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Feb 28

Increase Salon Income. The perks and risks of renting out space in your salon

Reading Time: 4 mins

Renting out space in your salon can be an excellent way to diversify your offering and drive some extra income. When starting your salon, you have to decide if you want to employ individuals to work for you, or if you will fill your salon with self-employed chair renters. It’s important to know the difference from the beginning, as failing to understand your responsibilities could spell trouble. 

In this article, we will outline some of the misconceptions around space renting and how you can avoid getting mixed up in the confusion. We’ll look at the advantages and disadvantages of this practice so you can determine if it’s the right choice for you.

 

What is space renting?

The most common misconception about chair renting is that it’s one of the types of employment available to salon owners. This couldn’t be further from the truth. Chair renting is not a form of employment. Instead, you are acting as a landlord instead of a boss.

This means that you will avoid:

  • Employment law. You aren’t employing the person, so they are not protected by UK Employment law. 
  • Employment costs. You don’t have to pay them when they take time off. You are also free from things like parental leave. You also don’t have to pay their national insurance.

 

When you rent a chair, you are responsible for:

As the salon owner, you are responsible for creating the rent-a-chair agreement. This is not an employment contract, but rather a lease agreement. You can include things like the term of the contract, terms of termination and what your renter will have access to in your salon. 

You will also have to outline your liability if they cause injury to a customer or a member of the public. You can find advice about creating a rent-a-chair agreement on the HMRC website. A rent-a-chair agreement is a legally binding contract, so it’s important for both sides to understand what they are getting into.

You will also have to agree on how you will be paid. You might choose a weekly/monthly rental, or agree to take a percentage of the contractor’s earnings. You can also offer a combination of the two, so you have some guaranteed income which is topped up by a small percentage of their takings.

 

In a rent-a-chair agreement, you cannot:

There are certain things that are out of your control when you agree to rent a chair to a stylist. This includes:

  • Setting their prices
  • Setting their working hours
  • Choose which products they can use or sell
  • Choose which services they offer
  • Choose what they wear to work or make them wear a uniform
  • Pay for their training
  • Control how they run their business

Failing to follow these rules can have disastrous consequences for you. This is known as sham contracting, and it is a way to get around offering an employment contract. If found guilty, you could be liable for backdated taxes in addition to penalties for late payment. The renter can also accuse you of not providing certain employment benefits, such as paid leave. This is why it is important you understand the key differences.

 

What are the risks?

  • Your renter could be competing for clients. If they offer a similar service to a similar standard, you could be competing for every person who comes through the door.
  • It can be difficult to run a smooth operation with multiple people running their own business under one roof. Customers won’t care about your business structure, they just want to be given the best possible service. This can make things complicated when customers try to book with your salon but don’t specify who they want to do the treatment.
  • Your customer data could be at risk if things don’t go well with your chair renter. With a salon software like Salon Iris, your customer data will be safely secured in the cloud and you can decide who can access it. This is one way to get around having multiple people running a business under one roof.
  • If the chair renter doesn’t do a good job, this could damage your reputation. You can’t decide how they do their job, so if they let their standards slip, this will reflect poorly on the entire salon. This is why it is important to include a clause in your contract that allows you to end your agreement if you are concerned about the reputation of your business.
  • They could cause conflicts with existing staff members. If you have a mixture of staff and chair renters, this could cause friction.
  • They might not fit with your salon branding. Since you are not allowed to decide what they wear or which services they offer, they could take your salon in a direction you aren’t happy with.
  • Sharing equipment can be difficult to manage, it will require effort from everyone to make it work smoothly. This is why it can be helpful for each person to have their own tools of the trade.
  • You can’t fire them if things don’t go well. If you aren’t happy with the way things are going, but they haven’t broken any terms of the contract, it can be difficult to get rid of them. You would have to put up with them until they break their contract or the contract expires. This is why a break clause can be helpful so they can leave if you both agree it is the right thing to do.
  • They could take your clients with them. They are essentially a rival business, and your clients and customers may choose to follow them if they leave.

Space renting can be an excellent way to guarantee income, but it is not without its risks. The best way to make space renting work is to offer up space for people who offer different services. This can help to diversify your offering without inviting competition into your business.

Another way to help manage the potential impact of introducing chair renters is to agree to a trial period. It should be clear pretty quickly if things are going to work out, so having a 2-3 month trial period can help to protect you.

While renting salon space might offer you some financial freedom, it should never be done to the detriment of your business. If you want to build something you can take full ownership of, then renting chairs might not be the best way to go.

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