Business Owners Flee Wage Hike (higher minimum wage in West Hollywood)

By Samson Amore of Los Angeles Business Journal.

"The city of West Hollywood increased its minimum wage by roughly $4 to $19.08 an hour on July 1, and some local business owners are opting to list their properties and move somewhere easier to strike a profit. 

Lucian Tudor, chief executive of Global Dining Group and owner of La Boheme on Santa Monica Boulevard, opened the restaurant in 1991 but said he expects to list the location for sale within a month. 

Tudor said La Boheme was profitable until the beginning of this year, when the West Hollywood minimum wage rose to $17.64 an hour ahead of the increase to $19.08 an hour. “We’ve been in West Hollywood for 32 years, and we never experienced such a tough financial moment in all (that time),” Tudor said. “We didn’t make any money at all (this year),” despite cutting 1,000 working hours and averaging $600,000 in monthly sales. 

One of West Hollywood’s most famous gay bars – the Abbey – and its sister business  The Chapel at the Abbey, was listed for sale this week by owner David Cooley, who founded the club in 1991. A price was not listed, and Cooley declined to comment. But a source familiar with the business told the Business Journal that Cooley had met with West Hollywood Mayor Sepi Shyne before the wage hike took effect to protest the policy. 

The source said Cooley “told (Shyne) that he had never before thought of closing until now seeing their policy destroying us… The policy adds another million dollars to the Abbey’s expenses.”

Despite its small footprint – just under 2 square miles –West Hollywood has more than a quarter of its workforce in hospitality, the city’s Chamber of Commerce President Genevieve Morrill said. Some establishments are expecting labor costs to exceed 40% of their total expenses, she added.  

A ‘devastating’ change 

The policy to increase the minimum wage was approved by West Hollywood’s City Council in November 2021 and took effect on July 1. 

Wages will increase annually, up to 4%. The policy also requires businesses to pay workers sick leave and vacation time, a benefit that could be life-changing for them but is rarely heard of in service-industry jobs. 

For comparison, MIT’s Living Wage Calculator estimates the living wage for a single, childless person in Los Angeles (it doesn’t track West Hollywood) is $21.53, still more than the city’s new minimum wage.  

Business owners said they want to support paying their employees higher wages, but expressed concern that added costs could force them to lay people off or reduce hours. 

It’s difficult to discern how many businesses in West Hollywood will close because of this policy, partly because the city doesn’t keep a record of shuttered establishments, Morrill said. Some, like Tudor, claimed they might leave California altogether: He called the state “overrated.” 

Brett Latteri, owner of the Den on Sunset, has operated his upscale restaurant and bar on the Sunset Strip since 2009, and renovated it last year. He said once taxes and the new paid time off are factored in, his workers’ wages are “somewhere between $23 to $25 per hour.”

“It makes these businesses not viable,” Latteri said. “It’s not sustainable… and you could be, for me, 60 feet east and be in the city of L.A., with 25 to 30% lower labor costs.” 

Dimitri Komarov, president of 1933 Group, which owns three locations in West Hollywood – Formosa Cafe, Tail o’ The Pup and Harlowe – said the wage increase is “devastating,” especially on the heels of a tough couple of years during the pandemic. 

“West Hollywood was always a pro-business place,” Komarov said. “A lot of these businesses don’t know how they’re going to survive.” Komarov added that across his locations he’s cutting staff hours to stay afloat because “we can’t raise prices too much more, because it’s already ridiculous.” 

Businesses can apply to waive the wage increase if they can prove financial hardship, but few have. “It’s throwing business owners under the bus,” Tudor said of the waivers. “If I do this, to my employees I look like I don’t want to pay them.” 

Latteri said he hopes to avoid closing the Den on Sunset. 

“I am all for my employees living the best life they can,” he said. “But I have to be able to employ them.” 

Expensive to visit

Tudor was one of several local business owners who blamed the wage hike on political posturing. 

“Restaurants will definitely disappear from West Hollywood because of the political agenda of the mayor, Sepi Shyne, running for Congress, and the ex-mayor Lindsey Horvath,” who was recently elected as a Los Angeles County supervisor, he said, adding that the wage increase “goes very well (with) their political agenda.” 

“They should be held accountable for the loss of jobs and life and businesses in West Hollywood,” Tudor added.  

More than 40 local businesses expressed concern to the City Council and sent some 120 more letters in protest of the policy, Morrill said – but the Council moved ahead. She added she thinks it will “create a very expensive city to eat, shop and play in. Essentially only formula retail and corporations will be able to afford the high rents and labor.” 

She added the increasing wages could lead to West Hollywood – already an expensive city inaccessible by public transit – becoming a “city for the elite and luxury travelers.”"