Margaret River's Muster Bar and Grill caught on fire on Thursday night.
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Tim Hartwell and his son were on the scene when the flames were noticed, alerting Muster staff of the fire occurring upstairs.
"My son and I were driving north along Ned Higgins Lane and noticed smoke and flames coming from the back of Muster Bar and Grill Suites, firstly thinking it was a barbecue out of control," Mr Hartwell said.
" We quickly pulled up and ran over to get a better look and could see large flames enveloping the doors of a room and burning through the roof sheeting.
"I called out to see if anyone was there and no response, the gates were locked and I couldn't get into the area.
"I called triple zero and notified what was going on and ran downstairs into the restaurant and raised the alarm with staff, who quickly but calmly came up and attended to the blazing room, which turned out to be the laundry.
"While the head chef and other staff used fire extinguishers and buckets of water to control the blaze, the fire service arrived and took control of the situation, shutting down the power and gas and evacuating the restaurant which was a full house."
Mr Hartwell said by 8.30pm everything seemed to be under control, with firefighters checking the rooms and facilities.
Mr Hartwell said the footpath was packed with onlookers while the incident occurred upstairs.
