Panera Bread’s Pay What You Want System Works
It’s an interesting experiment for a business model. Two years ago, the Panera Bread Company opened a cafe in Missouri – that didn’t “charge” for the food you ordered; Instead, customers were prompted to pay what they wanted to for the food – after being given the “suggested menu prices”.
Who knew asking people to pay whatever they wanted for a sandwich or a cup or soup would prove to be a successful business model? Panera Bread’s nonprofit arm generated some buzz in 2010 when it announced an unusual concept: Rather than having fixed prices, the menu at “Saint Louis Bread Company Cares” in Clayton, Missouri, would have suggested donation amounts. It’s a model that’s more typical for museums than sandwich shops — but crazily enough, it works. Now the Panera Bread Foundation is expanding on this unconventional restaurant model.
Panera says that more than the majority of it’s customers pay the suggested menu price – and some even give more.
[A]round 60% of patrons pay the suggested price (which is the regular menu price) at the ”Panera Cares” branch in Dearborn, Michigan, which opened in late 2010. And around 20% of customers actually pay more than the suggested price. These deep-pocketed diners help subsidize the remaining 20% who won’t — or can’t — pay full freight.
Although there were some hiccups in the system along the way, company officials found inventive ways of dealing with them.
After a second location attracted free-loaders, the company employed people to help change the tide.
T]he problem was solved when the company to hire a community outreach specialist to talk to the cafe’s patrons on a daily basis. College students were told it was inappropriate to grab a daily lunch and just pay a buck or two; homeless patrons were asked not to bring all of their belongings and essentially camp out in the cafe. Shaich told the paper that once people grasped the idea that the cafe was supposed to be a resource for the needy in the community, they started pitching in and stopped taking the freebies for granted.
Panera is now looking at expanding these “pay what you want” cafes to other locations across the country.