You're talking about the Davis Merchantile. Originally it was an old hotel, but that building burned down several years ago and they rebuilt a huge new building. Lolly's and A Little Bit of Lolly's is in that building.
Lolly's has recently marked up all their fabric to $11.99/yd, or so I've been told. I don't shop there anymore, since I started working at Caroline's. She has much more reasonable prices and does a terrific job of choosing fabric for the shop.