For-Profit Restaurant Goes Nonprofit

In Clayton, the St. Louis Bread Co. (a chain known in most other locations as Panera Bread) has a store with a slightly modified new name, and a new motto. At the newly opened St. Louis Bread Co. Cares, customers will be provided with a “suggested price,” after which they can choose how much they wish to pay, whether it be more or less than suggested.

The company is hoping that proceeds will cover the cost of the new facility’s food, rent, and salaries. Baked goods offered will be day-old bread from nearby St. Louis Bread Co. and Panera outlets, which will cut down on expenses. Any extra profit will be directed toward the charitable cause the chain has chosen to fund via this new venture: training at-risk youths. The company hopes to expand the new “Cares” stores across the country, under the name “Panera Cares Cafe.”

This is not an entirely new model; restaurants in Denver and Salt Lake City, for instance, also feature a “pay what you can” motto. Panera, however, has the advantage of a national distribution network, allowing the chain to use its economies of scale in order to save on costs.

Here’s the part I find most intriguing: The “suggested price” does not include sales tax, because the food customers receive is not technically being sold. This means that if a customer donates the same amount for a particular item that she would have paid at an ordinary Panera, an even larger portion can be devoted to charitable purposes than would otherwise be the case.

In a media environment that emphasizes corporate mismanagement, malfeasance, and negative externalities, St. Louis Bread Co. Cares is a great public relations move. It is also an interesting way for a corporation to give back to a charitable cause. Whether the model is sustainable will be seen over the next few months. At the very least, its initial efforts seem to be working:

[Ron Shaich, who stepped down as Panera CEO last week] converted the restaurant into a non-profit and reopened it Sunday. As it turns out, he says, the location’s revenue was actually up 20% on opening day vs. the previous Sunday.

What’s more, says Shaich, who spent Sunday and Monday at the cafe, one-third of those who ate at the restaurant left more than the suggested retail price.

I patronized the St. Louis Bread Co. location in Clayton when our office was only a few blocks away. Every time I’ve gone there, it has been relatively busy. I imagine that customer base will increase with the redesign, which may help the store increase its charitable impact. I, for one, hope that the model is successful enough to generate money for a worthy cause.