There is a local coffee shop where I live that works like this.
They are a small shop that only seats around 30 people. On Saturday night they either feature a solo or duo acoustic act.
You must make a reservation for a seat on Saturday and order at least a sandwich or a piece of pie.
They add $5 cover charge to the bill for each person and that goes to the performer, so a single act makes $150 plus tips for three hours and the house is always full.
People don't mind the cover charge because they come for the show and usually all stay for the full three hours. Ben