Panera Bread Testing The 'Pay What You Want' Model

from the trying-it-all-out dept

Wed, May 19th 2010 10:27am — Mike Masnick

Popular restaurant chain Panera Bread has long been interested in experimenting with smart new business models. It was one of the first restaurants out there to push free WiFi in all its locations -- at a time when many thought fee-based WiFi was the future -- noting how much it helped bring in more business for the food. A bunch of folks are now submitting the news that Panera is testing out a pay what you want model in one of its new restaurants. There are "recommended" prices -- but you can pay more or less than those numbers. This seems to be a take on the trend that became popular last year of restaurants offering certain days or nights where you could get free meals, which some restaurants found actually resulted in much more revenue (along with more loyal customers).

While I'm intrigued with how this will work out, I'm not convinced it's going to be a success (though I'd be pleasantly surprised to find out I'm wrong). The whole thing is actually set up separate from Panera, via a non-profit foundation, which Panera is supporting. The restaurant won't use the Panera name, but St. Louis Bread Co. Cares, which apparently was the company's original name. I would guess that many people will feel guilty enough to pay the list price, though some will obviously pay less. I doubt very many (if any) people will really pay much extra, which puts the operation in a tricky position. Since we're talking about food and salaries, there are real scarcities to deal with in terms of expenses, so a "pay what you want" model seems like it would have difficulty scaling.

Still, as business models go, it's one worth watching.

Filed Under: food, pay what you want
Companies: panera

28 Comments

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Anonymous Coward, 19 May 2010 @ 10:38am

give it away and pray. short term good, long term enough mooches figure out they can get free food and the place dies.
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iamtheky (profile), 19 May 2010 @ 10:50am

reading comprehension much?

"has converted one of its St. Louis Bread Co. stores into a nonprofit operation aimed at raising funds for community groups."

It is a non-profit operation. Are you seriously going to encourage people to speculate on whether a food bank donation box "business-model" will work, when the stated goal of the operation is to not make a profit, seriously?
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:Lobo Santo (profile), 19 May 2010 @ 10:50am

Re: BizTard!
Yes, that always happens because nobody in any business ever thinks to adjust policies on free offerings until they're out of business...
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imbrucy (profile), 19 May 2010 @ 10:51am

St Louis Bread Co
St. Louis Bread Co was there original name and is still used in the St. Louis area. They changed the name in areas outside St. Louis after they started expanding.
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Mike Masnick (profile), 19 May 2010 @ 10:54am

Re:
It is a non-profit operation

Non-profits still need to make enough money to survive.

Are you seriously going to encourage people to speculate on whether a food bank donation box "business-model" will work, when the stated goal of the operation is to not make a profit, seriously?

Yes. There's actually quite a lot of discussion around non-profit "business models." Just because you're a non-profit it does not mean you are not running a business. It's just that the goals of the business are different. I see nothing wrong with discussing the business model of a non-profit operation.
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Anonymous Coward, 19 May 2010 @ 11:00am

Re: Re: BizTard!
no, because nobody in business is stupid enough to get into a model where it your cannot control your costs versus revenue in any meaningful manner. the only reasons they appear to be going there is that this is a non-profit, potentialy getting some nice tax writedowns on other parts of their business by charitable donations of older (but not expired) food stock instead of throwing it away.
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NAMELESS.ONE, 19 May 2010 @ 11:04am

um physical objects versus digital
i can cheaply copy digital items
but with physical it is no so.

won't work
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Anonymous Coward, 19 May 2010 @ 11:05am

Re: Re: Re: BizTard!
I throw out tons of digital product everyday. If it weren't for the 'rats, I wouldn't know what to do.
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Brock Phillimore (profile), 19 May 2010 @ 11:09am

> I doubt very many (if any) people will really pay much extra

Customers are already use to paying extra in the restaurant business. 10-20% extra in the form of tips. I have never eaten at Panera, but if it is an average or below average restaurant, then I would agree with you that they won't see many people paying extra. However if their food is really good with great service, great atmosphere and a real fan base, I wouldn't be surprised if a lot of people paid extra.
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A Dan (profile), 19 May 2010 @ 11:23am

Peer pressure
I think the amount people will pay will be more influenced by the amount other people pay than the specific list price. If everyone else is paying 20% above suggested price, you'll feel like a jerk if you pay below the suggested price.
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ChurchHatesTucker (profile), 19 May 2010 @ 11:29am

Re:
There have actually been shops that have experienced success with this model. (Can't easily google them, unfortunately, due to the term's use in the cellphone industry.)
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Aaron Martin-Colby (profile), 19 May 2010 @ 11:31am

Sounds fun, but...
Won't work. Fun to try, but raw materials in a restaurant are expensive. This isn't being used as a loss-leader, so those economics are out the window. It would be easier to just sell sandwiches, but then the non-profit competes with their for-profit locations. No matter how they do this, Panera will be competing with itself.

Why aren't the employees volunteers? How will local governments respond to lost taxes? What about after people acclimate psychologically? Will they pay full price for a time, but then start skewing downward? The only example has been staying "afloat" since 2003.
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iamtheky (profile), 19 May 2010 @ 11:34am

How does any non-profit stay open when they have to have some overhead? This "model" includes being sponsored. Which they are by Panera Bread (and I got money that this is a "day old" store, cashing in on what were lost sales).

How dull would the discussion be about the business model of the restaurant in the Ronald Mcdonald House.....but they give all their food away for free, and sodas!
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Anonymous Coward, 19 May 2010 @ 1:01pm

lucky
good thing most hobos can't access the internet to read techdirt
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Anonymous Coward, 19 May 2010 @ 1:17pm

Re: Re:
nothing wrong with it, except that the business model doesnt apply to anyone else. non-profits often make up their bottom line with donations, freebies, and other methods that just dont apply to anything other than a non-profit. although i will say, your suggested course for the music and movie industries would make them non-profit organizations, which perhaps is why you are bringing it up.
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Comboman (profile), 19 May 2010 @ 1:18pm

Re:
True enough, but tipping the server is different from paying extra to the restaurant. I wonder how they are going to handle sales tax? Will you be taxed on what you actually pay or on the "suggested amount"?
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Sneeje (profile), 19 May 2010 @ 1:59pm

Re: Re: Re:
As someone that works for a non-profit consulting firm (after having worked for a for-profit consulting firm for 12 years), you're completely wrong. Nearly everything about how I did business before applies to how I do business now, except two things: I don't have a profit incentive and my customers trust my motivations more than before. I still have a revenue incentive because I have to figure out how to keep x number of people employed and keep my business relevant. I still have to manage costs and overhead, and I still have to plan my strategy.

What is supposedly so different? And please speak from your experience.
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TastyTreats, 19 May 2010 @ 2:42pm

Yea that's nice but...
WTF is with them not having:

- honey mustard
- salt bagels
- chicken bacon dijon
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btrussell (profile), 19 May 2010 @ 2:50pm

Re: lucky
They aren't allowed into libraries?
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Tom Landry (profile), 19 May 2010 @ 3:16pm

Panera Bread is the food of the Gods. there is nothing better on this planet than a warm fresh loaf of their product and a bowl of sweet cream butter to slather it in.
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Anonymous Coward, 19 May 2010 @ 3:26pm

Re: Re: Re: Re:
having worked for non-profit organizations including food banks, local community groups, etc, i can say that a true non-profit has no income incentive, because everyone working there should be doing it for free. a non-profit with a paid staff is a pretty misleading things, because in the end you are motivated by income rather than by the noble goal itself. if you work for a non-profit but draw a salary, your motivations will never be pure.
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Sneeje (profile), 19 May 2010 @ 4:20pm

Re: Re: Re: Re: Re:
Ah, now we're going to redefine "non-profit" in a way designed to denigrate my example. Nice.

But good, you have experience with a volunteer non-profit, not the example given here. Now it's clear why you don't understand, because your experience doesn't apply to the store in St. Louis.

Also, it's fairly disingenuous for you to say that one set of motivations are pure and others aren't. Even individuals in volunteer organizations are driven by motivations and incentives that aren't necessarily explicit or pure. So stop peeing on others from on high, as you like to say.
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Anonymous Coward, 19 May 2010 @ 5:37pm

Re: Re: Re: Re: Re: Re:
non-profit and not-for-profit are two different situations. one has its goal pretty much to give away the store, the other is pretty much trying to just break even. the motivations of players are different, that is for sure. my experiences do not extend to operating a not-for-profit operation. i just think it is a list misleading to say this is a non-profit organization, when it is really something else.
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Anonymous Coward, 19 May 2010 @ 6:32pm

Re: Peer pressure
it only works if everyone knows what everyone is paying. otherwise, the tendancy is going to be to slip it down. short of cash? drop a $5 instead of a $10. forgot you cash at home? get it next time. over time, its a slippery slope to non-payment or low payment. some will pay over, but just like radiohead saw, most people didnt pay anything, and the average of the rest was way lower than retail. restaurants dont have zero marginal costs, so they cant hold up the losses very well. the more i think about this story, the more i see a company looking for a tax writeoff.
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Anonymous Coward, 19 May 2010 @ 7:02pm

Re: Re: Re: Re: Re: Re:
Also, it's fairly disingenuous for you to say that one set of motivations are pure and others aren't.

And how many times, on this very website, have we seen someone make this exact same comment in regard to the "purity" of motivations between professional and amateur content creators?

Hell, I wouldn't be the least bit surprised if YOU were one of the innumerable proprietors of that incredibly common freetard maxim.
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Anonymous Coward, 19 May 2010 @ 7:50pm

Re: Re: Re: Re: Re: Re: Re:
Professional content creators are merely whores whereas amateur content creators are simply sluts.

Happy now?
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Any Mouse, 20 May 2010 @ 1:54am

Re:
And yet, if you would actually read attached articles? You might notice that there are a lot more restaurants doing this. Even one that's noted in Salt Lake City that's been doing it since 2003. Guess what? They aren't showing a loss.
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Roger, 20 May 2010 @ 5:52am

Been there.
I live in Saint Louis and have actually been to this Bread Co. in question.
First off what people won't say or don't realize is that this particular store is in a very wealthily neighborhood and a very rich business district. You have lots of lawyers and dignitaries eating there daily. These people normally would pay extra in the form of tips, but since Bread Co. is not a place to take tips, this is a way of generating more "donations" (it's a non-profit, for charity store)(just because it has the name "Panara" doesn't make it a "for-profit". Yes there will be some people who will pay below the value, but can you honestly say if the cashier says your food costs $12 bucks, you hand her a $10 and say thank you.

The people that work their are very friendly, it's clean, it's safe, its a great place! So to walk in and pay less than the value comes down to moral ethics and not revue and money.

They don't just hand you your food and say thanks, like at a food bank, they tell you "this cost X amount, and donations are appreciated"

(have you ever taken beads from the breast cancer survivors outside the baseball stadium, or do you take them and "donate" a buck or two because it's the right thing to do!)

As far as this being a "non-profit" it's because in order to "donate" food and accept donations on that food, the profits go to charities. So technically after the store pays its over head, the rest goes out the door. Another reason to "pay your fair share"
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