Panera lets customers pay what they want

http://www.msnbc.msn.com/id/37213165/?gt1=43001

by landyman • 16 years ago

63 24 16 years ago

msnbc.msn.com

_delirium• 16 years ago

Very strange hybrid of models. The non-profit food "seller" with flexible payment/donation policies is taken straight out of the traditional hippie and anarchist food co-ops model (though one thing they often have that this seems to be missing is the ability to volunteer some labor in lieu of monetary donation). But in this case it appears to be merged with Panera's branding and some sort of raise-money-for-charity goal, and stuck in an upscale suburb.

samd• 16 years ago

I'd think this would be more successful if you didn't have a national brand behind it. Nobody feels guilty taking things from a big corporation.

logic• 16 years ago

From the article:

"The first location bears the name St. Louis Bread Co. Cares"

I suspect detaching themselves from the national chain brand will help; really, I think branding and location choices are going to end up being the primary success factors here.

This will be very interesting to watch.

tricky• 16 years ago

not sure if you know this, but all Panera's in St. Louis are branded "St. Louis Bread Co."

mortenjorck• 16 years ago

I have to imagine this business model must have existed in various ways throughout the history of commerce, but it's fascinating to see it experimented with again by a business in a traditional industry. Particularly so now that we've seen it expand throughout the tech world, in both the passive "donate button" form and the active form popularized by Radiohead.

invisible• 16 years ago

The tricky part is staying above the cost. I know it's relatively low, but I have no idea how much a loaf of bread costs Panera from wheat-to-customer.

I wish more food stores operated on a minimum charge as opposed to pay nothing or whatever you want. I suppose that loses the "give a lot" mindset.

sliverstorm• 16 years ago

> I suppose that loses the "give a lot" mindset.

I personally think it's the part where you could pay just a penny- the store makes themselves vulnerable. If you charged a minimum, people would just pay the minimum, simple as that.

bia• 16 years ago

Ron Shaich, Panera's chairman says he's “trying to find out what human nature is all about”: http://stlouis.bizjournals.com/stlouis/stories/2010/05/17/da...

Not sure if this is a reference to how employees and customers will behave in the context of the new store or to whether or not the store will manage to stay afloat at all.

Batsu• 16 years ago

I like how it looks on the outside as an experiment, but it obviously can't be sustained without rules -- surely they won't let someone come in, take everything for a penny, and leave?

It has the stench of a publicity stunt, but it seems well intentioned nevertheless.

pak• 16 years ago

I was about to cite the second law of thermodynamics. I don't think people are on the whole bad to each other, but the ones that are can ruin it for everybody too easily in the absence of rules. Your example is perfect.

po2• 16 years ago

I know a lot of people when I was in high school or college who would have had no qualms about eating there every single day for free regardless of any social stigma. I can't imagine that there wouldn't be some resentment by the employees or other customers that someone is taking the most and never giving back.

curio• 16 years ago

that reminds me of the girl who takes advantage of the zappos free returns policy and gets 5 new pairs of shoes every singles week only to mail them back a few days later. but zappos doesn't cut here off -- she is important evidence that they are serious about their policy & for zappos there are enough honest people out there to more than make up for her.

Gormo• 16 years ago

Do you think prescriptive rules are necessary, or is it better to handle these kind of situations on a case-by-case basis?

Most social systems seem to be based on a maximin decision rule, and try to minimize the impact of imagined worst-case contingencies (there was an interesting thread on HN last week discussing this) - but perhaps we would realize our objectives more effectively and minimize the entropy that accumulates by too often adding new rules if we instead optimized the system to the general case, and dealt with outliers (as catastrophic contingencies necessarily are) specifically and individually.

ABrandt2• 16 years ago

I worked at Panera (St.Louis Bread Co. actually) for three years back in high school, and this new store is literally down the street from me.

Every one of their locations already donates a huge amount of baked goods to local charities each and every day. I would say on average, my store either threw away or donated 75-100 lbs. of food from our bakery every night (and this is a low ball estimate). And that's exactly how a non-profit model actually might work for them. They're shifting the burden of all of this waste from the company, to the charitable consumer. Theoretically, pay what you want pricing will drive up demand for their food and thus eliminate the amount thrown away each day.

This certainly wouldn't work everywhere, but the Clayton neighborhood is perhaps the most affluent in St.Louis. Bread Co. customers are already accustomed to paying $3 for a muffin--the idea of sending all of that straight to charity could be phenomenally successful for everyone involved.

wheels• 16 years ago

I'm not sure it works that way -- the amount baked is basically one standard deviation above expected demand on a given day so that people don't show up and the shop is out of bread. It's stabalizing demand, not driving it up, which would reduce waste and I don't see any way that this addresses that.

ABrandt2• 16 years ago

This is true, we did put quite a bit of effort into properly forecasting demand. At the end of each day I'd count every piece of food we had left, feed that into some software along with some variables such as weather, and try to calculate what we needed to bake that night. Turns out even with an extremely short forecasting horizon, it's damn near impossible to accurately predict how much fresh bread people want in any given day at a particular store. (I'm not sure if we did use one standard deviation, and if we did that would only account for 68.3% of variation anyways). I've literally been screamed at for not having any whole-grain bread left 10 mins. before closing time.

If I was to manage this non-profit store, I wouldn't bake according to expected demand. In this particular scenario, a reasonable amount of stock-outs would mean that you have more money left at the end of the day to donate to charity rather than covering the production costs of waste. (Of course you would want to avoid creating ill-will with too much stock-out).

But the real reason this makes sense for Panera is that they're already donating a ton of goods to charity everyday. For this store, instead of donating bread, they'll be donating cold hard cash that people fork over. Great PR and great for the community.

mattblalock• 16 years ago

A question I'm wondering is how this works with credit cards... do they offer a credit card payment option?

From the article: "...Frierdich tried to hand him $12 in cash, but he directed her to put it in the donation jar."

Seems like an opportunity for a new tech that would allow a "customer" to make a credit card donation of an amount they choose. Maybe on exit? Or... idk. Could be an interesting project for someone with a little credit card industry knowledge.

po2• 16 years ago

…and can you make change for yourself out of the donation jar?

BrianAnderson• 16 years ago

I am wondering how many people are like me and see this as analogous to the the codesketch marketing model where you give something away for free in order to generate increased exposure, pr, etc? (http://news.ycombinator.com/item?id=1359313 - btw I think it is a brilliant idea)

If panera was experimenting in a vertical they were not firmly entrenched, I maybe would have a different opinion, but why would Panera really be interested in building a national competitor to their branded stores?

duairc• 16 years ago

Did anybody else misread this as "Pantera"?

robryan2• 16 years ago

While I can see this as a valid experiment in the digital world where each additional copy doesn't cost you anything, it doesn't make much sense when each item has a cost to produce.

lsc• 16 years ago

I can see why it might not work because each item costs something to produce, but that doesn't make it an invalid or uninteresting experiment.

My expectation would be that the experiment will fall with the current model (put some money in a jar) - I would guess they would do better with something less anonymous, with more room for social pressure.

On the other hand, four is shockingly cheap when bought in bulk, and service workers are also not particularly expensive, so it's quite possibly they'll be 'facebook profitable' and if you've got a large corp willing to cover your CapEx, that's good enough.

robryan2• 16 years ago

An interesting side effect of money in the jar though is that people are socially pressured not to take change from the jar, meaning they may pay say $5 instead of the $3 they normally would because they had the note.

Panera lets customers pay what they want

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