The £3.5 million scheme is set to see the two buildings linked as a hotel, tea room, bar and restaurant. There would also be rooftop terraces.

The plans have been submitted by Tokyo Industries.But there have been objections to the scheme – including from nearby venue Judge’s Lodgings.A letter sent on behalf of Judge’s Lodgings says the owners have concerns about the impact on heritage and on the operation of their own hotel.It says: “Judges Lodgings is a hotel and there are a number of guest bedrooms that are in close proximity of the proposed development at Impossible Wonderbar.

“We have considerable concerns that the introduction of outside seating areas, in particular the proposed roof terrace, will result in significant noise nuisance to Judges Lodgings customers.”

A number of other nearby businesses raised concerns about noise from the roof terraces and a resident who lives nearby wrote: “The proposed size of the development will attract crowds and groups of party-goers to a small area with narrow streets which has outstanding heritage, and risks damaging York’s historic buildings and cultural reputation.”

But the developers say their plans will create 120 new jobs and “see these unknown hidden treasures of York come back to life.”

They say they plan to “respect architectural features of note” and reinstate features where they have been removed.

At a licensing hearing on April 8, solicitor Paddy Whur told the council the venue will work with residents and create a noise management plan that will need to be approved.

He said: “At a time when the leisure industry and retail is suffering more than we’ve ever seen, you’ve got a person of quality prepared to invest £3.5 million and create 120 new jobs in the centre of York. This is a ground-breaking development.

“Do you really think we’re going to invest this money in a massively expensive high end hotel and then create a nuisance in our other premises next door so that the hotel fails?”

Four planning applications in total have been submitted for the project – two for the hotel in the former Marchbrae shop and two for the former Carluccio’s.

The two applications for the hotel were approved on Friday by planning officers, despite eight objections to the scheme.

A report says the plans “put the building to viable use and is beneficial in sensitively restoring the boardroom and providing public access. Whilst a low level of harm to significance has been identified, through accommodating bathroom areas within the proposed guest rooms, the harm is outweighed by the benefits of the comprehensive re-use of the building, which preserves areas of the highest historic and architectural importance.”

Conditions restricting opening hours and when the rooftop terraces can be used by customers are set to be imposed and are set to be published by the council when agreed.