Case 3 PANERA EXPANDS PAY-WHAT-YOU-CAN EXPERIMENT Error! Main Document Only.When it comes to corporate philanthropy, many companies dont go much further than cutting a check. While it is certainly generous to give money to a good cause, donating to charities and food banks simply wasnt enough for Ronald Shaich, chair of the bakery-caf chain Panera Bread. He wanted to lend assistance to those in need in a way that was integrated within the day-to-day operations of one of his stores. In the end he decided to use one of his locations in Clayton, Missouri, for a radical experiment: let the customers decide how much they want to pay for food. The idea is that those who have money to spend would pay full price, or even more if they so chose, while cash-strapped customers would pay whatever they could afford. The net revenue that is left over after the company covers its overhead costs would be given to charity. In essence, Shaichs nonprofit plan is a large-scale version of a community kitchen, where people who need a discount or even free food can get it if they need it. The only difference is that Panera is a successful restaurant operation with more than 1,400 locations across the country, not exactly your normal nonprofit. Shaich says the honor system experiment started out shaky, with one teenager walking out with $40 worth of food after putting just few dollars on his credit card. But after one month in operation, most of the customers abide by the goals of the program. About 60 to 70% of customers pay full price, while 15% leave a little more and a further 15% either pay less or nothing at all. Within its first month the nonprofit Panera grossed $100,000, but Shaich wont reveal the margin between total costs and revenue. Still, the company must be happy enough with the results since it plans to open two more nonprofit locations within the next few months. Like the affluent but accessible Clayton location, the next two nonprofit Paneras will be located in upscale neighborhoods that can be easily reached by poorer customers, but still retain a wealthier core population that can pay full price.i

Questions for case 3 1. What seems to be the strength of Paneras nonprofit locations plan?

2. Do you suspect competitors will follow Paneras lead?