No Such Thing as a (Nearly) Free Lunch? Think Again

LONDON, Feb. 9, 2009 — -- How much would you pay for lunch if you could walk away paying next to nothing?

This is the question weighing on every diner's mind when the bill arrives at Little Bay restaurant in central London. The kitschy, chic Mediterranean-inspired restaurant is in the middle of a monthlong promotion to ease the pain of the economic downturn.

Owner Peter Ilic invites customers to virtually skip the bill and pay only what they believe their meal is worth, plus the cost of beverages. The minimum: 1.5 cents.

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"Our menu is our usual menu except there are no prices on it," said Jessie, a veteran server at the restaurant who declined to provide her last name. "So you pay how much you think it's worth. The only bill you'll get is for drinks."

Inspired by the credit crunch, Ilic aims to attract customers by giving them an opportunity to save during tough times on any meal. Little Bay, located on the edge of the City, London's financial district, draws many of its clients from the banking industry.

"Poor bankers are losing their jobs and now they cannot afford to have a meal, so I'm giving them a chance to eat," Ilic told ABCNews.com last week.

"Now that there's bad news everywhere, I thought, 'let's give people better news and maybe I'll get more customers as well,'" he said.

Customers Pay Up Despite Price-Less Menu

At first glance, Ilic's February business model, which relies solely on consumer confidence, seems impractical, especially during a period of tight budgets and tentative diners. But Ilic says Little Bay is doing better than ever in the seven years it has been in business. Not to mention, he ran the same promotional deal at another one of his restaurants in 1985 with great success.

"Like before, the majority of people are actually paying more," Ilic told ABCNews.com. "Yesterday, someone paid 2 pence [3 cents] for their meal while most others paid much more. I work off the average and I'm making more."

"On Sunday, I'd say customers were paying about 20 percent more than the price," Ilic said.

He plans to run the special, which started Feb. 1, through the end of the month. If his revenues continue to skyrocket, Ilic will consider extending the opportunity for another month. With all of the free advertising by word of mouth and media attention, he estimates he has obtained more than about $148,000 worth of news publicity without spending any of his money.

The Staff Benefits Too

Servers are also benefiting from the unconventional promotion. Ilic allocates 10 percent of revenue for tips and his employees like what they see.

Jessie, who has been waiting tables at Little Bay for more than four years, says the pay-what-you-like policy is actually helping her get through this economic crisis with some extra cash.

"It doesn't affect the tips," she told ABCNews.com. "It's even better."

Putting Your Money Where Your Mouth Is

A mixed bag of bankers, students and regulars are jumping at the opportunity to dine on roasted duck, grilled salmon and hamburgers for 1.5 cents. But when it comes to paying the bill, most end up forking over more than necessary.

"We honestly thought it was a scam or something," said Hummad Ahmed, an undergraduate student studying economics at University College London. "We saw it online ... and decided we might as well check it out."

Hoping for a good meal for a low price, Ahmed brought two roommates along to Little Bay. Staring at the price-less menu, the students wondered aloud how much the set lunch would cost on a regular day.

"This would probably be about 20 pounds [about $30] for a three-course meal," Prayag Thakrar, Ahmed's classmate, told ABC News.

According to the owner, the three-course set lunch is usually listed at around $13. Time Out London magazine gave the restaurant three out of six stars in its Eating & Drinking Guide 2009 with this from the reviewer: "Our roast vegetable tarte tatin arrived as a pretty pinwheel with rocket and Parmesan. Lamb steak was cooked to order and came with a lovely melange of Mediterranean veg and mash. The menu also takes in burgers, duck breast and plenty of fish."

How much did the students end up shelling out for their three meals? They politely declined to reveal but promised they paid a fair price based on taste, quality and portion size, with their student budgets in mind.

A few tables over, a group of graphic designers who work around the corner from Little Bay reached a consensus after a lengthy debate: They would pay according to the prices they remembered.

"They know we know what the prices are, so it could be embarrassing if there is a disconnect ... and then we come back," Edson Alexandrino told ABCNews.com.

Alexandrino's colleagues, though, doubted that Little Bay's promotion would work in other industries.

Ian Dryborgh, another regular, shook his head when thinking what "pay what you like" would mean for their industry.

"It'd be pretty suicidal in design," he said.

Little Bay Makes a Big Splash

Ilic's promotion is turning heads around the world. In Ireland, restaurant owner Gavin Gleeson deleted the prices from his menu in Killarney after hearing about Little Bay on the radio. A small restaurant in Australia claims it is doing the same.

At the new Ibis hotel in Singapore, room rates normally start at about $92 but, as part of a promotional campaign before its Feb. 12 opening, guests can click onto its Web site and enter the price they want to pay for a certain period.

Despite Little Bay's newfound fame, Ilic says he will not institute the "pay what you'd like" promotion at the restaurant he owns and operates in his hometown of Belgrade, Serbia.

"I can only control one [restaurant] at a time," he said. "Maybe people will take advantage of it."

For now, Ilic will continue his meal deal in London, hoping his customers will confirm the age-old adage that there's no such thing as a free lunch.