Serving up inherent goodness

CLAYTON, Mo. - As the first crowd of customers filed into Panera Co.'s nonprofit restaurant in this St. Louis suburb last month, only the honor system kept them from taking all the food they wanted for free.

Ronald Shaich, Panera's chairman, acknowledged as he watched them line up that he had no idea whether his experiment would work. The concept for Panera's first nonprofit restaurant was to open an eatery where people paid what they could. The richer could pay full price - or extra. The poorer could get a cheap or even free meal.

Now the verdict is in: It turns out, people are basically good.

Panera, which operates 1,400 franchised and corporate-owned bakery-cafes across the country, including 20 in the Philadelphia area, plans to expand the nonprofit model around the nation, opening two more locations within months.

"I guess I would say it's performing better than we even might have hoped in our cynical moments," Shaich said in an interview, "and it's living up to our best sense of humanity."

Its cashiers tell customers their orders' "suggested" price based on the menu. About 60 percent to 70 percent pay in full, Shaich said. About 15 percent leave a little more, and another 15 percent pay less, or nothing at all. A handful have left big donations, like $20 for a cup of coffee.

The restaurant had sales of $100,000 in revenue its first month. Shaich declined to say what kind of margin this left between total costs and revenue, but he predicted the restaurant would be able to cover its costs within months and eventually generate extra cash for charitable programs.

Panera's nonprofit plan is the largest example of a concept called community kitchens, where businesses operate partly as charities. Customers who need a discount, or even free food, can get it with no questions asked.

Shaich borrowed the idea from a restaurant in Denver and then connected with Denise Cerreta, who runs the One World Salt Lake City restaurant with a sliding-scale menu.

The Clayton store, which opened May 16, is run under the company's St. Louis Bread Co. banner by a nonprofit organization called Panera Cares, which publicly traded Panera Co. supports.

The Clayton Panera has hardly turned into a soup kitchen. Its longtime business customers are keeping the lunch hour busy, with well-dressed workers clustered around laptops and talking on cell phones.

But there are new customers - drawn to the bargains. Anna and Bennie Ward heard about the pay-what-you-wish model on the news, and they came for lunch with their two children.

It was a rare chance for the couple to dine out, Anna said. Bennie is laid off, and her only income is from disability checks.

Shaich had moments of doubt during the restaurant's first weeks, including when a teenager bought $40 worth of sandwiches to go and put just a few dollars on a credit card.

To control freeloaders, signs remind customers that "You're on your honor."

Shaich said the nonprofit chain was a challenge to other corporations to push their philanthropy beyond writing checks. More valuable, he said, is to put their supply chains, technology, and knowledge to use.

"The fascinating question to me is: Can we take our skills - our core competencies, as we call them in business - and apply them very directly to solving some of the problems" in society, he said. "And not just for publicity, but to make a difference."