Cr Greg Matthews said families would bypass neighbouring accommodation and dining options if Bultje Street hosted a restricted premises.

He was one of two people to vote against an application to use a former cycle store to sell adult products and other restricted items, in addition to offering tattooing and other services.

The applicant, who already operates a lingerie and adult products shop not classed as a restricted premises in Macquarie Street, will have to wait on the full meeting of Dubbo City Council next week for a final decision.

The development application (DA) prompted considerable debate at this week's planning and development committee meeting, one year after the gazettal of the Dubbo Local Environmental Plan 2011.

During the preparation of the document the council had eventually bowed to a request by the NSW Department of Planning, loosening restrictions on where sex shops could trade.

Cr Matthews harked back to that episode when speaking against the application, which had prompted two objections from the community.

He argued the proposed store would have negative economic impacts on nearby businesses.

Families would bypass accommodation and dining options in Bultje Street if the restricted premises was approved, Cr Matthews said.

He added the approval of the Riviera shopping and accommodation centre boded well for the section becoming the prime area of the CBD.

"I ask councillors to think of the atmosphere it's going to create," he said.

"I think our strategic planning would be amiss if we allow a restricted premises.

"This is a planning argument, not a moral argument."

Cr Ben Shields had already moved the recommendation from staff to approve the DA subject to 24 conditions.

"If we do want this city to be vibrant, rich and diverse, then this is the kind of business (we should have)," he said.

"I say all power to them if they want to expand their business."

He also cautioned against getting into a legal wrangle.

"If we front up in court (on this) we'll get our nose bloodied, and have to pay their costs," he said.

"We should fight the fights we can win."

Cr Tina Reynolds said the proprietors had been forced to move because their premises was sold as part of the Riviera development.

After a number of councillors had stated their support, Cr Matthews moved to add a condition to have the shop's signage approved by councillors rather than staff.

The amendment was narrowly lost and then the motion was put, passing with nine votes against those of Cr Matthews and Cr Rod Towney.