As an investment decision, a plan by the founding family of Rite Aid Corp. to increase its stake in Norfolk's Farm Fresh Inc. makes sense. At the same time, operating Farm Fresh, a regional food chain, independently of the Rite Aid drug chain, as chairman Alex Grass and family members plan, may be a sound business decision.

Analysts who have been bullish on Farm Fresh in the past believe the food retailer's prospects for significant improvement in earnings and market share are excellent.

Still, the Grass investment group's overture to Farm Fresh raises some intriguing questions about the investors' ultimate plans for Farm Fresh.

Could an acquisition of Farm Fresh by the Grass group eventually lead to the creation of a chain of food-pharmacy combinations involving Rite Aid?

"Zero," replied Rite Aid executive vice president Martin Grass, assessing the chances of that happening. "This is purely a private transaction."

Thus far Alex Grass, his son Martin and other family members have accumulated a 7.1 percent stake in Farm Fresh. The group has informed Farm Fresh's management that it would like to acquire the remaining shares in the chain.

"We think {Farm Fresh} is a company that's undervalued and has terrific market share in the Tidewater area" of Virginia, Martin Grass explained. "Farm Fresh has 40 percent of the market in Tidewater."

That seems like a strong enough reason to invest substantially in the Norfolk firm but the Grass family wants more than just an investment. "We'd like to {manage} both," Martin Grass said. "Our primary goal is to continue as executive officers of Rite Aid {but} we are interested in owning and improving Farm Fresh."

Implicit in his comments is a conclusion that his group can do a better job of managing Farm Fresh and improving its margins. After reporting a 29 percent gain in operating income in 1986 and a 1 percent increase in gross margins, Farm Fresh has tallied some rather disappointing results in 1987. Sales in the second quarter were up modestly but earnings plummeted 62 percent, prompting analysts to revise what had been conservative but favorable estimates for the year.

"Our outlook for 1987 earnings is decidedly pessimistic," said Kenneth M. Gassman Jr. of Wheat First Securities in Richmond.

Gassman had forecast a 10 percent earnings increase for Farm Fresh in 1987 but, in the face of "continued negative store-for-store sales trends," he has since projected less than a 5 percent rise in sales. Earnings are likely to be in the range of 65 cents to 70 cents a share for the year, down from 80 cents in 1986 and well below Wheat First's earlier projection of 95 cents, Gassman wrote in a recent evaluation of the company.

Nonetheless, Farm Fresh could achieve earnings of as much as $1.10 a share in 1988, which would represent the beginning of a recovery, according to Gassman. It's possible for Farm Fresh's earnings to be as much as $1.35 a share, though that isn't likely to occur until at least 1989, he believes.

Still, there is considerable value in Farm Fresh, an aggressive retailer that also has stores in the Baltimore area and in North Carolina. Its acquisition of Open Air Markets last year, an aggressive pricing program and expansion of nonfood consumer services, such as bank branches and automatic teller machines in its stores, have bolstered its long-term prospects.

Even with its big share of the Tidewater market and prospects for improved performance, Farm Fresh may need a new dimension to boost sales. Food-pharmacy combinations, perhaps?

"We're very pleased with the progress we've made with Rite Aid," said Martin Grass, dismissing the notion that food-pharmacy combinations may appeal to his group because of its extensive experience in operating a drug chain. "We think {Rite Aid} is more profitable than most drug chains. Farm Fresh stands on its own."

Unquestionably Rite Aid has made its mark as one of the more successful drug chain operators. With 2,035 stores it is the country's largest drug chain, based on the number of operating units.

Rite Aid also operates Encore Books, a chain in the Philadelphia area, and eight auto parts stores in New England. Management projects sales of about $2.5 billion this year.

Rite Aid is known in the industry as an operator of no-frill, generally smaller stores that specialize in the sale of prescription drugs, over-the-counter medicines and health and beauty products. The former Gray Drugfair chain in Washington, which Rite Aid bought earlier this year, is beginning to take that shape..

The jury is still out on whether the Rite Aid formula will be successful in the Washington area, where big supermarket chains with combination food-pharmacies hold a huge share of the market traditionally held by drug stores.

The marketplace clearly favors the combination food-pharmacy in large metropolitan areas. It may be the wave of the future. Consider this: Rite Aid anticipates sales in excess of $2 billion this year from 2,035 stores. Giant Food Inc. rings up more than $2 billion annually from its 144 stores, 90 of which are food-pharmacy units. If not Rite Aid, then some combination of Farm Fresh and a drug chain seems logical for the Baltimore-Washington-Norfolk region.

The Grass family obviously doesn't agree yet.