Sunday, July 29, 2012

Booth Rental - Owner's Perspective


Booth Rental

The most popular post on this blog (by far) and probably the post that brought you here initially is on How to Pay your Technicians. In it I touch briefly on Booth Rental, Commission and Hourly/Salary plans. Because of that post's popularity, I'm going to go into more detail on each of those methods, beginning with Booth Renting.

We'll look at it from both the technician's and the salon owner's, discussing the advantages and disadvantages to each party.

Overview

Booth rental is a very popular salon model in many parts of the country. In my area, about 75% of salons are chair rental. In some states the practice is illegal. With booth rental the technician pays the salon owner an agreed upon amount for a station at the salon. The rent, usually weekly, may include salon supplies, color, receptionist, etc. or may not - it depends on the salon. 

Salon Owner's Perspective

As an owner you will give up a lot of control in a rental model compared to a commission or salary model. You should assess how important it is to you that you have the ability to control:
  • The quality of the work leaving your salon
  • The hours stylists area available to see clients
  • Which products / lines are used in the salon
  • A training or apprenticeship program
  • The level of consistency of services provided in the salon
If you cannot accept limited control over these items, operating a booth rental salon will result in endless frustration.

What is the vision you have for your salon? Are you looking primarily for a place to hang your shingle and practice your craft, but want some other people around? Or is it important to you to build a name and reputation for your salon. If it is the latter, booth rental would not be a good choice because your ability to build a brand is limited by your lack of control over key drivers of excellence. Do you endeavor to build a profitable business that could be sold at some time in the future? It will be difficult to exceed lackluster growth in a booth rental model because competition from other salons will make it difficult for you to increase rents to increase profitability. If the growth portion of the business is coming just from your sales behind the chair, not only are you limiting growth, but you have become the business...where is the value without you? What is there for a buyer to purchase?

But what if you are just looking for a place to work yourself while bringing in some rent money on the side? Is rental a good model for you? Well, it depends. Can you afford the salon without the rents of others? Booth rental salons are very susceptible to walk-outs and you could easily find yourself in a financial bind if you lose your renters. If you can't handle that risk, perhaps you should rent in someone else's salon.

Do you enjoy the business side of the business? This includes everything that must be done in addition to your duties behind the chair and include:
  • Staffing the front desk
  • Making sure the salon is clean
  • Handling client complaints
  • Paying bills
  • Ordering salon supplies and retail inventory
  • Mediating squabbles between renters
Running a booth rental salon does not eliminate the need for these items, so while you do have the simplicity of not worrying about technician payroll, taxes and worker's compensation insurance, salon management will require a significant amount of time away from client work.

To bring this discussion full circle, the most important thing to consider in deciding if you want your salon to be booth rental is the the control issue. With booth rental you are a landlord. You do not control many of the factors necessary to create a successful salon. Make sure the business model you choose is consistent with your vision for the salon.

3 comments:

  1. Is there somewhere that outlines in depth the booth rental business model? Specifically detailing how the duties/responsibilities of both the landlord and the renters. Thanks!

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    Replies
    1. http://www.americanhairitagesalon.com/BOOTH_RENT_AGREEMNT2011.pdf

      Here's an agreement I found online. You should have a lawyer in your state look over it.

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