1048620--3/22/2010--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. Disruptions in the national economy and the financial markets have adversely impacted our business and may further impact our business. Our strategy of reducing or restructuring rents under current leases may adversely affect our relationships with our lessors, could result in the cancellation of leases, and subject us to damages, which could materially adversely affect our business. DHW has substantial control over us, which could reduce your ability to receive a premium for your shares through a change in control. The decline in visitors to the retail centers, shopping malls, or entertainment centers where our restaurants are located has negatively affected and could continue to negatively affect our restaurant sales and may require us to record an impairment charge for restaurants performing below expectations. Changes in discretionary consumer spending could negatively impact our results. Our geographic concentration could have a material adverse effect on our business, results of operations and financial condition. Less mature restaurants may vary in profitability and levels of operating revenue. We are subject to all of the risks associated with leasing space subject to long-term non-cancelable leases. Our business is subject to seasonal fluctuations. You should not rely on past increases in our average restaurant revenues 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. 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. 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. We do not maintain confidentiality and non-competition agreements with all of our executives, key personnel, managers, and suppliers. Our operations depend upon governmental licenses or permits. Regulations affecting the operation of our restaurants could increase our operating costs and restrict future expansion. We may face liability under dram shop statutes. Litigation could have a material adverse effect on our business. Our operations 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, 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 Future Restaurant Expansion We have significant capital needs and cannot give assurance that financing will be available to us to pursue any future expansion. Our business could be materially adversely affected if we are unable to expand in a timely and profitable manner. Unanticipated costs or delays in the development or construction of future restaurants could prevent our timely and cost-effective opening of any future restaurants. We may not be able to manage any future expansion. Risks Related to our Securities Fluctuations in our operating results may decrease the price of our securities. Shareholders may have difficulty selling our common stock. 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. A substantial number of shares are eligible for future sale by our current investors and the sale of those shares could adversely affect our stock price.

Full 10-K form ▸

1048620--3/22/2010--GRANITE_CITY_FOOD_&_BREWERY_LTD