Granite City Food & Brewery (Ticker: GCFB)
(All quoted from the current 10-K filing) Our objective is to develop and operate successful restaurants by
consistently exceeding our guests' expectations in product, service and overall dining experience, thereby
becoming a leader in the casual dining industry. We continue to pursue consistent, long-term growth in unit
and overall company earnings in an effort to provide returns for our shareholders. Our concept targets a
broad guest base by incorporating two popular national dining preferences: high quality, made-fromscratch, casual, value-priced food, and fresh, handcrafted, quality beers. We believe this concept
differentiates us from many of our competitors, who feature pre-prepared, smaller portioned food items and
mass-produced, pre-packaged beers. The key elements of our concept and strategy are as follows:
• Offer a broad selection of quality foods at reasonable prices.
• Offer Old World, classic beers made with an efficient brewing process.
• Create a fun, energetic atmosphere and destination dining experience.
• Create a passionate culture of service.
• Achieve attractive restaurant and microbrewery economics.
• Pursue deliberate and careful expansion.
At the core of our concept is our 85-item menu, complemented by fresh, handcrafted beers. Our menu is
committed to full-flavored ingredients and is based on the made-from-scratch preparation of distinctive
items not generally featured on restaurant chain menus. We create new menu items and weekly specials on
a regular basis. All menu items are staff and guest-tested, then refined before menu implementation.
Our menu is strategically tailored for patrons who tend to have greater price sensitivity toward lunch
items than dinner items. When our menu is opened, our guests find a special section of lunch selections
featured at prices currently ranging from $4.99 to $7.49, providing a premium meal at a special value for
midday diners. We also offer signature selections, meals which are marketed as our chefs' personal
favorites. These selections provide our guests with an opportunity to treat themselves to the highest quality
Granite City Food & Brewery has to offer. Our overall menu prices currently range from $3.99 for
appetizers to $20.99 for our BBQ Pork Ribs. Most of our 85 menu items currently range from $8.00 to
$14.00. Our check per person typically ranges from $11.00 to $14.00.
Some of our more popular items include our Granite City Ale and Cheddar Soup, Chicken Caesar
Chalupa, Grilled Chicken and Bruschetta Salad, Chinese Pasta Salad, Grilled London Broil with Bourbon
Onion Sauce, Southern Fried Chicken Breast Sandwich (marinated in buttermilk and Cajun spices), Honey
Rosemary Filet Mignon and Granite City Walleye. We currently offer up to five special menu items
weekly, ranging from appetizers to salads and entrees. This approach allows us to be innovative, keeping
our menu fresh and interesting. Approximately 11% of food sales are generated through weekly specials.
We also solicit input from guests regarding our menu offerings.
To ensure that we are serving food of consistently high quality, we have developed quality control
practices, including (a) the participation by each member of our kitchen staff in a thorough training
program, (b) the development of strict specifications that ensure that only high quality ingredients are used
in our food and (c) the requirement that each shift of cooking personnel consistently prepare each menu
item. Furthermore, we utilize a test kitchen in Minneapolis which provides a facility for our Executive Chef
to develop new menu offerings. We believe through these efforts that we are able to consistently provide a
superior value-oriented dining experience for our guests.
We focus our business strategy on providing high-quality, Modern American cuisine prepared by an
attentive staff in a distinctive environment at a great value. By focusing on the food, service and ambiance
of each of our restaurants, we have created an environment that fosters repeat patronage and encourages
word-of-mouth recommendations. We believe word-of-mouth advertising and taking care of each of our
guests are key components in driving guests' initial and subsequent visits.
REQUIRED:
a. The instructor introduced two strategies for companies in maturing markets. Based on
the financial reports, which of these strategies does Granite City appear to be following
and why? What is their weakness in following the strategy?
b. LIQUIDITY: Is Granite City in a good liquidity position or a poor one? Have they become
more or less liquid over the past three years? How can you tell?
c. SOLVENCY: Is Granite City solvent? Has the company become more or less solvent
over the past three years? How can you tell?
d. EARNINGS: Were there sufficient earnings for the past four years? Is earnings
sufficiency getting stronger or weaker over the past four years? How can you tell?
e. Granite has $4,712,000 in depreciation expense for 2007. What is depreciation expense?
Why did this expense increase for 2007?
f. Is Granite Foods becoming more or less efficient in its operations over the past 3 years?
How can you tell?
g. What is the significance of a market-to-book ratio of 1.65 for 2007? Is the ratio good or
weak? Is it getting stronger or weaker? Why?
h. What have been the two largest uses of cash flow from operations during the past three
years?