Will Panera's pay-what-you-want experiment work?

Can Panera afford to not enforce payment for a bowl of chili in St. Louis? We're about to find out.
Written by Tyler Falk, Contributor

Since 2010, fast casual restaurant chain Panera Bread has quietly opened five nonprofit cafes in big cities throughout the United States based on an unusual model for such a big chain. The idea is that customers at Panera Cares Cafes pay whatever they want for food. One person might pay $10, another, a penny or nothing at all. The hope is that it becomes a sustainable model for fighting hunger and providing greater access to food, with people who can afford it paying a little more to cover the costs for those who can't pay full price.

The model has worked well enough that Panera announced it is using the pay-what-you-want model on a larger scale. Throughout the St. Louis region, the company's hometown, Panera plans to add one pay-what-you-want item to the menu at all 48 stores. The Turkey Chili Bread Bowl -- with antibiotic-free turkey, vegetables, and beans -- will be listed on the menu for $5.89, but it will come with an asterisk. It's only the suggested price, you can pay more or less, the Associated Press reports.

If Panera's nonprofit cafes -- which have all menu items as suggested donation, not just one -- are any indication, the experiment should be successful -- meaning they're not just giving away handouts. The company found that 60 percent of customers paid retail price and there was an even distribution among those who paid less and those who paid more. And while the nonprofit cafes only brought in 70 to 80 percent of what the regular stores made (still enough to profit), it's a move that could boost the company's reputation as a socially-conscious chain without hurting profits.

If all goes well in this trial run, according to AP, the pay-what-you-want model could be used in all 1,600 restaurants throughout the United States. As of now, however, there are currently no plans to do so.

Panera extends pay-what-you-want idea to menu item at all St. Louis-area cafes [Associated Press]

Photo: Flickr/cafemama

This post was originally published on Smartplanet.com

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