JD Wetherspoon is buying a hotel with 18 bedrooms in the Welsh town of Ruthin, which has a population of just over 5,000.
Observers claim this is the smallest town ever targeted by the managed company.
Wetherspoon has bought the property, the Castle Hotel on St Peter's Square, from hotel specialist Lloyds Group, which has seven other hotels and five in the acquisitions pipeline. The town has eight pubs and a number of hotels and restaurants.
Licensee of the town's Corporation Arms, Caroline Crawley, said: "Ruthin is only a small Welsh market town. I don't think it has the people to support a Wetherspoons.
"We are already struggling with people not coming out until 9.30pm or later, and with people staying at home and drinking supermarket alcohol."
Lloyds Group also operates the Old Anchor Inn in Ruthin and the Wild Pheasant in Llangollen.
The smallest town that Wetherspoon has previously operated in is Oxted in Surrey, which has a core population of 12,000.