Granite City Food & Brewery Ltd. Reports 30% Increase in Third Quarter Revenues

Granite City Food & Brewery Ltd. (Nasdaq: GCFB), a Modern American upscale casual restaurant chain, today reported results for the third quarter ended September 30, 2008.

Highlights for the third quarter of 2008 compared to the same quarter last year were as follows:

• Total revenues increased 30.1% to $25.5 million

• Total restaurant-level EBITDA climbed to 13.7%

• Comparable store restaurant-level EBITDA at 16.0%

• September restaurant level EBITDA at 16.6%

• Non-cash impairment charge of approximately $1.1 million related to Rogers closing included in quarter

Third Quarter 2008 Financial Results

Total revenue for the third quarter 2008, which consisted of 14 weeks, rose by 30.1% to $25.5 million compared to $19.6 million for the third quarter of 2007, which consisted of 13 weeks.

For all the restaurants, the restaurant-level EBITDA margin was 13.7% for the third quarter of 2008. This represents an increase of 1.6% in restaurant-level EBITDA compared to 12.1% in the second quarter of 2008. All regions showed improvement in restaurant-level EBITDA in third quarter of 2008 compared to the second quarter of 2008.

'We are very pleased with our quarter over quarter margin improvements,' commented Steve Wagenheim, CEO and President. 'In the last month of the third quarter, our company-wide restaurant-level EBITDA was 16.6% - moving back to historical ranges for the company. As well, the improvement of our adjusted EBITDA to $706,000 in the quarter compared to the prior year quarter of $457,000 is an excellent example of how our execution is moving in the right direction. While operations at the store level are improving, we are also very excited to announce significant food and distribution cost savings that are beginning to take shape. We are targeting nearly $2.0 million in savings as a result of negotiating better distribution and food vendor agreements, along with better pricing as a result of more direct relationships with our suppliers. While some of these savings will filter in through the remainder of the year, the real benefit for us will be in 2009. We believe these savings will represent approximately 2% more in margin for us as we head into 2009.'

Total cost of sales was $22.0 million in the third quarter or 86.3% of sales compared to prior year cost of sales of $17.1 million or 87.2% of sales. The third quarter cost of sales represented an improvement over the 87.9% second quarter cost of sales. The improvement in the third quarter compared to the prior quarters was due to several factors: First, across-the-board improved execution in labor and food costs helping to drive our prime costs down, second, the ability of many of our new partners hired in the early part of 2008 to begin to gain traction with their stores and meet management initiatives and expectations, and third, the maturing of the new stores that have been opened over the past year.

General and administrative expenses were $2.7 million or 10.7% of sales for the third quarter of 2008 compared to $2.1 million or 10.5% of sales for the third quarter of 2007. The overall percentage increase was primarily related to increased staff levels related to growth, costs associated with an increase in recruiting, relocating and training as well as consulting costs. These costs were also associated with management changes during the quarter and the company's oversight initiatives, and are expected to subside through the remainder of the year. Non-cash compensation expense within the general and administrative expense represented 0.5% of sales for the 3rd quarter.

The net loss for the third quarter of 2008 was $4.3 million or $(0.26) per share. Of such loss approximately $1.1 million or $(0.06) per share was attributable to non-cash asset impairment and lease termination costs recorded in conjunction with the closure of our Rogers, Arkansas restaurant.

Year-to-Date Financial Results

Revenue increased 32.7% to $74.6 million for the forty weeks ended September 30, 2008, compared to $56.2 million for the 39 weeks ended September 25, 2007, aided by seven new restaurants, and the additional fiscal week in the third quarter of 2008.

For all the restaurants, the restaurant-level EBITDA margin was 11.5% for the first three quarters of fiscal year 2008, while the restaurant-level EBITDA margin for comparable restaurants was 14.6%. Similar to second quarter margins, the overall restaurant-level EBITDA margin was negatively impacted by newer restaurants open for less than one year.

General and administrative expenses were $8.2 million or 11.0% of sales for the first three quarters of 2008 compared to $5.7 million or 10.1% of sales for the same period of 2007.

The net loss for the first three quarters of fiscal year 2008 was $11.8 million or $(0.73) per share compared to a net loss of $5.1 million or $(0.33) per share for the first three quarters of 2007.

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