You seem to want to balance two principles: the first being that people should be able to associate freely with whomever they want, regardless of the negative consequences to the economy and society at large, the second being that people should be able to go about their business freely, without having to worry about being discriminated against in their day-to-day lives.
You do this by saying the standard for persecution should be "substantial hardship." The reason I presented the diner scenario is simple. There are three restaurants in my town. One, as noted, is out of the price range for most people. The other two are affordable to anyone. Of the affordable two, let's say that one of them is owned by a person who hates Mexican-Mennonites, and views their presence in town as a scourge. We'll call it Diner A. The other will serve anyone. This is Diner B.
According to your standard, this is allowable, because a Mexican-Mennonite can easily go to Diner B. They can't get service in Diner A, but they can still get service in Diner B, and this doesn't impose too much of a hardship. They both serve more or less the same meals, they are both more or less equal in terms of service and food quality, etc.
Now let's say that Diner B goes out of business, as restaurants are apt to do. Now, according to your own principle, that same Mexican-Mennonite is experiencing substantial hardship. He can't go to a restaurant in town, because he can't afford the one, and the other one doesn't serve Mennonites.
So now where does your principle stand? He wasn't experiencing substantial hardship before, now he is. Yet the owner of Diner A hasn't done anything different. He has the same "No Mennonite" policy as before, but now, according to you, he should be required by law to serve Mennonites. How does this benefit anyone? It isn't fair to the business owner, who thought that he had the right to associate freely, and now faces a lawsuit. It isn't fair to the Mexican-Mennonite, who has to file said lawsuit to show his substantial hardship and get a court injunction against the owner.
In what world is this good policy? How does this "balance" benefit anyone?
It is truly astonishing that this is even a debate. In literally no other place in the Western world would this even be considered a legitimate question. There is something grotesquely defective about American political mythology if people such as Medius, fstar and Non can seriously attempt to justify this sort of disgusting behaviour, on the grounds of "freedom," no less.