Hiring Independent Booth Renters At Your Salon
The hair salon industry reached $46 billion in 2018. There are 996,338 businesses in this industry. Are you one of close to a million salon owners?
If so, you have probably wondered whether hiring employees or renting out booth space is a better option.
Read on to learn all about the booth rental salon agreement and the pros and cons of both options.
What to Expect in a Booth Rental Salon Agreement
A hair salon booth rental agreement must include a contract between you and the owner of the salon. This legally binding contract protects you, the salon owner, as well as the stylist. It is the document the IRS uses as proof that your leasees are independent and not employees.
A salon booth rental agreement includes the rent/lease rate and how cancellation can take place. It also outlines the length of the contract and what your contractors get in exchange for chair rental.
It is common to provide use of one station, water, electricity, and salon equipment. Typically the agent and their clients can use the reception area.
You may choose to let your leasees use the salon phone and receptionist.
The booth rental agreement also outlines the obligations you have as the salon owner. They include paying the taxes on the salon, protecting the salon property from damage as well as performing necessary repairs.
This contract should also outline that the booth renter is expected to clean up their work station. You can add that your renters must display their license and provide liability insurance.
You can include a clause that indicates that the booth renters are expected to work during your salon’s business hours.
Who Pays the Taxes?
Self-employed hairdressers pay all taxes related to their employment. As a salon owner, you are only responsible for your property and business taxes.
They are also responsible for their own health and liability insurance.
What About Retail Products?
Your salon booth rental agreement can include a paragraph that prevents your tenants from selling merchandise that competes with your retail items.
But, you can’t require your tenants to sell your retail merchandise to their clients.
You can encourage your booth renters to sell your retail line by holding monthly contests. The person with the highest retail volume could win a gift card or reduced weekly rent.
Who Sets the Prices and Collects Money?
Independent business professionals are responsible for setting their own prices and collecting payments.
They maintain their own books, too.
Clients will pay your booth renters directly. You will never provide a paycheck to your renter. Nor will your renter’s clients pay you.
Ideally, each self-employed stylist will use salon software to take payments from their phones.
Perks and Cons of Salon Booth Rental
We’ve mentioned this before but it bears repeating. Independent contractors are responsible for handling their own taxes, clients, and paperwork.
Renting out space in your salon means that your salon is full of your colleagues, not employees.
This means you don’t have to pay salaries. And the overhead costs of your salon are more manageable as you are collecting rent.
You also don’t need to provide health insurance, paid vacation or offer retirement plans.
Renting out chairs gives you a full salon. Your renters are business owners who want to bring in as many clients as they can. They are growing their own business and will work hard to find and keep clients.
Plus, you often get less turnover when you rent out booths. That’s because each stylist is building a clientele based that is their own.
When you don’t have employees, you don’t have to worry about making schedules or covering appointments if a stylist doesn’t show up.
The main drawback to renting booth spaces is that you lose some control. You can’t control what happens between stylists and clients. You can’t implement the techniques and procedures you prefer.
And because each stylist is working for his or herself, there can be a competitive atmosphere instead of a team-based one in your salon.
Perks and Cons of the Commission Salon Model
The other option besides renting our booths in your salon is to hire employees. Most salons that follow this model pay employees on commission, without base pay.
This means that pay is based on how much each stylist brings in to the salon.
The best thing about this model is that you only pay for real work. If the stylists are standing around waiting for clients, you aren’t paying them. This method motivates employees to help build your client base.
Another benefit of hiring employees is that everyone is part of a team. And the goal is excellent service.
But, there are a few drawbacks to the commission model. For one thing, the operational costs of running a salon are constantly going up. Most salons average 10% of their pre-tax earnings to operational costs.
That means that it can be difficult for you to offer competitive pay that is based on commission.
Finding high-quality employees can be difficult. You can expect a high turnover rate. That’s because employees tend to want to run their own business. And when they leave, they may take their clients with them.
Bottom Line on Hiring Independent Booth Renters at Your Salon
Thanks for reading. We hope this article has given you a good idea of what you can expect from renting our booth spaces at your salon.
The most important thing is to make sure that your booth rental salon agreement identifies all the necessary points so that both parties are on the same page.
At Salon Iris, we offer salon software to fit any size salon. Get your free 14-day trial today!