Panera Cafe: Take what you need and Pay what you want..
vaibhav shekhar
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By Bruce Horovitz, USA TODAY
Imagine walking into a Panera Bread and picking out anything you wanted to eat or drink — then, at the end of the line, instead of handing your money to a cashier, you faced a donation box.
What would you do if you knew that some of the money you placed in the box would be used to train at-risk youths or to feed folks lacking funds to feed themselves? KINDNESS COMMUNITY: New ways we give and volunteer
That's what Panera Bread is trying to find out this week in an outside-the-box experiment in St. Louis. It's a concept that has never been tested by a restaurant chain — and that marks a new career for Ron Shaich, who stepped down as Panera's CEO last week. "I'm trying to find out what human nature is all about," says Shaich, 56, who has converted a former Panera-owned restaurant in an urban area of St. Louis into a non-profit restaurant dubbed Saint Louis Bread Company Cares Cafe. (Similar cafes planned outside of the St. Louis area will be called Panera Cares Cafes. Panera was founded in St. Louis and still brands its restaurants there as St. Louis Bread Company.) A sign at the entrance says: "Take what you need, leave your fair share." Customers who can't pay are asked to donate their time. The cafe opened Sunday and will operate seven days a week from 7 a.m. to 4 p.m. While the store does have cashiers, they don't collect money. They simply hand each customer a receipt that says what their food would cost at a conventional Panera. The receipt directs customers with cash to donation boxes (there are five in the store). Cashiers do accept credit cards. Shaich considers the non-profit Panera Foundation to be his next big thing. "My hope is that we can eventually do this in every community where there's a Panera," says the entrepreneur who bought Panera more than two decades ago when it had just 19 locations and grew it to more than 1,400 locations and upwards of $2.8 billion in annual sales. He plans to open two more of the non-profit cafes in two more cities in the next six months, but declined to say where. His goal is hundreds of Panera Cares Cafes around the country. But first, this one has to work. "It's a fascinating psychological question," says Shaich, who says he's dreamed of doing something like this for years. "There's no pressure on anyone to leave anything. But if no one left anything, we wouldn't be open long." Experts are divided on whether the concept can work. "It's a step forward not just for Panera, but for the whole restaurant industry," says Dennis Lombardi, executive vice president at WD Partners, a food service consulting firm. "You'll see other restaurant chains thinking about doing the same thing." Not everyone agrees. "I don't think the honor bar system will work nationally," says Marian Salzman, a trends consultant. "While young people are very much attuned to helping out and making a difference, if they find themselves sitting next to other customers with whom they don't feel comfortable, they're not coming back." But the concept has worked, with surprising success, at a handful of individually operated community cafes in Salt Lake City, Denver and Highland Park, N.J. Those cafes have all operated under the guidance of Denise Cerreta, founder of One World Everybody Eats, who has consulted with Panera. The community cafes are open to everyone, she says, but are less of an attraction to the homeless and more of an attraction to folks who may have lost jobs or are facing other unexpected economic hardships. She says that Panera is about to take community cafes to the next level. "Ron Shaich is creating a tipping point of this movement," she says. "I think we'll see a wave of people following." But all that Shaich really wants right now is for his first community cafe to work. It looks like a Panera. Its menu is identical to a Panera's. It even puts the same antibiotic-free chicken in its salads and sandwiches. The only substantive difference is that the baked goods — except bread used to make sandwiches — arrive one day old. These are unsold items from other St. Louis Bread Company restaurants in the area. This particular Saint Louis Bread Company site had been a marginally profitable company-owned restaurant. Shaich was particularly fond of the location because he once lived just down the street — and ate at it often — when he formerly lived in St. Louis. He converted the restaurant into a non-profit and reopened it Sunday. As it turns out, he says, the location's revenue was actually up 20% on opening day vs. the previous Sunday. What's more, says Shaich, who spent Sunday and Monday at the cafe, one-third of those who ate at the restaurant left more than the suggested retail price. Many have warned Shaich that this will fail. He thinks otherwise: "The core of my life has been to make a difference. Now, I'm using my business background to make a difference in the world. 
Signs explain the pay-what-you-can concept, encouraging charity. Sometimes customers can miss them so an employee greets everyone and explains the policy.
By JIM SALTER  updated
CLAYTON, Mo. — Rashonda Thornton looked up at the menu on the wall, ordered a Caesar salad and dropped a $10 bill in a box. Pretty generous, considering the meal at Panera Bread Co.'s café in the St. Louis suburb of Clayton sells for less than $7. It was a year ago that Panera converted the Clayton restaurant into a nonprofit pay-what-you-want restaurant with the idea of helping to feed the needy and raising money for charitable work. Panera founder and Chairman Ronald Shaich said the café, operated through Panera's charitable foundation, has been a big success, largely because of people like Thornton. "Sometimes you can give more, and sometimes you can give less," said Thornton, a teacher's assistant. "Today was one of my 'more' days." Panera, based in suburban St. Louis, has long been involved in charitable giving, donating millions of dollars and giving away leftover food to the needy. But Shaich sought more direct involvement. "We were doing this for ourselves to see if we could make a difference with our own hands, not just write a check, but really make a contribution to the community in a real, substantive way," Shaich told The Associated Press. What developed was the largest example yet of a concept called community kitchens, where businesses operate partly as charities. Panera's success in Clayton has led it to open two similar cafes — one in the Detroit suburb of Dearborn, Mich., and one in Portland, Ore. It plans to add a new one every three months or so. The majority of patrons pay retail value or more. Statistics provided by Panera indicate that roughly 60 percent leave the suggested amount; 20 percent leave more; and 20 percent less. One person paid $500 for a meal, the largest single payment. "From the day it opened, the community has just gotten stronger and stronger in their support of this," Shaich said. "They got that this was a café of shared responsibility." The Clayton restaurant could pass for any of Panera's nearly 1,500 cafes. Soft jazz plays as people chat quietly. Men in suits sit at a table next to women in tank tops. Fresh breads and pastries entice from behind a glass counter. The smell of coffee fills the air. The differences are subtle. Signs explain the pay-what-you-can concept, encouraging charity. One thing Shaich learned was those signs tend to go unnoticed, so cheery employee Terri Barr greets everyone at the door and spells it out. The biggest difference is at the checkout. The menu board lists "suggested funding levels," not prices. Payments go into a donation box, though the cashiers provide change and handle credit card payments. Nicholas James, 34, visiting from California, seemed a bit puzzled as a cashier walked him through the process, before stuffing $15 in the donation box to cover lunch for his friend and himself. The payment was right at the suggested cost. "I think it's great," James said. "I would much prefer to give this place my money." Not everyone is so generous, but that's OK with Brooke Porter, who manages the restaurant. She knows that times are still hard for many. She has seen families down on their luck come in to celebrate birthdays with a meal they normally couldn't afford. A teacher laid off after 25 years stops by on his way to job fairs. He can't afford to pay much but makes up for it by volunteering at the store. "If a man in a suit and tie leaves a dollar for a $10 meal, that's fine," Porter said. "We don't know his story." Only a few take advantage of the system — "lunch on Uncle Ron" as Shaich calls it. He still fumes over watching three college kids pay $3 for $40 worth of food. Generally, peer pressure prevents that sort of behavior, he said. "It's like parking in a handicapped spot," Shaich said. Overall, the café performs at about 80 percent of retail and brings in revenue of about $100,000 a month. That's enough to generate $3,000 to $4,000 a month above costs, money being used for a job training program for at-risk youths. "We took some kids that typically wouldn't be employable, didn't know how to work in society," Shaich said. "We gave them a combination of job training and life skills." The first three graduates of the program are starting jobs at other Panera restaurants. Shaich admitted he didn't know how the pay-what-you-want experiment would pan out. He said the success should send a message to other businesses to put faith in humanity. "The lesson here is most people are fundamentally good," Shaich said. "People step up and they do the right thing." Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Panera Cafe and Chicago's philanthropic spirit?The latest in business newsJune 26, 2012 Last week, a Panera Bread in Lakeview switched over one of its oldest locations in Chicago to a nonprofit entity called Panera Cares. The storefront looks just like every other Panera, but instead of cash registers, there's a donation box: everybody pays what they can afford.I covered the opening last week, but what intrigued me most what how people respond to a "pay what you want" model. It was the first morning, there were plenty of media reporters milling about, as well as the company's CEO and all of their public relations staff. I did watch patrons for a while, wondering how people would respond. First, here's how it works: it looks just like a regular Panera (down to the all the food and a menu board with prices), and when you give your order, a clerk "rings" you up, but your total is a suggested donation. The clerks can make change for cash, or take a credit or debit card, but how much you give is up to you. It's not free. If you can't afford to pay for your meal, you can sign up to do an hour's work cleaning tables, for example. It was a short time period, but everyone I saw did pay more than the suggestion, even if it was just rounding up - I saw very few coins in the boxes. The Panera Cares model has been carefully crafted - this is the fourth such enterprise for Panera, which turns exisiting stores over to the Panera Foundation, a not-for-profit organization. Panera Cares project manager Kate Antonacci told me the other three Panera Cares locations (in Oregon, Michigan and Missouri) all so far have had its direct operating costs covered by the donations. While the Panera corporation donates the space and existing assets, all ongoing bills - rent, food, employee salaries (employees make the same at a Panera Cares location than they would at a regular Panera cafe) - have to be covered by donations. "We really look for neighborhoods that are economically diverse," Antonacci told me. "You have folks coming in who can contribute and you also have folks that need you." Tuesday on Eight Forty-Eight, we'll speak with Northwestern University's Kellogg School of Management professor Liv Livingston Howard, who specializes in philanthropy. She's the Associate Director of Kellogg’s Center for Nonprofit Management and also teaches social enterprise. She'll shed some light on why she thinks the Panera Cares model will work, especially in Chicago. | ||||||||||||||||||||||||||||||||
Vaibhav Shekhar
Faculty (Marketing & Strategy Department)