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Veggie Boys in Mosgiel will close at the end of the month.
Co-owner Marty Hay said he was disappointed but the Bush Rd store was not economically viable after almost two years of trading.
Three months after opening, business became difficult when the store went through a costly process to obtain a resource consent to operate, he said.
At a Dunedin City Council hearing last year, a submitter expressed concern about Veggie Boys setting a precedent that would allow grocery stores to operate in rural areas.
The council considered any perceived precedent was limited and granted a consent.
The four staff had been offered work in other Veggie Boys stores in Dunedin, he said.
Veggie Boys Mosgiel is at Wal's Plant and Fun Land. The owner of Wal's, Clive Wallis, was overseas and could not be reached for comment.