What is a Salon Chair Rental Agreement?
A "salon chair rental agreement" is a legal contract between two parties wherein one party (the "salon owner") agrees to allow another party (typically a hairstylist, barber, or beautician) to lease space in the salon to provide services to salon customers. It’s an agreement that sets out the expectations for how the business relationship between the two parties is to function, in as much detail as possible. And while there are many different stylist agreements a salon might employ – including commission and booth rental agreements – a chair rental agreement is still the most common type of stylist agreement in use today.
As it relates to beauty and wellness , the salon chair rental agreement is typically used by hair salons, beauty salons, and barbershops. When a person leases a chair in a beach spa, resort, or hotel hair salon, for example, this type of stylist agreement would generally be used. It is important to note that while the salon and hairdresser typically have individual tax obligations and legal liabilities, they are jointly responsible for ensuring that the hairstylist is properly licensed. A properly created salon chair rental agreement will normally avoid any tax liability issues.
Important Clauses in Chair Rental Agreements
There are several essential terms that should be included in the contract. Commonly, you would want to begin the contract with a clear statement that it is a rental and not a partnership. It should be stated that rent is due at a certain time, perhaps by the 10th of each month, and how it should be paid to avoid concerns that it may not have been paid on time. While this term most commonly states that the rent is due monthly on a certain day, consider if you wish to start new rental arrangements mid-month, whether the rent will be prorated or the amount for the prior month adjusted.
Term and early termination are important terms to include. Indicating that the contract is for a one year term, and if not terminated with proper notice, the contract continues indefinitely will allow you to plan both for your own income, as well as turnover of space if it is required. The contract should also provide early termination terms, which should provide for termination with a specific number of days notice, and possibly some early termination charge. Note that while you may wish to add or remove some of these terms as appropriate, some states are beginning to restrict the use of these provisions and requiring 30 days notice for early termination.
There are a number of common maintenance responsibilities that you could include in the contract. In addition to these, there are other spaces that are more common for early termination provision, including issues of conduct outside of the salon (criminal convictions, failure to obtain licenses), bad debt, processing credit card sales, alcohol or drug abuse, abusing clientele, health issues and treatment of shared spaces. Because early termination terms are critical, it is suggested that you review all optional terms with your attorney.
Other terms might address other matters including the following:
Non-solicitation of clients can be an important term, particularly if you are giving up the significant investment of equity in the salon space in exchange for the right to live with your choices. A client is part of a salon’s business, and in order to protect your investment you would want to avoid having your present client being solicited by those who are working with you. Non-solicitation provisions are a bit different from non-compete provisions, which can be applied more broadly to prevent any solicitation of beauty services by a former chair rental operator. Some salons also provide a non-solicitation in which the salon owner agrees not to solicit the clients of the chair rental operator. This area is often ripe for litigation, and care is required in drafting.
Essential Legal Considerations for Salon Owners and Stylists
When it comes to salon chair rental agreements, there are a few legal aspects that both the salon owner and stylists should have on their radar:
Liability Insurance: From a stylist’s perspective, it’s a good idea to carry some sort of liability insurance. Your stylist license protects you from anything you do with your license inside your salon suite or table. If you happen to do an outside job (sometimes called "off the clock" jobs or "freelance work") you are no longer protected by your state board of cosmetology license, so you are wide open to being sued and held financially responsible for any possible mishaps. Even if you don’t do freelance work, there is a chance a client could mistake you for an employee, injure themselves, and then sue you.
From the salon owner’s perspective, you definitely want liability insurance. You may want to carry insurance at the rental suite level to cover any possible damages that result from the actions of a stylist, as well as at the business level to cover your possible liabilities.
Not all rental chair agreements cover liability insurance. If you are an independent contractor, you should be careful that your rental agreement does not require you to have in-force liability insurance. If you are categorized as an employee of Steve’s Exclusive Salon Rental, you are classified as an employee of Steve’s Exclusive Salon Rental LLC, and Steve’s Exclusive Salon Rental LLC should therefore provide employee liability insurance. Steve’s Exclusive Salon Rental LLC should also carry insurance on the salon itself, and also have salon liability insurance. When you and your clients walk into the salon you don’t want to be opening yourself and Steve’s Exclusive Salon Rental LLC up to lawsuits from your clients due to an unsafe environment.
It’s important to protect yourself and your clientele from possible risks that you are already exposed to as a result of the nature of the services you provide, and it’s also important to protect both you and your salon owner from exposure to more liability than necessary and for any and all losses possible that might occur as a result of being the stylist or owner of Steve’s Exclusive Salon Rental LLC.
State Board Requirements: Know your state board requirements for your type of business, be it hair, makeup, spa, or aesthetics. All states have state board requirements operators must meet before they legally operate. For example: some boards require certain aesthetic treatments to be performed only by licensed aestheticians, and not by unlicensed estheticians. This is also true for hair and nail trays as well: for example there are certain boards that require there to be a licensed technician operating any sort of hair service, whether a licensed aesthetician, certified color specialist, etc., even if it is a low-risk task. For example, there is one universally safe hair treatment that isn’t chemically based that has only a slight risk of folliculitis and headaches, a treatment that is easily corrected if applied incorrectly – we are talking about the use of a heated fabric/hot towel cap on the hair. Some state boards will not allow any unlicensed person to operate this apparatus, while others state boards recognize as low-risk the fact that if it goes wrong the client merely has to take a shower to wash out the fabric and stop the headache. Essentially, be diligent when you lease your rental suite and nail or esthetic tables and ensure that you have checked in with your state board to make sure you are in compliance with the law.
Contract Disputes/Legal Issues: As with any legally binding contract, the best way to avoid contract disputes with your salon owner or your independent contract stylists is to have your rental agreement in writing, so you know the rules and general processes that govern your relationship with the salon. In the event that you are ever required to take legal action to obtain the remedies guaranteed to you by the terms of your rental agreement, you will want to have this written agreement giving you the security of having something to fall back on. In the event that you need to take legal action, you will also want to consult with a lawyer to ensure that your legal rights are properly protected.
Advantages of Chair Rental for Salon Owners
Chair rental agreements can offer several benefits to salon owners. For those owners now operating under a commission-based system, the transition to chair rental can be difficult. However, once the system is in place, owner/operators will have:
The reality is that if you have space available, and are not generating enough revenue to cover your current overhead, hiring employees and paying them commissions may not be the best system for you. You have two options: find a way to increase your current client base, or develop another way of generating additional income. But adopting the chair rental system may offer you the best alternative.
Here are some of the advantages to the salon owner of chair rental:
The risk of new trends and fashion changes is borne by the individual stylist, not the salon owner.
An Owner/Operator has more control over operating costs and income generation.
A salon owner earns rental income without dividing the money with employees.
The salon owner can attract talented, independent stylists.
Chair Rental enables an owner/operator to focus on marketing and promotion, revenue sharing with their talented staff, and raising customer awareness.
Why Stylists Choose the Chair Rental Model
Stylists opt to enter chair rental agreements for many different reasons. For some, the most attractive option is the potential to earn additional income from their base salary. Stylists make a commission on all services and products performed inside the salon, but when they generate their own clients through advertising and customer referrals, they receive 100%. This allows them to increase their income without the opportunity for promotion within the salon, which can take years when working under an established stylist .
Chair rental agreements are also enticing to stylists because they allow for greater flexibility in scheduling, particularly with respect to time off. Salon owners traditionally require their staff members to work all scheduled shifts, available to serve all of the clients and patrons of their brand. Chair rental agreement provisions, however, allow stylists to establish their own hours and time off, according to their particular demands. Many stylists who enter into chair rental agreements do so because they have other business interests outside of the salon, such as serving customers in photography or creating product lines.
Negotiating a Fair Rental Contract
Just as it’s important to consider the lease terms when leasing space for a salon, it is equally important to negotiate the terms of a rental agreement with any stylist who will be working in the salon space. While an agreement is often less formal, it does not mean that it becomes any less binding in nature.
The first and possibly most important term of the agreement between the owner/operator and the stylist is the rental amount. Typically, the owner/operator will charge a fixed fee or a salary to the stylist, and then will take a percentage of the commissions earned on the services provided. When establishing the rental rate, it is important to remember that it is money coming out of the stylist’s pocket before he or she has taken in any money.
Unlike a tenant who has the protection of the law if the rent is not due or not timely paid, the landlord has much more immediate recourse against a stylist who does not pay rent. The concern here is that the owner/operator could evict a stylist at any time and for causes that would not be permitted under landlord/tenant laws, unless the stylist was to voluntarily vacate the premises by providing proper notice. A stylist who is evicted would have nowhere to go but, at best, to a competitive salon.
Even if there is a good relationship between the parties, it is important that the parties agree on how payment is to be made and when it is due. If the owner/operator requires a monthly payment in advance, and the stylist has provided services to a client on the last day of the month, then the proceeds from those services may not be received until 10 days later. If the owner/operator has legitimate expenses to cover, while it may make sense to require payment in advance, it may be more palatable for the stylist to pay on a weekly basis. In that manner, the owner/operator does not have to wait for payment to be made after the services are provided, and the stylist is not adversely affected by paying rent out of money earned from clients who received services just prior to the payment becoming due.
With respect to the services provided, the parties should agree on who is handling the marketing. The stylist needs to protect her client base, so it may end up being more favorable for the stylist to handle her own marketing than for the owner/operator to handle that. While signage may be the property of the owner/operator, a stylist should not be precluded from advertising herself. Similarly, while it may be unlawful for a landlord to refuse to lease to a massage therapist, a rental agreement could preclude the massage therapist from providing massage services in the space by treating the area as exclusive to hair stylists. Even in a barber shop, there are many related services being provided to different parties at different points in time. The parties should agree on who can provide what services and in what locations in the shop, and agree to be amicable even if the parties do not provide the same type of services.
It may also be preferable for the parties to agree that the stylist will not interact with that stylist’s clients outside of the salon itself. If the stylist has another job, and potentially another salon at which to earn money and potentially limit her exposure, then a client may have less loyalty to that stylist. Assuming that the goal of both parties is to maximize the stylist’s income and thus the owner/operator income as well, the owner/operator should allow the stylist to grow her business. The owner/operator would have the ability to have independent contractors, therefore this would also allow the owner/operator to still manage the salon and not give up control by having to hire an employee. Both the stylist and the owner/operator want the stylist to be successful, so the rental agreement needs to be fair and reasonable as it can only work if both parties’ success depends upon the other’s.
Common Pitfalls and Ways to Avoid Them
Even with all the important components of a rental agreement, mistakes can happen. The most common error is failing to clearly define the services provided—this should be done using specific and unambiguous terms. Few things can cause as much damage to your reputation as seeing an upset customer leave a stylist’s chair without having received the service she paid for. Either through simple miscommunication or something a stylist said, letting down a client is something everyone wants to avoid. Even if the services provided are defined legally, vague terms could be miscommunicated between the stylist and the salon owner.
Another common mistake is leaving payment terms open-ended. Like the previous example , open-ended payment options can cause trouble—it may benefit the stylist by offering some financial freedom, but it makes it difficult for the salon owner to budget monthly expenses. Without a firm schedule for payment and a specific price for services used, if a stylist were to leave, he or she would be difficult to track down to collect outstanding payments.
Salon owners should also not stray from any stipulations set out by local law. Even if an area has not yet outlined mandatory regulations, you shouldn’t attempt to set your own. It is better to err on the side of caution than to bend or break the law because it’s unclear.