How Do Pay-What-You-Want Restaurants Work?

Lucy and Ethel did it when they couldn't pay for their half of the bill. Kanye West claimed to roll up his sleeves and do it in "Gold Digger." Mickey Rooney's done it in a classic Disney short film. Though it may be an apocryphal tradition, pop culture has long perpetuated the image of people inadvertently "paying" for their fancy night out by washing dishes in a restaurant kitchen.

But the practice had never been built into any restaurant's financial model — until the birth of the pay-what-you-want restaurant (PWYW). Though it's hard to say exactly when the first of these opened, one of the earliest was Annalakshmi in the 1980s. According to its website, the restaurant "is not a soup kitchen or a place to feed socially deprived. Instead it is a place that supports the act of giving, from the heart."

Today there are restaurants around the world who have adopted some version this model, leading to the occastional food magazine listicle that helps diners identify where they can find a bargain. ("Every time a Top 10 [list] is published on the internet, we receive a lot of extra bookings, mainly by cheap-food-seekers," says Marjolein Wintjes, founder of a PWYW studio in Amsterdam.) Some businesses operate as regular restaurants with special PWYW occasions, while other entrepreneurs have made the model work for their entire business. But are these places simply culinary-based community centers — often operated as nonprofit organizations? Or could they ever become financially sustainable on their own?

How does it work?

From the outside, the PWYW restaurant looks just like any other. There are places to sit and enjoy your meal, a menu (whether you order at your table or at the counter), and a place to take your payment. What sets the businesses apart are the currencies they're willing to accept. Many of them give customers the chance to work for their food, washing dishes or prepping vegetables in the kitchen. And though a guest would rarely be judged for dropping only a few dollars into the donation box, they're not really supposed to walk out without paying. The perfect PWYW restaurant is like an idealistic society — everyone does their fair share.

The perfect pay-what-you-want restaurant is like an idealistic society — everyone does their fair share.

At the Denver-based PWYW SAME Café, owner Libby Birky will "call out" customers who regularly eat meals without paying with either time or money. "It's like if your roommate constantly asked you for five dollars and never paid you back," she says. "Eventually you'd say 'no.'" But research suggests that most people are inclined to pay: In a 2012 field experiment, researchers discovered that customers consistently paid for their meals, regardless of whether or not they were being observed. The results, researchers argue, "supports our proposition that people often pay to enhance their self-image." A two-year study of PWYW restaurants published in the Journal of Socio-Economics, meanwhile, found that only one-fifth of a percent of all payments totaled zero dollars.

But most PWYW restaurants are not in it for the financial gain — and they're not always successful. Brooklyn restaurant Santorini Grill adopted a PWYW model in November 2011 for food consumed on the premises, then went out of business four months later. Owner Paula Douralas didn't think the donation model was the sole culprit, but it contributed to the Grill's decline. "Before that, business was a lot better," she told Gothamist at the time. But once PWYW went into effect, Douralas "couldn't make up the expenses to pay the bills. Not because people abused it. They just stopped coming."

Douralas' experience matched the Journal of Socio-Economics's findings: That guests pay the most right after restaurants open, and ideally for business owners, that initial customer boost helps make up for the eventual decline in payment per person. (Maintaining a steady flow of guests is perhaps even more important to the PWYW than a regular restaurant.) Still, researchers believe that PWYW could be "a viable strategy in the long run" — not just as a non-profit, but as a real business.

Photo: Facebook

Playing with your PWYW

Amsterdam's Studio de Culinaire Werkplaats uses food as a medium to explore everything from Dutch tulips to local architecture. But rather than test ideas on friends, the "culinary design studio," which has been in operation since 2009, uses its donation-only weekend dinners to promote its work. The restaurant portion runs on a theme which changes every two months. Guests are asked to fill their own water, keep track of the alcohol they consume (which does come with a fixed price tag), and clear their plates — though they don't have to wash them. "We still do the dishes for our guests so it remains some kind of a dinner experience," says co-founder Marjolein Wintjes.

"When people have to [think about what] an eating experience is worth to them, they start to eat in a different way."

These meals — available only on Friday and Saturday — ask guests to "pay what they think the eating experience was worth," Wintjes says. The PWYW aspect started as a way to explore "how fair the Dutch are," but Werkplaats takes it a step farther. "It's not about what you want [to pay]," Wintjes says. "We ask our guests to decide what a fair price is for the eating experience." How much guests value the meal financially provides feedback for the dishes and Werkplaats' concepts. "When people have to find out what they think an eating experience is worth to them, they start to eat in a different way," Wintjes adds.

While the restaurant aspect may be secondary at Wintjes' studio, at New York's Bubby's, it's everything. For 364 days of the year, Bubby's is a normal restaurant. But every Thanksgiving for the last four years, owner Ron Silver has invited guests to pay what they want for their dinners, giving a suggested price of $75 a person. Bubby's is a "straight-up American restaurant," Silver says. "Our goal is to really celebrate the American table and restore the food supply system." Once he realized that hosting a holiday meal would be a good fit for its overall mission, Silver decided donation-only was the only way for them to go. And in his experience, Silver believes people generally pay the sticker price or more. "I think that everybody is feeling generous on that day," he says, adding, "I don't find people to be really stingy in general."

Photo: Jason Tester/Flickr

A mission of dignity in dining

The groundbreaking Annalakshmi set the tone for many PWYW restaurants to come. The restaurant, which now has outposts in four different countries, is a major source of revenue for the Temple of Fine Arts, a spiritual arts organization founded by Swami Shantanand Saraswathi, and it focuses more on the social experience of eating than a mission of feeding the hungry or religious outreach.

Libby Birky's PWYW restaurant was born of a similar mission. Birky and her husband Brad often volunteered in soup kitchens and shelters, but had always been perturbed by the quality of the food and the stagnant population. "The people on the first day were the same people there on the last day," she says. But when the Birkys moved to Colorado from Illinois, they started volunteering at a local branch of the Catholic Worker House, and "it was a totally different experience," Birky says. "It was smaller, and it focused on community and the dignity and value of the individual human being... it was really empowering."

From talking to people who came in, Birky learned that when people weren't eating at the Worker House, they were "choosing fast food and 7-Eleven to stretch their dollar." So in 2006, Birky opened SAME Café, where patrons have the option of donating an anonymous amount or volunteering their time in exchange for food. (Birky's current lunch-only menu is made up of items like sunchoke arugula soup, chicken and feta pizza, or quinoa and kale salad.) The anonymity of SAME's payment system, which can also allow guests to "pre-pay" for meals by volunteering ahead of time, allows everyone to eat with dignity. "It looks like a real restaurant," Birky says.

Photo: Facebook

While SAME is fulfilling its goal of serving healthy, cheap food, Birky is especially proud of the community-building aspect a mixed-income restaurant can have. "People make assumptions about others all the time," she says, remembering a recent customer who remarked that "nobody in here looks homeless." "We have stereotypes of what homelessness looks like," Birky says, and unfortunately, potential customers lump the cafe into the same category as a soup kitchen. "Our biggest obstacle has been convincing the general population that we're for everyone."

The majority of PWYW restaurants are a version of the SAME model — a donation-only menu with the option to volunteer time in exchange. Even Panera Cares, a nonprofit community café started by Panera in 2010, operates on a "pay what you can" model where customers who volunteer for an hour can also earn a meal voucher. Though the chain lists suggested prices on the board (which pays for food, overhead costs, and builds-in the cost of free meals), Panera Cares basically relies on an honor system by suggesting that those who can pay full price do so. The most interesting caveat is that, according to its website, the restaurant asks people getting reduced-price or free meals to consume meals on-site "as a means of building community."

While Panera has easier access to funds that can cover donated meals, other PWYW restaurants often rely on non-profit status and outside donations to make ends meet. When SAME first started, Birky had no employees and "were pretty self-sustaining," she says. Though SAME has now been in operation for eight years and its revenue has gone up, it also has three full-time employees to pay — but most labor still comes from volunteers, keeping costs lower than a traditional restaurant. "Right now, about 65 percent of what we need comes from donations," explains Birky. The remaining 35 percent comes from grant money and outside fundraising.

For those running for-profit PWYW, the major challenge is bringing in enough guests who can pay full price — which not only offsets the cost of reduced-price meals, but ideally, fosters a sense of community. Birky believes that these restaurants highlight our "responsibility toward each other as humans." Because by paying for your own meal, in a way, you're paying it forward, too.