Hugh Osmond's Coppa Club is "considering all options" around its plans to expand into Brighton after planning permission for an outdoor pavilion was denied.
The Berkshire and London-based restaurant group was seeking approval to install new a new, single shop front at 12 to 16 Brighton Square as well as an outdoor pavilion in the centre of the space.
The company secured permission to convert the four units into a restaurant in 2017 with the intention of investing £1.5m in the project and creating 50 permanent jobs.
But Coppa Club's property director John Gripton told The Caterer that all plans have now been put on hold as the company's entry into the Brighton market was contingent on the planning application being successful, "to justify the considerable cap-ex investment in the project".
"We have had an agreement to develop the site for two years but the planning refusal has put that in jeopardy and we are discussing options with the landlord," he said.
"In a difficult market for restaurants Coppa Club is one of the few that is growing and we need to constantly innovate to reflect changing needs, but the planning process does not appear to be in tune with commercial reality."
Coppa Club was also seeking permanent consent to create additional restaurant space in a new pavilion within the square, which is privately owned with no public right of way.
The proposals involved the demolition of a fountain featuring a dolphin sculpture by local artist James Osborne, which had stood in the spot since 1992. The company was looking to create a smaller fountain that would be incorporated into the design of the timber and glass pavilion.
Councillor Tom Druitt spoke in favour of the development after discussing the proposals with the Lanes Traders Group and walking through the site with the developer.
He said: "The whole area is run down. It is a real shame within the centre of Brighton's old town we have an area of decay."
But presenting officer Luke Austin described the open nature of Brighton Square as a positive contrast to the narrow and restrictive character of the neighbouring lanes and recommended that the application be refused.
"Overall a building of this scale is not considered appropriate for a square of this scale", Austin said. "We have an open square which is a central focal point. It provides valuable open space and is a positive contrast to the narrow and restrictive character of the lanes."
Commenting on the pavilion, committee chair and councillor Julie Cattell said: "This is not place-making; this is place destroying."
After councillors voted seven to three against the scheme, councillor Druitt tweeted that it was "a huge wasted opportunity to breathe life into the area and a big let down to residents and traders".
Public and local response to the proposals ahead of the Brighton and Hove City Council Planning Committee meeting on Wednesday leaned in favour of the project.
Supporters sent 138 letters backing the scheme, arguing that it would create jobs, attract pedestrian activity and create a perfect spot for restaurants and cafes.
But there were also 34 letters of objecting to the pavilion because of poor design, the loss of public space and on the grounds that it would alter and isolate the dolphin sculpture from the public.
Coppa Club's Gripton described the committee's decision as "incredibly disappointing" and slammed the "arcane" planning system for thwarting innovation and investment.
"We were requesting a 10-year temporary permission over the privately-owned square so this was not a permanent decision, but I understand it is the safe route for councillors to maintain the status quo," he said.
"We will bounce back, but as a Brighton resident it is the lanes traders and residents who I feel for most, because planning decisions like this mean the investment they need to see coming into the area is held back.
"All over the country, we, and many other businesses, are trying to invest money to create new amenities, bringing jobs, wealth and new life into communities.
"Yet, every time, we all fall foul of an arcane planning system that, as a minimum, causes delays and frustration, and, as frequently, rejects the proposed investment altogether."
Coppa Club's portfolio includes sites at Tower Bridge, Oxford Circus, St Paul's, Sonning-on-Thames and Henley-on-Thames. The group's sixth venue is expected to open in Maidenhead this summer.