Two rival branches of the Co-operative movement want to build supermarkets just 50ft away from each other in Morton.
Plans by The Co-operative Food to develop the Lord Nelson pub site in Morton, into a supermarket, were revealed at a public presentation at the church hall in Morton last week.
A planning application has not been submitted and The Co-operative Food declined to comment to the Mercury.
The pub is currently owned by Marston’s pub company and is open.
But on the other side of the crossroads, Lincolnshire Co-op is due to open a foodstore on the site of the former King’s Head pub and intends to start work on Monday demolishing the building. The pub has been empty since it was severely damaged in what was believed to be an arson attack in 2007.
The site was purchased by Lincolnshire Co-op after the fire.
Its spokesman Emma Snedden said: “We have owned the site in Morton for a number of years and have recently received permission to demolish the former pub building. We are weeks away from submitting an application for a new foodstore, which will be in keeping with the character of the village.
“We believe that such an outlet would be the best way of bringing the site back into economic use and would provide villagers of Morton with further shopping choice.
“We’re not in a position to comment on potential schemes being developed by other organisations.”
In 2011, Lincolnshire Co-op put previous plans to convert the pub into a shop on hold because of concerns about maintaining the building.
Lincolnshire County Council highways officers also raised concerns about access to the site via the A15 entrance.
Villagers had protested against those plans and now residents have set up a petition against the development of the Lord Nelson site.
Debbie Cope, who works at the existing independent village shop and has lived in the village for eight years has set up the petition.
She said the main concern was people crossing the A15 to reach The Co-operative Food store at the Lord Nelson and increased congestion on the road.
She said: “We don’t want a shop there, we don’t want that road and junction to get any busier, it is already horrific.
“Everyone is terrified of that road as it is and they want to make it 10 times worse.”
Mrs Cope said the Lincolnshire Co-op proposal was more favourable because it was on the same side of the road as the village and was “further down the line”.
She has already collected more than 200 signatures.
Marston’s, which owns the Lord Nelson, said the pub was on the market and a sale would be subject to planning consent.
“We are currently in negotiations with our tenant over operations until the pub ceases trading,” a spokesman said.
Morton and Hanthorpe Parish Council meeting discussed the Lord Nelson plans at its meeting on Tuesday.
Parish council clerk Terry Barnatt said the council was “bemused” by the whole situation but didn’t feel it could act until an application was submitted.
To sign the petition visit www.epetitions.direct.gov.uk/petitions/56110.