In a public bathroom in downtown Warsaw, Agnieszka Siemiatkowski is having a lovely lunch of Polish dumplings with side salad and a piping hot cup of tea.

She finds nothing unusual in this.

"Delicious," she says when asked about her meal. And her surroundings? "Very nice," she says.

Indeed, they are. The walls are a marbleized baby blue. The tables are bright and shiny. The kitchen is spotless. And the toilet, well, that's just fine, too.

The public bathroom--that foul-smelling bane of municipalities everywhere--has branched out in the try-anything capitalism of new Poland.

"Public bathrooms are not profitable," said Eugeniusz Gora, Warsaw's public bathroom czar. "We wanted to keep public toilets but expand their activities, because we didn't have the money to maintain them."

And so, public bathrooms are now luncheterias, Chinese restaurants, pubs, blues bars, even veterinary offices--all the while maintaining their, er, basic function.

"We've had two kinds of reaction," said Marcin Affek, who opened his "Lunch Time Bar" in a public bathroom on a traffic island in the city center in May. "Some of the older people would come down, hit their foreheads, and say 'What is going on?' But the younger people thought it was very cool. And we're doing great business with all the office workers around here."

To be fair, the transformed public bathroom no longer looks like a public bathroom except for the grim march down a narrow staircase from the street and the black and white "WC" sign that, by law, must remain on display. Affek's eatery, except for its underground location and lack of sunlight, is every bit the Warsaw diner. And the toilet is discreetly nestled by the entrance, just around a slight corner from the eating area.

"The biggest psychological barrier for the customer is the walk down," said Affek.

In 1994, Gora's state agency, charged with picking up the trash and maintaining public restrooms in the city, found itself in a cash crunch. Public restrooms were falling into disrepair when a bright light at the agency--Gora doesn't recall the person's name--thought it might make sense to advertise the bathrooms as places to do business to the city's army of striving entrepreneurs.

The mantra: location, location, location. After all, most public bathrooms are situated in the parts of downtown with the highest pedestrian traffic, or in the city's best parks.

Since the idea was hatched, 28 of the city's 42 public bathrooms have been leased to businessmen for nominal rents in exchange for renovations and a commitment to allow the public to use the facilities freely.

"The rent for this location is really good," Affek said.

Gora's staff periodically visits each business-bathroom to ask--undercover, of course--to use the toilet and ensure that the lease terms are being maintained.

"If they don't let people use the toilet," Gora said, "they risk losing their lease. Every tourist, every citizen of Warsaw has the right to use these toilets."

But the fact is that an unsuspecting but desperate member of the public would be hard-pressed to know that these transmuted toilets are, in fact, public toilets.

In a series of difficult interviews with passing pedestrians who were asked to identify a certain business, they unanimously described it as a bar--also coming to suspect that a questioning foreigner was a lunatic:

"Excuse me. Is that a public toilet?"

"It's a blues bar," said one woman, pointing to a sign as she walked by the "Blues Bar" near the Museum of Modern Art.

"Is it a toilet?" repeated the inquisitor.

"I'm sure they'll let you use the toilet," replied the clearly confused woman before she walked off, turning her head back repeatedly as she fled.

Indeed, Karol Kusmierczyk, the owner of the "Blues Bar," is happy to let anyone use the facilities. But, he admits, he is a little embarrassed by the small "WC" sign hanging over his premises, and few people venture down the stairway just to use the toilet, he said.

"The sign has to be there," Kusmierczyk said. "But this is a blues bar: live music, blues, rock and roll. We can get 80 people in here on a Friday night."

There is one major loser in this capitalistic transformation--the bathroom grannies who used to sit at the doorway, clean the toilets, and traditionally charged about 10 cents for the privilege of entering. In the Darwinian world of free markets, they have lost their underground bailiwicks.

"They've retired," said Gora, without an ounce of regret.

CAPTION: Karol Kuzmierczyk, owner of the "Blues Bar," stands at the entrance to his Warsaw establishment, which is technically a public toilet.