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Panera Sandwich Chain Explores 'Pay What You Want' Concept

Sep 7, 2012
Originally published on September 19, 2012 4:11 pm

The concept of "pay what you want" for goods and services is a nostalgic throwback to the days when people trusted one another just a little bit more, and it's something you expect to see at the occasional farm stand or at a hip, independent coffee shop.

But recently, the sandwich and coffee giant Panera decided to get into the business with Panera Cares, a nonprofit version of the national chain. The company takes existing stores and donates the entire setup to the foundation. The money the store makes pays for the operations. Any additional profits go to local charities.

"They feel like every other Panera Cafe in America; they don't feel the least bit different," says Ron Shaich, co-founder and co-CEO of Panera Bread Co. Well, there is one difference customers will see: There's a donation box where the cash registers were.

Shaich is also president of the Panera Foundation, which runs the Panera Cares that recently replaced the Panera that had been a fixture of the Lakeview area of Chicago. He sees the cafes as a way for the company to help the community and raise awareness about middle-class food insecurity.

Lakeview is the fourth Panera Cares in the country, and Chicago is its biggest market yet. Panera does not track the numbers exactly, but it says roughly 20 percent of Panera Cares customers give more than they're asked. An additional 60 percent donate the suggested amount. The rest pay less or nothing.

While some customers were a bit confused by the donation boxes when earlier stores opened a couple of years ago, Chicago resident Laura Lamar says when the Lakeside Panera became a Panera Cares, it didn't really change her routine: Her coffee used to cost $1.79 a cup. Now, she just gives them $2, and tells them to keep the change.

"It's just, what, 21 cents," Lamar says. "It's not going to make a difference in my life, but it might help somebody else, and if everybody just gave an extra quarter or 50 cents it would make a difference."

But does it make sense for a business?

Robert Gertner, deputy dean of the University of Chicago's Booth School of Business, says it's a fairly unusual model for a for-profit company. "It's very rare where you see companies where their charitable activities are a nonprofit version, if you like, of what they do," he says.

Gertner says it's hard to replicate this model well. He points to Ben & Jerry's, which has had a similar effort for decades. The ice cream company created "partner shops" where they waived the franchise fee, which was then run by local nonprofits.

The results, he says, were mixed, but in the long run, it did not really work out: Ben & Jerry's at one time had more than a dozen partner shops. Today, it has only three.

"I think it's something of a challenge to make it work well," Gertner says. "We'll see if it works well for Panera Cares."

Gertner thinks Panera has a chance. The nonprofit stores may even inspire more loyalty from customers and employees, who feel like they're making a difference. He says people are always more likely to give toward an immediate, easy-to-understand need like providing a meal, rather than for something abstract.

So far, Panera says this cafe, like the other locations, is paying for itself.

Copyright 2013 Chicago Public Radio. To see more, visit http://www.chicagopublicradio.org.

Transcript

RENEE MONTAGNE, HOST:

The Panera Cares cafe that opened this summer in Chicago is going with a pay-what-you-want business model. The idea tried by others with varying success is to offer what the chain calls the Panera experience, regardless of how much a customer can afford. The company sees its string of pay-what-you-want cafes as a way of tackling hunger in America.

From Chicago, reporter Niala Boodhoo has more.

NIALA BOODHOO, BYLINE: Laura Lamar has a morning routine: wake up, feed the dog and the cats, get dressed, then head to her neighborhood Panera cafe for coffee, where she expects to run into other regulars - in this case, Eivor, her across-the-street neighbor.

EIVOR: Laura and I come in here every morning for our coffee. Sometimes we are imbedded in our reading, and we just say hi. Other mornings we get into the food, which we both love very, very much.

(LAUGHTER)

BOODHOO: This Panera has been here for more than a decade. But earlier this summer, it changed formats. It became a place where patrons pay what they want. A number of for-profit companies have charitable endeavors - think of McDonald's and its Ronald McDonald house. But Panera essentially uses the same business model for its for-profit stores that it does for this location, called Panera Cares.

Lamar's coffee used to cost $1.79 a cup. Now they tell her it's a suggested donation. So now she just gives them $2 and tells them to keep the change.

LAURA LAMAR: You know it's just, what, 21 cents. It's not going to make a difference in my life, but it might help somebody else. And if everybody just gave an extra quarter or 50 cents, it would make a difference.

BOODHOO: There's a donation box where the cash registers used to be. This is the fourth Panera Cares in the country, and Chicago is its biggest market yet. Panera doesn't track it exactly, but they say roughly 20 percent of Panera Cares customers give more than they're asked. Another 60 percent donate the suggested amount, and the rest pay little or nothing.

RON SCHAIK: They feel like any Panera cafe in America, they don't feel the least bit different.

BOODHOO: Ron Schaik is the co-founder and co-CEO of Panera Bread Company. He's also president of the Panera Foundation, which runs this cafe. Schaik sees these cafes as a way for them to help the community and to raise awareness about middle-class food insecurity.

Panera, the corporation, takes existing locations - a deliberate choice, because the company knows the store's history - then donates the entire setup to the Panera Foundation. The money people pay for the food and coffee covers operating costs. This is a fairly unusual model for a for-profit company.

ROBERT GERTNER: It's very rare that you see situations where company's charitable activities are a nonprofit version, if you like, of what they do.

BOODHOO: Robert Gertner is a deputy dean at the University of Chicago's Booth School of Business. He says this model is hard to do well. He points to Ben and Jerry's, which has had a similar effort for decades. The ice cream company created partner shops, where they waived the franchise fee, which was then run by local non-profits.

GERTNER: And that was, at best, a mixed success.

BOODHOO: Ben and Jerry's, at one time, had more than a dozen partner shops. Today, it has only three. Gertner isn't surprised.

GERTNER: I think it's something of a challenge to make it work well. I think we'll see whether it does work for Panera Cares.

BOODHOO: Gertner thinks Panera has a better chance of this succeeding because the typical customer there is more likely to be able to afford and support a nonprofit cause. It may even inspire more loyalty from customers and employees, who feel like they're making a difference. And he says people are always more likely to give toward an immediate, easy-to-understand need, like providing a meal.

So far, like the other locations, Panera says this cafe is getting enough donations to be self-sustaining.

For NPR News, I'm Niala Boodhoo, in Chicago. Transcript provided by NPR, Copyright NPR.