rather eat with dogs than most humans I've met..It's outside , at the owners discretion..I dont see a problem at all.if you don't like dogs , eat somewhere else. The OWNER ( the guy who worked all his life to buy the place )should have a the liberty to let people sit with their pooches outside, or allow smoking if he ( THE OWNER) chooses.
When I was in Greece there were large numbers of stray cats wandering in and out of the outdoor restaurants.