Retailing with Heart

Venture into a Panera Cares café and you’ll see the same menu and racks of freshly baked breads that are staples at the 1,400 Panera Bread restaurants across the United States. The only thing missing is the cash register. Instead, there’s a donation box where customers pay on the honor system.

“We tell you the suggested price but the choice is yours,” explains Panera co-founder Ron Shaich, who recently stepped down as CEO to focus more of his energy on philanthropy. (He continues to chair Panera’s board of directors and heads the Panera Bread Foundation.) “If you’ve got a few extra bucks, the right thing is to leave it. If you’re feeling pressure, you can take a discount. If you’ve got nothing, you’re free to enjoy your meal with dignity.”

Since opening its first “restaurant of shared responsibility” last May in a St. Louis suburb, the chain is poised to take its upscale version of a soup kitchen nationwide. A second Panera Cares café opened in November outside Detroit, and a third was slated to open in Portland, Ore., in January. Neighborhoods have been selected to include a mixed clientele, with well-heeled professionals dining side by side with homeless families.

The concept is groundbreaking in the food service sector. “It’s not like a free Grand Slam breakfast that Denny’s offers on one day a year,” Shaich says. “We want this to be sustainable.” Any profits generated by the cafés will be channeled into job training for disadvantaged youth and other community programs. Unlike the Ben & Jerry’s PartnerShops that are franchised to local nonprofits, Panera Cares cafés are managed by the corporate foundation.

The model offers the company a way to put its core strengths to work on social problems. Panera has long been active in philanthropy, donating more than $100 million worth of goods annually to local agencies, Shaich says, “but that product goes out the back door in brown bags. Nobody gets connected to where it goes.” He liked the idea of getting his workforce more personally involved in solving challenges. “How do we take our skills and add more value than just writing a check?”

An answer started to take shape when Shaich heard about a Denver-area nonprofit that was running a no-price café to serve the community’s hungry. The idea sounded promising but had taken years to implement. In the corporate world, Shaich says, he’s used to opening two restaurants a week. He also thought about an experience of helping his young children deliver food to shut-in elderly. “The three of us spent three hours driving to the warehouse, filling bags, and taking food to a couple of people. That’s nine hours of human capital for two bags of food.” The entrepreneur in him knew he could make giving more efficient.

To fine-tune the Panera Cares concept, Shaich visited soup kitchens in various communities. His decades in food service didn’t prepare him for what he saw. Waiting in line for a handout “is an experience that lacks in dignity. With all due respect,” he adds, “it’s negative energy.” That’s when he decided the new cafés needed to offer a full menu, not just bread and soup. “Then it became a dare to ourselves. If we’re serious about offering a high-quality experience to everybody, then we have to put all the power of our brand behind this.”

Patrons have responded favorably, with about 60 percent challengpaying suggested price, 20 percent paying more, and the rest taking a deduction. It averages out to 80 percent to 85 percent of suggested retail, which is more than enough to cover costs, Shaich says.

Nordstrom may be the next national chain to start retailing for charity. The upscale clothier will open a unique store in the SoHo neighborhood of Manhattan in fall 2011. All profits will benefit charitable causes. Devoting a whole store to charity goes beyond cause marketing campaigns like Product RED.

It’s not yet clear what merchandise will be sold or which charities will benefit, says Nordstrom spokeswoman Pamela Lopez. But unlike Panera, Nordstrom will not brand the store as its own. “There will be no Nordstrom sign,” Lopez says. “This is a chance for us to do something unique.” Not coincidentally, the store will offer the company a window into the New York retail market, “where we aspire to have a full-line store eventually.”

Read more stories by Suzie Boss.