For such a small town, Arroyo Grande offers LOTS to do.

The quaint Victorian downtown  is popular with visitors and locals alike. It is well-maintained with many large flower pots and benches. Within easy walking distance you find upscale wine and gift shops, elegant imported antiques and home decor items, gourmet kitchen supplies, womens clothing stores and other boutiqeus. There are also several restaurants and coffee shops.   

The Clark Center for the Performing Arts  offers many touring shows, as well as performances by local theatre groups. (Hey, Zac Efron appeared here in high school musicals when attended the high school next door!)

The town also offers a "power strip" mall, with many national chains, and a popular multi-plex theatre.

There are also great outdoor activities. The Lopez Lake Reservoir offers fishing and boating, though no actual swimming in the lake itself. It does offer a small waterpark however.

Wine tasting is also an option. Arroyo Grande offers Laetitia Winery along Highway 101 to the south of town, and Talley Vineyards on the road to Lopez lake. Tasting rooms for both are open daily.   

Biking is also popular - try Huasna Road as it leads into the tiny hamlet of Huasna, and then make the turn onto Huasna Townsite Road until it deadends at an old wooden bridge. This last section of Huasna is effectively a 12 mile dead-end road, so there is very light auto traffic, and the people that live along the road expect bikers. The road is well-maintained, so you can use your racing bike! (Unfortunately, there are no amenities along the road.)