KFC has applied for a liquor licence for its new Parramatta store in a bid to keep up with the growing popularity of "fast casual restaurants", which are increasingly offering alcohol on their menus. But public health advocates have criticised the move.

A KFC spokeswoman confirmed the "concept" store on Church Street would sell beer and cider, but refused to give further details.

It is an apparent attempt by the company to diversify into the fast-growing middle market for fast food dominated by chains such as Mad Mex, Nando's, Guzman y Gomez and Grill'd.

But Mike Daube, professor of health policy at Curtin University, condemned the move and urged authorities to deny the company a licence.

"KFC is the last place where alcohol should be sold," he said. "This is a company that markets to kids and families.

"This comes at a time when kids around the country are watching the KFC Big Bash on TV and at grounds every day. Now they will associate KFC and its marketing not only with junk food but with alcohol."

The Parramatta plans appear to take a lead from two pilots launched last year by the global chicken chain's Canadian operations.

Two Toronto restaurants, made over as KFC Fresh-branded outlets, began selling alcohol late last year.

They feature hipster interiors, exposed brick walls and an outdoor balcony and promise "more unique" choices, including mango rice salad, waffle fries and bottled beer.

"We want people to linger longer," a company spokesman told the Toronto Star.

Documents lodged with Parramatta Council show the company has contracted award-winning interior designers The Great Indoors to plan the fit-out, which features timber-lined windows and exposed ceiling beams.

A worker at a neighbouring business said the building had been fitted out for the launch of a "high-end" pilot store operating under the name KFC Urban.

Restaurants such as Grill'd style themselvesas "fast casual" eateries. They try to distinguish themselves from typical "quick service" fast-food restaurants by claiming to provide better food and more inviting surroundings. Many also serve alcohol.

Fast casual restaurants are the fastest-growing segment of Australia's food market. They grew at 30 per cent in the past five years, analysis by Euromonitor showed, compared to 5 per cent for typical fast food.

The Parramatta rebranding came after KFC's arch-rival McDonald's quietly began operating a hipster dining outfit in Camperdown.

The Corner, as the McDonald's-owned cafe has been called, shows little sign of its ties to the global giant and offers quinoa salads and pulled-pork sandwiches.

A Roy Morgan poll last year found KFC was losing its grip on the youth market to Nando's. Three-quarters of Nando's customers are Generation Y, compared to half for KFC.

A spokesman for the Liquor and Gaming Authority confirmed it had received an application for a liquor licence. It said it had asked KFC to provide a statement showing its proposal would not be detrimental to the community's wellbeing, which it had yet to receive.