Staff photo by Mike Pare / Nikki's Drive-Inn on Cherokee Boulevard sits at the entrance of the Stringer's Ridge Tunnel overlooking downtown Chattanooga.

A Chattanooga development group has changed its plans for a condominium project on the site of the popular Nikki's Drive-Inn on the North Shore.

Fletcher Bright Co. now is looking at putting a smaller, 10-unit townhouse project on a tract on Cherokee Boulevard next to Nikki's, said Cardon Smith, a company vice president. It previously planned to build a 52-unit housing complex on the Nikki's site.

Smith said on Friday that the company still has a contract to buy the Nikki's site and plans to keep the building, and it's working out details on the future of the restaurant with the business owner.

"We have a good relationship with the restaurant owner," he said. "We're not sure what we're doing. We're still working through those details right now. He has not indicated what he plans to do."

Nikki's, an 80-year-old restaurant icon in the Chattanooga area known for its jumbo fried shrimp and onion rings, temporarily closed in March amid the COVID-19 pandemic.

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Staff file photo / A neon sign marks Nikki's Drive-Inn on Cherokee Boulevard.

Restaurant owner James E. Jones, who was doing maintenance work on an empty building on the adjacent parcel this week, referred comment on any future project to the developers.

Last fall, Fletcher Bright Co. won approval from a city panel to build 52 residential condominiums on the Nikki's tract at Cherokee Boulevard and West Bell Avenue just before the Stringer's Ridge Tunnel. Smith said the units would be a mix of one- and two-bedroom condos.

(READ MORE: Panel OKs nearly all zoning changes for condos on Nikki's Drive-Inn site)

But on Friday, Smith said it analyzed the market and cited the magnitude of the site work on the Nikki's location as reasons to hold off.

Plans are to proceed with the smaller project at the adjacent site. Each of the townhomes would be three stories with two-car parking on a bottom level, Smith said.

The units with three bedrooms and three-and-a-half baths would sell in the mid-$500,000 range, he said.

"They'll have excellent views," Smith said, noting that each unit will have a large, walk-out patio on the top floor.

Next Thursday, Fletcher Bright Co. plans to seek variances from the city's Form-Based Code Committee for the new project.

Smith said that, if approved, work is scheduled to begin in September on the $5 million project with the units opening about nine or 10 months later.

Not far away, just off Cherokee Boulevard, the company has started work on another project to build 26 condos called The Fairpoint. That three-level complex is selling units from the high $200,000 to mid-$400,000 range at 411 Fair Point St. That project has a $7.5 million price tag.

Contact Mike Pare at Follow him on Twitter @MikePareTFP.