business

You could say Donald Dunham likes Granite City Food & Brewery Ltd. so much that he bought the company.

An early investor in the St. Cloud-based restaurant chain, Dunham on Monday took a 64 percent ownership stake in Granite City in lieu of $15 million he's owed. The debt-for-equity transaction helps the company get out from under $19 million in payments while handing Dunham 28 million shares of stock valued at 54 cents per share.

The move comes as Granite City, founded in 1999, watches its liabilities grow amid one of the worst periods for casual dining in years. Recession-wary diners have fled the padded booths of such chains as Applebee's and TGI Friday's for the relative security of home cooking, buying more groceries and using more coupons than ever. Left behind have been restaurants such as Granite City, where the share price has steadily declined since early 2007.

Dunham, who owns a Sioux Falls, S.D., construction and property management company called the Dunham Co., built all but four of Granite City's 26 locations. He leases 16 of those locations to the company through DHW Leasing, of which he's a managing member.

Granite City CEO Steve Wagenheim described Dunham as the guy "who drove the Midwest with me looking at sites and funding these things." The company has 26 locations in 11 states, all in the Upper Midwest.

Dunham said he's yet to see a profit from his Granite City venture, but he expects a turnaround as the economy strengthens. A piece of Monday's deal would allow management to buy back a portion of shares granted to Dunham for just .001 cent each, but only if Granite City's stock climbs above 71.3 cents.

Already this year, Wagenheim said, he and other executives have renegotiated restaurant leases and long-term debt instruments, shaving $4.3 million from annual expenses. It wasn't enough to bring profits, though: The company reported a loss of $2.53 million in its most recent quarter, ended June 30.

Still, customers have been loyal, Wagenheim said, dropping by for the chain's burgers and brewed-on-site beer. "The underlying business was healthy," he said.

Granite City stock closed Monday at 59 cents per share, up 13.33 percent.

Matt McKinney • 612-673-7329