The owners of Woodhead's Cafe on Simpson Street claim a food kiosk installed in front of the Premier Convenience Store on Station Road is blocking the view of their business from the Promenade.
Woodhead's owner Lisa Elawamy says this has led to a fall in trade at her business which has been serving fish and chips since the 1960s.
But Huseyin Kaplan, who owns the Premier store, says he has a lease from Blackpool Council to locate the kiosk on the site after he spent his own money clearing unsightly toilet blocks from the forecourt.
The kiosk, which is not yet trading, does not have planning permission, and Mr Kaplin says he will be seeking planning approval.
However Lisa said: "We used to have a lot of custom from people who could see our cafe from the Promenade.
"But on May 24 a kiosk was erected which completely blocks the view from the Promenade and it has not got planning permission.
"If they are allowed to do this, it will be a free for all and everyone will put things like this up.
"I would like it to be removed otherwise it sends the message that anyone can put a kiosk up.
"We're worried this could put us out of business. We were banking on getting business from the Promenade but it has just been getting less and less since the kiosk went up.
"It has been difficult enough recovering from the impact of the Covid pandemic without this.”
Mr Kaplan said there had been two entrances on the forecourt for disused underground public toilets, which he had paid to have removed and filled in after the council told him it could not pay for the cost of the work.
The council had then awarded him a lease for the kiosk, but he did not realise he also needed planning permission.
He said: "I actually have a lease for two kiosks, but only want to operate one which I will blend into my store so I am not blocking anyone's business and I hope to serve Mediterranean food such as spinach and feta pastries.
"The kiosk had been made for me and was being stored in the manufacturer's yard, but I was under pressure to move it so I brought it to the forecourt.
"I have spent a lot of money improving this area and will be applying for planning permission. The forecourt previously looked very unsightly so I am disappointed to come in for criticism when my investment has led to the area looking so much better for everyone.”
Mr Kaplan said he hopes to create an outdoor seating area on the forecourt, and added: "My shop brings in trade and footfall for other businesses in this area."
A spokesperson for Blackpool Council confirmed there was no planning permission in place for the kiosk, and currently no application for planning permission.
They added: "Blackpool Council are aware of the situation and are in contact with the owner."