The Coolest Small Company in America

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Eleven years ago there was no room for such people at Zingerman's. The deli had a reputation for being warm-hearted, fun-loving, and food-obsessed, but it had nothing to offer experienced professionals looking for new business challenges and no need for their services. Then, in 1992, Weinzweig and Saginaw began developing an innovative growth model that redefines the choices founders have when they've achieved their initial goals and begin thinking about what to do next.

Standing alongside each other, Ari Weinzweig and Paul Saginaw bring to mind Don Quixote and Sancho Panza -- or perhaps the Cisco Kid and Pancho. Where Weinzweig is long and lean, Saginaw is short and sturdy, with a barely visible five o'clock shadow covering the top of his shorn head. They met in the late 1970s while working at an Ann Arbor restaurant called Maude's and immediately hit it off. What united them was the dream of a perfect corned-beef sandwich on rye. "We both grew up in cities with great delis, and Ann Arbor didn't have one," says Saginaw, who comes from Detroit.

Twenty-one years ago the two started a deli meant to carry the finest artisanal food products and serve the best sandwiches known to humankind. "We wanted sandwiches so big you needed two hands to hold them and the dressing would roll down your forearms," says Saginaw. "We wanted people to say about other sandwiches, 'This is a great sandwich, but it's not a Zingerman's."

Within a decade, they'd accomplished that and more. Articles extolling the deli's food appeared in the New York Times, Bon Appetit, Eating Well, and other publications. "In Zingerman's," novelist Jim Harrison raved in Esquire, "I get the mighty reassurance that the world can't be totally bad if there's this much good food to eat, the same flowing emotions I get at Fauchon in Paris, Harrod's food department in London, Balducci's or Dean and DeLuca in New York, only at Zingerman's there is a goodwill lacking in the others."

Still, when all was said and done, in 1992 Zingerman's was just a deli doing $5 million a year out of a cramped red-brick building in Ann Arbor's historic district. One manager was starting a bakery to supply the deli with bread and pastries; otherwise there were no plans for growth or even significant change. Zingerman's was, in short, a typical, mature, stable small business, exhibiting all the symptoms of companies that have plateaued. Behind the shelves crammed with exotic spices, oils, and vinegars, bureaucracy had begun to creep in. There was an active rumor mill. Opportunities to advance had dried up, and competitors were beginning to encroach on Zingerman's market.

Weinzweig and Saginaw had a choice. They could keep Zingerman's a small, local operation and run the risk that it would languish or atrophy. Or they could take it to the next level. But if they grew Zingerman's aggressively, they might sacrifice the very attributes that had made the deli extraordinary since its beginning -- close contact with a community, intimacy with customers, team spirit among employees, and exceptional quality of food and service.

Weinzweig can pinpoint the exact moment when the growth issue first reared its head. It was a sultry summer day in 1992, and the lunchtime rush was in full swing. In addition to the usual headaches involved in feeding the hungry multitudes, a cooler had broken down. Weinzweig was racing around, trying to deal with the problems, when Saginaw came hurrying in. "Ari, we got to talk," he said.

"OK, Paul, but not now," Weinzweig said. "I've got too much going on here."

"No, it's important," Saginaw insisted. "We've got to talk right now. Let's go outside."

Weinzweig reluctantly followed Saginaw out the side door and sat down beside him on a bench. "OK, what is it?" he asked.

"Ari," Saginaw said, "where are we going to be in 10 years?"

"I couldn't believe it," Weinzweig recalls today. "I sat there thinking, 'I don't have time for this. The cooler is broken, the kitchen staff is stretched thin, and he hauls me out to talk about 10 years from now?' But I had to admit, it was a real good question."

It was also the start of a two-year debate that tested the limits of their partnership. Saginaw felt strongly that the company had grown smug and complacent, leaving it vulnerable to competitors who could copy Zingerman's merchandising and chip away at its customer base. The partners had recently settled a lawsuit against one such copycat, and the experience had convinced Saginaw that legal protections were a poor substitute for innovation. The business needed to be shaken up. It needed to build higher barriers to competitors by expanding, improving, and trying different things. In short, it needed a new vision for growth, and Saginaw thought that all options should be on the table, including the possibility of opening Zingerman's clones in other cities. That was, after all, the most logical way to grow a retail food business. A lot of people had already suggested it and offered to get involved. "We might be stupid not to do it," he told Weinzweig.

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Bo Burlingham

Burlingham joined Inc. in 1983. An editor at large, he is the author of Small Giants: Companies That Choose to Be Great Instead of Big. The book was a finalist for the Financial Times/Goldman Sachs Business Book of the Year Award in 2006. Burlingham is also the co-author with Norm Brodsky of The Knack; and the co-author with Jack Stack of The Great Game of Business and A Stake in the Outcome.

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