Fullerton Council to Weigh Spaghetti Factory Lease That Would Nearly Double Depot Rent
The Fullerton City Council will vote on the consent calendar for the August 18 meeting on a rewritten lease for The Old Spaghetti Factory at the city’s historic train depot that staff projects would raise the restaurant’s annual payments to the city by 54 percent in the first year and by 119 percent by 2041. For comparison, Bushala Brothers, Inc. leases the train station, cafe and adjacent properties at 120–140 E. Santa Fe Avenue from the city. They pay roughly $0.29 per square foot per month — about $3.48 per square foot annually — for 6,248 square feet, totaling approximately $22,000 a year, according to figures cited at the July 15, 2025 council meeting.
The proposed Second Addendum to the 1983 lease at 110 E. Santa Fe Ave. sets a guaranteed base rent of $260,000 for the year beginning June 1, 2026, rising to $275,000 annually through May 2031. It also raises the city’s share of restaurant sales above a rolling breakpoint from 4 percent to 6.25 percent. The city collected $227,961 from the restaurant in 2025 and $225,093 in 2024, according to the staff report prepared by Economic Development Manager James Wurtz and submitted by Community and Economic Development Director Sunayana Thomas.
Staff estimates the new terms would generate about $351,707 in the first year — roughly $2.03 per square foot per month, compared with $1.31 under the current arrangement — and roughly $500,278 in the fifteenth year. Over the full potential 15-year term, the report projects about $6.5 million in rent, or $6.72 million including a new $15,000 annual payment toward common area maintenance.
The council reviewed the negotiated terms in closed session July 21 and directed staff to proceed. The item returns in open session for formal approval of Resolution No. 2026-XXX, which would authorize Mayor Fred Jung to execute the agreement and the city manager or a designee to administer it. Council options listed in the report are to approve the motion, decline to adopt the resolution, or pursue other alternatives.
The addendum establishes an initial five-year term running June 1, 2026, through May 31, 2031, with two additional five-year extension options. Base rent would climb to $352,000 annually during the first option period beginning June 2031 and to $387,200 in June 2036, with 2.5 percent annual adjustments thereafter tied to the Consumer Price Index. The document specifies that total annual rent may not fall below the applicable base rent regardless of gross receipts.
The agreement also rewrites the definition of “Gross Receipts” to capture on-premises dining, takeout, digital orders, third-party delivery, merchandise, catering, events, surcharges and service fees — categories that did not exist or were marginal when the original lease was drafted. Sales taxes, gratuities passed to employees, bona fide refunds, credit card processing fees and third-party delivery fees are excluded.
Audit provisions are strengthened. The city may audit the tenant’s revenue once a year at the company’s corporate office with at least 10 business days’ notice. If an audit finds an underpayment of more than 3 percent, the tenant must pay the cost of the audit plus 10 percent annual interest on the amount underpaid.
A separate section addresses the adjacent public parking lot, acknowledging that the city has deferred maintenance there. The city commits to resurfacing the lot within the first two years of the term and to keeping it accessible during construction, with alternative parking for restaurant customers.
Staff argues the property has no true market comparison. At 14,436 square feet, the restaurant is more than three times the size of the average restaurant space available for lease in Fullerton, which the report puts at 4,382 square feet, with the largest available listing at 6,840 square feet. Independent data cited in the report supports a range of roughly $2 to $4.50 or more per square foot per month on a triple-net basis for comparable Orange County restaurant properties.
The report says staff reviewed CoStar lease data, comparable restaurant transactions, occupancy-cost benchmarks, Placer.ai foot traffic data, broker opinions and sales at other Old Spaghetti Factory locations, and consulted Cushman & Wakefield along with other brokers. Those brokers confirmed the terms are reasonable given the building’s size, historic preservation restrictions, limited pool of replacement tenants and the improvement costs the city would face if the space were re-leased, according to the report.
The city’s relationship with the restaurant dates to a lease executed June 21, 1983, between the Redevelopment Agency of the City of Fullerton and The Old Spaghetti Factory of Fullerton, Inc., in connection with relocating and restoring the historic depot. That agreement required the tenant to finance construction at its own cost and to preserve the historical and architectural integrity of the Union Pacific Depot Building. Rent began at $1 for the period ending Oct. 31, 1984, then $15,000 a year.
Under the structure established by a first addendum in April 2010, monthly base rent functions as an advance against an annual percentage rent obligation, with the city ultimately receiving 4 percent of gross receipts. That agreement anticipated that a successor lease would be negotiated at fair market rental value on maturity.
Chris Dussin, president of the lessee entity, signed the addendum on July 24. Dussin and his wife, Letty, were named in the 1983 lease as permitted assignees; Chris Dussin is the son of Guss Dussin, the chain’s founder.
The documents are not fully consistent on the tenant’s identity. The staff reports names OSF International, LLC as the counterparty, while the resolution and the addendum itself identify Fullerton Spaghetti Restaurant, Inc., a California corporation. A rent table in the addendum also lists a period ending May 29, 2031, while the surrounding text sets the initial term’s expiration at May 31, 2031.
The project is categorically exempt under Section 15301 of the California Environmental Quality Act, and a notice of exemption would be filed if the resolution passes.