The Lighthouse at Emily’s, a popular North Shore restaurant, will close next Sunday. And this time, its owners say it’s for good.

The closing comes after a yearlong effort by the North Shore Scenic Railroad to buy the Knife River property ended unsuccessfully. With tracks running right behind the eatery, the nonprofit wanted to use it - in partnership with the restaurant - as a new destination stop for railroad excursions.

“The railroad didn’t go through, the owner wouldn’t lease, so at the end of the month we’ll be done,” said Claire Pierson, who owns the restaurant with her sisters, Lynne Compton and Brita Aug, and her niece Andrea Darsow.

For the past year, Ken Buehler, the railroad’s general manager, had been working on a plan to buy the building that would be acceptable to the railroad’s board of directors, the seller and the lenders. But In the end, no agreement was reached, and the railroad’s board voted Oct. 8 not to continue to pursue the purchase.

“We put a lot of work into it,” Buehler said. “The project had merit. I think it would have been a unique opportunity for the railroad to expand its market, offer a service and an experience not available anyplace else in this market or around it. I think it would have been very successful.”

The four women have operated Lighthouse at Emily’s on Scenic Highway 61 since September 2011. For four years before that, they ran the Lighthouse on Homestead, a neighborhood restaurant shaped like a lighthouse that they started from the ground up.

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Sunday’s closing of Emily’s won’t be the first time they’ve closed the business.

They shuttered the restaurant a year ago when owner Kristine Ehlen put the property up for sale, and they didn’t want to buy it. The North Shore Scenic Railroad, however, was interested in buying the property with them as tenants. So the women reopened the eatery in January on a month-to-month lease.

“We’ve been waiting a year for this to go through,” Pierson said.

With their month-to-month lease ending at the end of October, she said they had asked the owner for a year’s lease but didn’t get it.

“Our goal has always been to sell it,” explained Ehlen, who lives in Richfield, Minn.

Emily’s owners ruled out moving to another location.

“We’ve moved once,” Pierson said. “This has been a fabulous location for us. This is a community we would have stayed in, but it just wasn’t meant to be.”

While Pierson said she and her sisters and niece may team up again on a future venture, it wouldn’t be another restaurant.

“The universe is telling us to do something else,” she said.

The vision

It was Buehler who came up with the idea to establish a destination stop in Knife River for the North Shore Scenic Railroad in addition to its Two Harbors runs. Besides stopping for a meal in Knife River, passengers could visit the Great Lakes Candy Kitchen and Russ Kendall’s Smoke House across the street. He also envisioned building a train station next door and offering activities for children during the stop.

But key to the plan was the partnership with the Lighthouse at Emily’s.

With a nautical theme, the cozy eatery along Scenic Highway 61, about 15 miles northeast of Duluth, is popular with locals and tourists. It’s known for serving good food - tasty, homemade offerings that often are locally sourced and prepared with creative twists.

Ehlen supported the railroad’s plan and wanted to sell the property to them.

“We loved their vision for the place and would like to see it come to fruition. But to this point, it hasn’t,” said Ehlen, who bought the building in 2007, renovated it and ran Emily’s Eatery at the site from 2008-10.

At its recent meeting, the railroad’s board supported the plan but not the financial terms that had been laid out, Buehler said.

The parties involved - the railroad’s board, the property owner and the lenders - had reached an impasse, he said.

Ehlen had come down considerably from the initial $429,000 asking price, but the railroad’s board wanted an even lower price. The lenders - a bank and a foundation - wanted the board to guarantee the loan, but the board wouldn’t do it, Buehler said.

Through it all, Ehlen said she never received a formal offer.

“We have not gotten a purchase offer that we could work with, but we’re always open to that,” she said. “There has been lots of dialogue, lots of great discussions. We would like to be optimistic that they will be able to come through.”

Moving on

But Buehler says it’s over.

He had fashioned a compromise requiring give and take from all. It included a lower sale price from the seller, no signed guarantee on the loan from the lenders and more equity provided by the railroad.

None of the parties liked the compromise.

Because of the lenders’ requirement that the Lake Superior Railroad Museum, which owns the Scenic Railroad, guarantee the loan, Buehler recommended the board vote to stop negotiations for the Knife River property.

“I could not in good conscience recommend that the board go with that guarantee,” Buehler said.

In a unanimous vote, board members agreed, ending the effort.

But Buehler said he still believes the Knife River plan is a good idea.

“There’s nothing saying that we can’t work and engineer a similar deal with a different buyer,” he said. “If somebody comes in and buys it over winter and opens a restaurant next summer, there’s nothing saying we can’t negotiate and make some infrastructure improvements.”

With Sunday’s closing of the Lighthouse at Emily’s, its 35 jobs during the tourist season also end.

“It’s a shame,” Pierson said. “We will miss the community. We love Knife River, and we have a great staff.”

The owners want to go out on a positive note, however.

“We’d love to see our loyal customers come see us before we close,” said Pierson, urging people to use up their gift certificates before then.