The minimum wage debate through the eyes of self-made laundromat owner

Marc Tavakoli has all the classic trappings of success, but he once was a latchkey kid

Marc Tavakoli has all the classic trappings of success: A law degree from Columbia University, stints at Manhattan law firms, a Beverly Grove penthouse apartment two floors up from a pop singer.

He only hoped for such a comfortable existence growing up. His immigrant parents, before breaking into the middle and upper classes, earned paychecks so small that Burger King seemed like a luxury.

These days, Tavakoli manages his family's Los Angeles real estate holdings. His latest venture, Desi's laundromat in the working-class Pico Union neighborhood, serves as a constant reminder of those tougher times.

The struggles of his employees and customers echo his days as a latchkey kid, clothed in his cousins' hand-me-downs. But his family's self-made wealth makes him keenly aware of the opportunities afforded by hard work. He understands the pressures of poverty — but also the pathways out.

It's an emotional and intellectual dilemma for Tavakoli, one made especially poignant by the citywide debate over Mayor Eric Garcetti's plan to raise L.A.'s minimum wage to $13.25 an hour from a statewide floor of $9.

"We're the American dream," Tavakoli said. "I have a lot of sympathy for people who are struggling to make a living and support families, but also a lot of resentment toward people who have a sense of entitlement and don't want the jobs available to them."

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The family's struggle started in 1980, when revolution broke out in Iran. Tavakoli, then 5, escaped with his parents and brother using exit visas procured by a family friend. His father, Eghbal Tavakoli, an official in the Ministry of Agriculture, then returned immediately to Iran to tie up loose ends.

He hid in a friend's apartment for six months before being smuggled out under a blanket on the back of a motorcycle.

In the U.S., the elder Tavakoli packed boxes at a beauty supply store for minimum wage. His wife became a manicurist, conducting house calls late into the night. The family eventually started their own beauty supply chain, where Marc Tavakoli stocked shelves, mopped floors and served customers.

His father started dabbling in real estate in the 1980s, buying a few parcels near Palmdale and Mojave. Now, the clan owns nine apartment buildings — several housing low-income residents — and other investment properties.

The family purchased the Desi's property in 2003, around the same time Marc Tavakoli left the practice of law and turned full time to real estate. In 2006, he started MDT Properties, which develops and manages his family's holdings as well as other sites.

In 2012, the laundromat's owner fell behind on rent to the Tavakolis. Sensing a good opportunity for reliable cash flow, Marc Tavakoli took over the lease and started running things himself.

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At Desi's, flat-screen televisions broadcast the muted chatter of Spanish cooking shows and "George of the Jungle" cartoons. Tavakoli checks out a finicky change machine, coins clattering into the tin.

Customers drag neon underthings from four 90-pound Magnum Load washers, each of which cost more than $12,000.

"A lot of people think running a coin laundry is a passive business — those people fail," he said. "It's a constant effort keeping this place looking good and running well."

Tavakoli has spent $800,000 fixing up the laundromat. Open 18 hours every day, and always supervised by at least one of Tavakoli's five employees, Desi's largest expense is labor, running about $8,000 a month. (The second-largest is the $7,500 in rent he pays to his parents' company.)

Tavakoli just launched a fluff-and-fold delivery business and wants to start operating through the night, endeavors that will require more workers. With a higher minimum wage, he might spend up to $11,000 a month on his employees, he said.

Tavakoli quickly deduced that he would have to boost his prices at least 10% to compensate for what would be, by 2017, a 47% increase in the minimum wage. Desi's pay scale, between $9.50 and $12.50 an hour, would swing up to $13.25 to $16.

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But a higher wage also means his customers will have more money — to spend on laundry, among other basics. So Tavakoli expects an increase in business from customers such as Ricardo Ontiveros, 35, lounging nearby in a massage chair.

Ontiveros, a popular busboy at a West Hollywood restaurant, regales strangers with tales of Paris; Sydney, Australia; and dozens of other foreign cities he's visited. He makes $9.50 an hour and about $25 in tips a night. He frets that taxes will consume any wage gains.

But even if prices go up at Desi's, where laundry costs him 75 cents less to do than at his apartment building a block away, he said he'll keep coming because the machines are always available.

"My customers are not doctors or lawyers," Tavakoli said. "Every dollar they make, they'll probably spend."

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Tavakoli wants to encourage productivity and loyalty, but he needs to stay competitive.

"I'll give you an honest job and decent pay, but I'm not going to pay more than I have to," Tavakoli said.

Many local laundromats pay workers under the table in cash, bypassing minimum wage increases as well as contributions to Social Security, unemployment insurance and workers' compensation funds, he said.

Many workers prefer it that way, so they can continue collecting government benefits such as rent vouchers.

Tavakoli lost one worker that way — she pleaded with him to be paid in cash so she could avoid losing certain welfare benefits. When he refused, she quit.

But maybe, with a minimum wage increase, Tavakoli figures, workers will be more inclined to take an honest job than collect a welfare check.

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Tavakoli checks in with his manager, Adelina Cruz, 28, a slight woman in a purple shirt with matching eye shadow, as she folds sheets and Hilfiger shirts behind the gum ball dispensers while tuning in to Spanish ballads on K-LOVE 107.5.

Her first raise more than two years ago, to $9.50 an hour, rendered her ineligible for food stamps. Now, as the laundromat's highest-paid employee, she earns $12.50.

Another pay boost would allow the single mother to move out of the $750-a-month studio she shares with her three children. She could put her 9-year-old son into music camp or sports teams.

But Cruz doesn't subscribe to her boss' optimism that higher wages will nullify higher prices. Groceries are already a struggle, costing her nearly $500 a month.

"I'll get paid more," she said. "But everything will go up, so I'll also have to spend more."

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For all the debate over the minimum wage, Tavakoli believes other public policy decisions would have a bigger effect on his business and his workers' lives.

He'd rather see comprehensive immigration reform or an overhaul of the state workers' compensation system, which he believes is fraught with fraud.

A higher minimum wage, he says, may not help low-wage workers as much as advocates for the policy believe. Many work for employers who plan to trim hours, demand more output or skip overtime pay to keep labor costs low. And landlords (including Tavakoli) may increase rents to capitalize on higher competition for apartments as workers look to upgrade into larger spaces.

As for Desi's laundromat, Tavakoli sees little downside after working the numbers. At worst, he predicts, it will have a neutral effect on his profits. At best, it may help Tavakoli retain high-quality workers and ensure customer loyalty.

And, Tavakoli adds, his personal history makes him especially empathetic to workers' need for a livable wage.

"A strong middle class is important for the long-term health of any society," he said. "A higher minimum wage is a good step."

Tiffany.hsu@latimes.com

Twitter: @tiffhsulatimes

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