The new minimum wage laws are the last straw for some Flagstaff businesses.
Cultured Yogurt and Country Host West, located near the Walmart on Woodlands Village Boulevard, are two businesses that have closed since the new wage laws have passed.
Kelly Hibbs, the owner of Cultured Yogurt, said she and her husband closed the business after a person wanting to buy the coffee house and dessert shop dropped out of the sale in December because of the minimum wage propositions passing.
“This is heartbreaking for us to have it end this way. We loved the people who worked for us and our customers,” she said. “It’s not that we didn’t want to pay our employees more. We just couldn’t afford to do it.”
Proposition 206 and Proposition 414 both passed in November. Proposition 206 increased the state minimum wage to $10 an hour Jan. 1 and would gradually increase the state minimum wage to $12 an hour by 2020. It also mandated that employers give employees sick time. The Arizona Chamber of Commerce, Flagstaff Chamber of Commerce and other business organizations have filed a lawsuit to get the proposition overturned.
Proposition 414 set a minimum wage for the city of Flagstaff and would increase the city’s minimum wage to $15 an hour by 2021. The increase in the local wage is due to start in July and would be $10 an hour or at least $2 above the state minimum wage, whichever is greater.
Flagstaff voters, proponents and opponents of both minimum wage laws did not expect both ballot measures to pass. With both ballot measures in force, Flagstaff’s minimum wage will increase twice in six months: to $10 in January and then to $12 in July.
Hibbs said she and her husband first put the business up for sale last year after having a child. Cultured was holding its own, even with Dutch Bros moving in across the street, but things were tight. Hibbs was working 60 to 70 hours a week without pay in order to keep the business running. Her husband has a full-time job and neither of them was getting to spend much time with their child.
She said they had multiple buyers who were interested in the business, until the minimum wage issues hit the ballot. Once the minimum wage laws passed, the last buyer dropped out, she said. And the Hibbs couldn’t absorb the wage increase.
Hibbs said that nearly all of Cultured’s employees were tipped employees and were paid about $5 an hour plus tips. The tipped minimum wage in Arizona before Proposition 206 and 414 was $4.90 an hour. With the new state minimum wage in effect, the tipped wage has increased to $7 an hour.
The minimum wage increase would have brought Cultured’s employees to $9 plus tips in July, an 84 percent increase in payroll, she said -- not quite double what the current payroll was, but enough to push the business over the edge.
When business is good in the summer, the business socked away money to pay employees when business slowed down during the winter months, she said. That money would now go to paying for the increase in the minimum wage, and there wouldn’t be anything left to save for the slower months.
Hibbs said they stopped selling gift cards as soon as they knew the sale of the business fell through and offered refunds to customers who could mail the cards back to them by Jan. 7. After that, the company was out of funds.
Minesh Patel, one of the business partners who owns the Country Host restaurant, said the minimum wage hike was the final nail in the coffin of the restaurant’s westside location.
The business was up for sale in April at the request of one of the business partners, he said. They removed the listing in October, thinking they could keep moving the business forward, but then the minimum wage laws passed.
“We were a second location restaurant and making ends meet, but could not support such a drastic increase in the minimum wages mandated by the local Prop. 414 because our small customer base would not support ... the pricing we would have to take up,” Patel wrote in an email.
He estimated that the additional pay for just the servers at the restaurant would have been another $1,000 a month. They also would have had to increase wages for kitchen staff ($700 a month) for a total increase of $1,700 a month in payroll starting July 1.
Patel said the business partners plan to keep the eastside Country Host restaurant open, but will have to increase prices in order to absorb the increase in wages.
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