A different economic model: Panera Cares

Or, as Quartz puts it, “How a restaurant with no cash registers and no prices makes money.” The mechanics of these special Panera locations:

There are no prices listed next to items on the menu boards and no cash registers. Instead, donation boxes sit on the counter, with signs telling customers: “Take what you need; leave your fair share.” Panera cashiers take meal orders, hand patrons receipts indicating how much the items would normally cost, and let them decide how much to leave in the donation box or to take off their credit cards.

There are five such cafés up and running. The objective is to provide some support for individuals who have a tough time paying for their next meal. And Panera is not just footing the bill – in fact, many of the five seem to be accomplishing their goal of self-sustainability:

The bet Panera has placed is that other customers will pay more than their meal costs in order to subsidize those who cannot afford to pay full-price. So far, it’s worked. Most of the cafés are consistently self-sustaining, with approximately 60 percent of patrons paying the suggested price, 20 percent paying less or nothing, and another 20 percent paying more than the cost of their meal.

It isn’t often I come across such an unconventional business model, but it may in fact have some staying power. The linchpin is Panera’s understanding of the psychological foundation for an individual’s willingness to pay, and its relation to social pressure. The article is a fascinating read, as much from a cultural and social perspective as from an economic one.

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