You step through scarlet curtains into a dining room lit gently with candles and decorated with black and white photographs. Attentive waiting staff serve delicious South American dishes to a groovy young clientele.

But this is no ordinary top-end eatery. It is a "rebel restaurant" run by an anarchist collective that opened in a squatted building in Bristol last night and will continue to welcome guests until Saturday before vanishing into the ether.

The idea is to challenge the normal restaurant model of charging as much as possible for as little as you can get away with and paying staff next to nothing.

Here the collective – professional and amateur chefs, waiters, bar tenders – have come together to briefly run the best restaurant they can for the love of it, begging and borrowing everything from cutlery and pots and pans to chairs and tables. It's a not-for-profit venture – at the end of every meal guests pay what they think the meal was worth, no more, and profits are ploughed back into the project.

And it is working. The restaurant is just about the hottest ticket in Bristol. As word spread, it was booked out before the group could send its flyers out.

The collective has asked the Guardian not to reveal the location or the name of the restaurant – not because they are worried about the authorities, but because they fear they could be over-run by would-be customers.

"I was shocked by the response," says Lady Hop – not her real name – who is one of the front-of-house staff. "It really seems to have caught people's imagination. The idea is to work collectively and see what you can create in four nights."

The rebel restaurant is hidden behind a bright door in an old red brick building. Knock hard and a benevolent bouncer in a bomber jacket emblazoned with "anti capitalista" on the back opens up.

A maitre d' (that probably isn't the term an anarchist collective would use) greets guests and shows them into the lounge, where – and this is probably the biggest shock – smoking is allowed.

Up one flight of a grand staircase decorated with pieces of modern art is the dining room. The power lead wrapped discreetly around the balusters is a big clue that this is no conventional restaurant.

On the top floor a team of Colombian chefs is cooking soups, fish stew and bandeja paisa in a makeshift kitchen. There is no Gordon Ramsay figure in charge here.

The maitre d' explains the structure. "Kitchens and the service industry are very hierarchical set ups. The classic image is of the head chef barking orders.

"We organise horizontally, there's no leaders amongst us. A misconception about anarchism is that there's no leaders. I think it's more about everyone taking a lead in doing certain stuff. This is a shared dream of many people."

The chefs change every night and a new menu is created from scratch.

In the dining room, some of the guests have gone to just as much trouble to make this a special night out. One sports a top hat, white bow tie and tailcoat. Another has opted for a green felt hat cheered up with plastic charity-shop flowers.

Juan says: "This feels like something unique. There's a philosophy behind it. It's done for the love of it. When you go to any place with that kind of approach you feel warmer, there's a bond. Everyone is giving the best of themselves."

Shonette says it is a good night for her because it comes just before pay day. "I think a lot of people pay over the odds at restaurants. You shouldn't have to pay 40 quid just to enjoy sustenance."

Back downstairs, Lady Hop says that the group hopes to repeat the exercise somewhere else soon. "This is a testing ground, an experiment. We'll see how it goes. If it's a success we could do it again in a few months' time.

"Each building has a different character, each time of year is different, it's nice not to be constrained to open all the time."

And she's off to meet and greet the next batch of guests who, for one night at least, have been tempted away from the chain pizzerias and gastropubs.

Thursday's menu (it changes every night)

Starters:

Potato, spring onion, coriander and lemon soup

Lentil and tomato soup sweetened with parsnip and squash served with side salad

Mains

Fish stew, spiced with paprika, cumin, coriander, tomato

Bandeja paisa - parsley rice with fried plantain, red beans, a mince alternative, salad and avocado

Dessert

Natilla, a custard-like pudding