(FORTUNE Small Business) – You see it everywhere these days: the pocket-width, burgundy restaurant survey that is commonly mispronounced "ZAG-itz" (correctly called "Zuh-GAT"). The restaurant review books began as a hobby for Nina and Tim Zagat, who peddled the guides from their station wagon while both had real jobs as corporate attorneys. Without any advertising, the Zagat Survey gained a cultlike following and made the couple owners of a big-league publishing business.

Although the Zagats have since quit their jobs and forsaken the station wagon sales for bestseller lists, the philosophy of the Survey hasn't changed much: The books have always chronicled the likes and dislikes of the everyday diner and still do. In the 21 years the Zagats have been in business, their Survey has expanded to 45 cities; it is printed in English, French, Hebrew, and Japanese; and its scope now includes hotels, resorts, spas, airlines, and car-rental companies. The family-owned firm won't disclose figures, but Tim says the company has been profitable since 1983.

The Survey is now entering the digital age and marking its territory in cyberspace. Zagat plans to spin off a dot-com company and, wouldn't you know it, go public. From their New York City office overlooking Central Park, Nina and Tim told us about their past and their plans. Edited excerpts:

How did all of this start?

Nina: We were working in Paris as young lawyers. We thought we were going to be there for only six months, so we grabbed every opportunity to try different restaurants. We kept a list as a hobby during the two years we wound up living there. Once we were back in New York, we joined a wine-tasting group. Many members felt there wasn't a reliable guide that told where to eat out in New York, and many disagreed with the dominant critic at the time. So we started to keep a list of our friends' opinions.

Did you distribute this list?

Tim: We started this as a love, so we gave it away. We gave away 10,000 copies for free the third year! It was Nina, the practical one in the family, who said we couldn't afford this hobby. So we started selling books in the fall of 1982.

Have you always published the guides yourselves?

Tim: We tried to get a publisher, but they all turned us down. And we had very good contacts--our respective law firms had publishing houses that we were close to. But most national publishers don't like local books, and the track record of publishing restaurant guides up to that time had not been very good.

Without a publisher, wasn't it hard to get in the door at stores?

Nina: Yes. We needed to figure out how to distribute the books, so we stuck them in the back of the station wagon and went up Madison Avenue and down Lexington Avenue to bookstores, asking if they'd carry the book. We were also sending them out from our dining room to people who ordered copies. We were both still lawyers--it was just a fledgling business--but every year we started doing better. The first year we sold 7,500; the second year 18,000; the third year 40,000. Then in 1985, we went from 40,000 a year to 75,000 a month.

You've never advertised, so how did that happen?

Tim: There was a cover story in New York magazine in 1985. The article was called "Food Spooks," and there was a picture with Zagat surveyors. All of them were pretty prominent, interesting people. For us, it was like somebody put a rocket under our sales. I think we took in $500,000 in cash that month.

So after that, in 1986, you decided to expand?

Tim: It was Nina, because she is responsible and also the tax lawyer in the family, who realized we were going to have to pay a lot of taxes on this. So we used the revenues to take the Survey on the road and see how it would do in Chicago, Los Angeles, and San Francisco.

You've expanded quickly. How have you managed your growth?

Nina: We've always funded internally and expanded through profits. Hiring has always been hard, but with time we got better at it. We haven't had major growing pains, because we both practiced law for a long time. We took advantage of our experiences helping other companies. Tim left law in 1987, and I left in 1990, when we decided we had to treat this as a business or stop doing it.

How did you make money?

Nina: All of our income came from book sales. In 1984, we began to sell customized editions. Although book publishing is the major profit source, licensing our data online has been a substantial portion of our income.

Where did you license?

Tim: We began licensing data ten years ago to all the dominant online players at the time: America Online, CompuServe, Prodigy, and eventually Microsoft Network. Those streams of licensing revenues have been pure profit.

There were a lot of places the consumer could get your information. Was there a danger of making yourselves too available?

Tim: We were surprised there was no danger. You could license Prodigy, you could give the same thing to CompuServe, and because they had essentially different customer bases, you were not duplicating. When the Web became dominant, we licensed city by city. We sliced and diced the data so there wouldn't be excessive overlap.

People could get your information for free online. What did that do to book sales?

Tim: Frankly, we really were worried when we licensed all the data for free in California because we thought it could hurt our book sales. In fact, from almost the moment they put the material on the Web, our sales went up. We think there was a huge number of people who had not seen the books before.

What about with your own Website--did it help or hinder?

Tim: As far as we can tell, our sales have gone up since May, when we launched our site. I won't know until the end of the year, because our sales are subject to returns, but now they are about 15% higher.

And the site is free?

Nina: Yes, right now. We didn't want to charge for content--we wanted to make it available and get traffic. Also, the ability to survey online is easier and more cost-effective for us. Eventually, there might be subscriptions to the site. There might be premier memberships for a fee, and members would get books, additional services, and content.

It has already been an overwhelming success. Were you prepared?

Tim: The servers that we originally installed were supposed to handle five times the expected maximum traffic for the first year, and we were being conservative. We blew them out on the second day, so we had to go and get much more powerful servers than we had anticipated. Traffic was just way, way beyond anybody's expectations. We now have more than 180,000 registered voters. That means since May we've registered 80% more surveyors online than we had in the past 20 years. New people are registering at a rate of 2,000 a day. We're shocked as hell. I had thought we were going to pay our Web developer a certain amount of money, and I looked at it like we were building a house. It's more like having a baby.

How much did you invest?

Nina: We invested $1 million initially, but we're pouring more money into it every day. It seems there's no end in sight. In the beginning we saw the Website as an investment, but now we see it as creating another business.

Do you make money off the Website with ads?

Tim: No. We will have six revenue sources: licensing, corporate sponsorship, a reservation system, e-commerce, restaurant-branded stuff [think Ruth's Chris Steak House knives], and business-to-business services.

Other plans for Zagat.com?

Tim: We want to have all of our editors work in real time so we can have reports of any significant changes, such as restaurant openings or closings, or news of chefs moving around.

That sounds like you're building a content-based Website. Will it be interactive?

Tim: Yes. As we said, we intend to create a reservation system. So you'll be able to go to one site, our site, and look at all of the different restaurants in a city and see what's available. Nobody else does this yet. I don't want to say too much about what restaurants are involved or when we'll launch. Let's just say we'll be starting in the largest cities first.

Why is this such a big deal?

Tim: It's a way of simplifying the restaurant reservation process. Diners can make reservations 24 hours a day. There's a function that lets a restaurant-goer search by, say, "French, East Side, less than $50 a head, Zagat rating above 20," and Zagat.com will find what's available and make a reservation.

There are a lot of other refinements that are possible, including knowing who good customers are by giving them special codes. Here's a feature for the restaurant-goer: Let's say you are interested in ten restaurants near your office. The system allows you to display those ten like you can stocks, where you can just turn on your computer and see what your stocks are doing. Here you can see the restaurants' availabilities. Turn it around, and the restaurant can use this as a marketing tool. Let's say they get cancellations. They can get the list of e-mail addresses of their customers so they can notify them of openings.

Is all of this free?

Tim: The restaurant will probably pay a flat fee per reservation. We are considering charging a small amount to the restaurant-goer, similar to Moviephone.

Isn't there a risk? On one hand, you publish an impartial survey, and on the other, you take fees from restaurants for your services. Doesn't that jeopardize editorial objectivity?

Tim: That's why we're going to spin off the dot-com business from the book-publishing business. All of the editors and book-publishing people will be with the Zagat Survey, and Zagat.com will have separate ownership. The editorial control will be by the Zagat Survey. We'll create a new corporation and make it very clear that this is a separate entity.

Are you going to be a part of both operations?

Tim: We are probably going to be on the board of the dot-com, but it's going to be run day to day by other people. We will probably bring in outside investors, who will also be on the board. Zagat.com will not be a 100%, personally owned Zagat business like the book publishing is. It will be a separate business and probably eventually taken to a public offering.

But how can an unbiased restaurant survey and a restaurant-service business under the same brand really work?

Tim: The survey is objective, like a newspaper. Its information is based on surveying customers. The number ratings are independent of us, and editorial comments are a synopsis of what the customers say. There will be a wall between the two companies. We have never been criticized for a review in 21 years. The survey will remain accurate and fair.

So you'll hire a whole new staff?

Nina: Yes. You can't use the same management team to do everything. And the approach and culture of a dot-com are quite different from those of a traditional business. That's also part of the reason we're going to treat them separately.

How do you fight off the temptation to grow even faster?

Tim: We have been asked to do a big expansion and have been told that people will pay for it, and we've always said no. We could have grown faster, but the most we really wanted to grow was about 25% a year because otherwise we couldn't train people and keep control of quality. Recently we were doing something in Japan, and the company we were doing it with asked us if we'd do the entire country in one fell swoop. But we didn't feel that we could go into that country for the first time and just guarantee the quality that our brand represents. We said no.