Colonia food is very similar to what you find across the river in Buenos Aires. Beef is the most important feature of many menus but innovation and a sense of subtle flavour is sometimes lacking. If you are on a budget make lunch your main meal and take advantage of the lunch specials which are available. Many visitors only spend lunchtime in Colonia if they are on a day trip from Montevideo or Buenos Aires so restaurants cater for this trade and sometimes close at night.
Breakfast is usually served up until around 10am and lunch from noon to 3pm. Most restaurants don’t open for dinner until 7pm and locals come in later. Breakfast for most locals is tea or coffee and some bread, jam and butter with small sticky croissants called medialunas. Dulce de leche is often provided for spreading on toast or bread. This is a sticky substance made by boiling vanilla-flavoured milk and sugar until they almost disappear. The thick caramel is used to fill cakes and biscuits or is dolloped on other desserts.
Visitors often order a lomito or a chivito (both sandwiches) for lunch but locals regard these as snacks to have between meals. Other snacks are small hot dogs with meaty sausages, the tostado which is a toasted ham and cheese sandwich, or empanadas, those small pastries with a savoury filling. Lunch for locals is either a barbecue with plenty of meat or pasta or pizzas. In my experience the pasta fillings tend to be unexciting, the sauces not particularly memorable and the pasta itself often overcooked. Pizzas on the whole are quite good.
Desserts are popular in Colonia but the choice is limited. Flan, a kind of cream caramel, is popular and is often served with dulce de leche. You will also often find a syrupy version of bread pudding, fresh fruit salad with ice cream or pancakes again served with dulce de leche. Fizzy drinks are popular with people of all ages. In restaurants you will be asked if you want bottled mineral water, either still or gaseous. Coffee, tea and mate are readily available and beer or local wines are popular. You can often buy wine by the glass.
There are many restaurants geared to the tourist market in Colonia that serve essentially typical Uruguayan fare. What you'll find on the menus over and over again are beef; milanesas (breaded and fried beef, chicken or fish); pastas with either "tuco" (a tomato-based meat sauce), "Caruso" (cream sauce often with pancetta) or "rosa" (tomato and cream sauce). There is some variety, but the atmosphere more than anything else distinguishes the different restaurants.
The closer you are to a colonial building, the more expensive it will be. Most locals eat at spots along the main street, Avenida General Flores, away from the historic section of town. Food and drink prices seem to be higher than in Argentina and generally the quality is not as good as Buenos Aires so you could save a splurge until you cross the river.