The company and the city couldn't come to an agreement after lengthy negotiations. Officials with the 1950s-themed chain restaurant said they had to make a tough businesses decision and fold on its longtime location.
Ruby's officials wanted to change the operation from corporate-owned to an independent franchise. Also at issue was a request to renovate the facility and the 1995 discontinuation of a people-mover service that once transported passengers from the city's Old Town shopping district to Ruby's.
The restaurant will be serving its final meals Sunday.
Employees and customers said they are in disbelief.
"It's a sad day," said the diner's manager, Art Haack. "I had many regulars this morning come in. There were a lot that cried that got me crying, too. It's been a wonderful restaurant."
"I've lived here my whole life and this is like a Seal Beach icon," said resident Jim Wood during a visit Saturday. "It's terrible that they're taking it away."
In a statement, the city said, "The city welcomes the opportunity to partner with a new establishment and will strive to preserve the elements that make visiting the pier a pleasing and desirable destination spot for residents and visitors."
Ruby's Diners in Long Beach, Oceanside and Huntington Beach will remain open.
City News Service contributed to this report.