Granite City Continues Its Positive Sales and Guest Count Trends Through Third Quarter 2010

Granite City Food & Brewery Ltd. (Nasdaq: GCFB), a Modern American upscale casual restaurant chain, today reported results for the third quarter ended September 28, 2010.

“Granite City continued to see its customer traffic and same store sales grow during the third quarter”

Highlights for the third quarter 2010 were as follows:

• Total restaurant sales increased 3.7% to $22.3 million from $21.5 million a year-ago. Comparable restaurant sales for the third quarter increased 4.0% to $21.3 million from $20.5 million a year-ago.
• Guest counts at comparable restaurants increased 3.7% compared to a year-ago.
• Restaurant-level income before occupancy (“IBO”) margin improved to 22.3% in the third quarter of 2010 from 21.7% in prior year third quarter.
• EBITDA at $1.4 million for the third quarter 2010 increased $300,000 compared to the prior year quarter.

Third Quarter 2010 Financial Results

"Granite City continued to see its customer traffic and same store sales grow during the third quarter,” said Steve Wagenheim, President and Chief Executive Officer of Granite City. “Although we used discounting and marketing at a higher level than we would have liked during the quarter, we are pleased with the momentum of our sales and guest trends moving into the holiday season. Our goal is to reduce our discounting during the fourth quarter to enhance our margins and cash flow."

Total revenue for third quarter 2010 increased by 3.7% to $22.3 million compared to $21.5 million for the third quarter of 2009. Total cost of sales before occupancy was $17.3 million in the third quarter or 77.7% of sales compared to prior year third quarter cost of sales before occupancy of $16.8 million or 78.3% of sales. The primary source of this percentage improvement was a decrease in labor costs as a percentage of revenue of 1.0 percentage points and a decrease in food, beverage and retail costs as a percentage of revenue of 0.2 percentage points, partially offset by an increase in restaurant operating expenses of 0.5 percentage points. For all the restaurants, the restaurant-level IBO margin was 22.3% for the third quarter of 2010 compared to 21.7% in the third quarter of 2009.

General and administrative expenses were $1.6 million or 7.1% of revenue for the third quarter of 2010 compared to $1.4 million or 6.5% of revenue for the third quarter of 2009. After adjusting for the one time reclassification of deferred transaction costs in the third quarter of 2009, general and administrative cost decreased $310,000 in the third quarter of 2010 compared to the third quarter of 2009 as a result of our cost control initiatives.

The net loss for the third quarter of 2010 was $1.5 million or $(0.20) per share compared to a net loss of $1.7 million or $(0.64) per share in the third quarter of 2009.

Year to Date 2010 Financial Results

Total revenue for the first three quarters of 2010 increased by 4.2% to $67.7 million compared to $65.0 million for the first three quarters of 2009. Total cost of sales before occupancy was $51.8 million in the first three quarters of 2010 or 76.5% of sales compared to first three quarters 2009 cost of sales before occupancy of $50.3 million or 77.4% of sales. The primary source of this percentage improvement was a decrease in labor costs as a percentage of revenue of 0.8 percentage points and a decrease of store operating expenses as a percentage of revenue of 0.1 percentage points, partially offset by an increase in commodity food costs of 0.1 percentage points. For all the restaurants, the restaurant-level IBO margin was 23.5% in the first three quarters of 2010 compared to 22.6% in the first three quarters of 2009.

General and administrative expenses were $4.8 million or 7.1% of revenue for the first three quarters of 2010, compared to $5.9 million or 9.1% of revenue for the first three quarters of 2009. The primary sources of such year-to-date decrease were lower expenses related to recruiting, consulting, compensation, legal and travel.

The net loss for the first three quarters of 2010 was $2.9 million or $(0.40) per share compared to a net loss of $7.0 million or $(2.59) per share in the first three quarters of 2009.

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