That used to be a good model, but here in the US, drinking is way down. DUI criteria are getting lowered all the time and the police are watching folks leaving bars so much, many folks are reluctant to have more than a couple. I have no issue with keeping drunks from behind the wheel. I applaud this. But it has really hurt the bar business and by extension the live musicians ability to make a living.Drinks are reasonable priced which I'm guessing is the old adage of 'make little but often' which probably gets him large discounts with the drinks wholesaler and in return higher profits than selling the drinks at a higher price.
So you're left with riding the fine line between prices for both drinks and cover that attract patrons and making enough to stay in business. Serving food brings in a whole 'nother set of regulatory folks, but it can add to the margin. Venue merch like t-shirts, hoodies, license plate frames can help your bottom line as well as help promote the venue. I am personally opposed to smoking (watched my mom die from it), but I recognize that it still exists, especially among the folks that go out to bars and music venues. And I've noticed that placed that have a semi sheltered area where smokers can go without huddling under a small porch, also keep more patrons for longer stretches of evenings.