What is a Booth Rental in a Salon?
For the uninitiated, salon booth rentals are arrangements where a stylists leases their space, and thus makes a "booth" (i.e. a part of an office) within a salon to operate their business at. This is increasingly popular as a way for salon professionals to maintain their own businesses while benefiting from the other amenities a salon owner provides their stylists’ clients.
As cheap as it is, that does not mean it is subpar to leasing an office or store as a standalone business . Being a salon professional who is engaged in a booth rental agreement means that you are your on boss and have the same freedoms that a traditional employee does. You have the autonomy to run the business in any way possible, short of breaking your rental agreement. The ability to set your prices free from someone else’s control is also a huge benefit and all the income you bring in is yours. However, it can be difficult to separate or compartmentalize your salon business from your personal life and it can be even more difficult to find a good work and life balance.
Key Components of a Salon Booth Rental Agreement
A salon booth rental agreement should clearly lay out the terms of the relationship between the salon owner and the stylist. The most important elements are:
The Schedule – An agreement should define the work schedule for the stylist and whether the stylist is required to be at the salon on certain days and/or for a minimum number of hours per week. Including a provision that allows both the stylist and the salon owner to cancel the agreement with sufficient advance notice is also recommended so clients are not inconvenienced.
Compensation – Compensation can base on a percentage of services, a flat fee or a combination of the two. A careful analysis of income and expenses will help determine the best option, as well as the most effective method of calculation.
Deductions – It is common for rents to be deducted for products purchased by the stylist. However, the type of products sold by the salon can create the appearance of a joint employer relationship. It is important to be aware of how these deductions may affect an Independent Contractor status.
Liability – Determining liability for activities by the stylist and the salon itself that result in liability to a client is an important part of an agreement. The parties should have a detailed discussion about insurance held by the salon and by the stylist, as well as in what situations the salon will indemnify the stylist and vice versa.
Booth Rental Agreement: Law & Legal Considerations
"Employment" Status Under the Law
In considering whether a salon employee is an actual employee or an independent contractor, the U.S. Department of Labor ("DOL") has announced an "economic reality" test that the DOL applies to determine whether an individual is in business for himself or herself or is economically dependent upon another entity for his or her employment. The outcome of the test does not depend on isolated factors but rather on the totality of circumstances. Factors suggesting independence generally include: the individual’s freedom to perform work for other businesses and persons, the individual’s investment in facilities and equipment that are not shared with other employees, and the individual’s ability to realize a profit and risk of loss. In contrast, factors suggesting economic dependence generally include: the individual’s physical location, work hours and earnings from the independent contractor, the working relationship’s exclusivity, and control over the individual’s work schedule. The "economic realities" test for determining whether a worker is an employee or independent contractor also applies under the federal Fair Labor Standards Act ("FLSA"). In addition to failing the independent contractor test, salon employees who work on commission frequently receive compensation that is less than the minimum wage under the FLSA and are not paid overtime. The U.S. Department of Labor frequently investigates and recovers unpaid minimum wage and overtime for improperly classified employees. Some states have a stricter standard for independent contractors. For example, at the time of publication Florida, Georgia, and Kentucky require their version of the independent contractor test to determine whether a worker is an independent contractor or employee for workers compensation purposes. All three require that the worker be free from the employer’s control.
How to Personalize Your Salon Booth Rental Agreement Template
You can easily customize a booth rental agreement template to suit your specific needs. However, it’s important that you take the time to customize and personalize the agreement so that it reflects the operations of your particular business and so that you are compliant with your state’s regulations pertaining to some aspects of salon rental agreements. You want to make sure that each detail of your rental agreement accurately reflects the terms of your particular business so that there is no confusion over what is expected of the salon and the renter.
In addition to adding and removing any clauses that are necessary to reflect your particular business operations, you will also need to thoroughly review local and state laws to ensure compliance. Most states won’t require many changes to the basic, default item requirements for a rental agreement, but there may be some that are of utmost importance. For example, many states require a clause that states the renter has full control over the manner and details of their work day, so it’s important to add that to your agreement if it isn’t included by default.
In addition, there may be other clauses that are required by your state or local government, and some of those may include specific language that they would like to be used in the agreement. Missing some of these clauses, or not using the required language, may make your rental agreement non-compliant, so it’s imperative that you check before using the rental agreement template.
Complimentary Templates for Salon Booth Rental Agreements
One great benefit of finding an agreement template online is that you can often find a version that has been specially tailored to suit your needs as a salon owner. A template that has been drafted or vetted by industry professionals or attorneys is far more likely to contain the right kind of language for your salon. For example, it should not only have legal protections for both you and your employees, but it should also contain specifics relevant to the hair and beauty industry. There’s no point in looking online if you can’t find a template that will make your job easier. The following are some of the best resources online for free templates:
LegalSoftwares.net offers a split booth rental agreement that is easy to download and fill in on your computer , but the template may not be as industry-specific as other templates.
iLawyerBlog.com provides a link to a free Suite Rental Lease Agreement from US Legal Forms that covers all aspects of a booth rental agreement.
SalonOwnerOnline suggests using their downloadable contract and disclaimer that can be tailored to your salon’s needs.
Remember to always be on the lookout for blank space within the body of a contract or agreement designating where you should write in the names of those involved or where you should add in disclosures specific to your salon that are not already part of the template. Also check downloadable forms for other requirements specific to your city and state that may not be included in all agreements downloaded from other sources.
Negotiating Your Booth Rental Agreement: Tips
When going into any type of business negotiation, it is important to know what you are up against during the process. This is no different for negotiating a salon booth rental agreement. First things first—have your own independent legal counsel review the proposed contractual agreement. An experienced attorney should either review and potentially redraft legal documentation on your behalf, or at the very least have the agreement reviewed so that you are able to best negotiate the key terms of the agreement to protect your personal rights as a tenant and business owner. Before really delving into the terms of the agreement, consider the area where you would like to open your salon and how much business you could potentially make while there. Do you want to be in a large city, or would you prefer being somewhere more suburban? Where will your clientele be coming from and how easily can they access your location? While these questions might not be directly answered in your booth rental contract, they are important to consider when deciding if a space is right for you. If you are paying a premium cost to be somewhere that will not generate any business, then you might want to rethink your location. That being said, there are a number of other key factors involved in negotiating a booth rental agreement, things that should be considered to protect yourself and your business. Start with the basics: How much is your monthly rent and what type of terms and payment schedules are outlined in your agreement? Be honest with yourself while looking at these terms. Do you actually think you can pay that amount for the space? Don’t let the fact that you are so excited about opening your salon blind you to significant issues in this area. While you absolutely want to negotiate for the lower rent, you also don’t want to start off on the wrong foot with your lessor by underestimating your necessary budget and then being unable to pay your rent. Another important tip when it comes to negotiating rent: remember that you are leasing space in someone else’s business. In this case, you are actually opening a business within their business. This is a big undertaking, but one that you can be extremely successful with. Just make sure you have done your homework prior to moving forward with a space. Figure out what similar salons in the area are charging for rent and how that reflects the results you are looking to achieve. You do not want to be "that restaurant", paying too much for your space to the point where you are unable to afford the cost of your business.
Booth Rental Agreements in Depth: FAQs
How much should you charge to rent out booth space? Typically, the amount that a salon can charge a booth renter goes up as the square footage does. However, there are many factors that go into charging for booth space. You don’t only want to be paying rent. You should also consider charging for supplies, utilities and other fees that can accrue outside of actually renting the space. When determining how to charge for your services, you should also take into consideration what you would be paying for rent if they weren’t there. Rent varies a lot, but is always one of the biggest expenses for a salon.
Does a booth rental agreement protect both parties? Ultimately, it is a business contract so it does not make or break a relationship. However, it is important that both parties are protected. Owners obviously need the protection of a contract so that they are compensated properly and can reserve the right to kick someone out if they are a bad employee or renter. But, renters also need protection in terms of schedule, confidentiality and other things . For instance, it protects them from discrimination and harassment, so that they feel safe while working in your salon.
Are booth renters employees or independent contractors? This is a tricky question and one that you should ask your lawyer about. This is one of the most common questions everyone has. The IRS has various tests that they use to determine if someone is an independent contractor or an employee. In general, they look at: If any of these are true and you are treating them as an independent contractor, they are not an independent contractor in the eyes of the IRS. Classifying an employee as an independent contractor can get you into serious trouble, so I would strongly suggest you check with your attorney before doing this.
Can I fire a booth renter? This depends on the language in your booth rental agreement. If they are a true independent contractor, you can’t really fire them because they aren’t technically employed by you, so the relationship is a business one, not an employer/employee one. However, if you do need to terminate the agreement, a salon owner just needs to uphold their side of the agreement in order to do so.