The first of 10 planned French Fry Heaven locations in Massachusetts and New Hampshire is targeted for Saugus’ Square One Mall in June and the Natick Mall soon after.

Fitchburg franchisee Aramis Jordan was catching up on reading one Sunday when he came across an ad for the Jacksonville, Fla.-based company.

“The first thing that came to my mind was, ‘Why didn’t I think of this?’ ” he said. “I looked at my wife and said, ‘What do you think?’ She said, ‘Everybody loves French fries.’ ”

French Fry Heaven sells Belgian-style fries (“Angels”) and sweet potato fries (“Saints”) cooked in trans fat-free peanut oil and served in paper cones for $3 to $6. Each location has 21 toppings, from the traditional salt or ketchup to mayo and chili powder, steak sauce and pepper, cheeseburger flavor and curry and peanut butter. Sweet options for the sweet potato fries include Nutella and peanut butter sauce, marshmallow and pumpkin spice, blueberry and vanilla, and funnel cake. Customers also can choose a variety of sea salts.

Jordan and business partner William Choate, who also own eight Edible Arrangements stores in Central Massachusetts, are in final negotiations for a 900-square-foot Saugus store and a kiosk outside the Natick Mall food court.

French Fry Heaven locations also develop regional toppings, and the duo is mulling lobster bisque or clam chowder flavors.

Former college president Scott Nelowet came up with the idea for French Fry Heaven in 2010 after seeing the proliferation of French fries-only small stands and stores on a trip to Europe.

“It probably has opportunities in nontraditional locations like kiosks in mall food courts, train stations or airports,” said Darren Tristano of Technomic, a food industry consulting firm in Chicago. “The only way you can make money on those types of concepts is to have low overhead costs and a platform of 500 to 900 square feet.”

A lot of the ingredients used in Piggy Pat’s recipes are a stone’s throw away: pork from Rodman in Jefferson County, cheeses from Newport, beef from Little Falls.

McCann, the New Hartford restaurant’s manager, estimates about 50 percent of the product sold comes from somewhere in the state.

Using local products is something the restaurant takes pride in, having started the practice about a year and a half ago. Getting the word out about that fact to their customers, however, is a little harder, he said.

“Marketing costs a lot, and you have to get that and buying the product into the budget,” he said.

“It adds up.” A bill making the rounds in the state Senate might alleviate that extra cost, while promoting local agriculture and foods at the same time.

The “Dine: Pride of New York” bill, encouraging restaurants to promote and use local products in their dishes, passed a vote by the Senate’s Agriculture Committee in mid-February and will go next to the Finance Committee.

If the bill is approved and made into state law within the year, it would take effect Jan. 1.

Membership in the program would be qualified by the number of ingredients grown and/or processed within the state. Restaurants that utilize at least 15 percent of local products would qualify for state designed logos and promotional materials touting the fact that they’ve gone local.

The bill is an extension of “Pride of New York,” which already promotes statewide agriculture and is more specific to the restaurants using those farmers’ products.

“Our thought behind this bill is to really help market those efforts and promote those efforts,” said state Sen.

David Valesky D-Oneida, the bill’s sponsor.

He said the materials range from stickers to go in restaurant front windows to a spot on a “Dine: Pride of New York” designated website. Restaurants also would specify from which farms its edible components come.

Valesky, McCann and others in the industry believe eateries and the sources of their ingredients – the farms – would benefit from the bill, but not without some difficulties.

Agriculture is the biggest industry in Upstate New York, and is the No. 1 economic generator for this part of the state, said Steve Ammerman, manager of public affairs for the New York Farm Bureau.

A bill like this would do nothing but good, he said.

“It seems like one of those no-brainer bills,” he said.

But finding the proper amount of the local products at the right price is a bit of a fishing expedition.

McCann said his restaurant would like to use more free-range local chickens – it used about 100,000 birds last year – but he said not a lot of local suppliers carry product on that scale.

Szarek Greenhouses in Westmoreland sells its hydroponic lettuce to Utica restaurant The Tailor and The Cook, which touts using local products on its website.

The farm’s co-owner Bernie Szarek said he would like to expand and sell to more restaurants, but the cost to farm the vegetables would break his bank.

“We’d be happy to do it, but it’s a matter of economics,” he said.

“It’s hard to feed a family today, but we have to sell a good product to stay in business, so it might cost a smidgen more.”

Logistics and cost of restaurants going local and using at least 15 percent of state-made products could make qualifying for the bill’s advantages a little tougher, said Darren Tristano, executive vice president of Technomic, a food-industry consulting and research firm.

An uptick in fiscal traffic caused by local hungry customers would help spur the bill’s efforts. Eating locally makes customers feel good because they feel like they are supporting their neighborhood businesses, as well as reducing their carbon footprint, he said.

“They have an emotional connection to brands,” Tristano said.

“It’s meaningful to them.”

Punch cards put the loyalty programme into customers’ hands. Customers carry a card that gets signed, hole-punched or stickered each time they make a purchase. The customers need to keep coming to get that 10^th sandwich for free.

Restaurant loyalty programmes evolved with the digital age, and swipe cards or keychain fobs replaced many punch cards. Today these programmes collect valuable data on consumers’ purchases and behaviours, what they like and when they visit. Online and smartphone-based programmes are even more convenient for consumers and enable more data collection on the part of operators.

Consumer Insights on Loyalty Programmes
Current restaurant loyalty programme participation rates in the United States suggest that opportunities are going untapped, and there are lessons to be gleaned for U.K. operators as well.

Technomic’s recent “Market Intelligence Report: Loyalty Marketing” found that while only about one-third of consumers (36%) say they participate in a restaurant-based loyalty programme, 72% say that if the restaurant they visit most often offered a programme, they would sign up. This indicates that there is opportunity for more restaurants to offer loyalty programmes. It is possible that some of these favourite restaurants do have loyalty programmes already; here, the opportunity exists in building awareness about the programme and its benefits.

The prevalence of restaurant loyalty programmes and consumers’ willingness to participate begs the question of why someone would be reluctant to join. Consumers say they are concerned about privacy, and they demand to know how their personal contact information will be used.

• Fully 70% of consumers say they would be more inclined to sign up for a rewards programme if they could be guaranteed that the restaurant would not pass along their information.
• Two-thirds of consumers want to know how restaurants intend to use the personal information provided.
• Forty-six percent say they are concerned about receiving spam or junk mail after signing up with loyalty programmes.
• And 39% are concerned that restaurants might share their personal information with others.

Technomic asked consumers specifically which personal information they would be willing to provide to join a loyalty programme. While 60% would share an email address, only 43% would provide a home address and only 30% would provide their phone number.

At the same time they explain what their loyalty programme’s rewards are, restaurants should let customers know what they will do with their information. Such transparency can help build trust, which is a good step toward building an emotional connection.

Base: 1,000 consumers age 18+
Consumers indicated their opinion on a scale of 1-6, where 6=agree completely and 1=disagree completely
Source: Technomic 2012 Market Intelligence Report: Loyalty Marketing

Operators will also want to consider who their customers are—or who they are trying to attract as customers. Our research has found that the more income consumers make, the more likely they are to participate in restaurant loyalty programmes. This may be because higher-income groups want to be recognised for the money they are spending.

However, don’t neglect “aspirational” diners, those who go out to eat at restaurants that are just out of their reach for most occasions but are used for special occasions. These consumers may not be your key demographic, but they add up, and you would miss them if they didn’t come at all. Programme tiers could offer different rewards to different customer groups. Aspirational members may be attracted to a reward that simply makes them feel included, such as an offer to try a new menu item and give their opinion. It would tell them that even though you don’t see them every week, you value them and their input.

Developing Programmes That Lead to Loyalty
Technomic recommends three steps to moving toward emotional connections.

• Set up a loyalty programme, offering enough of an incentive for customers to provide personal information.
• Use the data gleaned from those users to provide compelling and relevant rewards.
• Speak to what is important to them to build real loyalty.

Initial communications should focus on free or discounted food or beverages or other giveaways. As the following exhibit shows, the relationship will probably begin as a materialistic one, dependent on regular coupons and discounts and immediate benefits for signing up. Being invited to sign up by the restaurant’s staff or being welcomed by one’s favourite restaurant are incentives that begin to build the relationship between the consumer and a favourite brand.

Base: 358 consumers age 18+ who participate in restaurant loyalty programmes
Source: Technomic 2012 Market Intelligence Report: Loyalty Marketing

Customers don’t want to have to work hard—or at all, really—for their perks. Even when they are willing to sign up for a loyalty programme, they want restaurants to make it as painless as possible. Seven in 10 consumers (71%) would be more likely to sign up for a programme if perks were “effortless,” 59% don’t want to have to print coupons, and 39% don’t want to have to carry a physical card in order to receive loyalty-club benefits.

Base: 1,000 consumers age 18+
Consumers indicated their opinion on a scale of 1-6, where 6=agree completely and 1=disagree completely
Source: Technomic 2012 Market Intelligence Report: Loyalty Marketing

Compared to other consumers, loyalty club members are more likely to be active social media users. While 53% of all consumers “like” restaurant brands on Facebook at least occasionally, 62% of those who participate in restaurant loyalty programmes do the same. Similarly, 19% of all respondents read and/or write restaurant reviews on sites like Yelp, but 29% of loyalty-club members do so. This speaks to the importance of two-way communication with frequent diners.

To successfully communicate with frequent diners, operators must also speak the correct language and use the correct medium. Fully 78% of consumers who have smartphones and participate in restaurant loyalty programmes use their phones to access information or discounts from the programme. It’s no surprise that younger people use their smartphones more often than older consumers. It’s interesting, though, that a majority of consumers 45 and older also use their smartphones to access their loyalty programme. Savvy loyalty-programme operators will use this information and input from their own members to determine the best means of communication.

Base: 230 consumers age 18+ who have smartphones and belong to restaurant loyalty programmes
Source: Technomic 2012 Market Intelligence Report: Loyalty Marketing

Loyalty Membership Drives Restaurant Visits
The good news for restaurants with rewards programmes is that a majority of consumers who participate in loyalty programmes are likely to decide which restaurant to visit based on whether they are a member of that restaurant’s programme. And, just as higher-income consumers are more likely to join such a programme, they are also more likely to base their decision on where to eat on their membership.

Being in a loyalty programme does appear to put the restaurant in consumers’ consideration set, which helps get them in the door. It’s a good first step toward building those emotional connections.

Base: 358 consumers age 18+ who participate in restaurant loyalty programmes
Source: Technomic 2012 Market Intelligence Report: Loyalty Marketing

Darren Tristano is Senior Managing Director of Technomic Inc., a Chicago-based foodservice consultancy and research firm. Since 1993, he has led the development of Technomic’s Information Services division and directed multiple aspects of the firm’s operations. For more information, visit http://www.technomic.com.

Examples of Successful U.S. Restaurant Loyalty Programmes

Incorporating Social Media
Dunkin’ Donuts held a competition to award the title of President of Dunkin’ Nation. Members earned points for checking in via FourSquare and Facebook, and then selected the winner from among the top visitors.

Offering ‘Important’ Rewards
Understanding customers creates the ability to offer rewards that customers find important. For example, la Madeleine’s Card for the Cure speaks to the core values of the chain’s regular clientele, who are mostly women. The loyalty card costs $35 up front, and gives the customer 10% off all purchases for a year. Additionally, 1% of sales goes to Susan G. Komen for the Cure. The card can be renewed annually for $25.

Making Consumers Part of the ‘In Crowd’
Some successful programmes appeal to consumers’ psychological need to be part of the “inner circle.” The Greene Turtle Mug Club enables the chain’s customers to purchase their own mug at their local Greene Turtle restaurant. The mug is assigned a number and stays on display in the unit until the member comes in and orders a beverage. The company boasts that there is an average of 1,000 members per unit.

The chain’s waitresses are as buxom as ever but its sales have “flattened out,” said Darren Tristano, executive vice president at research firm Technomic, Inc. Revenue peaked in 2007 at nearly $1 billion but had fallen to around $850 million last year, he estimated. (The privately-held company doesn’t release sales figures.) The brand recently announced an overhaul aimed at making Hooters more mainstream than man-cave, adding more salads to its menu, remodeling stores and rolling out a series of ads last week to tout the changes.

These efforts have only made the brand a little more popular, a new consumer survey shows.

According to market research firm YouGov’s BrandIndex, both men and women think slightly better of Hooters than they did prior to its overhaul, but men’s impression barely squeaked into positive territory, and women’s overall perception remained sharply negative. BrandIndex CEO Ted Marzilli said the small gains were encouraging for the brand, but “it’s not a brand that appeals to everyone.”

Hooters’ PR agency declined to make a spokesperson available for comment, and messages left with the company’s chief marketing officer were not returned.

The Atlanta-based chain and founder of the unfortunately termed “breastaurant” trend is trying to keep its core customer — the guy for whom the chain’s signature wings are a secondary attraction to the scantily-clad wait staff — from defecting to newer competitors like Tilted Kilt or Twin Peaks, while at the same time appealing to their girlfriends or wives.

“Restaurants can increase their base if they can negate the ‘veto vote’… Women are the driving force on our everyday eating patterns,” said Harry Balzer, chief industry analyst at research firm NPD Group. “Traditionally, when you want to appeal to more women, you’re going to bring in issues that have to do with diet. It will be salads, things that are fresher.”

“The food had not kept pace over time,” CEO Terry Marks told Nation’s Restaurant News in August. “By broadening the menu and introducing items that are better for you, we can get both new people and lapsed guests who might have outgrown our core items.”

In January, Hooters debuted its first redesigned location, which the company said gives customers “a more open and brighter appearance,” thanks to higher ceilings and lighter colors.

“They’re moving it forward, but it’s a larger brand, so in order to move the needle, it’s going to take some time,” Tristano said.

“They developed a niche and by some standard were certainly successful in establishing that niche,” Marzilli said, but the chain’s focus on sex appeal has some inherent limitations. “There are some women who will say it’s a sexist theme or I dont like what the brand stands for.’”

In good economic times, that might not be an issue. But the recession pummeled the casual dining sector, and Hooters’ core customer, young men, have been disproportionately affected by unemployment.

“The overall casual dining space… has been undergoing a lot of turmoil over the last four to five years,” said John Gordon, principal and founder at restaurant consulting company Pacific Management Consulting Group. “Hooters had an even more difficult situation,” he said, because ownership turmoil distracted management from reinvesting in and reinventing what was becoming a dated brand.

NPD data found that Americans went out to eat, on average, 74 times last year. That’s the lowest number since the company began tracking it in 1984. “They’re appealing to a behavior that’s decreasing in this country,” Balzer said.

“The question is, mathematically… how do I keep my base while growing and attracting logical new users?” Gordon said. For Hooters’ management, the answer seems to be greater inclusivity.

But Tristano questioned whether catering to women is really in the brand’s best interest. “I think they need to stay true to their brand,” he said. “To try to make Hooters more female-oriented will move away from what has attracted men to the concept… It may be as harmful to target them as it is helpful to bring them in the doors.”

For nearly two years, he tried line busting with employees outside wearing headsets. Then he gave those employees handheld remote units to streamline ordering. Both methods helped alleviate the drive thru’s bottleneck, but there were other issues that technology and manpower couldn’t address.

So in November, Holmes installed a dual drive-thru lane.

“I recognized pretty early on from a volume standpoint that our drive thru had hit a lid, so to speak,” says Holmes, whose unit does an average 1,800 transactions a day. “We were at maximum capacity for lots of different reasons.”

The crowded, one-lane system was causing many customers to reach the dreaded turn-away point. “It’s an intuitive thing,” Holmes says. “People see that line and think, ‘I’m going to park and go inside,’ or ‘I’m going to go somewhere else.’”

A restaurant has a big problem if customers drive up and consider leaving, says Darren Tristano, executive vice president of Technomic, a restaurant consulting and research firm. “Every restaurant is marketing to get customers,” he says. “If you can’t manage them in an efficient manner, then you’ll lose that marketing effort, and you’re going to lose out on those customers. That is critically important to surviving today.”

Adam Noyes is the chief restaurant operations officer at Checkers/Rally’s. He says the chain is the biggest dual drive-thru concept in the country, with 85–90 percent of its locations featuring double drive thrus.

Noyes says that for operators who decide dual drive thrus are the best approach for their brand, it’s essential both lanes stay open during operating hours. “And if you’re going to have a double drive thru, you’ve got to have the technology, people systems, and training to be able to deliver on that experience,” he says. He adds that there is a learning curve for both staff and customers when installing dual drive thrus.

“When guests pull up to the passenger side [drive thru], that side is better designed for those with multiple guests, because you have to reach across,” Noyes says. “But that’s really the only negative. Our guests have learned that when you’re going to that side, it can be fun because they let the child pay and it’s a different experience. They turn that negative into a positive.”

Holmes’s parking lot isn’t backed up anymore, but he still has difficulties with the drive thru. His dual drive thru’s lanes each have a speaker box and menuboard, and merge into one lane up to the window, where guests pay for and receive their food. While his bottleneck used to be at the speaker box, it’s now at the window, an issue common with dual lanes that merge.

Holmes has increased staffing, not only to operate the drive thru, but also because traffic has increased inside the store. He says he doesn’t mind the extra staff. “What we’re able to do now is spend a little more time on service with guests, more than what we could before,” he says. “It changes the dynamic, but also gives you a better opportunity to serve guests.”

Noyes says extra staff when adding a second drive-thru lane can decrease the stress factor for all parties. “It gives the employees the opportunity to stop and be sure that they’re being friendly to the guests,” he says. “Sometimes when they’re doing so many things, they get overwhelmed and forget that hospitality piece.”

Cross-training staff is also imperative when operating a dual drive thru, Noyes says. “Being sure that an employee can easily slide over and help take an order or help bag an order, that’s another key piece so that you’re as efficient and productive as possible,” he says.

While there are a few negatives to the dual drive thru—including additional training, technology, and costs—it can be a boon to business if done correctly, Noyes says. “When guests pull up to our lot and see that they can choose between one lane or two, the perception is that it’s going to be a faster experience.”

For Holmes, a second drive-thru lane has produced tangible results. When his drive thru was a single lane, the maximum number of cars he could get through in a day was 123; with a second lane, that number has jumped to 143. In addition, revenue has increased 20 percent in two months, and his unit has moved up 150 spots in overall system rankings for the peak dayparts of lunch and dinner.

“From a volume standpoint, we’ve seen a good bump,” he says. “I was probably on a 7 percent increase for the year, and we [went] up 10–12 percent in November and December.”

While much of Checker’s/Rally’s business comes from dual drive thrus, Noyes says the option doesn’t work for every brand or location. To be more flexible, he says, the chain now offers franchisees a choice between dual-lane and traditional single-lane drive thrus.

“At the end of the day, it’s about convenience to the guests. How it’s delivered isn’t as critical,” Noyes says. Lately, new growth for the brand has been in urban centers such as New York City, where drive thrus aren’t possible—or even necessary.

“For us to get our brand in as many places where our guests want it, we need to be able to execute in many ways. Dual drive thrus are just one piece,” he says. “The question is, How do you grow your brand? There are many avenues to be able to do that.”

“More consumers than ever before tell us that eating healthy and paying attention to nutrition is important,” said Darren Tristano, vice president of research at consulting firm Technomic Inc., which unveiled a new “Healthy Eating Consumer Trend Report” in January. This report showed that consumers’ perception of healthy food is changing as they become more health-conscious. The study also found that consumers strongly associate with contemporary definitions of health, but balance better-for-you food choices with occasional indulgences.

Tristano explained that more consumers are gravitating toward “health halo” claims, such as local, natural, organic, whole wheat and free range. For that reason, he advises retailers to “leverage the growing interest in the health halo by developing the kinds of menu offerings that can underscore health without detracting from taste perception.”

Recent research from Mintel also demonstrates the shift toward healthier eating. According to the market researcher, just over two-thirds of Americans are opting for healthier fare.

“Consumers are more aware than ever of their own nutritional deficits and what poor eating habits can do in terms of their long-term health,” said John Frank, Mintel’s category manager for CPG food and drink reports. “As a result, today’s consumers are seeking out healthy food with greater urgency. However, skeptical or confused consumers aren’t likely to pay a premium for healthier food.”

Smart convenience store retailers are monitoring these and other consumer health trends, with some taking a more proactive role and experimenting in-store where it makes sense. Among those making headlines recently:

• 7-Eleven Inc. introduced a line of fresh foods and downsized some of its fare by creating portion-sized items. The goal is to have 20 percent of sales come from fresh foods in its U.S. and Canada stores, up from about 10 percent currently, according to a December New York Times report.

“We’re aspiring to be more of a food and beverage company, and that aligns with what the consumer now wants, which is more tasty, healthy, fresh food choices,” stated 7-Eleven President and CEO Joe DePinto. The c-store giant has reportedly put together a team of culinary and food science experts to study industry trends and develop new products.

• More than a dozen convenience stores joined in a Kansas county’s efforts to reduce the community’s salt intake. Hy-Vee Convenience Store, Gas & Shop Convenience Store, Larry’s Shortstop and 10 local Kwik Shops in Shawnee County, Kan., agreed to display a standalone rack of healthy, low-sodium items (chosen and customized by a dietician) in a prominent spot in their stores. This health initiative was spearheaded by the commissioners in Shawnee County, which provided the racks, promotional signage, technical assistance and advertising.
• C-store retailers in Brattleboro, Vt., joined the Healthy Retailers program, sponsored by the Brattleboro Area Prevention Coalition in collaboration with the Vermont Department of Health. In addition to discouraging tobacco and alcohol use among youth, the program resulted in vegetables, new fruit varieties, and ground beef and pork products from local farms being available for purchase at select convenience stores in the area.

Sonja Hubbard, former NACS chairwoman and CEO of Texarkana, Texas-based E-Z Mart Stores Inc., is one convenience industry leader who has been vocal about her belief that the opportunity exists to make c-stores a more nutritious place for consumers to shop.

In 2010, Hubbard told Convenience Store News she was initially offended by the First Lady’s remarks about the lack of healthy food in c-stores, but then felt empowered to make some changes at her own chain. Now, two years later, she shared with CSNews that she thinks “c-stores are improving on the way we are promoting existing health and nutrition options, plus we are continually adding more items and trying to grow sales in the category.”

Minute Market in Oregon is another c-store operator adding and testing better-for-you items like string cheese, low-sodium sunflower seeds, fresh fruit and “healthier” drinks for kids. “As the industry changes, we are getting more options to choose from and bring in as our main distributor picks up these healthier products,” said Phyllis Simpler, Minute Market’s operations manager. “Over the last year, especially, a lot more products have been made available to us.”

As US revenue drops, Yum is focusing on growing overseas, particularly in China and Southeast Asia. A plan taking effect in the next five years to limit restaurant franchise holders to operating 250 outlets in Indonesia, where fast-food sales rose 15 percent in 2011, may crimp openings for Yum and other US food chains as well as encourage similar restrictions in other nations.

“It’s going to probably slow things down a bit,” said Darren Tristano, executive vice president at Chicago-based restaurant researcher Technomic Inc. “This is going to be a bump in the road” for Yum, which already has 700 locations in Indonesia, he said.

Indonesian Trade minister Gita Wirjawan earlier this month announced the rule, which has certain exceptions, in a bid to protect small- and medium-size businesses. KFC, which sells wraps, spaghetti and chicken porridge in Indonesia, is the top US fast-food chain in the Asian nation with about 32 percent of the market, according to Bloomberg Rankings data from July.

Customers eat fried chicken with rice at fast-food restaurant Kentucky Fried Chicken in Jakarta. KFC, which sells wraps, spaghetti and chicken porridge in Indonesia, is the top US fast-food chain in the Asian nation with about 32 percent of the market, according to Bloomberg Rankings data from July. (Getty)

The rule “doesn’t impact Yum’s growth plans,” Virginia Ferguson, a company spokeswoman, said in an e-mail. “Our local franchisee will continue to work with authorities on the guidelines.”

Yum Expansion

Yum’s saturation of two or three stores per million people in Indonesia can expand to that of the US, where it has 50 to 60 eateries per million people, Muktesh Pant, chief executive officer of Yum International, said at an investor conference in December.

There is “no fundamental reason why Indonesia will not get there,” he said. In Indonesia, where gross domestic product growth is outpacing that of Brazil, Russia and India, Yum has said it can grow 43 percent to 1,000 stores by 2015.

“Indonesia is a very attractive market because of the extremely fast-growing middle class with discretionary income,” Bill Edwards, CEO of Irvine, California-based Edwards Global Services Inc., which advises retailers and restaurants, including Denny’s Corp. (DENN), in opening stores overseas.

While Yum says its growth won’t be affected by the rule, it’s harder to keep the brand and food quality consistent with different and smaller store owners, Edwards said.

“What if one operator does a bad job?” he said. More franchisees will require more supervision from the parent company, he said.

Yum, based in Louisville, Kentucky, has dropped 1.4 percent this year, while the Standard & Poor’s 500 Restaurants Index has gained 4.5 percent.

‘Still Evaluating’

The regulation affects companies such as PT Fastfood Indonesia, which operates more than 400 KFC restaurants in Indonesia. The rule applies to all food-mart franchisers and franchisees, including public companies, Wirjawan said.

“We are still evaluating and calculating the potential impact of the new rule,” Justinus D. Juwono, director of PT Fastfood, said in a telephone interview. “We haven’t changed or revised our investment plan or target yet. But, we’ll closely look into it, when we get our evaluation and calculation done in two or three weeks.”

Companies in Indonesia are allowed to operate 250 outlets either by selling partnership stakes or agreeing to open them in certain remote locations to be determined later, Wirjawan said at a press briefing in Jakarta on February 15. They will have five years to comply, he said.

Indonesia Population

Indonesia is the fourth-most populous country in the world with about 248.6 million people, according to a July estimate from the US Central Intelligence Agency World Factbook. China is the biggest country by population, followed by India and then the US, with 313.8 million people, the data show. Indonesia’s economic growth was about 6 percent in 2012. The nation had the world’s largest Muslim population as of 2010, according to the Pew Forum on Religion & Public Life.

Fast-food sales in Indonesia climbed 15 percent to $1.54 billion in 2011, compared with an increase of 9.6 percent globally and 3.6 percent in the US, according to data from Euromonitor International.

Dunkin’ Brands Group Inc. (DNKN), owner of the Dunkin’ Donuts and Baskin-Robbins dining chains, has about 600 stores in Indonesia, all of which are franchised. The company has been remodelling its Baskin-Robbins ice cream stores there.

“We are currently reviewing the regulation, and it is too early to determine possible impact,” Michelle King, a spokeswoman for Canton, Massachusetts-based Dunkin’ said in an e-mail. “We remain committed to the market.”

Me Too

McDonald’s Corp. (MCD), the world’s largest restaurant chain by sales, has about 130 stores in Indonesia, all of which are franchised. Becca Hary, a spokeswoman for the Oak Brook, Illinois-based company, declined to comment on the rule.

Indonesia may be the first of nations to impose restrictions on retail operators as other markets take on a “me-too” approach, Edwards said.

“This is one of the things we’re worried about in the franchise community,” he said. “This may set a precedent for other countries – the ‘me too’ does happen.”

Analysts with Great American Group Inc. report that overall retail food prices are likely to increase between 3 and 4 percent in 2013, which is above the historical average.

According to the National Climatic Data Center, about 55 percent of the country experienced at least moderate short-term drought in June 2012, for the first time since December 1956. It was compounded by a heat wave-laden July, which left farmers scrambling to save harvests.

The corn harvest in particular was dramatically reduced by the drought, affecting the cost of animal feed, which has spiked the cost of meat and dairy products. After reaching a high of $8.43 per bushel in August, corn prices softened in the remaining part of the year and into January 2013. Despite the recent decline, corn prices remain well above those of prior years.

To raise or not to raise prices?

In its latest Food Monitor (Inventory and Equipment), Great American Group notes that retail food prices have already been impacted by increases in commodity costs, with some operators wondering whether or not to pass those costs along to consumers.

“Commodity prices have been high for several months, and food retailers have been feeling pressure to pass along price increases to customers,” said Ken Bloore, chief operating officer for Great American Group’s Advisory and Valuation Services division. “Prices are expected to increase more significantly in the coming weeks and months.”

Some consultants, however, advise against increasing prices too much. Michael Shepherd, who owns three pizzerias in Ohio and Michael Shepherd Consulting LLC, said operators will risk losing customers if they increase prices too much while the economy is still slow.

Five or 10 years ago, this would have been a better option. Now, however, “it’s a whole new world,” he said.

“When people’s incomes are going down, your prices can’t keep going up,” he said. “Increasing sales volume to outrun your rising costs is a race you can never win. You’ll reach a point where you can’t squeeze any more from your customers, and when the economy goes south again, it’ll catch up to you.”

However, Darren Tristano, executive vice president at market research firm Technomic, said grocery prices are rising faster than restaurant prices, so “for consumers, restaurants are now actually a better value.” But while consumers may be more optimistic than they were last year at this time (by 4 percent), operators are feeling the commodities pressure and will have little choice but to pass along some costs.

“This year we expect a big spike in beef, so we’ll see more veggies and chicken, as well as operators who plan to take price increases. Fifty-four percent say they will raise their prices this year. They don’t want to, but most will have to,” Tristano said. He added that all eyes will be on McDonald’s. As the chain bumps its value offerings from $1 to $1.29, it makes other brands more comfortable to inch up prices as well.

Other factors at play in rising costs

The drought of 2012 isn’t the only driver of rising costs. Food prices were also impacted by the consumption of corn in the production of biofuels, as well as population growth and increased energy costs, according to Great American Group.

Also, gridlock in Washington, D.C. may exacerbate the issue, particularly with a possible sequester looming. The sequester (or the “second mini fiscal cliff,” according to CNN) dates back to 2011, when President Obama and Congress agreed upon certain budgeting cuts totaling $1.2 trillion to gain control of the nation’s debt. This agreement was made with a the idea that the government’s bills would be paid in the interim, but a compromise has yet to be made, which will force spending cuts to go into effect on March 1.

According to CNN, if these cuts aren’t averted by March 1, there will be a $51 million cut to food safety programs. This means food inspectors will be furloughed and meat and poultry plants could be closed for up to 15 days. Consequently there would be shortages of chicken, eggs, pork and beef, leading to price increases. U.S. Department of Agriculture Secretary Tom Vilsack told CNN: “Food safety could be compromised. There will have less food available — by as much as 2 billion pounds of meat, 3 billion pounds of chicken, 200 million pounds of eggs.”

Rick Akam, who became chief operating officer of Dick’s Wings Jan. 22, said the goal is to strengthen the Dick’s Wings brand as the foundation of American Restaurant Concepts Inc. Another goal is to add other brands to diversify the operating company while leveraging top-level management and the possibility of integrated menus, and products to make the new regional brands stronger.

“The opportunities appear to be just like Dick’s,” Akam said. “They’re a good, strong regional brand. The goal wouldn’t be to necessarily make them all a national brand. It would be to make them all regional brands in that region of the U.S.”

The idea behind acquiring small, regional restaurant chains is to keep the popular local flavor in the brands acquired.

The new strategy is the latest change for the company. Based in Jacksonville, American Restaurant Concepts operates 16 full-service Dick’s Wings and two Dick’s Wings Express restaurants, all of which are franchised. In 2010, the company (OTCBB: ANPZ) started trading publicly and in November 2012, money manager and private investor William D. Leopold II became the majority shareholder by acquiring 42 percent of the stock.

Leopold has an investment relationship with Seenu Kasturi, the CEO of a Louisiana-based development and investment firm called Blue Victory Holdings Inc. As part of that relationship, Blue Victory Holdings is now an affiliate company of American Restaurant Concepts, providing financing, management expertise and other resources. Blue Victory is also the franchisee for a portfolio of fast food restaurants in the Carolinas that include 20 Kentucky Fried Chicken restaurants, three KFC/Taco Bells and one KFC/Long John Silver’s.

Akam, who has spent his 35-year career in the restaurant industry with executive roles at Hooters of America LLC, Twin Peaks Restaurants and First Watch Restaurants Inc., said the first step in expanding American Restaurant Concepts is to standardize the flagship brand’s current restaurants and any future restaurants from the inside out. He expects to do that over the next six to 12 months.

Much like the other regional brands the company hopes to acquire, Akam said the company will grow Dick’s Wings regionally at first in the Southeast. He’s not focused on a certain number of restaurants, but on the areas where restaurants will be located.

“Dick’s is a great neighborhood concept and fits into a lot of different neighborhoods,” Akam said. “We’re trying really to evaluate the ideal demographics, the ideal location that it can go into.”

Ketan Pandya, a spokesman for Blue Victory Holdings, said that although initially Dick’s Wings will expand regionally, the company is already fielding interest from international markets as far away as Dubai and China.

Darren Tristano, an executive vice president at the food industry consulting firm Technomic Inc., said that, in general, buying regional restaurant chains could be a good opportunity for American Restaurant Concepts because it opens doors for franchising opportunities.

It also poses risks and challenges, because it means operating outside the segment the company is most familiar with and having to learn about the consumer base in each new region where it acquires a brand.

Akam said his biggest challenge will be to find the best franchisees.

“It’s very similar to some of my experiences with some companies of the same size that have become very successful,” Akam said. “Some of the real brand attributes are really good customer loyalty, very passionate owners and good food. All those similarities are there in Dick’s.”

All-natural burger chain’s first franchise location is set to open in Shrewsbury, and dozens more are slated for New England over the next five years

First conquer New England. Then the East Coast. And finally, the country.

The founders of b.good, a Boston chain of nine farm-to-table burger and fry joints, are launching an ambitious campaign to spread their feel-good fast food in two weeks with the opening of the company’s first franchise store in Shrewsbury.

“We set out wanting this business to be huge,” said cofounder Anthony Ackil. “We never wanted to open five restaurants. We never wanted 50. We want hundreds.”

Ackil and Jon Olinto, the company’s other founder, developed plans and found partners last year for 23 new franchise stores. The restaurants, along with 12 more corporate locations, are slated to pop up in Maine, New Hampshire, Rhode Island, Connecticut, and Massachusetts over the next five years.

The duo met long ago, in sixth grade at Dexter School in Brookline, and bonded over homemade meals cooked by Ackil’s late uncle. As adults, they shared a love of fast food — but not the post-consumption guilt it inspires.

Ackil and Olinto opened the first b.good nine years ago, serving all-natural burgers, fries, and salads. Now the chain’s restaurants feature wallboards identifying the farmers who raise the beef and cultivate the produce served at each location.

As the business grew in Greater Boston, Ackil and Olinto spent time dissecting every aspect of their menu, finances, and operations — down to the amount of potatoes an employee can cut in 15 minutes. The founders share these details with their franchisees and take a hands-on approach with the each store, believing the brand’s success relies on how these restaurants perform.

“We want to give our franchisees a road map to make money,” Ackil said. “It’s taken us a long time to get things right.”

John Freeley and his brother, David, owners of the Shrewsbury location, were drawn to b.good above other brands because of the owners’ attitude and the farm-to-table approach.

“One of the key factors was their involvement in the franchise,” Freeley said. “In most cases, you sign the deal and you’re on your own. That’s not the case with Jon and Anthony.”

B.good sold the New England franchise restaurants to four different investor groups in deals for four or five stores each. The Freeleys are on pace to open a store a year, like the other investors, for five years in Rhode Island and southern Massachusetts.

But one analyst questioned how b.good, which serves a niche market of health-conscious consumers, will perform on a national scale.

The company follows two different trends in the “fast casuals” restaurant category — farm-to-fork fare and better burgers, said Darren Tristano, an executive vice president at Technomic, a food industry research firm. That could be a problem.

A bleak national market for farm-to-fork fast casuals means b.good’s founders are either on the brink of something new, different, and ready to burst with growth or people just won’t buy it, he said.

“Only a minority of consumers want farm-to-table,” Tristano said. “Out of that minority there are those who aren’t willing to pay for it because the price is higher. Now you’re getting down to a small minority that want it and are willing to pay for it, and then there’s a small percentage that actually do it.”

And in the booming burger market, well-established brands are offering lower investment costs and yielding similar annual sales.

B.good’s owners said a franchise store requires an investment between $400,000 and $600,000 and is expected to generate annual sales of about $1.15 million.

Another strong, growing brand in the better burger business, Five Guys, has an entry cost of about $350,000 to $550,000 per store and produces annual sales of about $1.2 million.

“Franchisees, knowing the market for those other burger chains, will look at b.good and ask why the investment costs are higher,” Tristano said.

Olinto said the b.good restaurants require slightly more money upfront because of upgraded fixtures, furniture, and equipment that help drive home the farm-to-table theme.

“If you just come in and get a burger and fries and don’t learn about our concept or where your food comes from, we’ve failed in a sense,” he said.

B.good is also likely to see competition from other fast casuals such as Subway, Chipotle, and even Panera Bread, which also serve more affluent consumers who care about the food they put into their body.

Although franchise business growth is predicted to increase at a slightly slower rate this year — by 1.4 percent compared with 1.5 percent in 2012 — it is still ahead of other business sectors, according to an IHS Global Insight report released in December.

Burger restaurants continue to pop up in the franchise industry, according to Alisa Harrison, a spokeswoman for the International Franchise Association. Overall, about 3,000 new restaurant franchises are forecast to open this year.

“We continually see new burger concepts because burgers and fries never go out of fashion,” she said. “It’s a concept that people like and if it can be replicated from one region to another, franchising is a great way to grow your business.”

Ackil and Olinto are confident they can stick to their restaurant concept of serving real food, which they define as knowing its source and the farmers who produce it.

The all-natural beef served in the nine corporate-owned b.good restaurants comes from Pineland Farms, a co-op of 270 sustainable farms located east of the Mississippi River and as far south as the Carolinas.

Pineland also supplies Whole Foods Market Inc., and Olinto said b.good is likely to pursue new markets that the supermarket company has entered because they share a similar customer base and need for local suppliers.

Tristano said it’s no surprise b.good found diners and investors in New England, but the brand will be tested in markets that don’t place as much importance on their food’s source.

“They’ll likely grow in the short term, but the long term is going to be a bigger question mark,” he said.