As far as the other concepts—Kenny Rogers and Miami Subs—do you plan on doing any branded products with those as well?

No. Kenny Rogers is a system that we bought out of bankruptcy. The primary use of Kenny Rogers to us is that in a majority of Nathan’s restaurants and Miami subs restaurants we introduced a chicken sandwich menu and branded it as Kenny Rogers. So we used Kenny Rogers within our systems as a branded chicken concept. Secondarily, we are continuing to open Kenny Rogers restaurants through a master franchise agreement in Asia. Today there are well over 100 Kenny Rogers restaurants in Asia. Miami Subs is a regional quick-service restaurant chain primarily located in southern Florida, and that’s run as a separate entity of Nathan’s Famous.

The Kenny Rogers international franchise is the biggest growth mechanism for that concept.

Correct. Also, in the last 18 months, we’ve opened nine Nathan’s restaurants in Japan, and that’s an initiative which is continuing. We’re focused on Japan as the primary country that we’re developing, but we’ve opened three Nathan’s in Kuwait—two on Army bases and one in an amusement park—and we plan to open a couple more in Kuwait. We are having discussions with other potential master franchisees for other countries right now having to do with the Nathan’s brand.

I read that skyrocketing beef costs have hit you. Can you give us an idea of how beef prices are contributing to your costs and what kind of price increases you might expect?

The way the beef cost increases affect us the most is through the Branded Product Program because we are basically selling our hot dogs to others. Over a two-year period, I would say beef costs have gone up 40 percent. They were at a high a month or two ago, and since then they’ve come down slightly. Over the last two years, we have increased selling prices of our hot dog products in the Branded Product Program in sync with how everyone has increased prices. I would think proportionately we have probably increased our prices much less than the cost increases. So we’re not able to pass through all of the increases that we’ve incurred, and, quite honestly, that’s why we feel very good about the success we’ve had in the Branded Product Program, because we’ve had to overcome a reduction in margin.

Can you give me an overview of where Nathan’s restaurant franchising will be headed over the next 12–18 months?

Last year, as I said, we opened 28 new Nathan’s restaurants. I would think that generally the scope of that kind of development of new Nathan’s restaurants is going to continue. I also believe that last year, as in all other years prior, we’ve seen increases in the sales of the Branded Product Program, and I would anticipate that’s going to continue along with increases on the retail side of our business. So I am looking forward to seeing sales increases in each of these revenue centers.

Would you characterize Nathan’s as a restaurant company or some other food-related entity?

Our strategy, which has been very successful, has been to concentrate on marketing the brand Nathan’s and implementing a points-of-distribution strategy. The restaurants that we franchise and that we operate are just one way that we distribute our products. We also distribute our products to the Branded Product Program, where we allow others in the foodservice industry to market the Nathan’s name and sell Nathan’s hot dogs. In that situation, we sell them the hot dogs they use, and we derive a profit from the sale. The other thing we do is we license a manufacturer to sell packaged Nathan’s hot dogs in supermarkets and club stores.

So there are many ways through company restaurants, through franchise restaurants, through the Branded Product Program, and through retail distribution that we are distributing our products. The restaurant business is where are roots are. That’s where we started. That’s what we were all about for most of our history. But today, we really are much more diverse in the types of business that we do.