The Nonprofit Panera: a nonprofit, a social experiment or a marketing win?
Bagels in Clayton, Missouri, have never been so interesting. Headlines about the Panera that now allows each customer to "take what they need and leave their fair share" have been all over Twitter, Facebook and my Google Reader. It's definitely been a PR win so far, with people calling it "genius," "cool," "novel" and "awesome." And it's an interesting experiment to see if they can actually cover their costs, and even end up in the black by appealing to people's good nature - but I hardly think it's a good model for a nonprofit, and I'm not sure I understand the point.
The pay-what-you-can or pay-what-you-want model has been used by theater groups hoping to spread the word about a new play opening in a community and musicians trying to discourage piracy and fill concert seats, but it's not often adopted as a permanent business model. In 2007, Radiohead made a big splash by announcing its fans could set the price for their latest album "In Rainbows," and their gamble payed off, as they sold more albums and tickets than ever before - but even this successful foray into pay-what-you-want sales ended after a few months, when the band announced the download option would be shut down in favor of traditional outlets.
Any money raised, above what it takes to sustain the restaurant, could be used for community causes. They haven't determined what those causes might be, and unfortunately, I don't think they'll have to. If I took a field trip to Clayton right now, I would probably try to donate roughly the cost of my sandwich, give or take a dollar. If nothing else, social pressures would keep me from giving myself a big discount, but I wouldn't be motivated to donate a significant amount over the cost of my sandwich because, as I understand it, the money is either going to make up the margin being left by someone who doesn't pay their fair share (whether they are able to or not) or to an unknown cause. I just can't see that inspiring many people to give extra very often. So, if no money is raised for community causes, what's the gain?
In a New York Times article, Stephanie Strom points out that similar cafes in Ohio, Washington New York have either gone under or had to change their models due to the confusion, skepticism and less than altruistic attitude of some customers. But it can work. Salt Lake City's One World Everybody Eats, for example, has been operating since 2003, but the complexity of making the pay-what-you-want cafe work seems to require planning and strategy that I'm not sure Panera has put in so far.
Ron Shaich, who served as Panera's CEO until recently and still serves as its chairman, said it himself in the St. Louis Business Journal: "It's a real test of humanity," he says. "It's not a charity; it's a cafe of shared responsibility." I agree. While technically it is receiving tax benefits, it's not really a nonprofit. It's an experiment. And it's a marketing win. But is it something that's really going to make any difference in the Clayton community - or the other communities around the country that could find their own nonprofit Paneras popping up if this pilot store succeeds?
Don't get me wrong. I love bagels. Even more than bagels, I love bagels that taste like candy. But I have to wonder what the point of this "nonprofit" is, other than literally not making any profits. The nonprofit Panera is reporting that transactions (as I read that, it does not necessarily mean dollars) are up 20 percent over last week, when it was a for-profit restaurant. This isn't surprising given the media attention they've received this week. And I imagine that Panera's for-profit restaurants will also reap some brownie points and financial benefits from the publicity around this nonprofit venture, but is that enough?
What do you think? Will the nonprofit Panera last? And will it really benefit the community?
Comments
Hi Kristin,
I always appreciate the riskier point of view. I agree with all your points, but it's worth noting what Panera has that others who attempted the same don't: the backing of a 1,400+ scaled outlet machine. If I had to guess I'd bet that Panera pays less overhead than the indy shops that have tried and failed before. Your "give or take a dollar" has much less impact when the sandwich you donated $7 for actually costs $3.75 to make. Consequently, they have a greater opportunity to make this model work. Not saying it will (I agree with all your points), but Panera's scale is worth adding into the equation (not to mention that the guy heading this up was their CEO who is, frankly, probably smarter and more experienced that most who try).
Best,
Will
@willrobinsoniii
Will, Thanks for your comments. You have an excellent point about the advantage this nonprofit Panera has over indy restaurants who have tried the same model. The support of a successful national chain (and its former CEO) could definitely make the difference and allow this restaurant to keep its doors open.
But I guess that leaves me with the question of whether they will really be making an impact in the community. If their goal is to feed disadvantaged people in the community, there are probably more strategic ways to achieve that result on a larger scale. And if their goal is to provide dignity to those who cannot pay, but are happy to volunteer in the cafe to earn their food, couldn't they just make a point of hiring some of these people in their for-profit stores? One of my main concerns is that I can't quite tell what their goals are, which makes me wonder how strategically they are pursuing them.
Hi Kristin,
This is the start of a really interesting conversation. It's such a complex issue and I thank you for bringing that complexity to light. Here's my attempt at a neat and tidy theory: it's an experiment by a millionaire eccentric CEO. There may not be a goal other than to see if something like this can exist in our world. If it can - great. People will presumably benefit. If it can't - then I guess we just learned a lesson at Panera's expense. I love being wrong about things, because it means I just learned something. I don't want to believe this is a PR stunt of sorts because that would make me want to move my family to Guatemala and work on a farm. I want to believe people are inherently good and that good spawns good. By extension I'm hoping Panera feels the same way. Hoping others chime in on here to offer their viewpoints.
Best,
Will
I give them a standing ovation at there commitment to assist in feeding those who may find themself financially not able to. People who thought they were set financial have lost their income over the pass year. Panera we need all the help we can to keep our friends, family, and neighbor from becoming unto pressor.
I alway said this business is a giving business. I run a non-profit organization which panera allow us to pick up all that was left and give it out to other. People was alway grateful exspeacil if they did not have food. I was picking up in florida in ALTOMONTE.
At least they gave other store would take the fresh food and throw it in the garage while our country has a hungry problem. I see so much food go to the garage. PLEASE would other store follow PANERA example of giving. Don't waste which can me eaten. Stop a child from going to bed hungry. LET'S STOP THE TEARS.
I will find a location for a other panera near my ministry. I say to the Corporation. President and CEO and board memeber and officer stay bless and I will keep all of you in pray.
PASTOR
JANIS A. AMMOUR
PSALM 91 SPIRITUAL HEALING HOSPITAL OUTREACH MINISTRIES INC.
MIDWAY GEORGIA 31320
A great post on an interesting topic--thank you!
My husband and I discussed this over dinner at Panera a few days ago. We did not choose Panera because of the media coverage; we eat there fairly regularly. We both agreed that this model would not work in Pensacola, Florida, not only because it's in the poorest county of its size in the state, but because a lot of people we encounter here want more for less. A dozen years ago, we ran a consignment craft store with very competitive prices, but still we had people making ridiculously low offers as though we were at a flea market instead of a shopping mall. A friend who works in fast food deals with "customers" all the time who walk in demanding something for free. On the flip side, some local franchises refuse to honor national sales and promotions "because we can't afford to sell it so cheap." A non-profit Panera would be bust in a week here.
Fascinating business model, and easy to see how it would work and how it wouldn't work! I remember the Radio-head song being released in this way, would be very interesting to see how much money they actually ended up from the promotion alone...not that they really need the money!
Thanks for the post!
I alway said this business is a giving business. I run a non-profit organization which panera allow us to pick up all that was left and give it out to other. People was alway grateful exspeacil if they did not have food. I was picking up in florida in ALTOMONTE. Hotel Thailand
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