The 4,100-square-foot restaurant space at 256 Santa Monica Pier will stay empty after City Manager Oliver Chi terminated lease negotiations with California Roadhouse, Inc. on Tuesday, July 7, ending a process that stretched more than a year.

Chi wrote in a letter to company owner Sean Ahaus that California Roadhouse "rejected the Lease on the terms authorized by the City Council" and sought material changes to worker-protection provisions the council approved unanimously on Tuesday, April 28. The city, Chi said, had no option but to cancel the current procurement process.

The space formerly housed Rusty's Surf Ranch, which closed in December 2024. It has sat vacant since.

What broke down

The dispute centers on two lease provisions: a Labor Peace clause and an Employee Retention clause. Both are required under the city's Pier Leasing Guidelines and were part of the terms the full council authorized in April with a last-minute amendment by Councilmember Ellis Raskin requiring worker recall and retention language consistent with the city's existing ordinance. The vote was 7-0.

The city sent California Roadhouse a final lease on Monday, June 1. California Roadhouse submitted a proposed addendum on Friday, June 12, seeking clarity on definitions and employer rights. Chi told Ahaus the same day that he was prepared to execute the June 1 version but could not sign anything that materially deviated from it.

Chi called Ahaus on Monday, June 15 and again on Wednesday, June 24 to ask whether he would accept the June 1 terms. Ahaus declined to commit either time, saying he needed written answers first.

Ahaus pushes back

Ahaus disputes the city's framing. "We have not rejected the lease," he said in a written 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 sent the city a formal legal notice on Sunday, June 14, accusing officials of labor collusion and coercion, and demanding they preserve related records. Ahaus said the prolonged process has drained his financing, cost him staff and business opportunities, and left roughly 150 potential jobs unfilled. Some former Rusty's workers, he said, have been unemployed for more than a year and a half.

Ahaus suggested mediation and said he believes the parties can still come to terms.

Background: union involvement

The lease was pulled from a scheduled March 2026 council vote without a publicly stated reason after labor union UNITE HERE Local 11 secured an emergency meeting with senior city staff. The union had mounted demonstrations at the former Rusty's site and threatened legal action over the Pier Corporation Board's initial October 2025 approval of Ahaus's proposal, claiming improper notice.

Ahaus told the Santa Monica Lookout in June that the worker-protection terms amount to the city dictating his hiring. The city has not publicly responded to that characterization.

What's next

The city said it will pursue a new use for the space. In an official statement, City Hall noted the location drew more than a hundred inquiries and nine competing proposals during the prior procurement round and expressed confidence it will attract a strong operator.

No timeline for a new solicitation has been announced. The Pier space remains vacant.