Sunday, March 15, 2020, marked Zingerman’s thirty-eighth anniversary, normally a time to celebrate. But inside the company, it meant something else completely.
“That was the weekend when everybody looked at each other and said, ‘Now it’s for real,'” says Mo Frechette, a managing partner at Zingerman’s Mail Order, one of ten artisanal food enterprises in Zingerman’s empire. With Covid’s first wave rolling across Michigan, that Monday governor Gretchen Whitmer ordered restaurants throughout the state to close their dining rooms.
“This is the worst day of my life,” cofounder Ari Weinzweig said during a phone call that morning. “I just had to lay off three hundred people.” Overnight, the Zingerman’s Community of Businesses shrank from a $70 million enterprise, on a steady path to achieving $75 million in sales, to one doing about $45 million in annual revenue.
Although the 2008 recession had been tough on the company, no one had any experience in widespread job cuts. “You have to remember that we were always hiring,” says Amy Emberling, a managing partner at Zingerman’s Bakehouse.
And cofounder Paul Saginaw, looking at Zingerman’s books, could see that each business was in dramatically different shape. “If I could go back, knowing what was coming, I would have an enormous amount of cash on hand,” he says–enough to fund up to eighteen months of operations, if necessary.
Later that week, the partners met for their usual huddle, now under social distancing rules. This one was much different from the casual celebratory sessions before Covid, recalls Emberling. “The one big decision that we all made together in that discussion was, ‘Are we staying open? Is everybody staying open? Are some of us closing?'” she says. “Everybody was in different economic states. Everyone had different amounts of cash. All these PPP loan things”–referring to the Paycheck Protection Program–“no one knew how they were going to work.”
In particular, Rick Strutz couldn’t figure out how the Deli, where he was one of three managing partners, could function in the new environment. The cramped brick building on Detroit St. was always crowded with customers. On busy days, the line snaked through the building, out the front door, and around the corner.
“I said, ‘I want to close,'” Strutz recalls, shocking the other managing partners. “The fear that staff had, coming to work and serving people, was real. I didn’t want to be part of having someone die who worked at the Deli. Every day was hard. The Zingy-ness was gone.”
His fellow Deli partners agreed, and the group collectively told Weinzweig and Saginaw. But the two cofounders (and many of the other managing partners) fervently disagreed and pushed back–an unusual move; they usually let the managing partners lead without much interference.
But closing the Deli would have a ripple effect on the rest of ZCoB. It was a significant customer for the Bakehouse, the Creamery, and the Coffee Company, and the Deli sold many of the same products carried by Mail Order. The vertical integration of Zingerman’s could be blown apart. Finally, after lengthy conversations, and weighing the pros and cons, the Deli partners changed their minds.
“We decided we wouldn’t close,” Strutz says. But later, as he walked through the empty Deli, he was sad that the once-lively atmosphere from shoppers and diners was gone.
The Deli faced other problems, too. Its Catering business evaporated just as it would have been handling countless graduation parties and weddings. For months, the white delivery trucks with the Zingerman’s logo sat idle in the Community High School parking lot next door. “That was a really difficult time for me,” Strutz says.
Takeout and delivery were still an option, but at the beginning of the pandemic, delivery was only 3.3 percent of the Deli’s revenue, Strutz says. Distressed by the Deli’s dwindling income, he was startled in April 2020 when they suddenly received a $20,000 order from Kelly Stafford, the wife of then-Detroit Lions quarterback Matthew Stafford.
She told Zingerman’s that she would pay for lunches for any essential workers who came by the Deli and showed their ID badges. Stafford spread the word on her social media accounts, and orders flowed in. Her stipend “was gone in two hours,” Strutz says. The next day, she repeated the purchase, giving the Deli $40,000 in business in two days. “It turned the corner,” he says. “Now we were doing something good in the community.”
For three months, the Deli remained closed to all but carryout and delivery. Then, it reopened a few hours a day for grocery shopping. “There were so many things to think about,” says managing partner Grace Singleton. “How are we going to deal with taking cash? How are we going to deal with greeting at the front door?”
I was inadvertently the first customer to be allowed inside (I was there to chat with other shoppers, and to my surprise, found there was no wait to get in). The Deli established a cash-free carryout system. Customers called in or ordered online, then arrived in the courtyard on Detroit St. to collect their items.
Initially, customers were not allowed to stay and eat on the Deli grounds. Some were so eager for their food that they found spots on the Detroit St. curb, where they could sit and bite into their big sandwiches, the paper wrappings acting as place mats to catch anything that fell from between the slices of bread. By early fall, the restrictions loosened enough so that diners could occupy a limited number of tables inside or take spots in tents erected in the Deli’s courtyard. But then came the second wave, and a pause imposed by the governor in late 2020 banished indoor dining once more.
Inside, the Deli was reconfigured so that grocery and baking products were stocked along the ramp where customers once lined up. Gone were the colorful sandwich signboards, a feature of the Deli since its founding, since no one would be looking at a wall to find the name of their favorite sandwich.
Faced with unpredictable Deli business, and with nothing for Catering to do, the partners started brainstorming how the Deli could pick up some additional customers. Singleton wondered if there was some way that the shop could “take Reubens on the road.” She was inspired by a 2019 pop-up that Zingerman’s put on in Chicago, attracting more than a thousand customers who lined up down the street. Within days, Zingerman’s found bars, pubs, and other spots in Michigan and Toledo to host stops on its first “Reuben Tour.”
Customers prepaid for thirteen types of sandwiches, plus chips, soda, baked goods, and some deli items like hunks of Parmigiano-Reggiano cheese and sliced corned beef. A limited-edition Reuben Tour T-shirt, produced by Ann Arbor-based Underground Printing, sold out. The Deli repeated the Reuben Tour later in 2020 and subsequently created a Pie Tour, sending out a food truck loaded with savory potpies and sweet dessert pies from the Bakehouse. By 2021, Catering was picking up some lost business by offering family meal kits until demand for events returned that summer and fall.
The absence of the big menu boards with the fun sandwich names was an emotional loss, and customers mourned some of the discontinued sandwiches, like whitefish salad and roast beef. But Strutz wasn’t nostalgic for them, or for the line. “If we never had a line again, that would make me super happy,” he says. Sales of salads, noodles, and veggie dishes from the Deli case were about the same as they had been when Zingerman’s took in-‘person orders, and the food items were now preportioned, meaning it was faster for staff to add them to an order.
The numbers weren’t great: In fiscal 2021, the Deli’s revenue dropped to $9.75 million, down from $17 million in FY 2019. Early in the fiscal year, the Deli was forecast to lose $1 million, but it managed to cut its loss to around $300,000. Jokes Strutz, “Not losing $650,000 is almost like making money.”
Like numerous other food businesses, ZCoB received help from the federal government under the Paycheck Protection Program. By last year, it had received $9.8 million, which it used to pay staff salaries.
Deli customers quickly grew accustomed to placing orders in advance, either online or by phone. By 2021, about 88 percent preordered, with the remainder placing orders on a computer set up in a prefab plastic shed outside.
“We’re way, way more profitable at this level of volume without in-person ordering,” Strutz says.
He was optimistic that the Deli’s revenue would climb above $10 million annually once more, aiming for about $13 million to $14 million in 2022 and beyond. That should return the Deli to profitability, minus the crowds that the brick building once held. Says Strutz, “It’s no longer a mosh-pit experience.”
The Deli and Zingerman’s Roadhouse on Jackson Rd. are ZCoB’s best-known businesses, but they’re not the biggest–both Mail Order and the Bakehouse are bigger. And while the other managing partners were in shock from lost business, Mail Order’s partners were rattled by their immediate spike in sales, which were caught up in the sweeping trend toward online grocery shopping. “Our demand surged to levels we had never seen in the off-season,” Frechette says. “We were taking between 100 percent and 200 percent more orders” during the pandemic’s first months. Mail Order ended its 2020 fiscal year with revenue of $21 million, up about 27 percent from 2019. And, for the year ending in July 2021, it had revenue of $27 million–$11 million more than it generated two years before. In that time, “we grew what we would have expected over eight to ten years,” he says.
Steve Mangigian, managing partner of both Coffee and Candy, says he’s in awe of what Mail Order was able to accomplish. “They’re just kicking ass,” he says. “It’s hard to say whether they’re reaping the benefits of ten years [of sales] or if people fundamentally shifted the way they were buying and shopping.” But nevertheless, the business prospered.
“Will people continue to shop as much online as they did before Covid?” asks Ron Maurer, Zingerman’s chief administrative officer. “Probably not as much. But will they do more than they did? Yes.”
While Maurer believes Mail Order’s boom eventually will settle down, he says the pandemic alerted a new group of customers to its lineup. “They worked hard to be efficient. They’ve done very well and deserved [the business] they got,” he says.
And much of what Mail Order sold, the Bakehouse made. Even before the shutdown, its managing partners, Emberling and Frank Carollo, noticed that wholesale orders from restaurants and corporate customers were dropping. That business quickly vanished altogether once Michigan’s stay-at-home order was issued. “About half of our wholesale customers closed within two weeks of shutdown,” Emberling says.
The partners responded by prioritizing the products that sold in the highest volume. One early decision was to temporarily eliminate bagel production, as well as pretzels.
The pretzels were Carollo’s favorite item, and the partners had installed a dedicated oven solely for bagels. But in summer 2020, the parts for the oven lay against a far wall on the Bakehouse floor, waiting to be taken away. Emberling and Carollo concluded that they couldn’t give oven space over to products that only sold for $1.25 each and that went stale quickly.
But silver linings were already appearing. About three weeks into shutdown, demand for bread and pastries began to soar, both from Mail Order and local customers. Because its southside Bakeshop was considered an essential business, customers could still shop in person even when restrictions on restaurants were in place. Many waited in a socially distanced line that ran down the front of the building, while others used an app to order curbside pickup.
When the 2020 fiscal year ended, the Bakehouse wound up only 10 percent behind its 2019 results. Maurer says that the usual summer drop-off in business that the Bakehouse normally experienced did not happen in 2020 or 2021, underscoring its strength within Zingerman’s and with its customers.
By 2022, there was a full lineup to choose from. Bagels returned, although in fewer flavors, and so did Carollo’s pretzels.
“When you’re in a crisis, there’s nothing like everybody pulling together,” Emberling says. And she’s grateful to the Ann Arbor community, as well. “Ann Arbor supports us, and also demands things,” she says. “It has standards for us. It’s a really productive engagement.”
By the 2021 fiscal year, Zingerman’s employment had recovered to about 508 people, from 730 when the pandemic began. Once again, regular emails went out, listing the job openings across ZCoB.
Maurer says he never lost faith that ZCoB would get through the crisis. “I had supreme confidence that we would be okay,” he says. “I was confident we would have the resources to get through it.
“Did I think every business would make it?” He pauses. “I don’t know.” But last fiscal year, ZCoB’s sales returned to $65 million, and Maurer says $70 million is once again within reach.
Excerpted from Satisfaction Guaranteed: How Zingerman’s Built a Corner Deli Into a Global Food Community, available now at local bookstores and online. Maynard, Saginaw, Singleton and Weinzweig will discuss the company’s history at Zingerman’s 40th birthday celebration on March 15 (see Events).