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Plans submitted to Canterbury City Council by Equitable Inns will stretch across two properties on the corner of William Street and into Mortimer Street.
The ground floor will be converted from retail space and will include a pizza oven, kitchen and bar.
The first floor would be reserved for extra seating space while the basement will have an office and be used for cold food storage.
The second floor would become a new three-bedroom flat, complete with kitchen and bathroom space.
The plans follow the recent conversion of the former Odyssey gift shop into a new Tapas bar called Valkyrie across the road in William Street.
But the Demelza Hospice currently rents the shop on the corner of William Street and Mortimer Street and fears losing local support if the shop is closed.
Head of retail Claire Jordan said: “We would be very disappointed to lose our presence in Herne Bay as we have many loyal and generous customers and donors in the area.
“The shop helps not only generate vital funds to provide for the care and support of life-limited and life-threatened children and young people and their families, but also helps to maintain awareness of Demelza in the area, which is crucial for the charity."
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