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Mayfare Group Ltd co-owner Fleur Caulton, of Queenstown, who opened the restaurant in 2015, yesterday confirmed the lower Stuart St establishment would close permanently tomorrow.
She said the restaurant had been profitable in its first two full financial years, but it had become ''probably the lowest-performing'' Madam Woo restaurant in the country.
She could not say whether the latest financial year would also have returned a profit, but financial results were not behind the decision to close the restaurant.
Instead, it was largely due to the difficulty in finding and retaining skilled chefs, which meant the company was spending too much time in Dunedin dealing with staffing issues, including training new employees, she said.
''We don't think we have been offering the best product there for the last eight to 10 months, due to the problems with staff,'' she said.
The company had decided to rationalise its resource and focus on its other Madam Woo restaurants, including Queenstown, as well as opening new Hawker & Roll outlets, she said.
The closure of the Dunedin restaurant would affect 16 to 18 full and part-time staff.
All had been offered roles elsewhere, but it was not yet clear how many would take up the offers or opt for redundancy.
''Quite a few of them are looking at, and taking up, options,'' she said.
Staff inside declined to comment when approached by the Otago Daily Times yesterday.
Loyalty card members in Dunedin had until the end of today to redeem their points - at double value - in the Dunedin restaurant, after which they would be accepted at other Madam Woo sites nationwide, the note said.