Some small businesses caught in culture wars face financial woes, employee fears: 'Never been as bad'

When Republican Texas Gov. Greg Abbott declared a war on "woke" earlier this year with a proposal that would require booksellers to rate texts before selling them to school districts, he caught the attention of a small wholesaler in St. Louis who feared that his industry would be decimated.

"We're not book raters -- we're booksellers," said Benjamin Conn, the owner of Classroom Library Company and the president of the Educational Book and Media Association, a group of 150 distributors nationwide that sell books to schools. "It would be like if Paramount came out with a movie and every theater had to rate it themselves."

The trade association hired a lobbyist, who negotiated with Texas officials on behalf of an alternative version of the measure, Conn told ABC News, but to no avail. In response to a lawsuit brought by booksellers, a federal judge last month temporarily blocked Texas from enforcing the law, leaving the ultimate regulation uncertain.

"It has never been as bad as it is now," Conn said, noting that Texas schools account for as much as $40 million in revenue for some wholesalers and the move could prompt adoption in other states. "It's a mess. This has ground business to a halt."

In a statement, a spokesperson for Abbott told ABC News that he has led Texas to a period of strong economic growth, in part through his support for small businesses.

"Small businesses are a key part of the Texas economic juggernaut, with 99.8% of Texas businesses being small and employing nearly half of all working Texans," Spokesperson Andrew Mahaleris said.

While Fortune 500 corporations like Disney, Target and Anheuser-Busch draw attention as high-profile targets of anti-LGBTQ+ backlash, a lesser known but wide-ranging set of small businesses has been thrust into the nation's culture wars.

A slew of restrictive local and state laws, as well as a far-right consumer movement, have damaged employee morale or threatened the bottom line at small businesses from abortion clinics to beer distributors to apparel makers to nightclubs, according to ABC News' interviews with business owners.

The dire threat faced by some small business people gained prominence earlier this month when California clothing store owner and designer Laura Ann Carleton was killed allegedly by a gunman who police say tore down a Pride flag outside her business and shot her after making homophobic remarks toward her.

"It has sent shockwaves," Justin Nelson, the co-founder and president of the National LGBT Chamber of Commerce, told ABC News. "These companies pay their employees who are community members; they pay taxes. They're a part of the small-business engine that makes the local, state and national economy run."

The U.S. plays host to 1.4 million LGBTQ-owned small businesses, according to a report released by the National LGBT Chamber of Commerce last year.

Overall, the U.S. economy features more than 33 million small businesses, which make up 99.9% of all companies based in the country, the Small Business Administration found in May.

More than 520 anti-LGBTQ+ bills have been introduced in statehouses this year, including a record 70 laws that have taken effect, the advocacy group Human Rights Campaign said in May. Those laws include four measures censoring school curricula and two measures targeting drag performances, HRC said.

While the laws primarily address social issues, the measures often place a burden on businesses in related industries that must comply with the new regulations, Michael Morris, a professor at the McKenna Center for Human Development and Global Business at the University of Notre Dame, told ABC News.

Small businesses, which typically lack the financial buffer enjoyed by their larger counterparts, face an ongoing challenge as they recover from a pandemic-induced economic downturn amid the twin pressures of high borrowing costs and elevated inflation, Morris added.

"Businesses are in trouble and small businesses are especially in trouble in terms of navigating all of that," Morris told ABC News, adding that regulatory laws, whether put forward by Democrats or Republicans, can create added costs for small businesses. "Getting pulled into social issues is not a luxury that they have."

Pearl Bar, the only lesbian bar in Houston, Texas, according to owner Julie Mabry, was denied an insurance policy in March in part due to risks over the legal liability associated with a proposed state law prohibiting the performance of sexually explicit performances, such as drag shows.

"They looked at us as high-risk," Mabry told ABC News. "It's a risk because of this narrative that has been caused by politicians."

"If we have far-right people pull up in front of Pearl and call the police because of a drag king, will they get away with it?" she added, using a term for women drag performers who take on masculine characteristics. Mabry fears that accusers could claim that a child walking past the bar witnessed a drag performer, she said.

The bar, which employs 12 people and brought in $1.6 million in revenue last year, has also faced $50,000 in annual added security costs amid the recent anti-LGBTQ+ backlash, such as extra security guards and new metal detectors, Mabry said.

Pearl Bar paid $280,000 in state taxes over a recent one-year period, Mabry added, saying the restrictive laws could end up hurting the state government's finances.

"How can you be a good politician and think about the revenue in your state, when you're suffocating these businesses?" Mabry said.

A public letter issued by HRC condemning the anti-LGBTQ laws has been signed by more than 330 businesses.

"For years, business leaders have shared the detrimental business impacts of policies and debates that exclude LGBTQ people from full participation in daily life, including negative impacts on workforce, recruitment, productivity, and bottom line," the letter says.

In addition to the rise of state-level anti-LGBTQ laws, a growing consumer backlash against large corporations like Target and Anheuser-Busch has caused financial challenges for some small businesses.

A monthslong consumer boycott against Bud Light over a promotion from a trans influencer on Instagram has hammered hundreds of independent, often family-owned distributors that sell and deliver Bud Light to stores, bars and restaurants.

Anheuser-Busch InBev did not respond to ABC News' previous request for comment about the losses at independent distributors.

Meanwhile, a similar boycott against Target, as well as anti-LGBTQ harassment, prompted the company to remove some Pride products from stores in May.

The move angered some artists and design companies that considered it a retreat from the company's longstanding support of the LGBTQ community that could further embolden extremists and imperil vulnerable people.

Rob Smith, the founder and CEO of The Phluid Project, an LGBTQ-owned clothing company that has placed products in Target stores for three years, said he has "never seen anything in my lifetime" like the current backlash.

Target did not remove any products made by The Phluid Project, Smith noted. "We had no issues with Target," he told ABC News.

However, the rise of anti-LGBTQ sentiment has hurt employee morale at his company, he added. "I'd lie if I didn't say we're deeply discouraged to see so much hatred," he said. "But we're bright people and we talk through it and we support each other."

Large corporations that attempt to strike a conciliatory tone with anti-LGBTQ protesters risk harming small businesses and everyday people alike, Smith said.

"In general, I think any reaction to hate or violence and giving any room for a victory to those people is damaging in so many ways," Smith said. "Damaging to a brand, damaging to a community, damaging to a society."

Target did not immediately respond to a request for comment. In a statement, in May, Target said it removed some products from this year's Pride collection because the company "experienced threats impacting our team members' sense of safety and well-being while at work."

"Our focus now is on moving forward with our continuing commitment to the LGBTQIA+ community and standing with them as we celebrate Pride Month and throughout the year," the company said in the statement.

To be sure, many of the tens of millions of small businesses in the U.S. remain largely unaffected by disputes over social issues, Morris said.

"For most businesses, if you're running a transport business or running a hardware store or whatever it is, those issues don't interfere with how you run the business," he said.

Still, a broad set of businesses and community groups has stood in support of small businesses harmed by the nation's ongoing fight over social issues, said Nelson, of the National LGBT Chamber of Commerce.

"The opposition is trying to lean in and divide and polarize," Nelson said. "And what we're seeing is an outpouring of support."