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.
THE EARLS OF SANDWICH: Ari Weinzweig and Paul Saginaw transformed a small, local deli into one of the most attractive companies to work for in America.
There was just one problem: Weinzweig was dead set against it. "I didn't want to spend my time flying to Kansas City to see some mediocre Zingerman's," he explains. "For me, it was important to be part of something great and unique. You lose the uniqueness when you try to replicate the original. I said to Paul, 'I can't say you're wrong from a business standpoint. If that's what you want, maybe you should do it, but it's not something I want to be associated with. I'll leave."
"You have to understand," says Saginaw, "Ari is a guy who studies the history of orange marmalade. He has an emotional attachment to the product. He was afraid the coleslaw would be bad, and his name would be on the door. I said, 'Your name isn't on the door, and I don't care about the coleslaw. We can throw it out. But if you care so much about it, fine. We'll find another way."
That other way, however, proved frustratingly elusive. Saginaw and Weinzweig had no interest in pursuing acquisitions or moving to another location, and they knew of no alternative growth strategies for small companies like theirs. So they did a lot of reading, thinking, and talking -- meeting regularly to discuss their ideas at a picnic table next to the deli. They wrote vision statements and then rewrote them, soliciting input from people inside and outside the business. By 1994 the outlines of a grand design had emerged. The Zingerman's Community of Businesses was ready to be born.
Weinzweig and Saginaw envisioned a company comprising 12 to 15 separate businesses by 2009. Like Zingerman's Delicatessen and Zingerman's Bakehouse (which was already up and running), the new businesses would be small and located in the Ann Arbor area. Each would bear the Zingerman's name but would have its own specialty and identity. Each would have at least one managing partner who would work in the business and be an owner. Internal entrepreneurship would be encouraged and supported, but partnership would be open to outsiders as well. And whereas not every new company would be a food business, all would be designed to enhance the quality of food and service offered to Zingerman's customers and to improve the financial performance of ZCoB and its components. Initial funding would come from Weinzweig, Saginaw, and the new partners themselves, with the goal of reaching breakeven on a cash-flow basis as soon as possible.
"The key was having partners who were real owners," says Weinzweig. "We wanted the passion. We wanted people who had visions of their own. Otherwise, whatever we did would be mediocre, and the whole idea was to elevate the quality of each element of the company."
In the summer of 1994, Weinzweig and Saginaw presented their vision in a document titled "Zingerman's 2009: A Food Odyssey." It took the form of a long conversational letter from Weinzweig to the company's managers and employees. He wrote a similar letter to customers, whom he and Saginaw considered important members of the Zingerman's community.
Although the partners had prepared the groundwork carefully, their plans drew mixed reviews. Customers didn't understand why it was necessary to change a business they considered nearly perfect. Lawyers and accountants told the founders they were crazy to let the new partners have real stock and to run the new companies as separate businesses. But the most negative response came from Zingerman's managers, who voted with their feet. In the 18 months after the rollout, more than 80% left. "People had gotten comfortable," says Weinzweig. "We told them that we were going to have a significant culture change. It would be a lot like going back to a start-up. We'd have to work 90 hours a week again, and no one would be going home at 4 on Friday anymore. A lot of people didn't want to do that."
