I thought I read once that to make a brewing business worthwhile a person needs a minimum of a 7 barrel system.
Generally, that's true, but I think 3bbl is the absolute minimum. I can't think of any situation where anything smaller ever makes sense. There is a cafe in Michigan that does like 1bbl extract brews, in addition to selling other beer and coffee, but I think most nanos are vanity projects more than viable businesses.
You must be thinking of Sue's Coffee House/Bella Casa di Vino.
There is also Patchwork in Decatur MI that brews on a half barrel set up. A Bravo! restaurant in Kalamazoo brews on a small system maybe 1/2 barrel to 1 barrel. Paw Paw started off with a half barrel system, now has a 7 bbl. Odd Sides started at 1 bbl, but now has 7 barrel tanks, not sure on brewhouse size now. There are many in the 3 to 5 range in MI. Witches Hat in South Lyon started at 4, and he can't keep up with demand - his beers are usually good - and he is looking to expand.
It is a way to get started, but soon you will need a bigger system. Just so you know, Larry Bell started with a 15 gallon soup pot, and now will be in the 250,000 barrel/year range for 2012.