To some, a former grocery store’s transformation into an art maze/doughnut shop/music studio/craft beer-serving hipster hangout seems a perfect fit for Toronto’s eclectic Kensington Market.

For others, the soon-to-be converted store on Augusta Ave. has become the latest obstacle in the ongoing fight to preserve the beloved historic neighbourhood from overdevelopment.

The controversy surrounding Fairland Funhouse first flared on social media after it was revealed the building’s leaseholder applied for a liquor licence for a 622-person space — an Entertainment District-size venue many residents and local businesses say will forever change the Kensington community.

“It will signal a real shift from Kensington being a day market to Kensington being a night market,” said Dominique Russell, chair of the influential Friends of Kensington Market, a group that in 2014 helped prevent a Walmart from opening in the neighbourhood.

“It’s hard to imagine any neighbourhood that wouldn’t find something of this scale a concern.”

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Councillor Joe Cressy (Ward 20, Trinity-Spadina) said the proposal for a 622-person alcohol permit far exceeds Toronto’s site- and area-specific policies for Kensington Market. Zoning for the neighbourhood means no bar or restaurant can be bigger than 200 square metres — a measure to preserve the community’s diverse mix of small and independent businesses, he said.

Cressy plans to bring forward a motion to city council this week to oppose the liquor licence request; he said he is confident council will agree.

“The risk of a 622-person bar is that it will turn Kensington into an entertainment district and not a market district,” he said.

Russell, a 27-year resident of the neighbourhood, said a big nightclub-like space could bring a slew of problems, including street-clogging Uber cars, loud late-night music, and the potential violence and vandalism associated with inebriated patrons.

But the brains behind Fairland Funhouse, the pop-up art maze set to open in mid-August, and Liquor Donuts, the subsequent bakery/bar/music space to open in 2019, say their intentions and their venture are being misunderstood.

They are neither trying to dupe the neighbourhood, nor are they sneaking in a big-box-style entertainment venue, said J. Joly, co-owner of Liquor Donuts, the building’s leaseholder and producer of the 2014 Canadian horror film WolfCop, which features a fictitious Liquor Donuts restaurant.

“We have been trying to enter the Kensington community in a very organic way,” Joly told the Star while sitting inside the former Zimmerman’s Fairland grocery store, which had been vacant for three years until Fairland’s renovations began.

He said Liquor Donuts will not be a nightclub, but an arts and events space with a record press, basement music studios and permanent eatery fronting Augusta Ave. that will sell “punk-style doughnuts” and craft beer.

“Since May we have met with the Kensington BIA, residents, other business owners, telling them of our plans, including that we want to be licensed,” Joly said, adding that the recent concerns regarding capacity caught him by surprise. “After every meeting, I left my name and contact information and said, ‘If there is any issue, I’m happy to sit down and talk about it.’ But no one took me up on that offer. The information hasn’t been hidden.”

Jonah Brotman of Mondo Forma, the creative collective behind Fairland Funhouse, said he and Joly agree with Kensington Market residents: The community is unique and deserves cool yet respectful cultural spaces.

He said Ontario’s complex liquor licence application process, which requires applicants to calculate a venue’s capacity based on square footage, led to the 622-person number that outraged some in the Kensington community.

In reality, Brotman said, the space is more suited to about 200 people. The venue’s final capacity will be determined in conjunction with Toronto Fire Services, and after a further check into the neighbourhood’s bylaws and more consultations with the Kensington community, he said.

“We chose Kensington Market,” Brotman said. “We want to be here. We really don’t feel like what we are doing makes us outsiders.”

Since Russell posted her concerns about the venue on Thursday — her Facebook post called Fairland Funhouse a “Trojan horse” for ushering in a big licensed venue — she and others from Friends of Kensington Market have met with Joly and Brotman to find a way forward.

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Russell, who is hopeful the liquor licence application will be withdrawn, said many in the community support the idea of a space for independent artists but are wary of welcoming a large bar into the historic neighbourhood.

“This building (241 Augusta Ave.) has a very large footprint and Kensington Market is like a village. If you are coming with really big feet, you probably want to tread lightly,” she said.

“We need much more communication.”