Beat butter at medium speed with an electric mixer until creamy; add powdered sugar, beating well.
Combine flour and salt; gradually add to butter mixture, beating until well blended. Stir in chocolate mini-morsels, cherries, and vanilla.
Line an 8" square pan with aluminum foil, allowing foil to extend over edges of pan. Lightly grease foil and sprinkle with 1 tablespoon granulated sugar. Press dough into pan.
Bake at 325° for 40 minutes or until golden. Cool 30 minutes or until slightly warm in pan. Use foil to gently lift shortbread from pan. Cut shortbread into 1" squares using a sharp knife. Roll shortbread squares in 1/2 cup granulated sugar.