Dudley Council wants the retailer to vacate its site on Fisher Street near the bus station, which is needed as part of the authority's planned £24 million transport interchange.
However, Farmfoods has refused to budge until a suitable replacement site is found.
The store currently occupies 264sq m of ground floor and basement. But bosses say they will only move to a site of 10,000sq m – almost 38 times bigger.
Farmfoods has a 10-year lease for the site which expires in 2027.
Council chiefs have now engaged compulsory purchase order (CPO) powers in a bid to take over the site.
A statement accompanying the CPO said the council had been in "lengthy discussions" with Farmfoods over the site.
It said: "Farmfoods demised premises comprises 264 square metres of ground floor and basement town centre retail accommodation (without customer car parking) which is occupied pursuant to a 10-year lease from August 11, 2017.
"Farmfoods do not want to relocate to premises of an equivalent size or location, preferring instead a unit size of approximately 10,000sq m with customer parking and facilities for HGV delivery on a busy main road and in a built up residential location.
"The alternative premises they require needs to be within a short distance of the subject premises given that they already have outlets at Tipton, West Bromwich, Wednesfield and Brierley Hill.
"Equivalent alternative premises have become available during these negotiations but they have been dismissed by Farmfoods as being either too small (even though they are of an equivalent size to their existing premises), lacking direct customer parking (even though this is not within their existing demise), or is in a town centre, which is comparable to their existing premises but where they no longer wish to relocate to.
"Farmfoods have employed an agent to identify and secure alternative sites or premises to supplement the council’s and their own attempts to identify suitable premises or sites but this has not come to anything."
The transport interchange scheme, which will see the 36-year-old bus station demolished and replaced with a new site linking bus and Metro services, was granted full planning permission in September.
Work had been expected to start this autumn but it has yet to get underway after it emerged Dudley Council was struggling to secure the rights to around 27 per cent of the site.
Farmfoods declined to comment when approached by the Express & Star.