The borough council refused permanent planning permission for the pop-up cinema at land off the old A64 at Crossgates, last week.
Benjamin Stonehouse, of Moonlight Movies Ltd, hit out at the authority and says he will now take his business elsewhere.
A number of objections and letters of support were submitted but the councillors were told they had to base their decision on the impact on the closest neighbour to the site,
He said: “The refusal is based on one complaint from a neighbour about noise, which I think is completely unfounded.
“What’s strange is that before Christmas our case officer at the council told me the application would be recommend for approval.
“This was after the complaint came in from the neighbour.
“Then, four days before the meeting, I was told they were recommending refusal.
“I don’t know what changed.
“What I do know is that the day after our application went in the plans for the North Bay cinema were submitted.
“That was approved after three months but for some reason, with one objection, it took us five months to get a refusal.
“Maybe the council did not want competition for the North Bay cinema.” Since the Scarborough News broke the story of the refusal Mr Stonehouse says he has received many other offers.
He said: “I’ve had a few other towns in touch who are interested in the business so we’ll see what happens there.
“I’d love to come back to Scarborough but something will have to change.
“The council just don’t seem to want to help the town.”
Mr Stonehouse says he was surprised to read councillors saying they wanted to help him find another site, with one suggesting the park and ride site in Seamer Road as one possibility.
“When I was setting up I contacted the council about sites it owned and got no help from them at all,” he said.
“The [current] site was the only one that was suitable.
“One of the licensing conditions the council imposed was that the screening could not be seen from the road so I’m not sure how that would work with the park and ride site. “I’m just really disappointed by it all.”