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Minimum wage: A deli owner says a hike could put him out of business

Greenblatt's owner Jeff Kavin is opposed to the proposed minimum wage increase in Los Angeles. “It threatens to derail us,” he said. Benjamin Brayfield/KPCC

This is one of two personal stories on the potential effects of increasing the minimum wage. To hear the perspective from a worker making minimum wage click here.

Greenblatt’s Deli-Restaurant and Fine Wine Shop has been serving up pastrami on rye on Sunset Boulevard in Hollywood since Calvin Coolidge was President.

“Just about anyone you can imagine has wandered in to Greenblatt’s,” owner Jeff Kavin said. “You turn around and there’s Paul McCartney buying a sandwich.”

Its website boasts a quote from the San Francisco Weekly saying it served "The Best Sandwich on Earth." Three generations of Kavin's family have run the restaurant. He said in all that time, Greenblatt’s survival has never been as threatened as it now.

On Labor Day, Mayor Eric Garcetti called for Los Angeles’ minimum wage to jump to $13.25 per hour by 2017. About a month later, a group of city council members upped the ante, calling for a $15.25 increase by 2019.

The council voted Tuesday to study the effects of both proposals, which puts them both on hold until after the findings come back in February.

Kavin says he doesn’t need to wait until then to know he will be hurt.

“When you look at what the mayor is proposing and the city council, it threatens to derail us,” he said.

Kavin is worried because wages accounts for more than a third of Greenblatt’s operating expenses.

Greenblatt’s dining room is open 17 hours a day 365 days a year requiring shifts of waiters. All the items in his deli case are prepared by hand.

“Each one of those potato pancakes is a guy sitting over a frying pan,” he said. “Same thing with the fried chicken. The potato salad is made twice a day.”

The only employees at Greenblatt’s who earn minimum wage are the waiters, who make most of their money from tips.

All the other staff already make more than the current $9-an-hour minimum wage. But if $13.25 or $15.25 is the new floor, Kavin worries how much more he’ll have to pay to attract good workers. He said he doesn’t know where the money will come from.

“It could force us out of business,” he said. “It could force us to cut the number of employees by 50 percent.”

But Kavin admits he’s not exactly sure what will happen. His customers may put up with at least somewhat higher prices. Echoing business leaders and some economists, Kavin said the city is entering unchartered waters.

It doesn't help that the cost of beef has been shooting up.

Over the years, Greenblatt’s – where the same pastrami slicer has been used for 50 years – has made a point to change as little as possible.

Kavin said increased labor costs would force him to make at least some changes.

Delivery service would likely stop entirely, because it is hard to pay drivers well when customers expect their food to be brought to their doorstep for free. As it is, he says he has to compete with many delivery drivers who make less than the minimum wage because they are part of the underground economy.

“The delivery business, I can’t get it to add up any way shape or form,” Kavin said.

He might close earlier and he might cut benefits for his 35 employees, half of whom he said he provides with healthcare.

He'd stop paying someone to answer the telephone and customers could likely be ordering food from an iPad instead of from a human being, which some restaurants are already doing.

“That guy who takes your order at the counter is gone with this,” Kavin said.

Kavin said whether his business survives or not comes down to a simple question: How much are people willing to pay for a pastrami sandwich? He's not sure.

“You know I hope to survive,” Kavin said. “But I don’t think I’ll have as many employees. I think I’ll have a lot less”