These LA Cafes Let You Pay What You Want... Only Not Really
Located blocks from the beach, Metro Cafe is a non-profit, third wave coffee shop affiliated with Metro Church. Since switching to a pay-what-you-want model in October 2017, it has managed to be entirely self-sustaining. That means 100% of its operating budget now comes from its customers. There's just one catch. You can't really pay what you want.
If you offer a dollar for a latte, you'll get a drip coffee instead.
"In the very beginning, we'd have to explain, 'Hey, we suggest a little bit more on that because we're losing money on each drink," cafe founder and manager Stefen Snook says. (His dad, Steve Snook, is the pastor at Metro Church.)
He estimates it costs him between $2 and $3 dollars to make a latte. That figure includes rent, rising minimum wage (currently $13.25 for a small business like his in Santa Monica), locally roasted organic beans from Golden State Coffee Roasters and hormone-free milk.
For the uninitiated, pay-what-you-want restaurants are exactly what they sound like: places where you can, to one degree or another, choose the price of your meal. Some are associated with religious or spiritual organizations while others self-identify as socially responsible businesses that prioritize an alternative bottom line. Some are standalone non-profits. Others are altruistic arms of private companies. Metro Cafe, along with Upside Down in Westwood and Cafe Gratitude, which has four Los Angeles locations, have all experimented with the business model.
Around the United States, and the world, a handful of similar restaurants have popped up. At best, the results have been mixed.
The most high-profile was Panera Cares. It debuted in 2010 and had five locations at its peak. Panera's goal was to democratize the fast casual experience, regardless of people's ability to pay. The reality was different. Rich people didn't like eating with people they saw as being poor, according to a Fast Company article. Instead of breaking down barriers between socioeconomic groups, Panera Cares bolstered them. The chain-within-a-chain limped along until February 2019, when the company closed the last outpost, in Boston.
It's only one case study but the PWYW business model is fraught with peril.
How do you serve people who can't, by definition, afford what you're selling? And how do you do it while making a buck -- or at least not going out of business? Those are the million dollar questions. Panera couldn't answer them. But Metro Cafe in Santa Monica thinks it can.
DRIP DRIP DRIP...
Metro's coffee is good. Not amazing but good. I like being able to sip it in the sunlit, blond wood-adorned space and it makes me a little giddy to name my price. An americano for $3? Outside of Whole Foods, that's probably the best deal in L.A. Other people seem to feel the same way. Metro Cafe has an almost perfect five-star Yelp rating and was written up in The Guardian.
Still, the ambiguity of pay-what-you-want can be unsettling. If you asked for a latte only to be told your $1 or $2 donation doesn't cut it, how would you react? How do baristas handle these delicate situations?
"Most of the time, we're just completely honest with someone," Snook says. "'Hey, this costs us this amount of money. If you can't match what we make it for, we're not going to make any [profit off it].' And most people don't have a problem whatsoever."
Fair enough, if a three buck coffee is a negligible expense. But what about people who truly can't afford the price Metro Cafe wants them to pay?
Snook says only 5% of customers express reluctance or difficulty meeting the cafe's suggested donation.
"If they're like, 'Okay, I can't match that [price] whatsoever,' then we're like, you can still have coffee but it may not be a six shot latte with almond milk. It may be a drip coffee with almond milk."
Metro Cafe also offers a work/trade option on a case-by-case basis. Some regulars take out the trash or sweep the patio in exchange for their drinks. But that's rare. Snook estimates that 99% of his customers are financially secure. He founded the venture to create an affordable space in a community that is experiencing rising homelessness. If only 1% of his customers are under financial duress, to what extent is Metro Cafe actually fulfilling its mission?
Snook says many of his customers are elderly people who live nearby in rent-controlled senior housing. For a dollar, about the price of a McDonald's coffee, they can come in and linger at Metro Cafe for hours. They are among the people he set out to serve when he decided to launch the coffee shop as a non-profit. "All those elderly people who would walk by and look at our prices and leave [before we shifted to PWYW], they're now having coffee [here] every single week," Snook says.
What about people who can't afford even that?
"It trips me out, someone will want to donate a dollar," Snook says. "They have the newest MacBook Pro, they have the newest iPhone and earbuds but they don't want to cover our costs. There's a small margin of people that want to take advantage, and there's a small margin of people that can't afford a coffee whatsoever."
It can be impossible for a business owner to decide between the two. In Los Angeles, plenty of people on the lower rungs of the entertainment industry end up living out of their cars because they can't afford rent. Sometimes, people who look put together are dead broke. If a minimum donation isn't actually a donation, why doesn't Metro Cafe rebrand itself as a socially conscious, for-profit company?
There are financial perks to being a non-profit vs. being a regular business. As a donation-based organization, Metro Cafe gets to avoid paying Santa Monica's hefty 10.25% sales tax although Snook says that's not his main motive for holding onto the business's 501(c)(3) status.
For him, Metro Cafe's non-profit identity is at the heart of his vision. He knew from the start he wanted to launch the organization that way, in part to provide a space for the neighborhood's significant fixed income elderly population.
Snook may apply for grants in the future. "If we had $100,000 in the bank, stuff would be different," he says. But until he has the administrative infrastructure to make that happen, this is what he's working with -- and the vast majority of his customers seem happy with it.
ALL FOR ONE
Pay-what-you-want is one attempt to address socioeconomic inequity. Social entrepreneurship is another.
The latter is what chefs Roy Choi and Daniel Patterson tried to do with LocoL, the hip chef-driven fast food restaurant chain targeting low income neighborhoods. Although the chefs closed all their brick-and-mortar restaurants in 2018, their flagship Watts spot has pivoted to a catering and events space. In the eyes of many, especially Choi, the experiment remains a success because it brought attention to one of L.A.'s most underserved communities.
Everytable takes a different tack. The chain, which offers healthy, pre-made, carryout meals, isn't donation-based but its business model is founded on the notion that different people should pay different prices based on their ability to do so.
The South L.A. location, kitty corner from a mom-and-pop 99-cent store, offers $5.50 gluten-free Jamaican jerk chicken bowls amid blond wood floors and succulents. The same bowl costs $7.95 at the Brentwood location. Everytable has seven locations in Los Angeles, each with unique pricing.
As smart as that may sound, location-based pricing is nothing new.
A Big Mac in Los Angeles will cost you more than the same burger in rural Wyoming, the New York Times points out. So what's different about Everytable?
For one, its restaurant brought the first reliable source of prepared produce to South L.A., according to employee Jailene Miranda, who grew up in the area. "The closest thing to healthy food near here would be Ralph's, and sometimes their produce doesn't come in on time, and then you have to get fast food," she says.
Her co-worker Stephanie Retana agrees: "I've lived here my whole life, but this is the first thing we've ever seen like this."
The cheapest dish on the South L.A. menu, a kid's portion of spaghetti squash and turkey meatballs, costs only $3.50. Nobody will give you a weird look if you buy one for your adult self, which I did. I liked it so much, I bought three more to take to work. It was thrillingly cheap. I could see myself happily paying $15 for it in Silver Lake.
Miranda estimates that Everytable's clientele is a 50/50 split between longtime residents and USC kids, a more balanced ratio than in the shop's early days, when college students seemed to dominate. She attributes the restaurant's reach to its door-to-door canvassing, coupon giveaways and free samples.
The variable pricing model, in which all stores are dependent on each other (as opposed to most fast food chains where stores independent franchises), only works if you have enough locations and if every location does enough business. According to their website Everytable currently has seven locations. The company's Century City mall outpost closed in January 2019.
So what's the most sustainable and scalable way for a restaurant to increase food access and stay afloat? SAME Café in Denver has an answer.
MISSION VS. MONEY
Brad Reubendale thinks the problems with the pay-what-you-want model stem from their "suggested" prices. That's why at SAME Café in Denver, Colorado, there aren't any. Instead, the menu lists the production cost of a dish -- $2 for the ingredients, $12 including rent and labor -- as well as the average donation. Those figures are presented in the spirit of transparency, not pressure, according to Reubendale, the cafe's executive director.
First-timers who read the "participation wall" learn they can pay for their meals in three ways: donate a half-hour of volunteer time, donate produce or donate money. 70% of customers end up giving less than $5. "We love that," Reubendale says. "We love that 70% of the folks here are in need because that's our target demographic. Those are the ones we're actually trying to serve."
That's only possible because SAME Café doesn't rely on customers to meet its bottom line. Now its thirteenth year, the non-profit restaurant relies on grants and at-large contributions for 60% of its operating revenue. The rest comes from in-restaurant donations. Reubendale has paid attention to the rise of social entrepreneurship but he doesn't think it works with a pay-what-you-want structure.
"If your goal is to make enough money at the restaurant, then you're suddenly trying to figure out how to get more money out of your guests. We don't ever have to focus on that because we want everyone in here to feel like they're giving something significant to the mission," he says. People who donate a half hour or $2 for their meal, he says, feel just as invested as those who cut a $10,000 check.
When I lived in Denver, it was the only place in the city where fixed gear-riding hipsters, businesswomen and people toting shopping carts would routinely sit under the same roof and eat the same food. SAME's success, and the community spirit it has fostered, show that this is a model that has its merits.
Despite the social and financial complexities of pay-what-you-want, it has unique merits. In its purest iteration, it gives people the agency to choose and pay for their meal in a way that most food pantries don't.
"I hear regularly from people experiencing homelessness who say to me, 'This is the only place in my life where I get to give something back. Everywhere else I'm told that I can only receive,'" SAME Cafe's Reubendale says.
SAME Cafe, Everytable and Metro Cafe have all found success in different ways. How scalable are any of these concepts?
SAME has a food truck that travels to Denver's food deserts and is planning to launch a second brick-and-mortar location. Its founders travel the country consulting with other aspiring food businesses. Metro Cafe inspired Upside Down in Westwood, a Christian coffee shop that soft launched in March. So far, Yelp reviews are positive but that doesn't necessarily mean much.
Despite the feel-good rhetoric swirling around pay-what-you-want, it's a hyper-local bandaid for a much deeper problem. It isn't a widespread solution for food insecurity but it is one small avenue for change -- it just can't be the only avenue.