Panera’s Experiment in Social Enterprise

As I was sitting in the Panera Bread on Forbes Avenue, I noticed a sign placed prominently behind their cash registers boasting about the $17 million that it, in cooperation with Covelli Enterprise, had donated to charity in 2012. As a former Panera employee, I am familiar with some of their corporate giving programs, but I was only vaguely familiar with their most recent venture: the “pay-what-you-can” café. This program received significant media coverage when it was first announced, but the buzz died down dramatically after the first few months, causing some to question the idea’s effectiveness and sustainability.

The core idea of the “Panera Cares” cafes is that each menu has a suggested value, but customers are allowed to pay whatever price they see fit. This allows those with limited budgets to receive a low-cost meal, while wealthier customers’ higher contributions can help offset the lower payments. The plan was a success. Panera reported that approximately 60% of customers paid the suggested price, 20% paid more, and 20% less, resulting in enough revenue to continue to turn a profit despite average payments decreasing after the initial rush of support (1). While the pay-what-you-can cafes weren't as profitable as the standard cafes, the money left after covering costs was sufficient enough to both run a jobs training program and to donate to food-insecurity relief efforts (2).

Despite the initial success of the program, enthusiasm for the venture diminished rapidly. Panera cites many reasons for the lack of sustained interest: reductions in in-store marketing, a lack of communication between employees and customers, and the location of cafes in affluent and suburban areas that are not convenient to the program’s target demographic. Due to these factors, Panera discontinued the “Panera Cares” cafes in the summer of 2013, but there are plans to resume the program on a limited basis this winter.

While Panera’s program is not without its flaws, the success it did achieve shows the potential of private corporations to participate in social innovation and enterprise. The trial cafes did see lower profits, but Panera still made enough money to cover costs while gaining a significant amount of positive media coverage. This type of enterprise is not limited to private corporations; non-profits could (and have) develop similar efforts to generate funding to support their core activities. Is it possible to adjust Panera’s venture to be more sustainable in the long-term? How can this model be adapted to benefit other corporations and organizations?

(1): http://www.ssireview.org/articles/entry/whats_next_retailing_with_heart
(2): http://www.nbcnews.com/business/panera-shelves-pay-what-you-can-idea-6C10588100