Booth Rental:Is It Right For You?

Booth Rental: Is It Right For You?

I’m sure many people, especially those of you who are booth renters or salon owners who rent booths will not agree with article,but with over 49 years experiences as an salon owner, educator,business consultant, motivational speaker, seminar leader, and author , I feel I have earned the right to voice my opinion  and  speak out on this  very controversial topic.

If honesty and integrity is wrong, then I plead guilty. There is no substitute for basic honesty and integrity in one;s life.

This is just my opinion, you use the system that is right for you.

Those of you who know me know that I care deeply about my profession and my fellow beauty professionals and salon owners,including booth rental participants . My main goal is to help my colleagues raise their standard of living as well as help them reach higher levels of excellence — personally,professionally, and financially.

Our failure to adapt to change is causing a lot of hardship within our profession. The growth of low cost franchises  keeps growing.

We have allowed outsiders to bring the value of our services to discount levels when we should be raising prices to stay ahead of rising business costs and cost of living.To be fair,there is a market for both. This blog post is focusing on developing a high end well managed salon.

Hairdressers and salon owners are especially being hit hard.

Due to the growing challenges of trying to build s successful career and profitable business  have forced many salon owners to enter into booth rental just to survive.We have grown an underground economy and profession just to survive.

I am a firm believer in honesty and a code of ethics where everyone plays by the same rules. An equal playing field benefits everyone.
Renting booths vs. hiring employees is one of the most controversial and divisive issues in salon management today. Many people are entering into booth rental without a clear understanding of its consequences. As a result, the lives and standard of living of everyone working in the beauty profession is now affected, even worse our new generation of young talent will be affected as more and more salon owners refuse to train young starters only to lose them to a booth rental salon after training them.  Division between salon owners who hire employees and salon owners who rent booths is making it difficult to address the many other deep-rooted challenges facing all of us.

Having been a salon owner and educator for over 41 years, I feel I am in a unique position to take a step back and examine the pros and cons of this hot topic. The information presented in this article is based both on my personal experiences and on the opinions of the thousands of hairdressers and salon owners  throughout the U.S. and Canada that I have had the privilege of meeting as a popular speaker in our industry.

Which is the best salon management model for you? Only you can decide. Do your research, seek out information,know the consequences of your decisions, – including this article – with an open mind, get advice from trusted and knowledgeable advisors, seek out a labor law attorney who specializes in contract law especially in the area of independent contractor and then make your decision based on what will best fit your needs, goals, and vision. Make sure you are not violating workers rights especially with the new minimum and overtime mandates by our state and federal agencies which are now triggering more audits.

Many of you are unknowingly misclassifying your workers,the penalties can be enormous. With the new minimum wage and overtime laws, the beauty industry is being targeted.

Here are insights to help you decide what model is for you:

Booth Rental: The Salon Owners’ Perspective
When you follow the booth rental business model you are in effect just a landlord. Of course, many salon owners perceive it as a positive that they do not need to…
 Pay workers compensation or federal and state employment taxes
 Offer training and education.
 Provide liability insurance.
 Advertise for new customers.
 Manage employees.

The negative side of this business model is that, well, you are in effect just a landlord. Which means that as the salon owner you must deal with:
 Minimal or non-existent business growth, as you are dependent on rental income and working long hours behind the chair yourself.
 High staff turnover caused by staff pirating from other owners that offer lower rents and other perks. Because no business can continue to grow with a constant merry-go-round of staff turnover, this in turn leads to business instability.
 The inability to manage and educate staff, and create and promote a well-managed business with a professional and positive atmosphere.
 A lack of quality control standards – and the damage that this can cause your salon’s reputation to suffer.
 In-fighting and a lack of teamwork as your salon’s stylists compete against each other for customers.
 Exposure to audits by state and federal taxing agencies, which are currently targeting our profession. Most owners unknowingly misclassify their workers and tip compliance. This puts you at risk for audits, which can be triggered by anything from a labor law issue to a staff member filing for disability, unemployment,violating their minimum  and over time wages.
 The inability to sell other salon services or products.
 A temptation for not reporting income.

The inability to compete with well managed salons can be costly.

A recent government report showed that 95% of all business failures are due to a lack of management skills. By choosing to be a “landlord” rather than a “business manager” you are putting the success or failure of your salon in the hands of your tenants. However, because each of your independent contractor tenants views themselves as business owners, too, their decisions will be motivated by their own needs and goals, not yours.

The “Employee Model”: The Salon Owner’s Perspective
Okay, so what are the advantages and disadvantages of the “employee model” of salon ownership? Among the many benefits are…
 Control of your own destiny. You manage your business, its growth, and its profitability.
 Unlimited income and profit potential – provided you gain the necessary skills and knowledge to run a successful salon.
 The ability to create a staff development program, mentor new stylists, make staff changes when necessary, create and enforce quality standards, and provide leadership for your employees.
 The opportunity to market and promote your salon, set prices (including raising prices to combat rising costs), and create client retention programs.
 Dramatically reduced chances of losing an audit, losing your business, or running into problems with labor law.

In short, with this management model you manage your business rather than letting your business manage you. Plus, a well-run salon often has a competitive edge over other salons in the area.

Of course, no business model is all peaches and cream. Some of the drawbacks of running your salon on the “employee” model are…
 A high vulnerability to turnover, as competitive salon owners will try to pirate your top staff members by offering higher commissions or lucrative-looking booth rental arrangements.
 The risk of spending time and money on training and advertising, only to lose the stylist to a booth rental salon.
 The need to spend time training and managing people.
 An unequal playing field – you pay your taxes, workers comp, and liability insurance, while many booth rental salons do not.

Booth Rental: the Stylist’s Perspective
For a stylist, renting a booth can be very attractive. As an independent contractor you can…
 Set you own schedule.
 Manage you own business.
 Keep all of your earnings (less the booth rental fee).
 Choose your own product line.
 Possibly make more money.

On the negative side, though, renting a booth means you must…
 Cope with a lack of job security.
 Compete with other hairdressers in the same salon.
 Make less money during slow seasons.
 Advertise for new customers can be costly.
 Pay for your own education.
 Do your own book work, including filing and paying quarterly income taxes.
 Pay the “employer’s” half of your social security taxes.
 Sometimes work in a negative and unprofessional salon environment.
 Pay an ever-increasing booth rental fee.
 Purchase your own supplies and equipment,as well as incurring business expenses.
 You will not covered by workman’s compensation or disability expenses in case of accident or injury

Exposure to frivolous law suits by a client.

Plus, as an independent contractor you will not qualify for disability or unemployment payments if times get tough.

The “Employee Model”: The Stylist’s Perspective
Being an employee in a well-managed salon can have many advantages vs. booth rental. These include…
 Mentoring, guidance, support, education, and training provided by an experienced salon owner.
 Job security.
 The owners efforts in promoting their salon,helping you build a clientele
 The opportunity to benefit from the salon’s reputation and marketing efforts.
 A positive and professional salon environment.
 A team atmosphere where stylists learn from each other.
 Growth opportunities and incentives.
 Book work and taxes handled for you.
 Covered by workman’s compensation in case of job injury
 Save on employee taxes – owners pay all
 Take part in a benefits Package if covered

Conclusion
In my opinion, booth rental is creating a temptation for dishonesty and an underground economy in our profession, an unequal playing field, and division among salon owners. I am alarmed by the way that constant turnover is stunting the growth of our profession, and concerned by the business and career instability that I see. As we compete with one another, you will continue to see a rise in well managed low cost franchises

Price wars, commission wars, staff turnover, high drop out rate of newcomers, and staff pirating are especially alarming in today’s difficult economy. Whether you want to rent stations or hire employees, I urge you to think clearly about the long-term ramifications of your decision. Be sure to get legal advice from an attorney who specializes in labor law and independent contractor issues . It is not my intention to further divide us as salon owners. My goal is to make sure everyone understands the consequences of their decisions based on facts, not hearsay.

New opportunities and a profession we can be proud to be part of will be our reward.