According to Eater, after nine years of being in business, Panera Bread’s socialist pay-what-you-want restaurant, Panera Cares, will officially be closing shop on February 15 due to the business model’s unsustainability.
While Panera Cares billed itself as a “non-profit” restaurant designed to feed low-income people, the business model was anything but. Rather than create a charitable organization that distributes food to needy families or a discount outlet or even a $1 menu (like every other fast-food restaurant), Panera tried to create a socialist system in which meals were offered at a suggested donation price. That means some people would pay more while others would pay less based on what they felt like or could afford. By not simply offering food at a low price (hat-tip, Dollar Tree), Panera completely removed any incentive for patrons to meet even the lowest standards of consumer/retailer exchange. The result: some people paid their fair share while others enjoyed a “free lunch.”
Upon opening the first Panera Cares in 2010, the company founder Ron Shaich said the cafe was designed as a quasi-test on human sensibility to raise awareness about food insecurity. “In many ways, this whole experiment is ultimately a test of humanity,” Shaich said in a TEDx talk. “Would people pay for it? Would people come in and value it?”
Panera Cares went on to open five locations in cities like Dearborn, Portland, Chicago, Boston, and St. Louis. None of the restaurants were self-sustaining, with some locations reportedly being “mobbed” by students along with homeless people looking for a free meal.
“The Portland-based Panera Cares was reportedly only recouping between 60 and 70 percent of its total costs,” reports Eater. “The losses were attributed to students who ‘mobbed’ the restaurant and ate without paying, as well as homeless patrons who visited the restaurant for every meal of the week. The location eventually limited the homeless to ‘a few meals a week.'”
Though Shaich said the restaurants tried to educate people about “sharing responsibly, people ultimately came to the locations for a handout.”
“We had to help them understand that this is a café of shared responsibility and not a handout,” Shaich said in a 2011 interview about the Portland location. “It can’t serve as a shelter and we can’t have community organizations sending everybody down.”
Measures to maintain order, however, backfired, with multiple online reviews denouncing the restaurant for being an unwelcoming place, accusing it of false advertising. As with every socialist experiment, the natural harmony between the commoners and the power-brokers devolved into hostility.
“Patrons reported security guards roaming the entrance and ‘glaring at customers,'” reports Eater. “People working with at-risk residents described incidents during which they were rudely told off by managers for ‘abusing the system.’ Others described situations in which visitors trying to participate in the pay-as-you-can system feeling shamed for not being able to afford the suggested donation amount.”
Since 2016, the Panera Cares locations have been closing down one-by-one. The last remaining shop in Boston will be closing in just 10 days. After Panera was sold to private equity firm JAB Holding Company, Shaich stepped down as CEO in 2017. He admitted to the St. Louis Post-Dispatch in 2018 that “the nature of the economics did not make sense.”
Eater notes that the “pay-what-you-can restaurant model” has seen some success with Denver-based restaurant SAME, which inspired Panera Cares.