The Penny Farthing opened in late 1963 and closed in late 1968. It was run by husband and wife John and Marilyn McHugh, who arrived in Toronto from England in the 1950s. They previously ran the smaller coffee house called The Half-Beat but like the Fielders, opted for a larger property to capitalize on the popularity of the coffee house in Yorkville. The namesake of the venue was influenced by its former status as a grand old Victorian house, with the penny farthing bicycle serving as a symbol of the Victorian era. Nevertheless, not many people grasped this concept as the coffee shop received many letters addressed to a "Ms. Penny Farthing".

The inside of the venue consisted of bare walls, a stage and used furniture scattered throughout for patrons to sit on. According to one café goer profiled by author Stuart Henderson, the most expensive aspect of the inside was the penny farthing bicycle itself. The coffee house was also unique for having an outside patio in the front and a swimming pool in the back, where bikini clad waitresses served customers in the summer.

McHugh described the venue as "primarily a jazz house" but it also catered to folk revival music as well. After the more boisterous clubs and bars in the city closed for the night, jazz musicians would retreat to the Penny Farthing to play their industrial sounds till the sun came up - rendering it the jazz after hours social club of choice for many.

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American jazz singer and guitarist Lonnie Johnson was perhaps the most popular of the jazz offerings of the Penny Farthing in the early days before the popularity of late night jazz decreased and McHugh moved folk music to the centre stage. After hearing one of his performances, The Globe and Mail argued he deserved the keys to the city and credited him with bringing jazz to Yorkville. The house jazz band was jazz bassist Jim McHarg and his band, the Metro Stompers. They were also reviewed favorably, and it was written that their sound "created a tidal wave" in the swimming pool. Both of these artists recorded a now rare album together entitled "Stompin' the Penny". Legendary jazz pianist Oscar Peterson also played the Penny Farthing.

Joni Mitchell began playing the basement of the Penny Farthing (known as the Dungeon) but would later frequent the main stage as the venue switched to more folk offerings. This change brought The Stormy Clovers, a pop folk band that played more upbeat versions of Gordon Lightfoot songs as well as their own at the Penny Farthing. They were also notable for bringing Leonard Cohen into the limelight as they were the first to perform songs that he wrote such as "Suzanne" and Cohen would even sing duets with their lead singer - Susan Jains - who John McHugh speculated that he was in love with. Singer songwriter Bruce Cockburn also played the club as a solo artist, before and after he was in the aforementioned 3's a Crowd. Other notable musicians who played the venue include Puerto Rican singer songwriter Jose Feliciano and blues-man John Lee Hooker.

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John McHugh was an outspoken protector of Yorkville from forces that wanted to interfere with the neighborhood's operations. Seen in the audience of the Penny Farthing on June 11, 1965 was Mayor of Toronto Phillip Givens and distinguished author Pierre Berton. According to Globe and Mail author Scott Young, the father of Neil, quoted the mayor as saying "this was great, this was the new Toronto and that there was nothing wrong with this at all".

However, this attitude changed in 1967 as legislation was introduced that charged many popular coffee houses with operating public halls without a license - getting this designation because although they were not serving alcohol, they were charging for entertainment. McHugh along with help from Pierre Berton argued that this was unlawful and they ended up winning the case. McHugh and his employees also condemned riots and drunken behavior. When 2,000 youths caused a riot in Yorkville in April of 1965, employee Brian Walker stated that "the people who listen to our folk music and jazz are not the hoodlums who take part in street riots".

Tragedy struck the Penny Farthing on May 11th 1967 while during a confrontation, a 17 year old jumped up on a half wall outside the venue and kicked a 37 year old man in the chin who then fell back, hit his head on the curb and died. The youth was jailed and later sentenced to manslaughter.

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John McHugh was a huge fan of jazz and at first, catered to primarily jazz acts. The Globe and Mail explained that before McHugh, finding jazz in a Yorkville Coffee house was as rare as finding instant coffee. McHugh dedicated the main stage of the venue for jazz only and the basement for amateur folk acts. This is important because it allowed many to get their start in the coffee house circuit, including Joni Mitchell. In an interview with the Toronto Star, McHugh explained that he ran his home a lot like his coffee house. He once shared a house with Ian Tyson and designated his record player that he built himself for jazz music and if Tyson wanted to hear folk music, he had to use his own. Like the Riverboat, the music was the most important thing about the Penny Farthing. The popularity of McHugh's jazz offerings is evident in the fact that he believes his crowd every night had to have been there because of the music since they had no alcoholic drinks to serve.

However, this didn't stop the Penny Farthing from other endeavours like hosting art events like body painting and allowing hippies to get married by the pool. According to a menu from the summer of 1968, the Penny Farthing served hot and cold beverages, as well as their signature drink consisting of coffee, iced cream and whipped cream in a glass. Food options included sandwiches, pastries and a salad plate served only when "the lady boss feels constructive".

Jim McHugh sold the property in 1968 when he perceived the biggest draw to the venue as being when he played The Beatles' White Album on the turntable five days prior to its commercial release. McHugh saw this as a sign of changing times and decided to stop the Penny Farthing's wheels on a high note.