Marc Cullender, right, who opened Cullenders Delicatessen and Food Store with his wife three years ago had hoped to fill the empty unit, once home to The Parador Spanish restaurant, in Cage Yard, off the High Street.
But the Mirror understands a higher offer from Costa Coffee was accepted instead. This week, Costa confirmed its interest in a site off the High Street.
Mr Cullender said: "I wanted to combine my Redhill [Linkfield Street] and Reigate [Bell Street] branches to make one big cafe. We would have more dining space and would be able to offer a whole different experience."
He added: "This [another large chain] will push rents up even more and suck money out of the town. I employ locally, and shop locally."
He added: "Our business is going really well but I'm very disappointed with the outcome. Sadly, we can't compete with huge business because we cannot afford to run at a loss for a few years, which they can, supported by their other stores."