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# Ordinance discourages new eateries from coming here
- URL: https://www.smdp.com/ordinance-discourages-new-eateries-from-coming-here/
- Published: 2002-06-18T15:00:00.000Z
- Updated: 2026-10-23T00:20:48.000Z
- Author: Guest Author
- Tags: Opinion, Promenade, #archive-import

*By Tom Larmore*

(Editor’s note: This is the third installment of a weekly column editorializing on the hotly contested living wage ordinance. The city council passed an ordinance last July requiring businesses that generate more than $5 million in annual revenue to pay their employees $12.25 an hour. Those businesses and their supporters have asked for the ordinance to be rescinded, which is before voters this November.) Over the last few months, the City Council has been agonizing over the loss of restaurants on the Promenade. Although the immediate cause has been increases in rent due to the willingness of chain retail stores to pay substantially more than restaurants can afford, the ultimate challenge is presented by the Minimum Wage Ordinance.

As I explained in last week’s column, no restaurant can survive, let alone thrive, if wages are increased up to 80 percent, as the ordinance would require, even to those already making $15-30 per hour. The economic impact of the ordinance is so substantial that even if landlords gave away the space, restaurants could not operate profitably. It is no wonder the specter of the ordinance is keeping restaurants away from Santa Monica.

In a recent issue of the Los Angeles Business Journal, three major restaurant operators were quoted as being very interested in establishing a Santa Monica location but are unwilling to make that commitment if the ordinance becomes effective. (One said they would love to be here, “But that ordinance is literally holding us back.” Another said, “I won’t even touch that area right now.”) I have spoken to several others who express the same concern.

Opening any business involves risk, even under the most promising circumstances; this is particularly true of a restaurant. It is foolish to expect someone to make the necessary investment to open in a city where a law may go into effect which will almost guarantee economic failure.

This concern is not limited to restaurants which would expect to have revenues in excess of $5 million and be located in the designated zone. There are very real concerns by restaurateurs that the $5 million threshold will be lowered (recall that the proposed revenue threshold started at $3 million) or that the measure will be extended city-wide. While neither may happen, the concerns are sufficiently real to discourage many potential operators from signing a long-term lease and making major investments in tenant improvements, equipment and other start-up costs.

The most remarkable thing about the Los Angeles Business Journal story was a quote attributed to Mayor Michael Feinstein. When asked by the reporter about the uncertainty caused by the ordinance and the resulting chilling effect on new restaurants, he blamed the referendum! After all, he reasoned, if it weren’t for the fact that the fate of the ordinance rests on next November’s ballot, the uncertainty would not exist! This is like the attacker blaming the victim for the consequences of the struggle.

Of course, if there were no referendum, there would be no uncertainty and restaurant operators concerned about the law would simply dismiss Santa Monica out of hand.

Apparently, the mayor believes that if businesses would simply lie back and allow the council’s policies to be implemented, we would all experience a better world where the lemonade springs and the bluebird sings. However, those who must invest their own money to establish businesses and create jobs won’t do so based on such a fantasy. Reality is represented by comments of one of the owners of the Broadway Deli in the Business Journal article: “Most restaurants, (the owner) claimed, operate on a slim 5 percent profit margin. He estimates that an increase in the minimum wage would cost his 10,000-square-foot deli about $1 million a year. ‘If we took $1 million off our profit we would be in the red, red, red.’”

These comments amply support the analysis I provided last week in explaining why restaurants simply cannot operate under the ordinance. While existing restaurants, like the Broadway Deli, may be forced to seek a “hardship exemption,” no new restaurant will be willing to make the necessary long-term investments based upon such unreliable support. If the council is truly interested in seeking new restaurants, it should reconsider the wisdom of the ordinance. (Tom Larmore is a property rights attorney and a Santa Monica resident.)

*Originally published in the Santa Monica Daily Press print edition on June 18, 2002.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/061802.pdf?ref=smdp.com)