Mandi does not have a fine-dining scene to speak of, and that is part of its charm. Eating is a matter of small dhabas around the Indira Market and the slightly more comfortable restaurants in the heritage hotels.
The local dishes to try are Mandyali dham (a special-occasion vegetarian thali of rice, dal, kadhi, chana madra and meetha rice, served on leaf plates at weddings and festivals), siddu (a steamed wheat dumpling with savoury walnut or sweet poppyseed filling, eaten with ghee and dal), and the sour-spicy chana madra (chickpeas in yoghurt with whole spices, the signature Himachali curry).
The Raj Mahal Palace dining room is the formal option, with a passable Himachali set menu in the evenings. Hotel Mayfair and the small dhabas on Seri Bazaar do reliable, cheap thalis at lunch. For street food, Indira Market has stalls selling siddu and bhature; ask for siddu with walnuts (akhrot) if you see it on the menu.