A Restaurant with Only Suggested Prices

by Kay Lynn

Panera

What would you do if a restaurant gave you the option to pay the price you wanted?  Panera experimented with a “set your own price” model and found the honor system works.

Why open a set your own price restaurant?  Panera started the non-profit arm as another method of philanthropy.  Due to the success of the pilot two more sites will be opening this year.  Their spokesperson noted that if the experiment needs to be self-sufficient.

Most people (up to 85%) will pay the suggested price or even more. Only 15% pay less or nothing.    Middle and upper class patrons pay their own way (and more) offsetting those that can’t afford to.

The author, Christopher Leonard,  quoted a patron who can not afford to dine out with their only income from disability payments.  For Anna Ward to “…eat an actual meal and feel full is such a blessing”.

Freeloaders are hopefully influenced by posted  signs reminding patrons about the honor system and an employee explains the concept as they walk in.

Location is a major factor in this statistic.  The non-profit arm selected an upscale area that can be accessed easily by lower-income patrons.  

I’m wondering if it is successful because of the region and attributes of its residents.

 Would this work in New York City or San Francisco?  I sure hope so for people like Anna Ward. 

What do you think about this concept?  Would it be successful in your area?

photo credit: beautifulcataya 

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{ 24 comments… read them below or add one }

kt June 28, 2010 at 10:31 am

it wouldn’t be successful where i live. Most people are just broke college students and they would suggest free as the price 🙂 myself included

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Bucksome June 29, 2010 at 5:24 am

KT, A college location would be a terrible idea. I would have been eating for free in my college days as well.

Jersey Mom, we have a lot of homeless in our downtown area (attracted by the nice weather) so it wouldn’t work there but maybe some of our upscale neighborhoods?

Louise, I think location is the secret. Panera is at least trying something new!

Fig, maybe more people are like you than we think? I sure would like to think so.

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Jersey Mom June 28, 2010 at 11:18 am

I’ve heard of a restaurant in Jersey that tried this few years ago. It didn’t stay open long. From what I’ve heard, many homeless people went there to eat & those who can afford to pay for their food didn’t want to go there to eat next to homeless people. I know this doesn’t sound very nice but that’s what happened.

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Louise June 28, 2010 at 12:41 pm

I too live in an affluent area and think it would actually be successful here. That is really cool of Panera to try something like this. I knew I liked them!!

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Fig June 28, 2010 at 1:27 pm

I think it’s a really cool idea. I know that I would pay more if the food was really good and I had the cash. And I’d probably frequent a place like that often. But most people aren’t like me so it’s probably not a viable business option and more of something that would be philanthropic.

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Financial bondage June 28, 2010 at 1:35 pm

seems like a great idea, but you will always have a handful of people that will ruin a good thing for everyone else.

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Bucksome June 29, 2010 at 5:26 am

Financial Bondage, it is nice that they’re thinking outside the box. I hope that people that can afford to pay continue to do so.

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Evan June 28, 2010 at 1:58 pm

Interesting concept! My initial reaction would be that of Jersey Mom’s example. It would work in affluent places. However, I do know however that when prompted by The Met for a suggested price I paid in full. I even asked the guy as I forked over the $40 bucks and he said most people pay, but then again we weren’t talking about food.

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Bucksome June 29, 2010 at 5:28 am

Evan, we paid full price at the Met a couple of years ago when visiting. I thought the price was high, but I could certainly afford to pay and did so. But as you pointed out food is different as it’s a necessity.

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Everyday Tips June 28, 2010 at 2:22 pm

I live in a suburb of Detroit, and I don’t think it would work very well here. Heck, I can afford Panera and even I don’t want to pay what they are charging. It seems like they raise their prices every month.

I am afraid there are too many desperate people around here for this concept to be successful unfortunately…

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Bucksome June 29, 2010 at 5:30 am

Everyday Tips, Detroit sure has been hard by the economic downturn. There are probably too many people there that need a free or discounted handout to work. The secret I think is a mix of mostly middle-class/well-off patrons with about 10% lower income.

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Jolyn@Budgets are the New Black June 28, 2010 at 6:45 pm

I would have to agree that location would be key. Unfortunately, I also see the potential for word getting out and the honor system starting to backfire as more and more out-of-area patrons visited just for some free food. Whether the regular patrons could support that or whether they might stop coming so often themselves would remain to be seen…

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Bucksome June 29, 2010 at 5:34 am

Jolyn, good point about the reactions of regular patrons if the mix changed to include many out of area ones. No matter how much we admire diversity people want to hang out mostly with like people. If I go out to eat I feel comfortable surrounded by mostly people in the same socio-economic scale. I’m going to stop going if it’s too much out of my league… lower or higher.

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Lakita | Personal Finance Journey June 29, 2010 at 5:23 am

It’s a very interesting concept to say the least. It may or may not work at the St. Louis Bread Co (that’s what their called in STL and surrounding areas) — but I would love to see more market research and more businesses bold and brave enough to try something like this.

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Mandy June 29, 2010 at 8:02 am

I like to think that the majority of people would pay, even those on very limited budgets. I think besides location there are other things the restaurant could do to up the odds of people paying close to the suggested price – the portion sizes in most restaurants are way more than what is needed so they could be reduced. They could also do more of a “construct your own meal” like a choice of whether to have meat etc.

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Bucksome June 29, 2010 at 11:52 am

Good idea about offering smaller portions that are more affordable potentially. I also believe that most people will do the right thing. However, realistically location and it’s associated socioeconomic breakdown will have an impact.

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Rhonda June 29, 2010 at 12:14 pm

Sounds like a terrific concept for the right areas. (I would definitely be one of those people who would feel guilty the whole time that I was eating if I wasn’t able to pay the suggested price.) Perhaps they could incorporate a reward seating system. One fancy room for well paying customers,and a limited smaller section for tight wads. lol

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Bucksome July 1, 2010 at 5:53 am

Rhonda, I think you hit the nail on the head why it’s been successful. Most people wouldn’t feel right paying less than suggested if they’re able to afford it.

I don’t think the reward seating is a good idea though because the point is to make it accessible to the smaller percentage who can’t afford to pay full (or any) price. You wouldn’t want to call attention to them.

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Money Funk June 29, 2010 at 1:18 pm

I hear it works pretty good. I actually read about a guy opening a restaurant like this, except if you can’t pay or chose not to pay, you can work for a few hours in exchange. I think its great. And the guy said most people pay a fair price for what they receive. Plus, the food looked delish! So, I say, its a cool concept!

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Bucksome July 1, 2010 at 5:54 am

Money Funk, maybe some of us are too cynical. I think having people work in exchange for not paying is a way for them to keep their dignity and enjoy a good meal. Great idea!

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Barb Friedberg June 29, 2010 at 7:08 pm

It’s really hard to grasp. I’m not sure what I would do. I think the success of the concept is dependent on the neighborhood &/or the city. I’ve read that the concept has worked in a variety of areas. Regards, Barg

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Bucksome July 1, 2010 at 5:54 am

Barb, I guess this isn’t a new idea but it is certainly different. I hope it does succeed so Panera can add many more!

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Restaurant Marketing Software June 29, 2010 at 9:01 pm

It sure is a new concept in restaurant industry. I really like to know more about this story. Did they make more when only 85% of their patrons pay? What are they doing with the 15% who pay less or nothing? Did they get food for free? If this concept is working get ready to see this across many industries. Maybe it’s already working on insurance (progressive)

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Jim July 28, 2010 at 11:47 am

if you are in the right market and the surrounding area has nice restaurants i think this can work.

most people are honest and would pay the full freight. if they like the ambiance and the cuisine then you could easily set yourself up for success.

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