The hyphens shouldn't be there. Grandma is used as a proper noun here, and it should, indeed, be capitalized. As for the first sentence, 1)The pastry shop had a sale on the following: cakes, croissants, blueberry muffins, and D anishes.
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Ravi Kanth2)Lottie skipped down-the-road and across the bridge to Grandma's house.The hyphens are incorrect. "down the road" is a prepositional phrase. The only phrases that should be hyphenated are modifiers. He is out-of-this-world gorgeous.