Food Business
The bold “pay-what-you-want” restaurant experiment
A new dining trend allows customers to decide their own menu prices. An economist explains why it's a bad idea
In the last few weeks, a radical pricing strategy has been making waves in the restaurant world: establishments that allow diners to decide themselves what they’d like to pay for their meal. In May, the fast-growing Panera Bread Co. restaurant chain launched a pay-what-you-want outlet, attracting media attention everywhere from the New York Times to the Wall Street Journal. (Customers could also choose to work volunteer hours in the restaurant in exchange for payment.) This week, Vancouver’s more high-end Rogue Kitchen and Wet Bar began offering “suggested prices” for its menu of mini-corn dogs, steak and sushi bombs — joining the dozen or so other restaurants across North America that follow a similar model.
Of course, the pay-what-you-can model has been attempted with some success in other businesses, most notably three years ago, when Radiohead put its “In Rainbows” album online and allowed fans to choose its worth. The idea may make some sense in the current food culture, in which movements like organic eating and freeganism have gained remarkable traction, but it also puts a tremendous amount of faith in a restaurant’s customers at the tail end of a recession. Seattle’s Tera Bite coffee shop introduced the policy to great fanfare in 2007, but called it quits after two years.
To find out if the pay-what-you-can model could work for a restaurant, Salon spoke with Tyler Cowen, a professor of economics at George Mason University (and food writer), from Berlin, Germany.
Do you think this pay-what-you-can model could actually work for restaurants?
You can have a small number of restaurants that use it, but if every restaurant were like that, it would never work. It gets people talking. It’s like Radiohead — for the first group that does it, it’s a good idea, but is it a good model for the industry? Not really. Imagine McDonald’s at Times Square working on this principle. If you kept on going or eating they would discourage you from coming.
Do you think it could work on a small scale — two or three restaurants in a city?
I’m not even sure it can in the long run. I’m not sure if these places will still be going in three years’ time. Part of the problem is if you’re a customer and what you pay is voluntary, you’re under pressure to pay a lot of money. You do it once to prove to yourself and others how charitable you are, but how many people go back 17 times? I would find it a burden — my reputation is on the line. What if I only pay $ 27 instead of $ 34? What does my date think? What does my wife think? You end up wanting to feel liberated and just paying a listed cash price. I think there’s no way to solve that problem.
But Radiohead’s experiment was fairly succesful. What’s the difference between it and a restaurant?
With Radiohead, there’s a focal price of about $10, which is pretty cheap. If you download an album and send in $10, you feel you’ve done your bit, and it’s not a question of repeat business. You download the album once. Radiohead makes most of its income by touring, so even if they lose money on the album, but get more popular, they can just go on tour. A restaurant has no other way to get that money back. They count on the people to pay for their food.
Is there anything that these restaurants can do to encourage people to pay more?
You have to feel like you’re being watched. You have to feel that other people are paying. You have to feel like you’re part of a cool experiment. Even with Radiohead. it’s wrong to call them neighborly, but their fans pretend they’re a tight-knit pool of cool people. That’s an illusion, but you’re still relying on a peer effect. It’s a way to feel you’re better — that you’re so committed to the band you paid for something out of your own pocket.
Are some sectors of the economy better suited to this kind of pay-what-you-can model?
It depends on what you mean by giving things away for free. There’s plenty of stuff that gets given away for free, like NPR. But once NPR’s content is produced, it doesn’t cost them extra to have additional listeners. With restaurants, if somebody eats another plate of veal, it costs them money. It’ll keep this strategy limited. There may be some niche on a small level for these kinds of restaurants, but it’s hard to imagine people saying that they’ve been to six of these restaurant and they’re about to go to their seventh.
Why are these restaurants popping up now?
I’m actually not surprised you see them in down economic times. You let some people pay less that can’t pay more — it’s part of the charm. But these days there’s a restaurant for every possible cuisine, and so many marketing tricks. Restaurateurs are exploring every last possible idea. If you were opening a restaurant in 1957, you could do almost anything beyond steak and potatoes and be considered new, but if it’s 2010 and you’re across the street from the Malaysian place with roller skates, it makes some sense.
Thomas Rogers is Salon's Arts Editor. More Thomas Rogers.
Walmart’s war on the American food system
It's hard to eat healthy in fast-food nation. A new book, reported undercover at Walmart and Applebee's, tells why
You may not be truly shocked by any single statistic in Tracie McMillan’s new book, “The American Way of Eating: Undercover at Walmart, Applebee’s, Farm Fields and the Dinner Table” — but by the time you finish reading, you’ll definitely feel the impact of her cumulative case.
McMillan spent months exploring the American food system from three different angles: picking produce in California fields, working in two Michigan Walmarts, and expediting (organizing the flow of food from the kitchen to the dining room) at a Brooklyn, N.Y., Applebee’s. By turns analytical and anecdotal, her book marshals first-person experience, history and current research to paint a picture of America’s 21st-century food reality.
Continue Reading CloseEmma Mustich is a Salon contributor. Follow her on Twitter: @emustich. More Emma Mustich.
The rise of Big Meat-bred super bugs
Despite the public health risk of antibiotic-resistant bacteria, the lobbyist-swayed FDA keeps easing regulations
(Credit: Reuters/Mike Cassese) So far, 2012 is bringing bad news for people who don’t want “free antibiotics” in their food.
Antibiotics are routinely given to livestock on factory farms to make them gain weight with less feed and keep them from getting sick in confinement conditions. But the daily dosing, at the same time it lowers feed needs, lowers drug effectiveness and produces antibiotic resistant bacteria or super bugs that can be deadly to people.
Martha Rosenberg frequently writes about the impact of the pharmaceutical, food and gun industries on public health. Her work has appeared in the Boston Globe, San Francisco Chronicle, Chicago Tribune and other outlets More Martha Rosenberg.
How to save small farms
By protecting farmland from development, land trusts are making small-scale agriculture more viable
(Credit: Courtesy of Maine Farmland Trust) You could say Penny Jordan saved the farm. A veteran of the insurance industry with a business degree, she came back to work at her Maine family farm at age 48. Since then, she’s revitalized her old farm stand business with a bus that delivers produce to senior centers. She’s opened a tiny restaurant on wheels, The Well, where a fine-dining chef turns out an ever-changing menu to be eaten at picnic tables by the parking lot—albeit one with a stunning view of Spurwink River. Jordan, a spunky, silvery blonde who favors fleece and Carhartts, has so much energy she almost bounces as she walks. Her creativity may spark new business models for other small farms, and why not? This is a woman who seems like she could do anything.
Continue Reading CloseWant a taste of Ben & Jerry’s Schweddy Balls?
The ice cream makers reveal their most unusual choice yet, named after a "Saturday Night Live" sketch
Ben & Jerry’s — much like the porn business — thrives on coming up with catchy titles first, and figuring out the details later. And like X-rated movies, the names of Ben & Jerry’s flavors are often the most satisfying things about them. But even fans with a genuine appetite for Jamaican Me Crazy and Karamel Sutra may have paused their spoons in midair Wednesday at the prospect of a big, sweet mouthful of Schweddy Balls.
The beloved Vermont confectioners, who have previously paid sly tribute to their favorite people and things via Cherry Garcia, Napoleon Dynamite, Phish Food, Bonnaroo Buzz, Magic Brownies and Hubby Hubby (celebrating same-sex marriage), are now rolling out a limited batch inspired by a classic, innuendo-riddled “Saturday Night Live” sketch.
Continue Reading Close
Mary Elizabeth Williams is a staff writer for Salon and the author of "Gimme Shelter: My Three Years Searching for the American Dream." Follow her on Twitter: @embeedub. More Mary Elizabeth Williams.
My mother, the Hamburger U. professor
Mom went from Finnish farm girl to McDonald's teacher. Only now do I realize how hard the transition must have been
The odd thing about my mother, who grew up in Finland drinking cream from the cows on her family’s farm and feeding herring out of the nets to the herding dog, is that she moved to America and worked for McDonald’s. In 1989, the company hired her as an interpreter at their corporate campus in Oak Brook, Illinois. And so, for the next 12 years, the Finns at Hamburger U. learning to run a fast food restaurant through a microphone in their ears were listening to my mother.
Finland and McDonald’s may seem an odd pairing to those who associate the former with forests and socialism, and the latter with obesity and corporate greed. Indeed, my mother hardly embodies the McDonald’s brand. She’s bone-thin, elegant, and has a vaguely European sophistication — her sweet tooth is satisfied with a nickel-sized morsel of dark chocolate and she’ll go three years without saying “like.” But she also has a specifically Finnish industriousness, a self-sufficiency Finns recognize as born of a long history of hostile borders and surviving off the land. She guts and skewers, pickles and preserves. A few days ago I watched her use the last embers of a bonfire to cook a whole pike, which she wrapped in seawater-soaked pages from the Helsinki newspaper before jamming it into the ashes. This woman — the only person I’ve ever seen to mill her own wheat berries for flour outside of an anthropology textbook — deeply admires a company that sells nuggets of L-shaped chicken for a dollar to people in cars. Now as a grown-up — and one who sees McDonald’s as a greedy peddler of fatty trash — I marvel at this paradox and try to account for her unshakable loyalty to the company.
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