The scheme would see the existing shop in Risbygate Street bulldozed and replaced with a new 60,000 sq ft store, 84 homes and a multi-storey car park. The proposal has been submitted to St Edmundsbury Borough Council on behalf of Brook Properties Partnerships and is under consideration.
Roys, with seven stores in the East Anglia area and ranked 20th in The Grocer Top 50 league of independent retailers, wants to retain the site, for which it has protected tenancy rights. It is willing to revamp the 25-year old, 36,000 sq ft store.
However, if Roys loses the site, it could be squeezed out of the town for good.
Chairman Brian Godfrey said: "There's a queue of retailers that want to get into the town and we may not be able to afford the rent. But hopefully we're going to conclude some sort of deal."