Pay What You Want at Panera

A new non-profit Panera outside of St. Louis has caught the eye of a number of Freakonomics readers. Customers are told to pay what they want for their meals. “The pilot restaurant is run by a nonprofit foundation,” the Associated Press reports. “If it can sustain itself financially, Panera will expand the model around the country within months. It all depends on whether customers will abide by the motto that hangs above the deli counter: ‘Take what you need, leave your fair share.’”[%comments]

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  1. DanInesanto says:

    This is also something that may work at a small, localized, unique sort of situation but may not be effective if scaled up.

    The special status of that particular Panera location may provide an incentive/reminder/expectation to customers to pay a “fair” share sufficient to sustain the place. However, once the practice moves to a larger scale, the special status may disappear and with it the incentives for everyone to pay.

    This may also not work in different locations because of the different microcultures of places.

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  2. Elton says:

    How do I know what’s fair for a Panera sandwich, once profit is removed from the equation? Do they at least post what the marginal cost of producing the sandwich (plus amortized fixed costs like rent and electricity) so people know whether $4 or $8 properly compensates them?

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  3. carl reisig says:

    One consequence:

    I, for one, will change my coffeeing patronage to
    Panera, no questions.

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  4. Vineet says:

    It says it is a “new store in the upscale St. Louis suburb”. I don’t want to be presumptuous about the result of the study, but the natural set up of the experiment is somewhat biased – a well-to-do area where most likely people stumble across each other rather regularly?

    I don’t believe people are ‘bad’, but the context/environment mattters. It would be interesting if such an experiment were set up in an area like where Sudhir Venkatesh spent his PhD days. In particular, it would be good to compare how long before the ‘equilibrium’ sets in both cases – when people begin – and continue – to pay ‘fair value’ for the products.

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  5. Audrey says:

    Caitlin Hartsell of the Show-Me Institute (which used to have its offices just a block away from this Panera), explains the set up with more detail, and writes that Panera isn’t the first restaurant to try this:

    http://www.showmedaily.org/2010/05/for-profit-restaurant-goes.html

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  6. bsl says:

    This Panera is a few blocks from my office. It is located in an affluent neighborhood/business district outside of St. Louis .

    The menu is the same and the prices are the same as before, but now you’re given the option to pay what you want. The menu has “suggested prices” but the cashiers stress that you only pay what you want. I figure that the company was making a decent profit before so paying the regular price (and rounding up to the nearest dollar) is a fair price.

    Panera usually donates day old bread to homeless shelters and/or food pantries. There was a stack of day old bread sitting by the door with a sign asking you to pay what you think it’s worth. No prices were available for those items. I guess they figure getting money for the day old bread instead of donating the food is more efficient (of course).

    The one question I have is the flyer I was given at the store states the company will donate the profits to charities it supports. Very vague – I would like to know what charities are receiving the money. But that won’t stop me from buying lunch there every once in a while.

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  7. kisha says:

    I love this concept and hope that it will work. Barter systems is what many countries and business relationships have been built on. So back to the basics at this time seems fair and reasonable. Hopefully all participating act in an appropriate manner.

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  8. Bernie Goldman says:

    It will most definitely fail for sure because the overall moral condition in America and Americans acquired focus on ROI.
    Question: can an ethical person success in America business environment?

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