Pay-what-you-want works for Panera

The company's charitable foundation runs three donation-based restaurants, which have raised money for surrounding communities. With video.

By Kim Peterson May 16, 2011 1:24PM
Panera Bread (PNRA) plans to open more pay-what-you-want nonprofit restaurants, saying the business model is a success.

Customers place orders as they would at any other Panera, but the cashiers simply tell customers the suggested payment amounts for their orders. What customers actually put into the donation box is up to them.

Panera has opened three such specialized cafes, which raise money for charities. It plans to open a new one every three months, The Associated Press reports. Yes, there was that time when three college students paid $3 and received $40 worth of food, but mostly people are generous with their wallets, the company says.

Post continues after this video about whether Panera's nonprofit concept will work:
Panera told AP that 60% of customers leave the suggested amount. A fifth pay more, and a fifth pay less. One person paid $500 for a single meal.

The idea has worked well for Panera. The restaurants don't affect the company's bottom line -- they are run out of Panera's charitable foundation -- but they strengthen Panera's brand and reputation. Panera shares have been on fire over the past year, soaring some 60% to $122.34 Monday.

"From the day it opened, the community has just gotten stronger and stronger in their support of this," founder Ronald Shaich said about one of Panera's nonprofit restaurants in Clayton, Mo. "They got that this was a cafe of shared responsibility."

The restaurant in Missouri performs at 80% of retail, Panera said. It pulls in $100,000 in sales a month -- enough to produce about $3,000 to $4,000 a month for a job-training program for at-risk youths, AP reports. The first three kids to finish the program are heading to other Panera restaurants to work.
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