Hey Jim, as you know I am responsible for both sides of the coin, literally. As a bar owner, I do charge $1 for bottled water that costs me about $0.25. That still is only a $0.75 profit, but at least they are contributing something (no cover charge).
As the KJ I try to treat them the same as everyone else when it comes to rotation and such. BUT, I do keep a tight leash on them when it comes to the rules of the bar and my equipment.
Also, when they complain about this, that, or the other, or tell me "what you NEED to do is...." I ask them to step in to my shoes for a minute. What is the smart business decision here? How much money or time should I invest in you. What is the return on that investment? I am very happy for you to be able to come out and sing, but consider my business model. I provide a place to come, a clean restroom, A/C and heat, a place to set, people to wait on you (that you never tip), and karoke 6 nights a week. Now again I ask you, how much more $$ or time should I invest in you?
I am never accusitory or threatening. I am a very soft spoken guy (unless you make me mad) I just very nicely talk to them about how a business survives. If you don't continue to make a profit, you will die. Do you like coming here? I like having you, but I still need to pay the bills. How about this, next time I need to re-do the books, will you help me put them together? How about cleaning and fixing the ones we have now? How about instead of tipping the waitress, you help her out by emptying ash trays, or picking up empty glasses. Maybe you can help me by finding out who keeps writing on the bathroom walls or punching holes in them. You can still contribute without spending any $$.
I have found that if you are unhappy with someone, talking to them honestly is the best way to get it resolved. Maybe there is some kind of compromise or understanding you can come to.
If all else fails, beat the hell out of them
