While there is a pricy and overhyped restaurant; on the observation level there is a "cafe" that serves a variety of food and drinks. At the base of the Space Needle is an area called The Armory which a food court with many local restaurants offering a small sampling of the full experience they offer elsewhere in the city.
I haven't eaten there in years, but from what I remember it was pretty pricy for the quality of food that is served. Sky City the restaurant is closed for renovation right now as of September 5th. I'm not sure when it will reopen.
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