How one company grew to $60 Million in Annual Revenue by creating a Community of Businesses in their Hometown

Back in 1992, Paul Saginaw and Ari Weinzweig sat on a bench outside their already successful Deli.

They knew that they wanted to expand beyond their $5 million a year in revenue and single building.

But they weren’t sure how.

They had to address what felt like a hard question:

Where did they want their business to go from here?

It seemed like they faced a binary choice.

Either they could stay with their singular successful location or replicate their model through franchising or additional stores.

The problem was neither option to growth seemed right for them and their business.

Here’s the story of where they went from there.

Part 1: Saw a Problem with the Options in front of them

Lots of businesses follow the two options Paul and Ari had been considering.

In fact, there has been heavy growth of the franchise model starting in the 80’s and continuing on an upward trajectory.

But the model has downsides.

In particular, it can be hard to control your brand and even harder, as a purpose-driven Entrepreneur, to ensure that the values you’ve baked into your business will follow into the franchises.

This is not only true for small and mid-sized businesses.

Here’s what Howard Shultz had to say to Harvard Business Review about what it was like when he returned to the CEO role at Starbucks,

“The marketplace was saying, “Starbucks needs to undo all these company-owned stores and franchise the system.” That would have given us a war chest of cash and significantly increased return on capital.

It’s a good argument economically.

It’s a good argument for shareholder value.

But it would have fractured the culture of the company.

You can’t get out of this by trying to navigate with a different road map, one that isn’t true to yourself.

You have to be authentic, you have to be true, and you have to believe in your heart that this is going to work.”

Just like for Mr. Shultz, opening more locations didn’t  seem like a better option for Zingerman’s Deli.

While opening more locations would have allowed them to grow in alignment with their culture it would have:

  • Not given them substantial diversification in their offerings (or risks!)
  • Required geographic expansion to enter new markets
  • No opportunity to let employees grow their own business

DOWNSIDES of Traditional EXPANSION

Faced with these options, they started to consider if there was another way to grow their business.

Could they grow it without experiencing the downsides of either traditional expansion or franchising?

Part 2: Refused to accept the normal answers, Asked “what if”? And came up with a novel solution

What makes their story exceptional is that they found another way.  

A new way.

They didn’t accept that the paths that most businesses took were the only paths available to them.

Instead, Paul and Ari started thinking along the lines of “What if we built a community of businesses?”

Over two years they began to envision this united but unique “Community of Businesses”.

The businesses would be united not just by the Zingerman’s name but also by:

  • shared guiding principles
  • triple bottom line approach
  • sustainability practices
  • transparency practices
  • location
  • food
  • and a sense of togetherness!

This was uncharted territory.

The first step was to get really clear on the vision.

Screen Shot 2017-05-19 at 12.49.11 PM

In 1994 they did just that. They laid out a vision for where they wanted to go by 2009.

“We envision a Community in which each member business shares with Zingerman’s a common vision, a common road map toward the year 2009, a common set of guiding principles. Each is committed to the success of the other, committed to working in the best interests of the entire organization, linked financially, and emotionally. Each is committed to the success of its staff, and beyond all else, the satisfaction of our customers.

But significantly, each of these businesses will be owned and managed by a someone who has chosen to be our partner in that particular venture. A partner with a passion for a particular food or service. A passion for creating an exceptional business that has a personality of its own, yet is grounded in the principles that have been such an important part of making Zingerman’s what it is”

Zingerman’s 2009: A Food Odyssey

 

That document became the North Star that would guide them forward as they created the new community.

Part 2: Pilot the Idea

In that same year – 1994 – that they finalized their vision for 2009, they also launched the first new business.

They encouraged employees to share business ideas.

They also lay the groundwork for making this ideas relevant to their approach by using their “secret sauce”: sharing.


QuoteSecretSauce

If an employee had a business idea, there was already an understanding – starting from day 1 – of how Zingermans business worked.

That gives Employees a leg up in starting new ventures.

The Community of Business approach provided other kinds of support too.

An employee typically only puts up 10-15% of the capital needed for the enterprise.

Plus they get the benefit of the Zingerman’s brand power, industry and community knowledge.

With this powerful infrastructure in place, the model took off.

Part 3: Expanded the Model and Built the Community of Businesses

Today, there are ten businesses in the Zingerman’s Community.

Collectively they are doing more than $60 million in annual revenue.

All are located within the Ann Arbor area.

Map of Zing Biz

Each one is an independent business that none the less benefits from the Zingerman’s brand and expertise.

Each has a logical connection to their industry expertise.

For example there’s a bakery, a creamery and a catering service.

Zingbake

Each of the businesses are also lead by a managing partner who has often worked their way up through one of the businesses in the Community and now has an ownership stake in the new enterprise.

This structure has allowed Zingerman’s to attract and retain talent even as people move into positions of business ownership.

The Community has a common thread of culture that is about much more than food – it’s about a shared experience.

 

 

Equally important, they haven’t stopped visioning. They’ve now published a Vision 2020 that they began in 2006.

They built in collaboration with all of the Managing Partners, and input from hundreds of staff.  The vision articulates a next level of commitment to their values:

“We have a strategy for growth that is about the long-term economic health of our Community of Businesses and our local economy. When we talk about “great service” we refer not only to our customers, our community and each other, but also to our planet; we push ourselves to go beyond basic compliance on environmental issues.

We must be profitable in order to survive but our primary purpose is to contribute to a better life for everyone we touch. We do this by providing meaningful work, dignified employment, beneficial goods and services, and relationships of trust and caring that are the foundations of a healthy community. Through this work we have helped to create true prosperity, economic security and democracy in our larger community.”

 

It also articulates that they will aim to create up to 18 businesses, each unique and continuing to stay in the Ann Arbor area and offering “radically better food” and becoming an educational destination.

The thing that is truly amazing about Zingerman’s Community of Businesses is that they have managed to achieve as much, or possibly even more growth than they would have if they taken either of the traditional paths that they had been considering.

Back in 1992, they were getting requests to franchise. They were in a single cramped building and unclear on how they could grow without compromising their values.

They found not only a new path, and a path that aligned with their values, but also recognized that in order to achieve their mission they needed to continue to profitable and grow.


The path they created could offer more jobs, have a bigger impact on the community. I think when you read their vision 2020, you really see that reflected.

The purpose is so deeply baked in. The uniqueness is part of what they want to support and what they are celebrating in the Community of Businesses.

They may not have envisioned back in the early 90’s exactly how it would work.

Yet, they saw clearly that there was a pathway that could really meet their true intention and fulfill that intention in the world.

And this way of doing it  had so much more benefit for the community that they were a part of, for the employees they wanted to have different opportunities for and for their own businesses and growth.

I hope if you ever go to Ann Arbor you’ll go and visit them and have the experience for yourself!

Even more importantly, I hope you’ll find inspiration in their model of non-traditional business growth as you seek to expand your own business in line with your purpose.

Part 4: Find Your Own Path to Growth in Line with Your Values

Lots of people think that the traditional path to business growth is the only one.

In fact there are lots of ways to define growth on your own terms and leave a legacy you’ll feel great about.

You have to start by believing that another path is possible.

Finally, you have to start down your unique path. I’ve shared lots of tips about finding that path in the past, and here are a few of my favorite articles on the topic to help you out:

I’d love to hear about what non-traditional approaches to your own business growth you are considering or putting into practice!

 

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