Employers across the state are worried about what it means to own a business in Washington in 2026.

Small businesses, particularly those in unincorporated King County, are juggling rising minimum wages with rising costs, rising taxes and customers who can’t afford another price increase. The Association of Washington Business (AWB) is calling it a “deteriorating business climate,” with a recent employer survey indicating more businesses are considering leaving Washington.

The owners of Aroma Coffee Co. in Fall City have no plans of leaving, but operating has remained a challenge, co-owner Sara Cox said.

“There’s way more advocacy efforts underway for businesses in Washington because it is now a worse state to be a business in than California,” she said. “A coffee shop would aim to have … maybe a 30% profit margin would be a good goal. There’s no way we’re even going to get a third of that. We didn’t do it for the money, but it is not viable to open a business and think it could support your family.”

Impact of minimum wage

An ordinance increased minimum wage in unincorporated King County again starting Jan. 1, 2026, this time to $20.82 an hour, with exceptions based on staff and revenue size. Those exceptions will phase out in the coming years, until 2031, when all businesses, regardless of size and revenue, will pay the same minimum wage.

Businesses with 16 to 499 employees will pay $19.82 an hour this year, as will businesses with 15 or fewer employees that have a gross revenue of $2 million or more a year. (Gross revenue, in this ordinance, refers to global revenue.) This is because the businesses at this size get a $1 deduction on minimum wage this year.

Businesses with 15 or fewer employees that have a gross revenue of less than $2 million a year will pay $18.32 an hour this year. These businesses (the smallest of the bunch) get a $2.50 deduction on minimum wage this year.

These deductions are in dollar amounts because the deductions stay consistent, even when minimum wage doesn’t. Each year, minimum wage will be adjusted in line with the Consumer Price Index, so it keeps up with inflation. All new deductions and the new minimum wage will go into effect on Jan. 1 of each year.

The number of employees is determined by the average number of employees a business has had in the last 12 months.

When King County initially implemented the ordinance in 2025, there were a lot of unanswered questions from local business owners. The three owners of Aroma Coffee Co. believed they could no longer work at their own shop, for fear it would push them into the “more than 15 employees” category.

King County Council has since clarified some of these concerns, and Cox said she and her co-owners are able to take on shifts.

“One of the great things that the county did in response to our advocacy was they did not include owners in the 15 employees counting,” she said. “That was a huge piece for us because it would mean either we couldn’t be paid, or we couldn’t staff our floor.”

More details on the ordinance can be found at kingcounty.gov, but King County itself does not enforce the ordinance. If an employee believes their employer is not complying, they would have to seek damages through a lawsuit filed in civil court.

‘Deteriorating business climate’

Though Aroma and other Valley businesses have managed the minimum wage increase, that cost has been directly passed on to their customers.

Johnny Blair, COO of South Fork restaurant outside of North Bend, told the Snoqualmie Valley Record in 2025 that $25 burgers would not be “out of the realm of possibility next coming year.”

As of Feb. 25, 2026, South Fork’s menu includes a $22 burger, a $25 brisket sandwich and many other entrees averaging a similar price.

“We don’t want to impact the customer experience, but we’re going to have to,” he said. “This recent bump is going to cause us to raise prices again.”

Aroma is telling the same story. There, a 16-ounce flavored latte will cost about $8 after tax.

“I know this is expensive, it’s a barrier to me. I wouldn’t be able to buy coffee on a regular basis even as an owner of this business,” Cox said. “But it’s not inflated because we’re trying to get rich. We really are just trying to keep up with it and continue to provide a service that is high quality.”

But the minimum wage increase is just one factor here, Blair said. The issue, he believes, is the compounding effect of rising wages, taxes and the general cost of doing business.

“There are a couple of things happening in this economic kind of firestorm,” he said. “We are in a state that has one of the highest gas taxes. So that’s putting a burden on Washington businesses, and I’m not talking about just restaurants, I’m talking about growers. That puts them at a disadvantage from other states. We have to get our produce from somewhere. It’s got to be trucked. It’s got to be shipped.”

According to AWB, Washington business owners have identified taxes as their number one challenge. Additionally, AWB’s winter employer survey, released at the beginning of February, showed that business owners have a growing interest in taking their business out of Washington.

Out of 400-plus employers surveyed, according to AWB, 44% of “business leaders” are considering moving their personal residence out of state.

“Washington employers are growing more pessimistic about the direction of the state economy, largely because of the rising tax burden,” AWB President Kris Johnson said in a news release. “[Lawmakers] need to understand that Washington employers, especially small- and medium-sized businesses, are under severe strain right now. They are not feeling good about the direction of the state economy or their own business prospects.”

Blair noted that, when push comes to shove, a lot of restaurants would rather sacrifice quality than sell a $25 hamburger. More and more mid-tier restaurants, he said, are choosing to source from Cisco rather than source locally and/or make food in-house.

“It’s a demise of the restaurant industry,” Blair said. “We make everything from scratch, but other companies can’t afford to, and they’re not going that extra level for quality.”

He added, “What are we going to be eating in 10 years if we keep on this path?”