Panera's 'pay-what-you-want' restaurant

The popular sandwich chain is opening a number of nonprofit eateries that operate purely on the honor system

Panera, also known as the Saint Louis Bread Co., has opened a number of pay-what-you-want restaurants that try to help those in need.
(Image credit: CC BY: Richie Diesterheft)

A year ago, the Panera Bread company's charitable arm opened a "pay-what-you-want" restaurant in the St. Louis suburb of Clayton, Mo. It was such a hit that the company has opened two more Panera Cares cafes, in Portland, Ore., and Dearborn, Mich., and plans to keep opening four more every year. So how do these "community kitchens" work, and what's the secret to their success? Here, a brief guide.

What exactly is a "pay-what-you-want" restaurant?

The Panera Cares restaurants look much like a regular Panera cafe, with a few key differences. A greeter explains the system as you walk in: Instead of prices, there are suggested donations, which are either dropped into a box at the register, or paid by credit card. You really do pay what you want. The nonprofit cafes "don't affect the company's bottom line," since they are run by the charitable foundation, says Kim Peterson at MSN Money. "But they strengthen Panera's brand and reputation."

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They must lose a ton of money, right?

No, the original cafe brings in about $100,000 a month in total revenue — and a profit of $3,000 to $4,000 after costs. Roughly 60 percent of patrons pay the suggested amount, with 20 percent giving more, and 20 percent giving less. Indeed, some people vastly overpay.

So people don't game the system?

Mostly, no, says Clayton cafe manager Brooke Porter. Either way, the employees try not to judge. "If a man in a suit and tie leaves a dollar for a $10 meal, that's fine," Porter tells the AP. "We don't know his story." But some people do take advantage of the honor system. Company founder Ronald Shaich has seen some people have "lunch on Uncle Ron," especially three college kids he saw leave $3 for about $40 worth of food. "It's like parking in a handicapped spot," he fumes.

Is this a new idea?

No, and not everybody has had similar success, says Teresa Novellino at Portfolio. The Terra Bite Lounge in Kirkland, Wash., for example, had to give up its pay-what-you-wish system, in part because it was located in a teenager-heavy neighborhood. Still, Shaich is confident in the model. "The lesson here is most people are fundamentally good," he says.

Sources: AP, Portfolio, MSN Money, Panera

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