Not many chefs working in small, family-run restaurants expect global megastars to turn up for dinner and to design them a menu from scratch.

But that’s what happened to Simona Di Dio last weekend, when she cooked dishes inspired by her Italian grandmother’s recipes for Madonna, who sat on the single wooden dining table in their cosy, candlelit Italian restaurant in Margate’s old town.

“It was really informal and really lovely, and relaxed. It was really special and she was really nice,” said Di Dio.

She said it was “mind-blowing” to think that she would one day cook her richly flavoured bean and kale stew or an unusual Neapolitan beef shin pasta for one of the world’s most famous musicians, though she acknowledged: “Margate is always full of opportunities.”

She moved with her partner, Harry Ryder, to Margate a decade ago, priced out of London and Canterbury, and Di Dio said she spotted there was “already a buzz” in the town, but the pair have been astonished to witness its changing fortunes.

Harry and Simona found it ‘mind-blowing’ cooking for Madonna. Photograph: David Levene/The Guardian

As well as raving about her visit to Di Dio’s Cantina Caruso restaurant during a visit organised by the Turner prize-winning artist Tracey Emin, Madonna enthused about Margate on Instagram, describing the town as “heaven” and “energised by creativity”.

While the Ryders recognised Madonna’s depiction of Margate as filled with artists, musicians and performers – vocations shared by many of their staff members – they felt that it was important not to idealise the town, which has a sharp social and economic divide.

Noting that the town has some of the most deprived postcodes in the UK, Harry said: “It’s not all rosy. She didn’t see it all, she saw the art scene. Obviously there is a lot more to it.”

But he added that although the influx of wealthier people and “DFLs” (Down From Londons) has been much maligned, lots of newer arrivals do want to contribute to the area.

Among the projects aiming to bridge the divide between Margate’s “two towns” is the Perfect Place to Grow project, a cafe situated on the site of Tracey Emin’s TKE Studios which trains local 18 to 24-year-olds who are struggling to access sustainable employment.

David Wilson, a chef and support worker who runs the kitchen, said: “Young people who try to engage with the Jobcentre and employment services locally are given very uninspiring options and we try to do the opposite of that.”

David Wilson runs the kitchen for The Perfect Place to Grow. Photograph: David Levene/The Guardian

Margate’s strong brand has given trainees the opportunity to work with celebrity chefs such as José Pizarro and Nathan Outlaw, he said.

Many local people have mixed feelings about Margate’s growing appeal to the rich and famous. Dan Thompson, an artist who has lived in the town for 20 years, moved in to what used to be one of the town’s “roughest streets”, but has been unable to keep up with prices rising as high-end galleries have moved in, and is now homeless and living with friends.

Dan Thompson is a longtime Margate resident. Photograph: David Levene/The Guardian

He said this experience was shared by others in his cohort of DIY experimental artists who moved in the early 2000s – with many moving to Dover in search of cheaper rents.

But he acknowledged that there have been “massive spillover benefits” from the town’s recent gentrification for some – for example, local tradesmen have profited from the increased demand for their services.

He is curating an exhibition that opens next week called Lost Margate, which looks at the way different waves of arrivals have rewritten Margate’s story.

“For 300 years, it has only existed to take money from Londoners, so has always reinvented itself,” he said. “People absolutely love this place, and every generation that comes in falls in love with it for a slightly different reason.”

Connor Sansby, a poet who has lived in Margate his whole life, is contributing a work to the exhibition, which uses the seaside town’s waves as a metaphor for gentrification, in which new arrivals erase that which existed before.

Conor Sansby is a poet who incorporates Margate’s seascape into his work. Photograph: David Levene/The Guardian

“Margate has become a place of two halves. It’s two places occupying the same space,” he said, noting that the new art world has “splintered” from local creatives.

“They’re not interacting with the Margate native population, so they don’t understand some of the issues,” he said, citing the battle over a Greggs opening as a symbol for the disconnection between people who need affordable food options and those who do not.

Despite this, Sansby agreed with Madonna’s assessment: “It does occasionally feel like an absolute dream. There’s a culture and a community of people who’ve been here the whole time, and we are all fantastic.”

Margate’s shabby high street is often seen as exemplifying the town that is being left behind amid the boutiques, restaurants and art galleries opening up in its old town.

Leo Kilburn-Long, who works in the McDonald’s on the street, said he appreciated how Margate’s changing fortunes have led to “new stuff popping up recently” to reverse the high street’s decline.

Leo Kilburn-Long is one of many people in Margate worried about the cost of living. Photograph: David Levene/The Guardian

But he viewed gentrification as a double-edged sword: “Cost of living down here is ridiculous, you have to spend an arm and a leg to even afford a little room in somebody’s gaffe,” he said. “Margate is a great place to go visit, but to stay down here it’s so expensive.”

Amy Holbourne, who works on the high street, hoped that Madonna’s enthusiastic post may “help bring a lot of business to the town”.

Amy Holbourne feels Margate is improving. Photograph: David Levene/The Guardian

But she said believed that rising housing prices had resulted in growing homelessness and drug addiction. Her niece, who has three children, has been on a social housing waiting list for three years and has been living with her grandfather. “There’s just no housing round here,” she said. “The council need to really sort it out.”

Asked if she too would describe Margate as “heaven”, she said: “I live here, I wouldn’t describe it as that … but it’s improving.”