Many who claim this angle either cannot back it up very well or tell a good story about it. The part I notice the most is the chasm between being a "good" business and a "local" or "family-owned" business. I suppose my biggest question is, "Does it really matter that a business is family-owned or local?"
There's one category out here that is highly competitive and where "local" matters: natural/high-end grocery. Before we were all taking out third and fourth mortgages to pay for soy milk, there was Nature's Fresh Northwest. This was the real deal: a local store that had everything you needed and wanted but still felt local, personable and truly Portland. Then, it was purchased by Wild Oats. People here flipped out. Then Whole Foods arrived in all its glory. Shortly after, Whole Foods scooped up Wild Oats. Portlanders, despite being prone to fits of protest, demurred and shopped away despite feeling as though they were shopping "corporate."
In the meantime, New Seasons opened its doors. It was conceived and opened by some key folks from the Nature's Fresh days. It was an immediate hit. They source as local as possible and have clearly established themselves as the local alternative to the bigger stores. As I understand it, swarms of old Nature's people went back there to work and Nature's loyalists followed suit. Throw in home delivery with trucks powered by biodiesel and you have a store that is true to its heritage and beliefs. It's a good story and Portlanders have reclaimed the glory days in a store that is better than the original.
To New Seasons, local really does matter, and they can back it up. It's that rare case where a business is "good" and "local" and the story is told well.
In my opinion, going "local" starts with a real commitment and belief that being local really does matter to people. It can't just be a throwaway and it's so much more than just being the antidote to "corporate" or "box stores." It has to be a real, tangible story and something that a company is more than just "proud of." For advertisers who choose to go this route, you need to be 100% sure that you want to hang your hat on it. And you can certainly learn a thing or two from a company like New Seasons.