Say it ain’t so, Lulu! Key Peninsula’s favorite diner has closed

After 30 years as the comfort-food kitchen and informal social center of the Key Peninsula, Lulu’s Homeport Restaurant and Lounge in Lakebay has closed down.

The location has been sold to the owners of Two Margaritas, a chain of Mexican restaurants familiar around Hood Canal, who plan to open their fourth restaurant in May.

Lulu’s Homeport served its last meal Jan. 31, and owner Lulu Smith will be retiring.

“I need to retire. I’m tired. I’m 74. I love that place, but I just got to where I’m tired,” Smith told The Gateway on Saturday.

Smith started in the restaurant business at age 14, working at a Woolworth’s soda fountain in her home town of Kansas City, Missouri. She opened Lulu’s on McKinley Avenue in Tacoma in 1983 and ran it until she decided to move to Lakebay in 1991.

“The people were so welcoming when I came out here,” Smith said. “There are way too many good memories.”

Hometown favorite

Lulu’s Homeplate quickly became a hometown favorite.

“I’ve had little kids crying. ‘Lulu, you can’t leave. Nobody can make pancakes like yours!’ ” Smith said.

People on the Peninsula still talk of the big ice storm of 1996, when almost everyone lost electricity for weeks — except Lulu’s, which kept the griddles going day and night, feedlng cold and hungry residents and the line crews trying to restore power.

Lulu’s menu was basic comfort food, and there was a lot of it.

“The chicken strips were my favorite,” Smith said. “They were just good, but most people liked the country fried steak, ‘cause it was huge.”

Hugh McMillan, a Gateway columnist and regular at Lulu’s, said the diner was “a home away from home” for Key Peninsula residents.

“The building into which Lulu Smith moved her Home Port Restaurant years ago had seen failure after failure,” said McMillan. “We all hoped for a good American home-prepared eatery and Lulu more than met our best wishes.

“No place offered better breakfasts,” he added. “But food aside, her Home Port became a welcoming gathering place for families, commuters to grab coffee and exchange stories, and old pals to congregate.”

The Key Peninsula Citizen’s Association met there, and KP Citizens Against Crime. Sheriff’s deputies stopped in for coffee. During the big blackout, the place was filled with linemen in hard hats.

Cindy Worden, a former advisor to the KP Youth Council, recalls taking the kids to Lulus on the way to their annual meeting with legislators in Olympia.

“Without fail, all the kids wanted to start the trip with an awesome breakfast at Lulu’s,” she said. “The kids got to order whatever they wanted, and always enjoyed the food and the service.”

In 1999, Lulu Smith was voted KP Citizen of the Year for her contributions to the community, including an annual Christmas party for kids, at which every child received a gift.

Margaritas in May

The owners of Two Margaritas are “really nice people who want to work with the community,” Smith said, and she’s happy to have the restaurant in good hands.

Ricardo Sahagun and Edgar Anaya are the owners of Two Margaritas. Their family-owned restaurant began in 1993 on Bainbridge Island, and through the years has opened locations on Vashon Island, Allyn, Poulsbo, and Union.

Sahagun said Lulu’s blue-and-green diner, located at 1509 Key Peninsula Highway NW, is currently being remodeled.

“I think the area is excited to see the place getting renovated,” Sahagun said. “We are keeping a lot of the signature stuff, like there’s a nice carving in the wall we are respecting.”

Sahagun estimates the Lakebay Two Margaritas will open within three months, aiming for May 1.

The family-owned Mexican restaurant serves a menu that ranges from basic Mexican dishes to lamb and pork shanks.

They are best known for their mushroom salsa, Sahagun said.

“In 2007 we were invited to a salsa competition and got five different awards,” Sahagun said. “Most unique, most innovating, most authentic. It’s something that separates us.”

Breakfast on the menu

Sahagun recognized a lack of breakfast options around their locations, so has reached out to another property, the Bistro Village in Allyn, to put together a traditional breakfast menu.

“They recently got nominated the best breakfast in Mason County,” Sahagun said.

Breakfast will be available on the weekends, but Sahagun said if there is a higher demand, they would run the traditional American breakfast all week.

“I’m so happy they are continuing breakfast,” said Smith. I’m hearing a lot of good stuff about them, and everybody else is, too.”

Sahagun said he has made contact with every ex-Lulu employee and offered them a job at Two Margaritas.

“Everybody is on board, so nobody lost their jobs,” Sahagun said.

That makes Smith happy, too. “These are people who have been with me for quite a while, and are good workers,” she said.

Along with familiar Lulu’s faces, Sahagun family members will be working at Two Margaritas.

“Our restaurants are family-owned, family-operated. In every location you will find a family member,” Sahagun said.

Smith said she hopes to travel in retirement, maybe going to visit her sister back in Kansas City.

“It’s tough to leave,” she said. “It hasn’t sunk in yet that I don’t own the restaurant. It’s hard not to go down there every day. But it was the right time,”

This story was originally published February 11, 2020 at 12:00 AM.