Lake City is along Lake Pepin (actually a very wide part of the Mississippi River) on HWY 61 and 63 in Southeast Minnesota. It's beautiful bluff country here...worth the drive to see the sailboats, ice fishing villages, and fall tree colors. Lake City is the place waterskiing was invented - REALLY! It's a tiny little town, with about 4,000 people. There is some "old money" around town, look at some of the old mansions.
A great local hole in the wall for certain items is "The Galley". It is great for a midafternoon dessert. The only pie they really make homemade is the snickers pie. It is a delightful slice, with a flakey crust, real snickers, extra chocolate and lots of sweet goodness. Order it warmed up with ice cream for a real treat. The coffee isn't anything special, a bit weak for my tastes, but you'll probably need some to get the pie down. For those of you used to metro restaurants, you'll blink at the price of your bill for dessert and coffee.
Be sure to go for non-smoking, especially if they are busy and you don't like smoke. They assume everyone likes the smoking section otherwise. Lunch fair is ok, standard greasy spoon food. Breakfast is cheap and pretty good. It is the breakfast place in town. The breakfast menu is funny, each item is named a nautical name, like the "Captain's special" or the "Boson's Plate". The Galley can be found at the intersection of 61 and 63, at one of the two stoplights in town.
The same couple also owns Bronk's, a bar that is a block away. It's less than a year old. Kind of trendy inside. IT IS NON-SMOKING! This a great feature. The wait staff is not particularily attentive though. If you expect to have a drink and sandwich, plan to stay at least an hour, if they are busy. Drinks are good. Expect to pay metro prices here though. Sandwiches are pretty good, nothing spectacular.
Between about September and December, traveling either slightly north or south of town, you will find several apple stores. They sell everything from fresh apples, to exotic candies, to good cheeses. They also carry fresh local produce. Lake City is an area with many apple orchards. Stop by if you get a chance.
For upscale dining, try Watermans. Their seafood specials are usually good. Watermans is on the north side of the lake.