The city of Santa Monica has called off lease negotiations with California Roadhouse, Inc. for the vacant restaurant space at 256 Santa Monica Pier, City Manager Oliver Chi said, citing the company’s attempts to negotiate over worker-protection terms approved by the City Council.
In a letter to Roadhouse ownership laying out the city’s position, Chi said California Roadhouse “rejected the Lease on the terms authorized by the City Council” and instead sought material changes, leaving the city “no option but to move forward with canceling the current procurement process.” The city plans to begin a new process to select a tenant for the 4,100-square-foot space, formerly home to Rusty’s Surf Ranch.
Sean Ahaus, California Roadhouse’s owner and CEO, disputed that characterization and said he believes a deal can still be reached. “We have not rejected the lease,” Ahaus wrote in response to Chi. “We just requested the city negotiate and communicate in good faith, an addendum that, among other things, confirms the city will honor our federally protected employer rights in our lease.” He said that if the city agrees to the company’s proposed clarifications, “I believe we have likely already agreed on all terms.”
The breakdown centers on two provisions in the city’s proposed lease: a Labor Peace provision and an Employee Retention provision. Chi said both are required under the city’s Pier Leasing Guidelines and were part of the terms the City Council authorized in April. According to Chi, Ahaus stated at that meeting that he was willing to accept worker protections previously negotiated with city staff.
Ahaus, in his response, said his agreement extended only to providing “a fair opportunity for all eligible former Rusty’s Workers to join our team,” which he called “the only or primary worker protection that we negotiated together and definitively agreed to.” He said his concerns about the other sections have been “well documented since 2025.”
According to Chi’s account, the city sent California Roadhouse a final version of the lease on June 1. After Ahaus asked the city on June 11 to confirm Chi’s authority to sign it, Chi responded on June 12 that he was prepared to execute the lease in its June 1 form but was not authorized to sign any version that materially deviated from it. Rather than accept those terms, Chi said, Ahaus sought the deletion of the Labor Peace provision and changes to the Employee Retention provision that would have reduced the protections directed by the council, while also raising the prospect of litigation against the city.
Ahaus said that on June 12, California Roadhouse submitted a proposed addendum titled “California Roadhouse Lease Clarifications and Definitions,” seeking clarity on lease definitions and on employer rights the company believed it might be forfeiting by signing the lease as presented.
Chi said he spoke with Ahaus by phone on June 15 to ask directly whether he would accept the June 1 lease terms. According to Chi, Ahaus said his position had already been laid out in prior email correspondence and that he was not prepared to sign without changes to the worker-protection language. Ahaus offered a different account of the call, saying he told Chi he was waiting for a written, detailed response to the proposed addendum so the company could understand “exactly what employer rights we might be jeopardizing” before signing.
Chi said he subsequently sought direction from the City Council, based on his understanding that Ahaus no longer accepted the lease terms approved on April 28, and that the council reaffirmed its position, declining to alter the worker-protection provisions. Ahaus called that characterization “a falsity,” saying he never agreed to terms. He said the company has “every intention of moving forward with leasing 256 Santa Monica Pier, under lawful terms” and noted California Roadhouse has already invested money and resources into improving the space.
Chi said he called Ahaus again on June 24 to relay the council’s reaffirmed position and ask once more whether he would accept the lease as transmitted June 1. Ahaus declined to say yes or no, according to Chi, saying he first needed written answers to the questions the company had been raising for weeks. Ahaus reiterated he neither agreed to nor rejected the lease during that call and was still waiting for an official response to the company’s addendum. He said Chi told him the request for clarifications “was just a bunch of noise,” a characterization Ahaus called shocking coming from a city official. Ahaus said some former Rusty’s workers have been unemployed for more than a year and a half, and he asked why the city would not spend “a few hours clarifying terms, definitions, and which employer rights we will be able to retain” rather than continue the impasse.
The dispute caps a lease process that has stretched more than a year. Ahaus submitted a winning proposal in 2025 through a competitive process, and the Santa Monica Pier Corporation Board approved it twice, once in an initial vote that was later challenged and again in December following a re-notice. City staff had recommended a five-year lease with a five-year extension option, monthly rent of $26,728 based on $6.25 per square foot, and incentives of approximately $725,000 in tenant improvements, building repairs, and waived rent.
The item was pulled from a scheduled March council vote without public explanation after labor union UNITE HERE Local 11 secured an emergency meeting with senior city staff to oppose the lease. City Council members later pushed for a labor peace agreement and right-to-recall provisions after their attempts to force the ideas upon the Roadhouse via a city ordinance failed.
Ahaus has said the prolonged process has drained his financing, cost him staff and business opportunities, and left roughly 150 potential jobs unfilled. He has also sent the city a formal legal notice, dated June 14, accusing officials of labor collusion, coercion, violations of federal labor preemption doctrine and potential civil rights violations under color of state law, and demanding the city preserve related records and communications. The notice stems from a Dec. 19, 2025, meeting at California Roadhouse’s offices where a UNITE HERE Local 11 organizer allegedly said, in front of a city Economic Development Department staffer, that the city had agreed with the union to withhold a lease unless California Roadhouse hired the entire former Rusty’s workforce.
Ahaus has said the evidence of collusion with the union has increased in recent weeks. According to Ahaus, Pier Corporation officials informed him that the Santa Monica City Council had advised the board that the next restaurant tenant on the Santa Monica Pier “will have to be represented by the union.” According to Ahaus, the statement was not surprising because it corroborates representations previously made by UNITE HERE Local 11 and further corroborates his accusation that the city has been working with the union to thwart his application.
Ahaus said that in his opinion the entire negotiation process was an attempt to appease the union rather than protect workers.
“These jobs are being held hostage by the city while pretending they are trying to protect these jobs,” he said. “All these people could go back to work tomorrow if the city would just agree to everyone’s federally protected rights.”
He said his last communication with Oliver went unanswered and if the city believes it can abridge his legally protected rights, they should be specific about that at the negotiation table.
“It’s not about jobs, if it was about jobs we could rehire everyone immediately,” he said. “This is about union infiltration of private business.”
In a separate email, Ahaus raised the possibility that if the city cancels what he described as the company’s “vested rights” in the property and reassigns them to a tenant benefiting UNITE HERE Local 11, the council could be in violation of additional laws. He said he believes the parties “can still come to terms” and suggested mediation if an agreement cannot be reached directly.
The City reiterated the process is closed from their perspective.
“In light of these circumstances, the City has concluded that the parties will be unable to reach agreement, and accordingly, the City will pursue a new use for the space,” said City Hall in a statement. “The City values the time the California Roadhouse operator invested in this process, and we wish the operator well in his future endeavors. This location drew more than a hundred inquiries and nine competing proposals, and the City is confident it will attract an excellent operator.”
editor@smdp.com