The proposal has sparked a huge public outcry from residents, conservationists and historians.
Built around 1890, the former Quality Hotel on Penn Road was once the residence of John Rollings, director of Star Cycles, Cars and Commercial Vehicles, and vice-president and benefactor of the Royal Wolverhampton School from 1894 to 1909.
So far council bosses have received 73 individual objections from neighbours and a petition with 105 signatures, along with just one letter in support of the development. The Victorian Society has also objected to the plans.
The building is located in the Graiseley ward.
In a report to the council, planning officer Andrew Johnson said: “The site is located adjacent to the Penn Road Conservation Area and diagonally opposite the grade II-listed Claremont House.
“The existing building itself is not a designated heritage asset. However, it does have some merit as a building of historic and architectural interest.
“The Victorian Society object to the proposals. The building is unlisted and is not on the local list, but is one of few remaining historic buildings on this section of Penn Road.
“They consider the removal of this Victorian house will mean the loss of one of the last references to the historic streetscape in this part of the city.
“Whilst there are some changes to the proposed design of the new building, it is still considered the food store and proposed layout of the site – combined with the loss of the building – will have a negative impact on the character of Penn Road.” added the report.
“The main building was formerly a large property that has been extensively extended, including linking it to others to form the current hotel.
“There is an extensive planning history for this site relating to the extension and alteration of the hotel facility. Nothing is recorded that would be directly related to this application.
“The conservation officer has contributed to the design process throughout, although he expresses concern for the loss of the building due to its historic significance and the impact the proposal will cause to the Penn Road Conservation Area,” added the report.
Neighbours have objected for a variety of reasons, including concerns over possible anti-social behaviour, loss of local heritage, the need for another supermarket in the area and loss of employment at the hotel, which is temporarily closed.
Planning bosses are due to make a decision on the application next Tuesday.