to make
a statement if he or she desires to do so and will be available to respond
to appropriate questions.

ANNUAL REPORT

The Company's Annual Report for the year ended January 3, 1999, which
includes the Company's financial statements, accompanies this proxy
statement, but is not incorporated as part of the proxy statement and is not
to be regarded as part of the proxy solicitation material.

OTHER MATTERS

The Company's management knows of no other matters that may properly
be, or which are likely to be, brought before the meeting. However, if any
other matters are properly brought before the meeting, the persons named in
the enclosed proxy, or their substitutes, will vote in accordance with their
best judgment on such matters.

STOCKHOLDER PROPOSALS

The Company intends to conduct the next annual meeting of stockholders
in approximately June 2000. Proposals by stockholders intended to be
presented at the annual meeting to be held in 2000 must be received by the
Company by March 1, 2000 to be included in the Company's proxy statement and
form of proxy relating to that meeting. Such proposals should be addressed
to the Secretary of the Company at the address indicated in this notice.

COST AND METHOD OF PROXY SOLICITATION

The accompanying Proxy is being solicited on behalf of the Board of
Directors of the Company. The expense of preparing, printing and mailing
the form of Proxy and the material used in the solicitation thereof will be
borne by the Company. In addition to the use of the mails, proxies may be
solicited by personal interview, telephone and telegram by directors,
officers and employees of the Company. Arrangements may also be made with
brokerage houses and other custodians, nominees and fiduciaries for
forwarding of solicitation materials to the beneficial owners of stock held
by such persons, and the Company may reimburse them for reasonable out-of-
pocket expenses incurred by them in connection therewith.

By Order of the Board of Directors

David G. Lloyd
Secretary

TACO CABANA, INC.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF STOCKHOLDERS ON THURSDAY, AUGUST 19, 1999

The undersigned hereby appoints STEPHEN CLARK and DAVID G. LLOYD, and each of
them, proxies, with the powers the undersigned would possess if personally
present, and with full power of substitution, to vote, at the annual meeting
and at any adjournment thereof, all shares of Common stock of the undersigned
in Taco Cabana, Inc. held of record on the record date, upon all subjects that
may properly come before the meeting, including matters described in the proxy
statement furnished herewith, subject to any directions indicated on this card.
If no directions are given and the signed card is returned, the proxies will
vote FOR item 1 and at their direction on any other matter that may properly
come before the meeting any adjournment thereof.

Instruction (change of address)

To withhold authority to vote for any ___________________________
individual nominee, strike a line through ___________________________
the nominee's name in the list below: ___________________________
___________________________
Stephen V. Clark William Nimmo (If you have written in the
Richard Sherman Cecil Schenker above space, please mark the
Lionel Sosa Rod Sands corresponding box on the
reverse side of this card)

No. SEE REVERSE SIDE

TACO CABANA, INC.
PLEASE MARK IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY

The Board of Directors recommends a vote FOR item 1 WITHHELD
FOR AUTHORITY
1. Election of Directors
(see reverse)

Note: Please sign exactly as name appears on the certificate. When shares are
held by joint tenants, both should sign, if a corporation, please sign in full
corporate name by president or other authorized officer, if a partnership please
sign in partnership name by authorized person. When signing as attorney,
trustee, guardian, officer or partner, please give full title as such.

- - - ---------------------------------
Signature Date