Translation:This is the coziest restaurant in town.
'town' can be used in English in an implicit definite form, but 'city' cannot. You would need to use 'the city' here for proper English, or change 'city' to 'town.
More formally, there are different implications to the terms in modern English, 'city' usually implies a much more urbanized setting than 'town'. Swedish, as far as I can tell, doesn't really differentiate the two however.