The four person limit isn't a concern. They will be classified as an ambulatory care facility by IBC definition even if they only have one at a time. The provision for separated construction kicks in after four people, but even if under four the classification remains. There are several issues with the proposed design, but they all fall in line behind the requirement for fire suppression in IBC 422.6.
Note that 422.6 (IBC 2012) refers to 903.2.2 which only requires the sprinklers if there are four or more incapable of self-preservation, or one or more on any floor other than the level of exit discharge. And the sprinkler system is not required throughout the whole building.