Humans: Give them an opportunity and they will almost always disappoint you. That’s one thing you should remember in general, but especially when you open a business. Sure, “pay what you want” restaurant models work in heartwarming movies and TV shows, but give people the option to pay nothing for goods and services and they’ll absolutely take advantage of it. And one restaurateur in China learned that the hard way when she let the customers pay what they wanted and lost $15,000 in a week.
On the surface, the idea — order as much as you want and pay whatever you feel — was a good one, in terms of driving traffic. According to Shanghaiist, business began booming shortly after the restaurant opened and people learned of the “pay what you want” promotion. But…
Some customers paid only 10% of the cost of their meal, while others dared to leave just 1 RMB on the table. After seven days, the restaurant had lost 100,000 RMB, The Paper reports.
“If our food or service was the problem, then that would be one thing,” owner Liu Xiaojun sighed. “But according to customer feedback, our dishes are both filling and tasty. It’s just that the payments don’t match up with the evaluations.”
The food and service are never the problem, friend! The problem is that the restaurant opened with that promotion, completely devaluing the food and service before they even gave people a chance to figure out how much it actually costs. All the “pay what you want” restaurants we’ve seen have had “suggested prices” next to the menu items. When you tell people “nah, it’s cool, pay whatever” is when you end up losing $15k and ensuring that at least one of your business partners will curse your name and “flee back to their hometown, vowing never to return.” (That is an actual thing that happened and probably the best tidbit of this entire story.)
Lest you think that this is just a fluke, Shanghaiist points out that a similar restaurant that tried to do the same thing — trusting the customers and relying on their goodness — lost $15,000 in one month back in 2013. Seems like people have only gotten worse since then. And yet owners are still so trusting:
Earlier this month, to celebrate the National Day holiday, a buffet restaurant in Anhui province distributed five days worth of coupons to eat for free to local residents, resulting in total chaos. More recently in Shanghai, residents have started ransacking local “sharing fridges” for all they can carry.
While some have speculated that this kind of thing is peculiar to China, it’s important to remember that the Pay What You Want model won’t work on its own in most places. A 2012 study found, in fact, that PWYW seems to work only when self-image is involved (for instance, some of the money is given to charity so diners don’t want to look bad). In 2015, Eater investigated the PWYW phenomenon and found the same results — the model works if restaurant owners only employ it once in a while, if they have a lot of funding to back them up, or, as in the case of SAME Cafe in Denver, Colorado, diners are required to either pay with money or with their time. The owner “calls out” diners who show up regularly and never contribute.
Unfortunately, it’s likely too late for the restaurant in this story. Since the promotion “fell apart,” the same diners who loved the food they got for free haven’t been back, now that they actually have to pay for it. And they probably won’t be.
By 4 p.m. on the first day after the end of the ill-fated “pay what you want” policy, not a single customer had visited Liu’s restaurant. “It makes sense that people like to eat food and not pay much. I just don’t understand why they haven’t come back since the promotion ended,” she confessed.