Granite City to nearly double in size

Despite an economic downturn, a money-losing quarter and a stock in the $2 range, Granite City Food & Brewery is planning to nearly double its number of restaurants.

The St. Louis Park-based casual dining restaurant chain signed a $66 million development and funding deal with Bloomington-based United Properties that will add 22 restaurants. Granite City currently has 25 restaurants in 14 states, including four in the Twin Cities.

The deal eliminates the need to obtain a series of individual bank loans, a method that in the past has delayed restaurant expansion, said Steve Wagenheim, Granite City CEO.

"We are in the cash-flow business, so for us to have somebody provide $3 million per store without a major funding event is a milestone for us," Wagenheim said. "Without this, we would have gone forward at a much slower pace, one store at a time, which makes it tough to plan and to coordinate manpower needs."

Officials of United Properties could not be reached for comment. United Properties develops office, industrial, retail, medical, residential and mixed-use projects, and currently has 17 projects under development in Minneapolis, Milwaukee and Denver.

The expansion plan follows Granite City's first-quarter results, announced Wednesday, in which it posted a $4.3 million loss, or 27 cents a share, compared to a year-ago loss of $1.4 million, or 10 cents a share. First-quarter revenue was $24 million, up 32 percent from a year earlier.

Granite City stock closed at $2.45 per share Thursday, down 27 cents or nearly 10 percent. A year ago it traded at more than $6 a share.

Many restaurant chains have been hammered in the struggling economy as many would-be diners choose to eat at home more.

Granite City's new restaurants would be developed and built by United Properties from 2009 to 2012. Most of the outlets would be in stand-alone buildings rather than part of malls, and would be located in states where Granite City has no presence now, such as Michigan, Indiana, Ohio, Kentucky, Oklahoma and Texas.

Under the plan, United would sell the completed restaurants to investors or real estate companies, Wagenheim said. As a guarantee to United, Granite City would buy the buildings if other purchasers could not be found, he said. Granite City would continue to be the restaurants' operator, no matter who owned the buildings.

The 22 new restaurants would be about the same physical size as the existing Granite City outlets, Wagenheim said. The schedule calls for four new restaurants in 2009, and six stores a year in each of the succeeding three years, although Granite City has the right to delay construction by one year if necessary, and also can choose to build more than the 22 stores, he said.

Steve Alexander • 612-673-4553