When Palerang Council approved the development it believed an independent supermarket would occupy the new building, a more preferable tenant according to councillors, than a big chain like Woolworths or Coles.

For three years Mr Heathcote negotiated with developer, Canberra's Krnc Group, to occupy the new site for his expanded supermarket, next to Le Tres Bon French restaurant in Malbon Street.

Weeks ago Mr Heathcote and Local Liquor operator Mike Blore signed up to move into the new premises. They were awaiting their new landlord to sign on the dotted line. Mr Heathcote had been negotiating with his main supplier Metcash which was to hold the head lease at the new supermarket.

Then Krnc Group contacted Metcash, announcing the deal with Woolworths, Mr Heathcote said.

The group's principal John Krnc says construction has started and a Woolworths supermarket and BWS liquor store will open in Bungendore in the first half of 2017.

In 2013 Palerang Mayor Pete Harrison said Coles and Woolworths would not connect with the rural community, and the council would prefer an independent supermarket.

At the time Bungendore butcher Paul Darmody said if Woolworths opened, family-owned businesses such as his would downsize or close.

"Everything that comes through my shop in beef and lamb is grown and fattened on my own farm. I support the local stock markets and support a lot of farmers in the Queanbeyan-Canberra district, " Mr Darmody said. "Woolies don't do that, they don't buy locally. A lot of people get hurt when a little fella goes out of business," Mr Darmody said.

Cr Mark Schweikert said during a previous development application in October 2013, John Krnc, principal of Krnc developments, spoke to the council.

"After he spoke I asked him [publicly] point blank words to the effect that would he be putting up a Woolies at his site [as we knew he had bought four blocks further up Malbon Street and was planning on a larger supermarket]. He confirmed that he would not."

Mr Heathcote's family has owned the IGA for 25 years. He opens seven days a week and in recent years has traded well above average from the 300-square-metre shop.

"It is my family's legacy," Mr Heathcote said. "Dad retired eight years ago and I took on the store with a view to either expanding on the current site or relocating to another, because the store is just over-traded."

Mr Heathcote said on Monday his negotiations for a bigger shop on his existing Gibraltar Street site had broken down years ago. He was subsequently approached by the Krnc Group three years ago, and talks continued with Metcash, with the agreement that he would take up a sub-lease.

Mr Heathcote had his business valued while organising finance for a new shop fitout and planned expanding staff from 55 to 120. Now Woolworths has arrived, he expects to go broke.

"I wouldn't survive. In Bungendore's population there's about 2700-3000 people, [Woolworths] will split the market. Both supermarkets will become unviable. I wouldn't be able to survive, I wouldn't be able to keep going. "

Cr Harrison said on Monday the council had approved a building believing the Krnc group was negotiating with Metcash. In any case, the council had no say on the business arrangements.

Mr Heathcote says he will try to gain community support and will urge the Australian Competition and Consumer Commission to take up the issue.