Pay What You Want Panera Racks Up

Proving that people are basically good, the pay what you want Panera opened a year ago is steadily posting profits. The concept is simple, provide a restaurant where 100% of proceeds will go to charity but instead of charging set prices, the company suggests the regular retail price of the item, but you are free to pay what you want.

With signs such as “Take what you need, leave your fair share,” cashiers also tell people the suggested price. Early data showed that between 60% and 70% paid the full price, 15% payed more, and 15% paid less or nothing at all. Panera pinned its hope on people doing what the felt was best and it seems to be working. According to Panera, the store performs at about 80% percent of retail and brings in revenue of about $100,000 a month. The result is $3,000 to $4,000 a month above costs. The program has been such a success that Panera is considering building more such stores.

This is not to say that some have not taken advantage of the system. From published reports it appears that younger customers have been more likely than others to take far more food that what they have paid for. But, on the other hand, there have been customers generous enough to leave a far greater donation than the value of the food that they have taken.

I like this “teach a man to fish” approach at charity. You get a decent meal, pay what you perceive the value to be, and your money goes to job training and other charitable activities that support the local community.

Do you think that this would work in your neighborhood?

This post was included in the Totally Money Blog Carnival #20: “What Would You Do?” Edition hosted by Outlaw Finance.

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19 thoughts on “Pay What You Want Panera Racks Up

  • I love that this Panera model has been successful. It really says good things about people in general. However, I worry that it might end up becoming a “give a man to fish” model if it were implemented on a large scale. Would people still pay at an appropriate rate if they knew that could get free food at many Paneras? I think this would still work in my neighborhood, but I don’t think it would work in many locations.

    • I wonder about expansion too. There will be always people that are willing to take advantage of the process, but I think that the store doing so well in a year when the economy was on a downturn might bode well for the next for years as the economy recovers.

  • Interesting. My neighbor is actually the Panera marketing manager for Virginia Beach. I’ll discuss this with her tomorrow morning at the bus stop to see if there are any plans to expand this model locally.

  • Wow, that’s really interesting. I don’t think this would work in my neighborhood. We live in a city with a lot of homeless people and students. 🙂
    It probably works better in the burb.

  • As a former restaurant owner, my first reaction is negative. In some strange way, it is similar to the open fountain concept where the customer draws as many drinks as they want. I thought that would be abused! Apparently it works. If 100% of the proceeds goes to charity, people react positively. Even if the margins fal, it doesn’t matter.

    • Did you have an open fountain in your restaurant? Do you remember if it was a money maker for you? I figure the time saved from having someone that you pay do the drinks versus someone abusing the system might even out?

      • I sold my restaurant in 1991, the open fountain concept was just starting. I suspect that margins stayed relatively the same. There may be abuse, but time and people savings offset it.

    • That’s true. If it was widely expanded I don’t know if it woudl work. As a novelty item in select areas it might be good. I can see it working in areas where the main customers are business people like here in the Financial District in NY. Most would be a lunch crowd that would be embarrassed if colleagues saw them abusing the system.

  • I had heard about the concept but didn’t know that Panera was specifically involved in this type of model. I love eating at Panera by the way. I can see this type of model working in certain locations but not every one. I think it could work near where I am.

  • Wow, I’ve never heard of this, but it makes total sense. It seems that guilt would get the best of most of us if we ever tried to pay below the suggested retail.

    Radiohead did this same thing with an album they released a few years ago. They let fans download and pay what they wanted for it. Most people ended up paying a fair retail price anyways.

  • I love this idea. Though I also wonder if they expand this model, if it will be as successful. I know that in my neighborhood, it would probably do okay, but at the same time I’m not sure the college students would pay their fair share (I live near a college). Interesting approach to retail, though. 😉

  • Thanks for the post. I didn’t know that Panera had a store like this. I love the idea but I know how hard it is for it to be successful… but it’s great to hear that its doing well.

    (I’ll be including this post in my weekly round up!)

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