Thursday, May 27, 2010

Philanthropic Decisions at the Bakery

You may have seen the news that Panera, a U.S.-based bakery and restaurant chain, has launched a new nonprofit store in St. Louis that will operate in exactly the same way as its other stores will. EXCEPT, it doesn’t offer any prices. Customers are told to donate whatever they want for their meal. It could be one cent, or ten dollars or 100 dollars. The company hopes to open additional nonprofit, pay-what-you-like restaurants if this one succeeds.

Now, there are community kitchens that have been run like this before, and certainly this idea has been gathering a little steam in the nonprofit sector. But this is the first time that a well-known chain has attempted to develop this kind of business model.

I’m very curious to see how this succeeds because it raises a number of issues related to philanthropy and fundraising. For starters, donors often need to be challenged in their giving. Ask a donor what they can give, and often times they won’t know. They won’t have a sense of what needs to be done and what of money it will take, or how much they can truly afford. Which is why we as fundraisers set out guidelines for them, such as giving options and giving clubs, or we inspire and challenge them to make a major gift that will have a significant impact on the cause. While donating money for your lunch is set more in the for-profit realm, I wonder how the restaurant will do without any sort of guidelines or “challenges” with regards to pricing.

On the other hand, the interplay between customers as they’re paying will be interesting to see as well. Knowledge of what others have given can affect a donor’s gift and will often result in an equivalent or larger gift. Similarly, if one customer sees another customer paying more, will he or she be inspired to pay more as well, or less?

There’s another issue too: how customers feel about what they’re doing. While this model is nonprofit, initial revenues will go to keeping the restaurant going. Any profits will be ultimately given to charity—at least that seems to be implied by what I’ve read. So will customers think it’s for-profit or nonprofit? If they pay more for the meal than what it might usually cost, will they think of that cost as charitable or philanthropic? Will they feel like they’ve been philanthropic? Or will they feel a bit confused and perhaps cautious about how Panera will use their money?

It’s an interesting business model that has many questions. I wish Panera the best with it. Perhaps it’s a model for future for-profit/nonprofit collaborations. What do you think?

7 comments:

  1. It will be interesting to see how Panera will make its case for support. I, for one, would need to know before I walked into the Panera store, who is benefitting from my donation and are the organizations going to be good stewards of my money? And of course, unless I give them $100 for a $10 salad, I haven't really made a charitable donation. Are they planning to disclose the value before the ask for my "donation?"

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  2. Very interesting! Can't wait to see how this plays out.

    Sandy Rees, CFRE
    Fundraising Coach

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  3. Amy Cole Buehler, MAJune 1, 2010 at 5:13 PM

    Linda,

    They give "suggested" pricing next to each item which would be the amount that you would pay at any other Panera in the St. Louis Metropolitan area.

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  4. I think this could potentially be a golden opportunity for local Panera's to partner with local nonprofits, particularly when it comes to volunteering. If a person can't afford to pay the full "price" they are asked to volunteer an hour at the Panera store. What would be even better is if they had a list of local nonprofits needing volunteers, and a person could sign up right at Panera to volunteer for an organization of their choosing.

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  5. Thank you for the update Paulette. Very interesting indeed and we will see what comes of it.
    Pastor Adam Barton
    Akron, Ohio

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  6. Dear Paulette,

    Thank you for writing about this. There's a book about this called "Instructions to the Cook" by Glassman.

    This blogger wrote a post about what they're doing. http://causecapitalism.com/greyston-bakery/

    It seems to be working.

    I wish more nonprofits would take the hybrid nonprofit/for profit model. It is a more stable model than the grants model.

    Sincerely,

    Mazarine
    http://wildwomanfundraising.com

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  7. Thanks to all for commenting on this new type of nonprofit/fundraising model. Everyone made good points and I agree that it will be interesting to see how this Panera store develops over time.

    I get the sense that maybe Panera just hasn't gotten far enough in the charitable direction to make this work. It might be a hybrid/nonprofit venture, but from the public's perception, there needs to be more--as has been suggested, maybe a place to sign up to volunteer, more clarity on how any revenue might be used for charitable purposes, etc. I think the public really needs to understand the venture better before it can really take off.

    Of course, it's still too early to judge, but just a sense I'm getting. Please keep in touch with your comments about this and I would be interested to hear from those of you that have eaten at the St. Louis store.

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