The news comes as the Federal Government on Sunday announced restaurants and cafes would be restricted to providing takeaway and home-delivery options.
Little Lipari owner Claire Di Stefano said she made the tough call to avoid exposing staff to risk.
“The most important thing is your health,” she said.
“We have huge numbers, hundreds of people coming through, so it's not fair for our staff.”Ms Di Stefano said she got the news about restaurant closures at 9 pm on Sunday evening.
“The government didn't give us enough time,” she said.
“It would have been nice to have until 2 pm, but shutting at 12 pm is stressful on our mental wellbeing.”
“We didn't get any notice and we had already pre-ordered food that will now go off,” she said.
“Now my baker, butcher and all of the people who supply us won't get offers from us for the next few months.”
Ms Di Stefano said 11 staff including herself had been laid off until further notice, but wished to reassure people Little Lipari would reopen.
“We love our shop, we know it will be open again and we can't wait to spring and summer,” she said.
“We'll be offering all our staff positions again.”
Ms Di Stefano urged the Shepparton community to support all Shepparton businesses offering take-away options.
“I’m so sorry we can't offer it,” she said.
“At least they can survive and pay their pills, I’m in awe of them doing that.”