I don't see the owners winning this fight at the municipal level. They'd have to get serious. The present laws are hypocritical in that prosititution in not illegal, but virtually every action surrounding it is. I don't think Parliament has the stomach to go backwards and declare it illegal, (unless that bloodless wacko gets into office).
It would take more money and time, but owners should pursue this at higher levels of government. Australia and New Zealand are similar societies, have more permissive sex laws, and the sky hasn't fallen on them.