If you have unearthed your true motivation for becoming a salon or spa owner and have come to terms with the pros and cons of business ownership, you’ll want to examine the type of salon or spa that’s right for you. Not so much in the styles of salons and spas or the services offered, but how the business is set up.
There are a few types of salons or spas as far as structure: employee, commission, and rental. Many value-oriented chain salons only have hourly employees and typically do not offer a percentage of commission to service operators. Others pay minimum wage plus a small commission. Either way, the operator is an employee of the salon.
A straight commission salon offers only a percentage of the services, which can range from 30-60 percent of the service rendered depending on the agreement. Some states allow salons to operate on a straight commission basis and have different laws as to whether the operator is an employee or an independent contractor. In the case of this business model, conduct thorough research in your area and consult with a CPA to be sure this structure is both legal and realistic for you and your goals.
Another type of business model is a rental salon, where an individual operator rents a room or station from the salon owner. Known as booth or suite renters, these operators each have their own business and are responsible for paying rent, usually weekly, to the salon owner. They are not categorized as employees and therefore can come and go as they please and set their own hours. In exchange for rent, the operator is granted access to the salon with their own room or station. In a booth renter situation, the rent usually includes a salon chair, countertop, storage, and access to shampoo bowls and bathroom facilities. The renter is responsible for marketing their own business, booking their own clients, collecting payment and paying their own taxes, among other things.
In the past several years, salon suites have become popular, which is a rental situation where individual rooms or suites are rented and other than electricity and water, it’s up to the renter to supply everything else. In the case of suites, a key is usually provided to the facility as well as the separate suites.
There are some upsides and downsides to each type of business model. With employee salons, it can be harder to motivate staff, as there is little financial reward for them beyond being paid minimum wage or whatever pay structure you have set up. Naturally, employees can keep their tips, which will vary depending on the services provided and the rate for those services. Just like any employee situation, the employer (salon owner) is responsible for marketing the business, helping to build clientele, and must supply all tools, equipment, and product used by employees to do their job. The upside with an employee salon is that the owner receives most or all of the service fees. If run efficiently, employee-based salons can be very profitable but take a hands-on presence either by the salon owner or a team of managers.
For the areas that allow commissioned operators, the salon owner is still responsible for advertising, attracting clientele, collecting payment, and paying the operator their share. The rules and practices regarding supplying tools and products vary from area to area, but the salon owner is still responsible for providing essential equipment, such as salon chairs, shampoo bowls, etc. The salon owners may or may not charge for supplies, like color, back bar, towel services, etc. The upside with a commission salon is that the staff is usually quite motivated, as the more services they perform, the more money they can potentially make. There’s definitely an incentive for them to keep busy.
In the case of rental salons, the relationship between the renter and the salon owner is strictly one of landlord and tenant. The landlord cannot dictate the hours worked, how the services of the renter are performed or the clientele the renter services. The upside of rental salons is that as long as all stations are filled, salon owners have a set amount of income generated each week/month. The downside is that you, the salon owner, are now a landlord, which can come with its share of issues. Many rental salon owners find that renters are quicker to complain than commission operators or employees. They also find the power dynamic to shift in favor of the renter.
In regard to salon structure, our best advice is to first to explore what is legal in your area and to look into any legislation trends or changes. Armed with that information, research what other salons in your area do and, if a commission salon, what the split is between the salon and the service provider.
If for any reason everything above is just too overwhelming for you, consider becoming a suite renter yourself. That way you can run your own business as you see fit but don’t have to manage others. For everything that you need to know about renting a suite, check out this article from MySalonSuites.com.
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