I don't understand how money laundering works in the anecdote at the beginning. I guess you can launder some money that way, but how efficient is it?
The high staff numbers indicate either a) staff can accumulate and no-one is really bothered because the normal economics don't apply, or b) more staff implies a bigger business (to anyone looking at the books), which means more money can be laundered without raising suspicion. Efficiency just depends on how much cash you can imply this coffee shop makes, so more staff is a good thing.
I suppose if your "other" side of the business has people working for it, then it's not going to change the financials much to have them on the books of the restaurant.
Efficient money laundering will get you caught. Incentive is not to get caught and not having all the money seized.
Which also comes back to early comments about "treat your employees well", which incurs a higher up-front cost to generate a massive long-term payout.
Also see comment on ML efficiency rates, yes, 30-40% hit to get the money clean is a lot better than no money plus jail. One of the reason black market goods are expensive is because the costs of doing business are so high. You pay 40% or higher money laundering "tax" to avoid paying tax.
But to clarify, I meant the 30-40% as a total cost, i.e. I put in 100 dirty dollars and take out 60 clean. You are correct that an income tax would then apply.
If instead I kept the 100 as cash, I could spend the 100, and not pay any income tax.
Staying all cash probably works at the 100 level. Becomes dicey at the 100K level.