SAN JOSE — Kaizen Lounge in downtown San Jose shut its doors over concerns it was operating as an illegal nightclub. Its owner claims excessive city “red tape” hobbled his business and forced it to close.
“The mayor says get rid of red tape,” venue owner Freddie Jackson told this news organization, referring to Mayor Matt Mahan. “But what the city has done to me is the definition of red tape.”
In 2024, Kaizen Lounge opened at 33 E. San Fernando St., where Gordon Biersch brewery restaurant operated until it closed in 2018.
In recent months, city code enforcement staffers determined Kaizen Lounge was illegally operating as a late-hours nightclub because the venue had failed to obtain a special permit to serve drinks after midnight.
Mahan said he recently convened a “conversation” between small business owners and city planners to identify ways to improve the permitting and inspection process.
“Improving our relationship never means looking the other way,” Mahan said. “All small businesses must play by the same rules to ensure fairness for entrepreneurs and safe experiences for residents.”
The city filed a lawsuit on June 9 against several individuals and business entities, including Jackson, Kaizen Lounge, Freddie J’s Presents, and Green Valley Corp., Santa Clara County Superior Court documents show. Green Valley owns the Kaizen Lounge property.
In the lawsuit, the city claims Kaizen Lounge and Jackson have committed multiple code violations.
“Kaizen Lounge is an unpermitted and unlicensed bar and nightclub located in the downtown core of San Jose with live DJs, amplified music that can be heard beyond the area under the control of Kaizen, dancing, and alcoholic drinks including bottle service,” the city said in its lawsuit.
The lawsuit claims Jackson failed to obtain a conditional use permit that allowed Kaizen Lounge to serve alcohol between midnight and 2 a.m.
“As such, their operation is a public nuisance,” San Jose claims in the lawsuit.
City code enforcement staff requested on July 9 that the San Jose Appeals Hearing Board impose a $235,000 fine on Kaizen Lounge due to alleged violations of city rules.
During the hearing, Jackson offered his own evidence that the city process to issue a conditional use permit had taken roughly a year and was still not complete.
A visibly exasperated Jackson asked San Jose staffers several times what actions he should take to comply with what code enforcement required of him.
At the hearing, Jackson stated he was operating legally.
Joseph Hatfield, a San Jose code enforcement supervisor, offered Jackson a stark solution: Kaizen Lounge would be in compliance if it ceased operations.
The board rejected five separate motions to determine how to proceed and eventually voted 4-2 to impose a $50,000 fine.
“The city has engaged in various and ongoing enforcement measures,” the San Jose Planning Department stated in an email to this news organization. “Kaizen has repeatedly failed to comply. Code Enforcement is following all policies and procedures to ensure a swift and fair outcome for all.”
The Planning Department declined to elaborate further because of pending litigation.
Jackson confirmed the lounge ceased operations on July 10. He also has launched negotiations with Green Valley regarding the lounge’s rental agreement.
He said there is no timetable for reopening, complicating efforts by the city to liven up downtown.
“Downtown San Jose has so many empty storefronts, so many boarded-up buildings,” Jackson said. “Other than San Pedro Square, the downtown is dead until 10 p.m.”
Jackson said he hopes to obtain what is needed to allow him to operate after midnight without running afoul of code enforcement. He said he has been active in downtown San Jose since 2000.
“I love downtown San Jose,” Jackson said. “I just want to get back to my livelihood. I have put my heart and soul into this business.”
Kaizen Lounge at 33 East San Fernando Street in downtown San Jose, seen on July 10, 2026. (George Avalos/Bay Area News Group)