Justin Foronda is the kind of creative and motivated second-generation entrepreneur who should be able to thrive in Los Angeles.
Born and raised in the historic Filipino peopleForonda opened Hifi Kitchen in 2019 and kept the doors open during the economic disruptions of the pandemic through sheer hustle.
Last year, the 37-year-old organized a Filipino Christmas market in front of Hifi to draw crowds to the neighborhood. He started a board game night at the store to attract customers. The next weekend he hosted a panel of DJs and emcees to discuss the history of Filipinos in hip hop, and created special drinks and food for each panelist.
She also tried opening a gift shop, selling clothing and making desserts. Offers new special offers almost every week. Foronda also works on weekends as nurse – and ends up causing the restaurant to float much of those profits.
All that effort has earned him nearly 6,000 followers on Instagram and has kept the restaurant open for five years, no small feat given the economic contortions of the last half-decade. But with the new California minimum salary for fast food workers that goes into effect this month, Foronda says he’s starting to run out of gas.
It supports a higher minimum wage and tries to pay its employees generously. But the minimum wage is rising so fast that the higher compensation you planned to offer as a retention strategy quickly becomes the new minimum.
“It’s like we’re playing Mario Kart and we’re always trying to get that momentum going,” Foronda said.
Small business owners in Los Angeles face a more expensive reality in which price disruptions caused by the pandemic have become permanent. Foronda said eggs are sometimes $40 a box and other times $125. So how much should you charge for an extra egg?
The new minimum wage is a valuable attempt to rectify the state’s growing income inequality. More money in the hands of fast food workers (who are more likely to be women, immigrants, and minorities) is a good thing.
Fast food is and always has been too cheap. McDonald’s one-dollar menu and 50-cent Jack in the Box tacos have become anachronisms in a world where an extra scoop of guacamole at Chipotle costs nearly three dollars. Fast-food companies have used their dominant position in the labor market to keep wages and prices excessively low, said Michael Reich, a labor economist and professor at the University of California, Berkeley.
“If you raise prices a little bit, demand for hamburgers won’t drop much,” Reich said, referring to large fast-food chains.
But the new wage in fast food changes the employment equation for all the small businesses competing for entry-level workers. Higher fast food wages put upward pressure on all those wages, creating additional strain for businesses already struggling to pay high urban rents. Restaurants and retailers facing costly commercial rent rates and higher supply chain costs must now decide whether and by how much to raise prices.
“These grassroots businesses are part of the glue that holds communities together and they are what give the community an identity,” said Chris Tilly, labor economics and professor of Urban Planning at UCLA. “A Starbucks just doesn’t play the same role.”
At Paul’s Kitchen in downtown Los Angeles, manager Charlie Ng has reduced the famous restaurant’s hours to save on labor costs. They are now closed on Tuesdays and no longer open for dinner. They’re staying afloat thanks to some pandemic-related government aid, but Ng isn’t sure what to do when it runs out.
Ng raised prices when ingredients became expensive, but tries to keep the increases below the dollar. Customers have been understanding, Ng said.
“Customers are not complaining about the price right now,” Ng said. “Even they see how expensive everything is getting.”
Reich, the economist, said the immediate effects of the wage increase will not be extreme because many entry-level jobs already pay more than the minimum wage.
But many small businesses, especially those located in urban areas with high rents, cannot afford to absorb new costs. If we want small, non-chain businesses to be part of Los Angeles’ future, we have to level the playing field. Individual business owners will continue to lose ground to highly capitalized real estate interests unless we build an economy where operating a small business is truly viable. In Berkeley, for example, small businesses have access to a special loan fund and enjoy a simplified permitting process.
A high minimum wage can be part of that future. More money in the hands of fast food workers means more purchasing power in the communities and neighborhoods that need it, and more revenue for local businesses. But someone always has to pay the price for California’s progressive politics, and too often it’s minorities, immigrants and wage workers who foot the bill.
Meanwhile, Foronda tries to keep his goals modest. He started the year hoping to make it to February, the restaurant’s fifth anniversary. Their new short-term goal is October, Filipino American History Month. If the business has to end then, at least it can come out strong.
“Five years was always the time where I was going to take a step back and see how this fits into my life, what my health is like, how my mom’s health is,” Foronda said. “So now we’re here.”