A Commerce Commission spokeswoman said a complaint was received in November saying the Octagon shop was misleading consumers by displaying alcohol images on a window when it did not sell alcohol.
The store's franchise owner and the master franchise owner for New Zealand Night'n Day stores had been spoken to and had been "co-operative".
"They have been sent a Compliance Advice letter asking that the images of alcohol be covered or removed until they get a liquor licence," she said.
Alcohol advertising was still in plain sight on the shop's windows yesterday and the owner said he was not keen to remove or cover the advertising.
Night'n Day Foodstores lodged an appeal against a decision by the Liquor Licensing Authority to deny its Octagon store a liquor licence in November 2008.
The decision to refuse the licence was understood to be the first test of a "line in the sand decision" denying licences to "convenience" stores.
Liquor Licensing Authority judge Bill Unwin said he was not satisfied the store, one of 27 Night'n Day Foodstores in the South Island, was selling household goods as its primary objective - a requirement for stores wanting to sell alcohol. An appeal was heard in 2010, but was rejected.
Store owner Murray Devereux said it had been a busy week with Christmas trading, and he had not yet had time to cover the advertising. Covering them would be difficult because they were self adhesive vinyl signs, face-mounted to the inside of the window.
"It will be difficult because we can only cover the signs with sticky tape on the outside of the window.
To be fair, when we put our signs up, we had an agreement with the Dunedin City Council that we would get a liquor licence. They reneged on the agreement."
Mr Devereux said he did not want to remove the signs because he reapplied for a liquor licence yesterday.
He said the authority had renewed licences at the other Night'n Day stores in Dunedin during the past year, and believed the chances for approving his were good.
Mr Devereux said he had made several changes to his store in the Octagon to meet the authority's requirements for a licence, which included doubling the size of his fruit, vegetable and meat sections.
Instead of removing or covering the signs, Mr Devereux planned to put up large signs saying the store was unable to sell liquor until it was granted a licence.
