In an emailed statement, Ootoya said it would announce on Friday that a group of employees were against the takeover, followed by a formal decision on Monday by the board of directors to oppose the bid.
Ootoya shares rose over 3% to 2,949 yen ($27.50) after the news, while the broader market .N225 was slightly down.
Colowide last week offered to buy Ootoya at 3,081 yen a share in a deal that would boost its stake in the company to 51.32% from 19.16%.
Japanese companies are increasingly seeking more control of affiliates to streamline operations.
A spokesman for Colowide, which runs several restaurants from izakayas to sushi chains, said the company does not have any immediate comments on Ootoya’s plan to oppose the bid.
Ootoya has criticised the offer, saying it came as a surprise given Colowide knew the majority of shareholders opposed such a move.
The bid also follows Colowide’s failed attempt to install candidates to Ootoya’s board - a proposal rejected at the annual shareholders’ meeting last month.
Reporting by Junko Fujita; Editing by Chang-Ran Kim and Himani Sarkar