The Zingerman’s Way

How a small Ann Arbor delicatessen grew into a $35-million powerhouse by teaching its employees to comprehend a P&L statement

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Zingerman’s
Business: Restaurant and food services
Partners: Ari Weinzweig (left) and Paul Saginaw
Headquarters: Ann Arbor
Employees: 500
Revenue: $35 million (2007)

On a recent football Saturday in downtown Ann Arbor, there’s a line of more than 50 people waiting for sandwiches. A Zingerman’s employee is at the door handing out menus and free samples of potato salad and other sides to whet the appetites of waiting customers. The small building holds a massive cheese and meat counter, and an impressive selection of foods from around the world: olive oils and balsamic vinegars; jams, honeys, and mustards from Germany and France; pasta from Italy; and chocolate from just about everywhere.

From a modest start in 1982 in an old red brick grocery store in Ann Arbor’s historic Kerrytown neighborhood, the company founded by Ari Weinzweig and Paul Saginaw — thanks to a $20,000 second mortgage on Saginaw’s house and a $2,000 loan from Weinzweig’s grandmother — now has more than 500 employees in seven separate businesses, dubbed the Zingerman’s Community of Businesses.

But unlike at most companies, everyone at Zingerman’s is familiar with the business operations. Weinzweig emphasizes “open-book finances”; not only does every employee have access to the company’s P&L statement, but each of them understands the basics of business management. They embrace the philosophy in Jack Stack and Bo Burlingham’s book The Great Game of Business, which encourages employees to think and act like owners through a “culture of ownership.”

Zingerman’s is “not a spectator sport,” Weinzweig says. His employees are “on the court,” responsible for the company’s numbers. “They own numbers,” he says. “They report numbers. They manage the numbers. [They] have to deliver. It’s not just like [they’re] sitting in the stands critiquing [Detroit Pistons General Manager] Joe Dumars: ‘You should’ve done this; you should’ve done that.’”

The privately held company shares its results with just about anyone. When a reporter asks, Weinzweig pulls out the company’s results for the last several years on a spreadsheet. “We kind of know what we’re doing and it’s really hard to get to happen, so I don’t know what anyone would do with our [financial results],” he says. “Everybody in the restaurant business’ food costs goes too high. Everybody’s trying to cut his or her labor. Everybody’s trying to be more profitable.”

Employees appreciate the openness, saying it builds trust and responsibility. “I understand what kind of money is coming in, seeing what we’re building,” says Zingerman’s Roadhouse server Shay Cook. “There are open lines of communication. You can fix [things] easier.”

Amos Arinda, 21, a server and manager who lives in Ann Arbor, says the fiscal openness is important. “To see those people who say, ‘Oh, I don’t know why our business is failing. It’s like a huge surprise to everybody,’ whereas here we have a direct connection with the numbers. You know what’s going on. If we’re failing in a certain area, you know you’re failing.”

Zingerman’s employees rattle off terms like “net operating profit.” “How many people who own restaurants don’t even know what the term is?” Weinzweig asks. “I’m not joking. I train people who own businesses, and I’d put half of [my employees] up against [those] people.”

A big part of the program is training. Zingerman’s employees have to take classes and pass tests, and they can’t get benefits until they complete a lengthy orientation — typically in 60 days. “Some people do it in 30 days,” Weinzweig says. “Some people take three years.” They get awards for passing classes, as well. And the company looks to use anyone’s talents. A deli retail manager recently sent out an e-mail to workers congratulating a 16-year-old employee for being so talented that she’s training people. “She’s training people who are in their 20s, 30s, 40s,” Cook says.

The company also rewards its employees in different ways. At the Roadhouse — because the restaurant did so well — management upped the employee discount last year from 20 to 30 percent. A few years ago, after Bakehouse employees performed well over an extended period and beat a series of annual goals to cut waste and accumulate savings, they received some $35,000 in bonuses. The employees are also eligible for regular profit-sharing, as well.

A key to the company’s success is that each unit has a managing partner who owns part of that business. “They make the push to go for greatness,” Weinzweig says, and they operate as one business with “semiautonomous units.” One of those partners is Allen Leibowitz, who runs Zingerman’s Coffee Co. On a recent Saturday afternoon, Leibowitz was working the crowd at Whole Foods in Ann Arbor, offering customers samples of fresh-brewed java. Across the store, another Zingerman’s employee handed out samples of the company’s three handmade candy bars.

Leibowitz used to work in computer security in Ann Arbor and traveled a lot, getting exposed to specialty coffee on a business trip to Palo Alto, Calif. His budding interest in coffee soon led to an obsession. “I became an amateur in the French sense of the word,” he says. “[Zingerman’s] only really cares about quality.”

Zingerman’s is renowned for its superior products, but they’re not exactly competing on price. “You can buy a cheaper mustard somewhere [else],” Leibowitz says. “We’re selling things that, fundamentally, nobody needs. Let’s face it: At the end of the day, you don’t need a $30 pound of farmhouse cheddar. You’re not going to wake up and go, ‘Oh my God, I’m going to kill myself if I don’t get that cheddar!’”

Leibowitz travels the world looking for top-quality coffees and carries some rare brews that start with a “pure food cost of $6 or $7 a pound.” Quality simply trumps corner-cutting. Five years after starting the coffee company, they’re on target for a $900,000 business, while roasting 100,000 pounds of coffee annually. (They even have a live Web cam where customers can watch the coffee being roasted.)

Zingerman’s alumni have gone on to write books and start their own businesses, such as the Mercury Coffee Bar in Detroit’s Corktown neighborhood, founded by Todd Wickstrom, a one-time Zingerman’s managing partner. Another former employee launched a chocolate company.

Throughout our interview at Zingerman’s Roadhouse — his high-end restaurant featuring traditional American classics — Weinzweig is in constant motion. “I have enormous appreciation for what the thousands of people who have worked here over the last 27 years have done and the thousands of customers who have patiently supported us,” Weinzweig says. And he’s always focused on improving. “It’s never done,” he says. “Everything could be better.”

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