1048620--3/10/2008--GRANITE_CITY_FOOD_&_BREWERY

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Risks Related to Our Business We have a history of losses and no assurance of future profitability. We have significant future capital needs and cannot give assurance that financing will be available in the future. Our business could be materially adversely affected if we are unable to expand in a timely and profitable manner. Our geographic concentration could have a material adverse effect on our business, results of operations and financial condition. Less mature restaurants, once opened, may vary in profitability and levels of operating revenue. Unexpected costs or delays in the development or construction of our restaurants could prevent our timely and cost-effective opening of new restaurants. We may not be able to manage planned expansion. We are subject to all of the risks associated with leasing space subject to long-term non-cancelable leases. Expanding our restaurant base by opening new restaurants in existing markets could reduce the business of our existing restaurants. Our business is subject to seasonal fluctuations. You should not rely on past increases in our average restaurant revenue or our comparable restaurant sales as an indication of future operating results because they may fluctuate significantly. Our profitability depends in large measure on food, beverage and supply costs which are not within our control. If our distributors or suppliers do not provide food and beverages to us in a timely fashion, we may experience short-term supply shortages, increased food and beverage costs, and quality control problems. Our inability to successfully and sufficiently raise menu prices to address cost increases could result in a decline in margins. The need for additional advertising may arise, which could increase our operating expenses. A decline in visitors to any of the regional malls, lifestyle centers, big box shopping centers or entertainment centers near our restaurants could negatively affect our restaurant sales. Changes in consumer preferences as a result of new information regarding diet, nutrition and health could negatively impact our results. Health concerns or negative publicity regarding our restaurants or food products could affect consumer preferences and could negatively impact our results of operations. Changes in discretionary consumer spending could negatively impact our results. We may be unable to recruit, motivate and retain qualified employees. The loss of key personnel could adversely affect our business. We may be unable to successfully compete with other restaurants in our markets. Our success depends on our ability to protect our proprietary information. Failure to protect our trademarks, service marks or trade secrets could adversely affect our business. We do not maintain confidentiality and non-competition agreements with all of our executives, key personnel, including store managers, or suppliers. Our operations depend upon governmental licenses or permits. Regulations affecting the operation of our restaurants could increase our operating costs and restrict our growth. We may face liability under dram shop statutes. Litigation could have a material adverse effect on our business. Our operations and profitability are susceptible to the effects of violence, war and economic trends. Compliance with changing regulation of corporate governance, public disclosure and financial accounting standards may result in additional expenses and affect our reported results of operations. We may be exposed to potential risks relating to our internal controls over financial reporting. Because the value of our business depends primarily upon intangible assets, such as our business concept and development strategy, the value of your investment could decrease significantly in the event of liquidation. Increases in state or federal minimum wage or required benefits could negatively impact our operating results. Limitations in our insurance coverage could adversely affect our operations in certain circumstances. Risks Related to our Securities Fluctuations in our operating results may decrease the price of our common stock. Shareholders may have difficulty selling our common stock. Our existing shareholders have significant control which could reduce your ability to receive a premium for your shares through a change in control. Our articles of incorporation, bylaws and Minnesota law may discourage takeovers and business combinations that our shareholders might consider in their best interests. If we do not maintain our NASDAQ listing, you may have difficulty reselling our shares.

Full 10-K form ▸

1048620--3/10/2008--GRANITE_CITY_FOOD_&_BREWERY_LTD