The Assembly Rooms is to be closed down for 18 months for the massive revamp, which will include general improvements and the creation of two shops and a restaurant on the ground floor. But Assembly Theatre, which has brought thousands of acts to the venue and built up an empire of linked Fringe sites throughout the city, fears that it will be priced out of a return in the summer of 2012.
A deal signed with the city council in 2003 came to an end after this year's Fringe, and council chiefs have confirmed they intend to put the Fringe lease out to tender in advance of the venue reopening.
Comedy promoter Tommy Sheppard, who runs the Stand Comedy Club, also today confirmed that he intends to join the running to take over the venue.
Assembly Theatre officials insist they are keen to return to the venue in 2012 - despite hitting out at the council publicly with their Save The Assembly Rooms campaign - but said they fear they will be priced out by other bidders. Sandy Ross, a member of the Assembly Theatre board, said: "If the proposals go ahead, Assembly Theatre would look at the tenancy for the building in its refurbished state.
"But it has been made clear to us that this would be done in such a way as the let would be offered to the highest bidders, which may not be us. Yes, we will tender - I have my doubts if we will be successful."
Bosses at Assembly Theatre are already on the hunt for a temporary new site to replace the George Street venue next year.
The contract to run Fringe shows at the venue after the redevelopment will go through an official tender process - with the council making a decision based equally on price and quality. A city council spokeswoman said: "We have to ensure we get best value for the public pound and that Edinburgh gets the best offer for the refurbished Assembly rooms."
Mr Sheppard said: "We would consider it when it comes up. Personally, I think there will be no shortage of people queuing up to operate it. It is an iconic part of the Fringe and still will be, even with the smaller number of rooms."
Councillor Deidre Brock, the city's culture leader, insisted that Assembly Theatre would still have an opportunity to remain involved with the venue. She said: "It will be a tender process - the council is obliged to do that - but they certainly have the option of being involved."