Surrounded by the pricey restaurants and bars of the state capital, Annapolis' historic Market House has found a modern niche among downtown workers and tourists by serving fried chicken, crab cakes, pizza and deli sandwiches.

"We've become a working man's lunch place," said Joseph Martin, 61, whose family has run Mann's Sandwiches in the nearly 150-year-old building on City Dock for 30 years. "It's a place where a guy can come eat for $3 or $4 at lunch time."

But as Annapolis gears up for a major renovation of the city-owned Market House after three decades of poor maintenance, it is re-evaluating how the market works and what it sells.

Responding to years of complaints from downtown residents that the market doesn't serve their needs, the city has hired a part-time manager who is visiting other markets in the region and talking with merchants to come up with a plan.

"There aren't many places you can buy an inexpensive sandwich and sit on the dock, but I think it has a lot more potential," said Mike Miron, the city's economic development officer. "We have the opportunity to start from scratch and have a brand-new market with a new design."

While most of the market's merchants agree that the building needs work - the paint is dingy and scuffed, the concrete floor worn dark, the lighting poor, the roof needs replacing - they fear what the city's plans could mean for their businesses and livelihood when their leases expire in two years.

Many of the nine stalls are family businesses employing multiple generations. And while merchants say they make a decent living, most work seven days a week, with few vacations.

"It's something that sits on the back of your brain," said L.J. Machoian, while serving fried chicken and potato wedges to lunch-time customers.

Her parents opened Machoian Chicken 30 years ago, after the Market House reopened from the last renovation. Closing the market for months, or even weeks, "would put us out of business or in the poorhouse," she said.

The first Market House opened at City Dock in 1788, four years after a group of businessmen gave the city land for that purpose.

A few different structures stood there before the current cast-iron-frame building with a French Colonial-style roof was built in 1858.

A century later, the city - pushed by tourism and local businesses - wanted to demolish the building for more parking.

But preservationists stepped in, saving the Market House by pointing to a clause in the deed that said the land would revert back to the heirs of those 18th-century businessmen if it was not used for a market.

Instead, the building was modernized and renovated, reopening in 1972. Large windows were installed around the exterior to mimic the original open-air market. Merchants moved in. Mann's Sandwiches and Machoian Chicken are the only ones who moved in then and remain.

Bill Sherman, director of conservation for the Historic Annapolis Foundation, which lobbied to save the building in the 1960s, said the Market House is a prominent structure important to the historic district.

"What you see now, someone from 1858 would recognize," he said. "It's an important feature of downtown, and it helps to explain the economics of how the town works."

As the city's downtown commercial district became more tourist-oriented, the Market House changed from a place to buy fresh produce, seafood and meat to a place that caters to state employees, restaurant workers, boaters, tour groups and others looking for a cheap, quick bite to eat.

When Rookie's, the last downtown grocery store, closed in 1994, the calls for a more resident-oriented Market House grew louder.

Alderwoman Louise Hammond, who represents downtown, said she and her constituents would like to see the Market House serve more upscale, gourmet items.

And even as the Market House became more dominated by fast food, the building has fallen into disrepair. In three decades, there has been only a minor upgrade to the air-conditioning system and few other improvements.

A place where the ceiling was patched remains unpainted. Shingles on the wooden roof are loose. The building's exterior wood is rotting, and the paint is chipping. Door frames are rusted. Interior columns are dingy and scuffed, and the concrete floor has darkened and cracked.

In contrast, Baltimore's Harborplace has had two major overhauls since opening in 1974, according to a report on the Market House done by one of Mayor Ellen O. Moyer's transition teams this year.

Even customers who say they like the Market House acknowledge that it looks dirty and needs improvements.

"It needs retrofitted from the ground up," Miron said.

Last month, the city hired Bill Grovermann as a part-time manager for the Market House, to make short-term improvements, come up with a marketing plan and begin working with merchants and city officials toward a long-term plan.

A former downtown resident with a background in historic preservation, Grovermann said no decision has been made as to how the changes and renovations will be handled when the merchants' leases expire in two years.