Construction has started on Excelsior's first grocery store in three decades.

Crews began work this month on Kowalski's, the much-anticipated grocery store that got final city approval on plans this month and was first announced in July. The town of 2,400 hasn't had a grocery store since the mid-1980s, when Red Owl left. Now, Woodbury-based Kowalski's Markets — which started in 1983 in St. Paul with a single store, a former Red Owl — is expected to open by March 1.

The site, at 440 Water St., is where the former Mason Motors car dealership was located before closing after more than eight decades in business. Now, Kowalski's is renovating and expanding the building — its 10th store in the Twin Cities. The 14,994-square-foot store will include the grocery store, a wine shop and Starbuck's.

"The grocery store is a big win," City Manager Kristi Luger said.

City leaders have long pushed for a grocery store, hoping for a smaller concept like Wayzata's new Lunds and Byerly's Kitchen, which is a third the size of a conventional grocery store and focuses on prepared foods and a large restaurant with wine and beer.

Facing the new grocery store will be a 20,000-square-foot retail and office building, at 400 Water St., which also started construction work this month and will eventually house offices for Oppidan Investment Co., the developer for the property, on the upper level. Retail is expected to go in on the first level.

A new Kowalski’s will rise on Water Street in Excelsior. It will be the small city’s first supermarket since the mid-1980s.

Fate of franchises

Oppidan bought the block-long development of the Mason Motors property in 2012. The first building, at 470 Water St., is an 8,744-square-foot strip mall housing four businesses — Steele Fitness, College Nannies and Tutors, SportClips and YogaFit.

That development has sparked a debate among city officials about blocking future franchise businesses in order to prevent more chain stores from coming to the small town to preserve the historic character of the main street. No ordinance has been proposed and it's still in the discussion phase; it would be the first city to restrict franchises.

"It's pretty controversial; we have to make sure it's the right direction for the city," Mayor Mark Gaylord said. "There's not a rush to be first."

Hotel still on hold

Meanwhile, plans for a boutique hotel bookending the other side of Excelsior's downtown are still in limbo.

The City Council recently approved a 90-day extension for developers to submit final paperwork, with a deadline of Nov. 13.

The hotel, which would be the first on Lake Minnetonka since 1964, has been delayed several times, awaiting final plans including needed figures related to tax-increment financing that would go toward public improvements of the city's port and park, the Commons. A hotel has been planned for the vacant lot just yards from the lake shoreline for more than five years. City leaders are starting to show their frustration with delays.

"The city obviously wants to move forward with the hotel and we've been waiting a long time," Gaylord said. "Quite frankly I've lost track of how many times we've extended [the final approval]. But we understand it's a complex and expensive project."

Kelly Smith • 612-673-4141

Twitter: @kellystrib