The head of a Chamber of Commerce has said a homeless charity should relocate before the local town is "doomed".
Susie Colley said Humanity Torbay's work in Torquay was "increasing problems".
She added traders believe the scheme has led to a rise in rough sleepers, which was having an impact on local businesses.
Humanity Torbay founder, Ellie Waugh, said the charity has "not encouraged people to sleep rough".
In her email to organisations across Torbay, including local MPs, Ms Colley stated there had been a "10% increase" in those looking for food and accommodation as well as begging and rough sleeping since Ms Waugh "set up her 'soup kitchen'".
"I am sure her motives are very laudable but her actions are increasing the problems in the town," she added.
Sarah Williams, who has owned a clothing store on the Strand in Torquay for 27 years, has been forced to close the shop twice due to the rough sleeping "epidemic".
She said that police were called after rough sleepers left shoppers "too scared to leave the store".
However, Jonathan, who uses the homeless centre, said that "beggars" were to blame, not real rough sleepers.
He added: "They're people on [the drug] Spice and they're begging for money for Spice.
"People who come in here are genuine rough sleepers or people who have no money, and they come in here for food."
Ms Waugh said that Ms Colley's comments had "shocked and appalled" her.
"We are not a soup kitchen, we are a registered charity. We help everybody. Our motto and our constitution is that we are a charity for vulnerable and homeless people.
"We are seeing 300 people to 450 people a week. Last week we actually had over 500 people in. We have not encouraged people to sleep rough."
Ms Colley suggested that the charity move out of the town and that the police presence in the area should be increased or it "will be the end of Torquay".