Does Pay What You Want Pay Off?
St.Louis-based Panera Bread Co. is trying out a new philanthropic cafe concept where customers can offer donations as opposed to fixed prices to receive sandwiches, soups, salads, pastries, breads and drinks. The idea behind the test location in Clayton, Mo. is that consumers who can't afford to pay for a meal can still afford to volunteer at the shop, and proceeds exceeding what Panera needs to sustain operations at the nonprofit cafe would go towards funding community programs, such as on-the-job training for at-risk teenagers, suggests Kate Antonacci, manager for the project.
Panera hopes to help others, but it is still a publically traded business with a bottom line to mind. So will this philanthropic enterprise help the brand, and will other national restaurant chains follow its path?
The company is hesitant to officially commit to future pay what you want locations, although the hope is that hundreds of such stores may someday be open in Panera-crowded markets. A consultant for the project - Denise Cerreta, founder of pay what you want community cafe consultancy One World Everybody Eats - belives there are steps Panera should take at its test location to better guarantee success, such as allowing consumers to choose portion sizes and having them hand over donations directly to a person, as opposed to placing them in a cash box, to increase accountability.
But the leniency in letting customers pay as they please, combined with the notion that proceeds will go toward helping others, could potentially benefit consumer perception of the brand - not to mention investor and franchisee opinion. "Not only can you fill your stomach, you can make a difference in the world or for members of your community," Cerreta says. "Who wouldn't want to do that?"
The concept "is a good extension of the brand in a way that will build some good will for them within the industry," says Orlando, Fla.-based restaurant marketing consultant Aaron Allen. He suggests that the positive buzz created by coverage in The New York Times, USA Today and from other media outlets has impacted Panera's stock price. But to prove the concept's marketing value, Panera's PR and marketing departments will need to show the overall ad equivalent costs tying back to press mentions and to pinpoint whether sales at the converted locations, and sales at locations in the same market, have increased.
So will other restaurant chains try out the pay what you want community cafe model to better improve their image and sales? Allen believes this concept hasn't reached its crest yet. Risa Sherman, senior consultant at Cause Consulting in Boston, agrees, saying the concept is raising the bar within the quick service restaurant industry and forcing competitors to sit up and take notice. But she says not every restaurant chain will be able to try this out. Panera can afford to given the size and profitability of the company and its brand personality. Cerreta adds that, with day-old pastries coming from other locations, Panera is in a position to further afford such locations. From a margins management position, a Dunkin' Donuts or a Starbucks could also try this. But the margins would be higher for burger and pizza chains, for instance, so this concept may not be worth their while, she says.
The June 3rd edition of Marketing News Exclusives features more about this Panera concept and its likelihood for success from a marketing perspective. Members of the American Marketing Association will be able to access that story by clicking here beginning June 3rd.
