Pay-what-you-want Panera called a success

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's cafe in the St. Louis suburb of Clayton sells for less than $7.

It was a year ago that Panera (PNRA) converted the Clayton restaurant into a non-profit 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 cafe, 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 said.

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% leave the suggested amount; 20% leave more; and 20% 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 cafe 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 cafe performs at about 80% 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."

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