Mrs Reid and her husband Kevin have owned the tavern, located near Lake Waihola, for nearly three years and had invested a lot of time and money into it.
The building was extensively damaged and the fire was well involved when fire services were alerted at 8.29am.
A large crowd gathered to watch as firefighters from Milton, Waihola and Mosgiel battled the blaze.
Eyewitnesses told One News they heard several large explosions.
Fire brigade incident commander Alan Tapp said he believed the fire had started in the kitchen area and no one was on the property when the fire started. The cause of the fire was not yet known.
The fire caused extensive damage to the tavern's kitchen before it was extinguished at about 9.45am.
Mrs Reid told the Otago Daily Times that the premises were fully insured and they were just waiting to hear back from insurance assessors.
Police earlier closed State Highway 1 while firefighters tackled the serious blaze.
Traffic was diverted from State Highway 1 while firefighters fought the flames. The road would re-open later this morning.
A fire crew with specialist cutting gear has been sent from Dunedin to investigate damage to the tavern's roof. - additional reporting from NZPA.
