Panera's New 'Pay-What-You-Want' Cafe: Can it Scale?

A national bakery and restaurant chain, Panera Bread Co., is cooking up a storm this week in St. Louis -- not to mention in social enterprise and innovation circles.The reason: Panera has just launched a new nonprofit storefront in an upscale suburb of this Midwest city that offers the same menu as Panera's other 1,400 for-profit locations around the country. The only difference? The prices. There aren't any. [A sign at the entrance says, Take what you need, leave your fair share].
Sure, the people behind the counter can (and do) suggest prices. But there's no pressure to pay, founder Ronald Shaich insists. If customers don't want to give money, or cannot, he says, they're asked to give time -- volunteering to help at-risk youth in the area.

It's a new twist on giving and social enterprise that tests whether communities will rally to keep such social ventures alive. "I'm trying to find out what human nature is all about," says Shaich, 56, an entrepreneur who was, until recently, the CEO of Panera. He retired earlier this month to take over as chief of the new pilot project. "I've dreamed of doing something like this for years," he says. If it works -- if this nonprofit store can sustain itself financially -- Shaich says he will move to open up more such pay-what-you-want stores in every community where Panera now operates its for-profit kitchens.

It's not the first time that nonprofits have opened up eateries where customers name their price. Nor is it the first sign of social innovation in the for-profit food sector. [Think Greyston Bakery.] But it is the first time that a name-your-own-price model is being attempted by the philanthropic arm of a for-profit national chain, bringing the potential of scale to the idea as well as nonprofit access to a national network of for-profit distributors and food suppliers.

Can it work? So far, so good. Revenue was up 20 percent on opening day, Shaich says, versus the previous Sunday, when a Panera store in the same location operated as a for-profit. Shaich says about one-third of those who ate at the restaurant on Sunday and Monday left more than the suggested retail price.

But can this behavior continue? Trends consultant Marian Salzman told USA Today she's doubtful. "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," she told the newspaper.

But Shaich, at least for now, will hear none of it. He says he's determined to do all he can to make sure the idea scales and finds acceptance in the community as a way for have's and have-nots to come together around a desire to help each other and those less fortunate. "Making a difference is what it's all about," he says -- both in the world and in the way businesses "make their dough...It's time we test different ways for communities and customers and companies to work together."

What do you think? Is this pie-in-the-sky? Can a nonprofit kitchen such as this one survive? Let us hear from you. [And don't say the proof is in the pudding. Please.]