Commitments and contingencies

6 Months Ended

Jul. 02, 2013

Commitments and contingencies

Commitments and contingencies

4. Commitments and contingencies

Leases

In October 2012, the Company entered into a 10-year lease agreement for a site in Lyndhurst, Ohio where it plans to construct a Granite City restaurant.  Per the terms of the lease, the landlord will pay the Company a tenant improvement allowance of approximately $1.2 million.  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 $456,850.  The Company anticipates opening this restaurant in the fall of 2013.  Under the terms of the lease, the Company may be required to pay additional contingent rent based upon restaurant sales.

In May 2013, the Company entered into an agreement to purchase approximately 2.5 acres of land in Louisville, Kentucky for $1.8 million, where it plans to construct a Granite City restaurant.  Additionally, the Company entered into a purchase and sale agreement with Store Capital Acquisitions, LLC (“Store Capital”) regarding this restaurant.  Pursuant to the agreement, Store Capital will purchase the property and improvements for the lesser of $4.5 million or the actual costs the Company incurs for the property and construction of the restaurant thereon.  Upon the closing of the sale, the Company will enter into an agreement with Store Capital whereby the Company will lease the restaurant from Store Capital for an initial term of 15 years at an annual rental rate equal to the purchase price multiplied by a capitalization rate equal to 8.75%.  Such agreement will include options for additional terms and provisions for rental adjustments.

In July 2013, the Company entered into a 15-year lease agreement for a site in Northville, Michigan where it plans to construct a Granite City restaurant.  Per the terms of the lease, the landlord will pay the Company a tenant improvement allowance of approximately $1.0 million.  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 $417,480.  Under the terms of the lease, the Company may be required to pay additional contingent rent based upon restaurant sales.