Success on Rye

It started as a humble deli, but Zingerman’s has stacked up its empire to include a creamery, bakery, catering service, coffee company,and restaurant. And its unusual business philosophy is what keeps it from being in a pickle
Zingermans Main Food
Photo by Joe Vaughn

Before heading to Metro Airport at the end of a recent home visit to Ann Arbor, Brenda Macon walked the two blocks from her parents’ house to Zingerman’s, the city’s famed deli, to pick up two sandwiches for the flight back to Denver.

After Brenda and her husband, Todd, who live in Durango, Colo., boarded the plane and settled into their seats, a flight attendant spotted their Zingerman’s bag and asked: “Are those sandwiches? What would it cost me to buy them from you?”

Brenda thought for a minute and said, “Upgrade us to first-class seats.” The attendant reappeared a few minutes later and cheerfully announced that she had snagged the last first-class seat. “It’s yours,” she said, eyeing the Zingerman’s bag.

“Sorry,” Brenda responded. “It’s got to be two, or no deal.” Then they ate the sandwiches.

Brenda has taken Zingerman’s on many flights and, she says, “I’ve been offered all kinds of things for my sandwiches, including champagne. One guy even proposed marriage.”
Most denizens of southeast Michigan know Zingerman’s as that fancy and very expensive delicatessen crammed into an old brick-front store in the farmers market area of town where, on football Saturdays, the line often snakes out the door and down the street.

Most also know it for the great breads, exotic artisan cheeses, cured charcuteries, pâtés, duck confit, all sorts of smoked salmon from Europe and the West, as well as shelves of pricey olive oils.

To others, it’s a deli that began as a social experiment and runs on enthusiasm and a lot of charm, warmth, and what looks like a lot of confusion. Co-founder Ari Weinzweig explains, saying, “It’s all kind of out of control, but operating with varying degrees of influence.”

Whatever makes Zingerman’s work caught the attention of Inc. magazine in 2003, when it published a cover story titled “The Coolest Small Company in America.” And, in April, Esquire honored the deli’s Number 97 sandwich, a beef brisket, as one of the best in America, which got it a spot on The Oprah Winfrey Show.

Zingerman’s today is radically different from the deli that opened in 1982. It’s actually seven separate companies spread around Ann Arbor, under one umbrella, with a combined $30 million in annual revenue and 520 employees who work in the bakery, coffee company, a creamery making high-end cheeses, a restaurant called Zingerman’s Roadhouse, Zingerman’s Deli and Catering & Events, and ZingTrain, a training company that has schooled thousands of food entrepreneurs using the secrets of Zingerman’s success.

There’s also the mail-order business, which started in the basement of the store in 1993 and now generates $9 million yearly from a 24,000-square-foot warehouse south of town.

It’s on the verge of overtaking the deli, the largest-grossing unit at $10 million annually. Zingerman’s is a mail-order player like Williams-Sonoma, Harry and David, Dean & Deluca, and Zabar’s.

Beyond the successes, Zingerman’s operates on one of the most unusual business structures in the country. It’s run by consensus of its 14 manager-partners, a method that Wall Street would likely consider some sort of hippie-dippy business model made for heartburn, not maximized profits.

For example, while most businesses are tight-lipped about their finances, Zingerman’s operates on an open-budget system. The income and projection each week are recorded on white boards in the lunch areas weekly for all the employees not just to see, but also use. They are required to track the numbers and then discuss in meetings what can be done to bring them up if their Zingerman’s unit starts to fall behind projections.

“Engaging the employee is smart because it really empowers them,” says Wayne Baker, Ph.D., a U-M business school professor/researcher. Baker has tracked Zingerman’s for years and uses it as a case study with students. “Part of it is that they are educating the employee on how the business runs,” he says.

The Zingerman’s model, while highly unusual, has been tried in different forms elsewhere, Baker says. “Southwest Airlines, for example. But what’s different is the extent to which Zingerman’s goes,” which is much further, particularly in its philanthropy.

“We’re here to support everyone and allow them to shine; people are not here to serve us,” says Amy Emberling, a partner-manager at Zingerman’s Bakehouse, who has a Harvard degree and a master’s in business from Columbia. She adds that managing so many under such a system “has its challenges. It’s about accepting that things are messy and unclear.”

Founders Weinzweig and Paul Saginaw still work at Zingerman’s, but 26 years after they started it they have stepped back and have become two of 14 managing partners.

“From an operational standpoint, Ari and Paul trust our capabilities,” says Tom Root, a managing partner who runs the mail-order unit with his wife, Toni Morell. “They don’t feel compelled to be here to run the businesses. They allow us to do that.”

Profit is recognized as essential, but 5 percent of the yearly profit is donated to an employee emergency fund — over and above their paid health insurance — and 10 percent goes to various community non-profits and causes.

“What’s very unusual,” Baker says, “is that if Paul and Ari were to leave tomorrow, I would be willing to bet that Zingerman’s would feel no impact. The reason is that the system they put in place has created a generation of up-and-coming people to replace them. They have created management succession.”

And while Michigan’s economy has tanked, and the stock market dodges the roadside bombs of the banking and mortgage debacles, Zingerman’s is doing just fine, with year-to-year revenue continuing to track upward and ahead of plan, says chief administrative officer Ron Maurer, who adds, “This year, I expect we’ll approach $35 million.”
Its other distinction is that, more than any other business or college or university, Zingerman’s is most responsible for having educated the palates and opening the eyes of Michigan to new ways of eating and new kinds of food. And it did that by catching the beginning of a wave back in 1982 that since has been heading toward the crest of a cultural change in food since then.

By the 1960s, most facets of what we loosely call American culture were well-developed, except one: We had no clear culinary identity, as do the French, Chinese, Indians, Italians, and others. It wasn’t until inexpensive airfares to Europe led masses of young Americans to discover the differences of social dining, as opposed to just eating. When they returned home with new respects for food, they started planting basil instead of marijuana in their flowerpots.

Since then, the changes in how and what we eat have been breathtaking. Among them are the development of the American wine industry, the variety of coffees we now drink, and the breads that reach our tables.

Into this swirling tide in 1982 stepped Weinzweig and Saginaw, both University of Michigan graduates whose formative years had been the era of the radical ’60s, the days of protests, the Port Huron Statement and Students for a Democratic Society, social justice, racial equality, and the women’s movement.

Weinzweig had studied Russian history and anarchism, not so much the violence, he stresses, but the philosophy. Saginaw, a Detroiter, arrived at U-M already imbued with a strong sense of social responsibility by his family.

At the time, Saginaw was a partner in a fish market, Monahan’s Seafood Market, with Mike Monahan — who would become one of the three primary investors in Zingerman’s. Saginaw and Weinzweig, who had worked together at a local restaurant, had kicked around the idea of a great sandwich shop. One day, a block away on Detroit Street, a failing deli came up for rent. They took it and renamed it Zingerman’s.

“We wanted to put out a really good corned beef sandwich, and we wanted to create a workplace that had meaningful work and dignity,” Saginaw says. But they also added an ingredient relatively unheard of at the time: exceptional customer service.

“We wanted something unique,” Weinzweig says, “a place for everyone, so the president of the University of Michigan could be sitting at one table and a truck driver at the next.”

Weinzweig and Saginaw added another component. Zingerman’s would become the first truly international “purveyors” of domestic and foreign luxury and artisanal food goods in southeast Michigan. “We wanted to sell things that people in this town had never seen,” Saginaw adds. “They didn’t know what aged balsamic or goat cheese was then.”

Weinzweig was soon traveling all over the country and abroad in search of small producers of cheese and meats. He went to Italy, France, Spain, and California, and learned about olive oils and shipped the products back to the store. He became — and still is — the store’s main product specialist. A decade later, the deli had grown to about 30 people and was doing $5 million a year. It had a lot of happy managers. But then, out of public view but certainly in the eye of its founders, Zingerman’s hit a wall.

For Saginaw, the cause was complacency. “Managers were becoming vested in their titles and the authority,” Saginaw says. “That’s not what we wanted. I wanted them to have an authority given to them by the people who worked for them on the basis that those people viewed them as competent and fair, and had [the employees’] success at heart, not their own titles.” Furthermore, Saginaw said, a lot of young talent was leaving because, “unless a manager quit or died,” there was little room to advance.

Then, one day in 1992, in the midst of a crisis at the deli — a cooler was on the fritz, the sandwich line was long — Saginaw pulled Weinzweig outside for a talk.

“What’s up?” he said.

“Ari, where are we going to be in 10 years?” Saginaw asked.

“Can’t this wait?” Weinzweig replied.

Saginaw now explains, “My question was simply: Ten years from now, how will we know if we’ve been successful or not?” Weinzweig saw it differently. “It’s true. We didn’t have a clear vision, and volume was up and profits were flat. But I knew we were at a point — it’s a normal stage of business development — for that to happen.”

The partners talked for a year, and what emerged was a plan they called Zingerman’s 2009, a rebirth that envisioned 12-15 new businesses in 15 years based on an updated set of guiding principles that included the unusual business model, one based on social conscience, returning good to the community, and entrepreneurial opportunity for employees and outsiders. Each new business would be controlled and run by those who created it, and the creators would become managing partners in the hub: Zingerman’s Community of Businesses.

One thing Saginaw and Weinzweig did agree on from the start was that they would never franchise or open a second deli or any of the other units. There would always be only one of each, with the objective to stay local and continue to increase quality.

“We had never seen an operation that was really good and then grew by replicating itself,” Saginaw says. They still haven’t.

Saginaw began moving into his growing interest: development of new partnerships and Zingerman’s community philanthropy. He was already instrumental in launching Food Gatherers, a program that collects unused food from shops and restaurants daily in Ann Arbor to feed the needy.

“My grandfather, Ben Sherman, used to say that half of what you have belongs to those who need it,” Saginaw says. “He lived his life by that. He said, ‘If you’re successful, make your friends successful.’”

Today, six of Zingerman’s seven independent businesses are run by people who dreamed them up, brought the ideas to the founders and partners, and themselves became managing partners of the bigger company. They do their own hiring, set their own prices, add whatever they need, but are linked to Zingerman’s Community of Businesses, the core hub on which they rely for health insurance, marketing, payroll and tech support, and common purchases of supplies, and must adhere to Zingerman’s philosophies of business.

John Loomis is a good example.

In the early 1990s, Loomis and his brother, Bill, started Loomis Cheese in Ann Arbor, making a genuine Welsh-style Cheshire cheese that got immediate acclaim, a mention in The New York Times, a listing with Dean & DeLuca, and the support of Zingerman’s, which promoted the cheese extensively. The problem, Loomis says, was that very few retailers had the skill and patience to handle the cheese properly. Also, in 1990, $10 a pound was a lot for a locally produced cheese.

“We wound up closing it down,” Loomis says. “And I went to work for Zingerman’s as the cheese buyer.”

Eventually, the discussion began to turn toward the idea of opening a new creamery under the Zingerman’s umbrella. John wrote a plan, found his own financial backer, got the other partners’ consensus, and is now the managing partner of Zingerman’s creamery, which sells 10 cheeses to fine-food stores around the country, including the famed Cowgirl Creamery in San Francisco and Dean & DeLuca in New York.

Alex Young, executive chef at Zingerman’s Roadhouse and a recent nominee for a prestigious James Beard Award, is another partner who had been the delicatessen’s chef.

His idea was for a restaurant that served uniquely American foods that were slowly disappearing. It became one of the freestanding businesses. Young, who once was executive chef for the Hilton hotel chain, is experimenting with what may become another venture: a Zingerman’s farm.

At Zingerman’s Bakehouse, in an industrial center on the south side of town, Frank Carollo and his partner, Amy Emberling, are facing a problem that has confronted other units in Zingerman’s from the early days, when it was just a deli: How do you balance a sudden surge in demand for your products against the values to which you have committed?

Orders are up more than 16 percent over last fall, and the bakery is already stretched due to three large new clients, including the new MGM Grand Detroit restaurants.

The bakery turns out 10,000 loaves of bread and 3,500 pastries daily. That “problem” might be a delight to a traditional company, but not to Carollo. “I really didn’t want this: 130 employees and working 24 hours a day. It’s unbelievable,” Carollo says. “We need to stay the same size or shrink a little and concentrate on the quality of the product.”

Adds Emberling: “It’s quality-of-life and a quality-of-relationship issue. For example, I need to know everyone’s name who works here. It’s getting to be that I can’t anymore.

“At Zingerman’s, we have three bottom lines, and they are not lip service: Great Food. Great Service. Great Finance. Those three have to balance out. If we grow too much, we risk balance; we get removed from the product. Then we make really bad baguettes. That’s not good.”

As Carollo says, the company could handle more volume. “But,” he says, “it’s not fun.”

In all the years that the hippie-dippy model has worked, Zingerman’s has succeeded by being genuinely fun.

Most Zingerman’s regulars have a list of personal favorites. Here are 11 picks from Zingerman’s stores and its restaurant.

Sandwiches from the deli:
1. #22 Jenny’s Fix: Niman Ranch pastrami, Switzerland Swiss, coleslaw, and Russian dressing on grilled rye. I had my first version of this back in the mid-’80s, after I moved to Ann Arbor and fell in love with it to the point that I didn’t order anything else for years.
2. Pastrami on Rye with Dijon Mustard: Then I switched to this plain old simple sandwich, which so many other places do badly. But here, it’s as close to perfection as it gets. It’s so Brooklyn, where I lived and first ate pastrami in the late 1970s.
3. The Extra Special: Stonington smoked salmon and Zingerman’s smoked whitefish salad, scallion cream cheese, tomato, and red onion on a toasted sesame bagel. Very traditional, but Zingerman’s makes its own cream cheese, and that makes all the difference.
4. #18 Georgia Reuben: High-quality turkey breast, Switzerland Swiss cheese, coleslaw, and Russian dressing on grilled Jewish rye. This is a favorite of many, and it deserves the praise. The combo is sumptuous.

Bakehouse delights:
5. Pecan Raisin Bread: A fabulous bread, recommended for the morning after a new love affair. It’s that sensual. Dense, rich, almost hard to cut, and the thickest, most flavorful raisin bread you’ll ever want. Slather on the butter.
6. Pain de Montagne: Rustic bread from the eastern mountain areas around France and Switzerland with a thick reddish-brown crust. Great for toasting.
7. Paesano Bread: With a lighter, airier interior, this all-purpose thick-crusted Italian peasant bread is from the Puglia region of Italy. It is also great to slice into thick chunks and simply grill lightly on a wood fire, then dip into olive oil or eat with cheese.

From the Creamery:
8. Goat Cream Cheese: It used to be that only Philadelphia brand made any kind of cream cheese. Try this delight made with goat’s milk and techniques that give it a creamier, fluffier texture.
9. Manchester: Described by the company as “a velvety-rich double-cream cow’s milk cheese with a fragrant, bloomy mold rind. It runs the gamut from mild, soft, and slightly runny under the rind to dense and firm with wild rogue molds and strong mustiness.” Lovely.
10. Detroit Brick: I have seen this in the cheese cases beside the best European cheeses in top gourmet shops in New York and San Francisco. “A dense, lemony goat brick covered with a snow-white mold rind and liberally studded with freshly cracked green peppercorns. As it ages, the pepper becomes more assertive and the cheese develops more goat flavor,” Zingerman’s says.

From the Roadhouse:
11. Buttermilk Fried Chicken: Chef Alex Young says he found the fried chicken at Gus’ World Famous Fried Chicken in Mason, Tenn., near Memphis, to be the best anywhere. But they wouldn’t share the recipe. So he figured out what they had done and made a carbon copy. The chicken goes through a milk marinade, then is tossed in flour and fried. It’s remarkably crunchy while moist inside.