Panera bakery chain tries "pay what you can" model for "community kitchens"

Panera Bread has been experimenting with "pay what you can" restaurants for about a year, at three of its 1500 US locations. So far, the model seems to be working.

Most patrons, it finds, drop the entire retail cost, or more, into the voluntary donation box, in essence subsidizing a meal for somewhat who can't pay the full amount. Panera says about 60 percent leave the suggested amount; 20 percent leave more; and 20 percent leave less. The largest single payment so far? One person paid $500 for a meal.

Few people seem to be taking unfair advantage of the system. Most know that wouldn't be fair. Not paying when you could "is like parking in a handicapped spot," Mr. Shaich says. "The lesson here is most people are fundamentally good."

(CSM via BB Submitterator, thanks Ari B)

• [simonbarsinister]

  I wonder… if Panera frequently sued tens of thousands of its customers for copying their recipes and making Panera-style food at home, potentially instead of buying food at Panera (or potentially not)… in that case would people have any moral qualms about taking unfair advantage of the system?

• [Anonymous]

  I live in Flint, MI. A place that needs no introduction. The closest “Panera Cares” to me is in Dearborn. I like Panera bread, not love, but like. Flint is pretty close to being a total shithole, while Dearborn has more money flowing through it than it knows what to do with. I think that if Panera really cared, they would open one of these up in a community that actually needs it, and not one of Michigan’s most wealthy areas. To me if feels like another excuse for rich people to overpay for something and feel smug about doing it, while people that could actually benefit from it are unaware or intimidated.

• [Anonymous]

  This model has been working successfully in Melbourne, Australia, for many years at the Lentil as Anything restaurants. They have expanded to three locations, based on this success, and have focused on employing and feeding the disadvantaged in the areas they service. Of course, this is slightly less cynical than a large organisation trying to do the same.

• [lordmoose]

  People are fundamentally good…when someone is watching.

• [Anonymous]

  Like other commenters, I think that customers partly feel pressure to pay the full price because someone is watching. However, I also think that they realize they are paying the employees who are serving them, indirectly perhaps, but nothing like paying for a song on iTunes.

  I don’t think that most people are fundamentally good, but fundamentally selfish. That’s evolutionary psychology.

• [Anonymous]

  For years our theatre company had a “pay what you can” admission with a suggested ticket price. We made far more than we would have had everyone paid just the regular fare. We are tribal creatures, helpful when we can be, and love the rush of gratitude and social capital we get from contributing.

  up yours, Ayn Rand

• [Anonymous]

  “The lesson here is most people are fundamentally good.”

  I disagree, the lessons is that most people conform to norms. This is why people pay the suggest amount, and it’s why people torture other people just for the heck of it.

  Being a sheep doesn’t make you good, it makes you easy to manipulate.

  • [Anonymous]

    YOU are the darkness that you expect from ‘others’

• [Super Nate]

  Sounds like the bagel guy from chapter 1 of Freakonomics:
  http://freakonomicsbook.com/freakonomics/chapter-excerpts/chapter-1/

• [flatfive]

  I don’t think this boils down to anything more than advertising for Panera. I can *guarantee* their beancounters ran the numbers before this little “experiment” was undertaken, and figured they could afford to outright give away all of their food at X number of locations (strategically placed throughout the country) for Y amount of time to justify the press it would garner.

  This paints the Panera brand in a rosy light, in a way that slinging overpriced sandwiches can’t do – at least in the eyes of those less cynical than myself.

• [andrei.timoshenko]

  The happier and less-stressed we are, the better we tend to behave towards others. So whether we are fundamentally good or not varies with circumstance. The people at Panera, for instance, are not more fundamentally good than the people at Part-au-Prince, for instance – they just have more opportunity to be nicer to their fellow human beings. It’s hard to care about others when your own life sucks.

• [scragz]

  I went yesterday to the Portland one to try to get a sandwich with my pathetic $3 and the guy was really sweating me about having to volunteer for an hour to not pay full price. I could’ve played it a little sneakier and just put the money in the box, but he was so excited to go on and on that they need to sell $9 sandwiches to be sustainable blah blah and I was too quick to say how much money I had. In the end I ended up with HALF a sandwich, all dude seemed ok with giving me.

  Moral of the story: It is some gross processed reformed turkey puke that isn’t worth $3.

• [Anonymous]

  Either they are fundamentally good or they just don’t want to embarrass themselves and appear incompetent by paying a subsidized price in front of other people. In psychology they call it “self presentation bias”.

• [Anonymous]

  I don’t mind the tomato & mozzarella panini. Fairly hard to eff up. And the bread’s always pretty fresh. The salads are blah.

• [Jack]

  I don’t begrudge the results, but question them since in my experience, this “pay what you wish” model really only works well when community guilt comes into play. If one is not connected to the entity or the players or could care less about the future of the entity, then the model falls apart.

  So the foundation of this is really to build places like this as genuine community centers.

• [Isoko]

  I don’t see how anyone can look around the world and think that people are “fundamentally good.” Paying for a sandwich when you don’t have to certainly doesn’t prove that statement, either.

  Theoretically, since the person who takes a free sandwich is working within the model that Panera sets up for all, I don’t see how you can say he/she is “bad” but the people who pay are “fundamentally good.”

  Still a cool idea. But it proves nothing on a larger scale.

• [Anonymous]

  In Salt Lake City, there is a restaurant called One World, Everybody eats that has used a pay-what-you-can model for over 5 years, as a successful and growing for-profit business. They have helped a number of restaurants run on similar models to start throughout the country. They have been and continue to be a sustainable business model that is NOT supported by a large chain operation.

• [landale]

  This model works far better in real life (where there’s actual social pressure) than the “pay what you want for an album download”, where people are hidden behind their computer screens and more anonymous. I’m sure if you could compare figures, more people pay a penny for the album downloads then for the sandwiches. It’s all about being perceived by others as being good rather than actually being good.

• [didymos]

  Are all of these Panera locations located on Bizarro Earth? I ask only because every single experience I’ve had with human beings suggests that, by and large, people will game the system whenever they get a chance.

  For example, just after the recent earthquake and tsunami in Japan, the Jersey Mike’s restaurants in my area ran a special deal: for one day only, you could get a free regular sandwich in exchange for a donation — however large or small — to the American Red Cross. One would hope that people would go and donate an amount at least equal to what they would have paid for the sandwich, but apparently that wasn’t the case. It’s my understanding that the restaurants really took a bath on this one, because people were lined up from lunch to dinner, their entire families in tow, all queued up to drop a dollar (or even less) for a sandwich that would otherwise cost five or six bucks.

  I guess there was some attempt by the poor staff of the restaurants to urge people to Not Be A Dick Because Hey This Is For Charity, but apparently there are considerable segments of the populace whose sense of charity is so small that it cannot even be located so that one can attempt to appeal to it.

• [Anonymous]

  actually, no. stealing from chain stores is “fundamentally good”. most people are “fundamentally implicated in their own exploitation”.

• [Anonymous]

  I did unrepairable degenerative injury to my back as a volunteer EMT in the United States and was never compensated because I didn’t report it properly thinking it would get better, fortunately state law protects the city from frivolous lawsuits.
  I ended up moving to my other country of citizenship to access national healthcare.
  The pain leaves me in bed sometimes 20 hours a day for months on end, it ruined my hard won and barely started law career.
  There have been times where I have actually had to dumpster dive to feed my family right after barely paying the rent. I am no stranger to eviction, having the power phone, water, and gas shut off, I never know when I will suddenly become unable to work and I have trouble with a non-native language.
  A place that wouldn’t shame me for accepting free food, not force me to go through hours and repeated background checks just for some old vegetables or bread would be heaven.
  Not many people realize how hard it is for the truly disabled to access assistance even in a socialized country because we don’t have the energy and patience that a faker has to wade through the bureaucracy.

• [Anonymous]

  I feel more comfortable without the psychological games. Just tell me how much the sandwich is. If I think the price is right, I’ll pay. If not, I’ll go somewhere else. Just that easy.

• [mccrum]

  New York’s Metropolitan Museum of Art has done this for years and they still seem to make enough money to buy art.

  I’m just sayin’ it probably works better than you think. Of course, they do have a good sized endowment…

• [takeshi]

  Maybe consumers who frequent Panera are fundamentally good. Maybe. On the other hand, maybe they’re lazy, careless with their money, terrible cooks, or operating under the mistaken impression that Panera’s sandwiches are worth anywhere near what they cost.

  I don’t for a second believe that Panera are testing out this business model as a means of illustrating the inherent goodness of people. They’re doing it because they realize they can still pull in a profit while making themselves look good in the process, and apparently it’s working. Call me cynical, but if the business model had failed, would Panera still be lauding the fundamental goodness of their patrons? Or would they instead abandon their own, widely trumpeted spirit of charitability in favor of more lucrative endeavors?

  The lesson here is that Panera thinks people are fundamentally good as long as Panera is still in the black. I think a “pay what you think it’s worth” model is a better gauge of honesty, anyway.

• [DJBudSonic]

  Used to be if you couldn’t pay at Panera you could jump in the dumpster out back, this is better than that. Panera is one of the few food prep places that doesn’t crush their ‘spoiled’ food. This is unlike Whole Foods, Kroger, etc. who throw away tons of food each day that is perfectly good, and don’t let anybody in there to save it if they choose.

• [Modoc]

  The parking spot is a bad example because it’s against the law. People park in handicapped spots all the time. The only reason why more people don’t is because of the potential punishment.

• [emmdeeaych]

  “The lesson here is most people are fundamentally good.”

  Which is why this will not make the nightly news, the show that reminds you that other people are mostly bad.

• [kittnkat]

  People ARE fundamentally good, especially when it is left up to their own conscience–and most people with any life experience at all will choose the helpful thing when it comes down to it.

  I’m saying this as a counselor working with kids from many many different backgrounds, as well as a business owner, I find that *kids* will lie or cheat or steal when they are a part of a group that does these things, the group will justify these actions amongst themselves, but these same kids will choose to make a right decision when it is left to them, as an individual. However, we’re talking teens here.

  Adults, on the other hand, are kind of screwed up. If I set a price for my service, they will do everything in their power to get the price down to a nub, but if I leave it up to them, as in state my expectation, let them think about it in silence, I usually make my price and above. So if they see something as an opportunity to get a deal for a steal, then they will gladly rob you blind, but if seen as an opportunity to be generous and reward me for doing amazing work, I get paid.

  Human nature.

  PS I’m a muralist, so each piece is different, I had to learn the hard way, but now I get paid.

• [Anonymous]

  “The lesson here is most people are fundamentally good” – when they’re being watched?

• [Anonymous]

  I wonder how the owner/operator of the mom and pop eatery located next door feels? Panera is a huuuge chain, they can afford to give away some small change.

  • [emmdeeaych]

    The “mom and pop” next door to a Panera franchise is almost always either a recently closed Borders or a Pep Boys auto center.

    Nice troll there.

• [ikegently]

  I don’t really understand the hate on this. Here’s my take:

  1) This is a cool idea. Some people who don’t have as much money as others can pay less. Some people who have as much money (or more) will still pay less. Some people who want to will pay more to feel good about subsidizing others. STILL: Some people who have a limited budget get to eat for less. RESULT: Good.

  2) They are a big chain company. While mom and pop places might be better in some ways, that isn’t the point of this. They are an entity that exists. If they do something that is helpful to the community, then that is good. Their motivation doesn’t, in my opinion, matter all that much. They are able to get some good press, put a blurb in their corporate documents, etc. Nothing too egregious there. Hey, they might even be able to recruit some socially conscious management personnel who might start implementing other socially beneficial programs.

  3) This might or might not be replicable. Even if it is not, they still are helping out some of their communities. The more interesting thing than saying :this would never work in…” would be to try to think of instances where this would work. People should try innovative approaches to pricing. This may or may not “only work because people are watching.” That isn’t necessarily bad. It just means that in certain instances, watching (or providing the illusion of watching) is helpful to keep people from letting their selfish nature overcome their adherence to societal norms. Maybe sometimes keeping an eye on what people do is a good thing.

  I’m sure there is more that could be said about this. Anyway, I think it is coll that they are trying something and that it seems to be working. Business doing things that help people is a good thing, not a bad thing. If you get mad when a business does something good and say that they are only doing it because they are a big bad business and this is a trick, you can get caught in a self fulfilling prophecy where businesses actually do act in that way. What if businesses changed? What if they changed and still were profitable, so that they didn’t just disappear? What if this is the first step in Panera’s change?

• [LongFlight]

  I’ve been working a modified “Pay What You Can” model in my bakery for several years and it works. For us, it’s really a modified form of passive haggling.

  We have a price at which ideally we like our goods to be sold, but that price is very flexible. I know my margins, and I make sure my costs are covered. My customers know our retail price, but they also know I want them to go home with my product.

  When we quote a price on a product to a new customer, if the customer shows any objection to the price, we offer them to pay what they can or what they think it’s worth. Remember though, if you agree to a lower price, they come to expect that, but it’s really never been a problem for us. Customers will pay what they know and will pay what they can.

  Many times, customers will receive a lower price because they might be a few dollars short. We all know that’s an embarrassing situation no matter what the reason, so we let the customer get what they want at the price they can afford. I would say in a majority of cases, that customer comes back, buys more the next time and many times tips us out even though we don’t formally accept tips (the overage gets used to contribute to the next customers tally).

  We also have a “giveaway” quota. My sales people know exactly how much product they can give away for free and are encouraged to do so. It promotes the business, it feeds people that might not be fed, and it’s just fun as hell to see someone light up a smile.

  Word gets around about businesses that treat customers with respect and dignity whether you offer flexible pricing or not.

  Panera has a good thing going. It’s cool to see it being tested on a larger scale.

  • [Cowicide]

    Thanks for your wonderful post, LongFlight

• [Anonymous]

  i often visit the panera in portland and i never get hassled when i cant pay and when i can pay full price, i do. and when i can pay more, i do. the food is really good and i see no downside to this, sorry. i’m poor and welcome a chance to eat out with my husband (who is unemployed at the moment) when i can.

• [Cowicide]

  Have any of you ever eaten the Fuji Apple Chicken Salad at Panera? It’s heaven in a bowl.

• [joeposts]

  My grocery store has been doing this for years. They call it “Self Check-Out.”

• [Anonymous]

  ripoff of this

• [wylkyn]

  Wow…a lot of cynics on here. You know, I’ve seen anonymous versions of the “Pay what you think it’s worth” idea work very well. The Humble Indie Bundles of software that wolfire.com has been running is a good example. You choose a price and get a set of games, and no crowd is there to judge you if you only want to pay a penny. They have obviously been successful enough that they keep offering new bundles. Yes, software is different from a sandwich. But the first two bundles made $1.25 and $1.8 million in sales. How does that fit into the “this only works because of community guilt” theory?

• [Meadslosh]

  Everything about this screams “bullshit” to me, but that may be because I worked for Panera Bread and hated it.

• [no1curr]

  The story seems to be ignoring the obvious adverse selection problem. Sure, it may be true that most people are fundamentally good, but it don’t mean you can sustain an operation that can and will readily be exploited by the remaining small fraction.

  • [T’Pau]

    I call it the ten percent rule. It’s probably closer to 1-2% percent but it’s enough to make life miserable. That ten percent is responsible for all the hell that’s out there. Theft, cheating, dishonesty, lying, misrepresenting, murder, assaults, rapes, etc.

    I’d like to see them try this model out in places where taking advantage of the system is a way of life.

    • [tamgoddess]

      “I’d like to see them try this model out in places where taking advantage of the system is a way of life.”

      You mean, like Wall Street?

      • [Shart Tsung]

        I think he means the hood, homie.

    • [EMJ]

      Why would you “…like to see them try this model out in places where taking advantage of the system is a way of life.”?

      Do they claim that it would work everywhere, all the time?

      Do you know of an economic/business model would work everywhere, all the time?

  • [TenInchesTaller]

    This just in, Panera files for bankruptcy after an episode of Extreme Couponing shoots at one of their locations.