Pastrami and partnership, to go
Zingerman’s Deli, known internationally for its many huge and creative sandwiches, has a highly unusual business model — one that has produced impressive growth while engaging employees who enjoy the opportunity to help run the businesses and even to start new ones.
The New York Times
It was a typical Wednesday morning at Zingerman’s Roadhouse, a restaurant in Ann Arbor, Mich., that offers nine varieties of macaroni and cheese and smokes its own hogs for pulled pork.
But on this particular morning, in a colorful back dining room, finance was on the menu.
Gathered for their weekly huddle at various booths and tables were roughly 50 restaurant staff members, all studying a large whiteboard filled with handwritten numbers. Alex Young, a James Beard Award-winning chef who has run the restaurant since it opened in 2003, noted one figure in particular: $165,256, the previous week’s sales.
That number, as the board showed, was nearly $13,000 more than they had anticipated in the monthly plan for this third week of April and close to $5,000 more than they had forecast just seven days earlier. Smiles erupted across the faces of everyone from the busboys to the line cooks to the wait staff. For one thing, they had served 300 more meals than anticipated.
“I think we could get that number up to $180,000 next week with the start of graduation ceremonies,” said Young, referring to the fast-approaching festivities at the University of Michigan. “How do you think we might get to that goal?”
Staff members started offering suggestions, including promoting products made at one of the restaurant’s sister businesses: graduation cakes from Zingerman’s Bakehouse, for example, or a gift package of “Zingerman’s Guide to Good Leading,” a three-part business book series sold by Zingerman’s Press.
“Great ideas,” said the author of the books, Ari Weinzweig, who was sitting in a booth, dressed in his standard uniform of gray jeans, slip-on rubber shoes and black T-shirt. The books explain how Weinzweig and his co-founder, Paul Saginaw, turned Zingerman’s Delicatessen, a tiny sandwich shop near the university, into a group of nine businesses that, three decades later, has 650 employees, 18 managing partners and combined annual sales of $50 million.
Founded in 1982, Zingerman’s Deli is now known internationally for its many huge and creative sandwiches. President Obama ate there earlier this year. (“The Reuben is killer,” he told a cheering crowd of students.) But its most important creation may turn out to be a highly unusual business model — one that has produced impressive growth while engaging employees who enjoy the opportunity to help run the businesses and even to start new ones.
Zingerman’s has also introduced a business to share its philosophies with other business owners who come from around the country and the world to learn how to create work environments where employees think like owners.
Shortly after the Roadhouse huddle, Weinzweig received an email from a line cook, Leo Chen, who pointed out that four of the cocktails prepared at the restaurant bar required egg whites. Chen estimated that 30 egg yolks a week were being thrown out, yolks that could be “used for breakfast, puddings, etc.,” he wrote to Weinzweig, who encouraged him to prepare a plan for collecting the yolks at the bar and transferring them to the kitchen; the plan could be presented at the next huddle.
In 1994, the two founders wrote a vision statement for what would become the Zingerman’s Community of Businesses, or ZCoB. Instead of building delis wherever they could, they envisioned a dozen or so distinct, local businesses that would all be operating by 2009. Each would be founded and run by a passionate managing partner who would invest their own money, generally 10 to 15 percent of the initial investment, so they would have a stake in the success of the business.
And they started rolling out new businesses: A bakery that had been started to make bread for the deli became Zingerman’s Bakehouse. A training and consulting business, ZingTrain, would share Zingerman’s strategies and philosophies, especially its emphasis on customer service and staff training.
There are now six ZCoB businesses clustered on the south side of Ann Arbor, including the Zingerman’s Mail Order business, the Zingerman’s Coffee Company and Zingerman’s Creamery.
Today, each business has its own “training engineer,” and the nine businesses offer staff members more than 50 training classes, including sessions on knife and food safety, effective interviewing and how to buy a house. At the deli, employees are taught the provenance of all of the cheeses, meats and smoked fish they sell, as well as how to greet customers with a friendly “10/4” — a smile from 10 feet followed by a greeting from 4.
“We get price questions a lot,” said Maddie LaKind, who worked part time in the deli during college and is now hoping for a career in food. “Customers might want to know, for instance, why our Italian submarine sandwich costs $15.50. I explain to them the value of the product. It has 11 different high-end ingredients. But we also happen to be paid and treated well.”
For employees, there is little reason not to participate in the training. They are paid their normal wage during class time and earn a 50-cent-an-hour increase for completing orientation. “I feel like I have received a business degree working here,” said Heather Kendrick, a music major at the University of Michigan who works in the deli.
Over the past few years, the organization’s net operating profit has hovered around 5 percent. That profit margin would be considered disappointing at many companies, but Saginaw and Weinzweig say they are happy knowing that the slim margin is a result, in part, of paying employees well and providing good health care.
Wayne Baker, a professor in the Ross School of Business at the University of Michigan, turned it into four case studies. Bo Burlingham featured Zingerman’s in a book called “Small Giants,” which is about companies that “choose to be great rather than big.” And the owners and employees of more than 1,000 companies have attended ZingTrain seminars to learn more about the Zingerman’s model.