What Happened When Panera Launched A 'Pay What You Can' Experiment
AUDIE CORNISH, HOST:
In 2010, Panera started opening nonprofit cafes called Panera Cares. They told customers, pay what you can afford. Sarah Gonzalez with our Planet Money podcast looks at how that experiment turned out.
SARAH GONZALEZ, BYLINE: The last Panera Cares cafe looks pretty much like any Panera with a few little differences, like there's this wall of day-old bread when you walk in.
BARRY COMBS: This bread wall's for anybody else that's in need. We have a bin here, and you can add what you can. Grab a loaf of bread. Bring it to the cashiers, and we slice it for you.
GONZALEZ: Barry Combs is the manager of the Boston cafe.
COMBS: Everything is suggested amounts.
GONZALEZ: Here, you pay whatever you want. Instead of cash registers, there are clear donation bins.
And all the prices on the menu are just suggested prices.
OK, I'm going to do the broccoli cheddar soup.
UNIDENTIFIED PERSON: It's up to you to just place your value in the bin, however much you wish to donate.
GONZALEZ: I got a 20, so I'll do that.
UNIDENTIFIED PERSON: Thanks so much. We really appreciate that.
GONZALEZ: The former CEO of Panera Ron Shaich started opening pay-what-you-want cafes hoping that enough wealthier customers would pay more than the suggested price so the needy could eat for less.
RON SHAICH: I fundamentally believed that there were enough good people in the world, that they would do the right thing.
GIANA ECKHARDT: My first impression of the idea was, this will never work.
GONZALEZ: Giana Eckhardt is a professor of marketing at Royal Holloway, University of London who was very skeptical of this experiment. She studies consumer behavior and says it went against everything she knew about how consumers behave. She says how people feel about a social issue like hunger doesn't really affect individual purchases made at a checkout counter. It depends more, she says, on things like how much cash you happen to have in your pocket when you walk in. Eckhardt observed the cafes for years. They ended up attracting a lot of homeless people.
ECKHARDT: And so you would see all of these shopping carts around, which also smelled in addition to the people themselves. And so the managers had to come up with rules about the size of bags that you could bring in.
GONZALEZ: Pretty early on, Cares cafes started telling customers that if they didn't have enough money to pay, they could volunteer for an hour in exchange for a meal, clean under the counters. But in the end, they were not attracting enough generous customers for Panera to break even.
ECKHARDT: What ended up happening is the people who were not food insecure did not want to eat lunch with people who were food insecure.
GONZALEZ: Almost nine years into the experiment, every Panera Cares cafe closed except for the one in Boston. But Ron Shaich still considers the experiment a success.
SHAICH: You've served millions of people over many, many years.
GONZALEZ: The one remaining pay-what-you-want Cares cafe is still losing money. The manager says they cover about 85 percent of their cost. Panera makes up the rest. But Eckhardt says there are more successful pay-what-you-want models, like the ones that make people feel like they're getting a gift.
ECKHARDT: So you think, oh, I've received a gift from someone that I don't even know, and this I-should-repay-that-gift is a very strong instinct inside people, I think.
GONZALEZ: Another thing that would work better - no prices. If you see even a suggested price, Eckhardt says that's the amount you think you should pay. With no price, people actually give more. Sarah Gonzalez, NPR News. Transcript provided by NPR, Copyright NPR.