Leases	6 Months Ended
Jul. 02, 2013
Leases
Leases	3. Leases Capital leases As of July 2, 2013, the Company operated 23 restaurants under capital lease agreements, of which one expires in 2020, one in 2022, three in 2023, two in 2024, five in 2026, four in 2027 and seven in 2030, all with renewable options for additional periods. Under certain of the leases, the Company may be required to pay additional contingent rent based upon restaurant sales. At the inception and the amendment date of each of these leases, the Company evaluated the fair value of the land and building separately pursuant to the FASB guidance on accounting for leases. The land portion of these leases is classified as an operating lease as the fair value of the land is 25% or more of the total fair value of the lease. The building portion of these leases is classified as a capital lease because its present value was greater than 90% of the estimated fair value at the beginning or amendment date of the lease and/or the lease term represents 75% or more of the expected life of the property. Included in property and equipment as of July 2, 2013 were $25.5 million of assets, net, held under capital leases. Amortization expense related to the assets held under capital leases is included with depreciation expense on the Company’s condensed consolidated statements of operations. Operating leases In February 2012, the Company entered into a 15-year lease agreement for a site in Franklin, Tennessee where it constructed a Granite City restaurant using a new prototype. Due to the design of this prototype and the more stringent building standards the Company requires, management believes the life of this restaurant and future restaurants built using this prototype will be 25 to 30 years. Per the terms of the lease, the landlord paid the Company a $1.75 million tenant improvement allowance. Because the Company incurred all the construction costs and risk of loss, the Company accounted for the transaction as a sale leaseback, pursuant to guidance in ASC 840 Leases. Management evaluated the fair value of the property and determined it to be equal to undepreciated costs, and therefore recorded a deferred loss of $1.7 million which will be amortized to rent expense over the life of the lease. The lease, which may be extended at the Company’s option for up to two additional five-year periods, calls for annual base rent starting at $158,000. The Company opened this restaurant on February 5, 2013. In June 2012, the Company entered into a 10-year lease agreement for a site in Indianapolis, Indiana where it constructed a Granite City restaurant using its new prototype. Per the terms of the lease, the landlord will pay the Company a tenant improvement allowance of approximately $1.1 million. Through the build out or “rent holiday” period, the Company recorded an aggregate of approximately $150,000 of non-cash rent expense in pre-opening costs. Of such amount, approximately $103,000 was included in the first half of 2013. The lease, which may be extended at the Company’s option for up to two additional five-year periods, calls for annual base rent starting at $210,000. Under the terms of the lease, the Company may be required to pay additional contingent rent based upon restaurant sales. The Company opened this restaurant on July 24, 2013.

3. Leases

Capital leases

As of July 2, 2013, the Company operated 23 restaurants under capital lease agreements, of which one expires in 2020, one in 2022, three in 2023, two in 2024, five in 2026, four in 2027 and seven in 2030, all with renewable options for additional periods. Under certain of the leases, the Company may be required to pay additional contingent rent based upon restaurant sales. At the inception and the amendment date of each of these leases, the Company evaluated the fair value of the land and building separately pursuant to the FASB guidance on accounting for leases. The land portion of these leases is classified as an operating lease as the fair value of the land is 25% or more of the total fair value of the lease. The building portion of these leases is classified as a capital lease because its present value was greater than 90% of the estimated fair value at the beginning or amendment date of the lease and/or the lease term represents 75% or more of the expected life of the property.

Included in property and equipment as of July 2, 2013 were $25.5 million of assets, net, held under capital leases. Amortization expense related to the assets held under capital leases is included with depreciation expense on the Company’s condensed consolidated statements of operations.

Operating leases

In February 2012, the Company entered into a 15-year lease agreement for a site in Franklin, Tennessee where it constructed a Granite City restaurant using a new prototype. Due to the design of this prototype and the more stringent building standards the Company requires, management believes the life of this restaurant and future restaurants built using this prototype will be 25 to 30 years. Per the terms of the lease, the landlord paid the Company a $1.75 million tenant improvement allowance. Because the Company incurred all the construction costs and risk of loss, the Company accounted for the transaction as a sale leaseback, pursuant to guidance in ASC 840 Leases. Management evaluated the fair value of the property and determined it to be equal to undepreciated costs, and therefore recorded a deferred loss of $1.7 million which will be amortized to rent expense over the life of the lease. The lease, which may be extended at the Company’s option for up to two additional five-year periods, calls for annual base rent starting at $158,000. The Company opened this restaurant on February 5, 2013.

In June 2012, the Company entered into a 10-year lease agreement for a site in Indianapolis, Indiana where it constructed a Granite City restaurant using its new prototype. Per the terms of the lease, the landlord will pay the Company a tenant improvement allowance of approximately $1.1 million. Through the build out or “rent holiday” period, the Company recorded an aggregate of approximately $150,000 of non-cash rent expense in pre-opening costs. Of such amount, approximately $103,000 was included in the first half of 2013. The lease, which may be extended at the Company’s option for up to two additional five-year periods, calls for annual base rent starting at $210,000. Under the terms of the lease, the Company may be required to pay additional contingent rent based upon restaurant sales. The Company opened this restaurant on July 24, 2013.