Key Components of a Salon Rental Contract

Salon Rental Contract Basics

A salon rental agreement is a common document used within the hairstyling and nailcare industries. It is used to outline the terms of lease between a commercial hair salon company and an independent, self-employed stylist or stylist group. In some cases, it may be in the form of a hairdressing salon rental lease. A standard rental agreement for hairdressers is a written contract that outlines individual usage of the workspace and the responsibilities of the styling professional in the commercial space.
Cosmetology and hairstyling are very busy professions, with time being at a premium as they are. Earning a license can take a school graduate a year to eight depending on the skills taught. Because it is such an important talent, many professionals open their own shop upon graduating. This has led to a rise of free-standing salon businesses only accounting for 20 percent of the total salons nationwide . The remaining 80 percent of styling shops are rental units. Hairdressers generally sign rental agreements with these lucrative businesses due to the time involved in starting their own establishment. This allows them to save on most startup costs while developing their skills fully.
The rental agreement for hairdressers is generally reviewed annually by both the styler and owner. It outlines tips on proper salutation and treatment of clients. It deals with fees and payments for usage of equipment inside of the building. It can also lay out solutions for deposit refunds and other profits such as sale of retail items. A hair salon rental agreement often ensures an agreement on how excellent customer service is to be delivered to clients and how often hygienic practices need updating to maintain a clean, neat space for customers.

Provisions of a Salon Rental Contract

Lease Term: The agreement should explicitly state the length of the rental agreement, whether it’s based on a month-to-month period or for a specific number of months.
Payment Terms: The frequency of rent to be paid should also be stated. Is it weekly, bi-weekly or monthly, etc. The amount that is due can also be explicitly stated.
Utilities: This is up to negotiation, but the agreement should clearly state whether or not utilities are included in the rent and which utilities that might be.
Responsibilities: All parties to the agreement should have their responsibilities outlined in the contract. This would include who keeps the common areas clean, restroom supplies, and what happens if a piece of equipment goes down or needs repair.
Termination: How much notice does the salon owner have to give the renter if the owner is terminating the rental agreement? This is typically 30-60 days but may be negotiated. Also what might terminate the rent agreement? Examples might be if the renter is:
Fire Alarm System: Is it the renter’s responsibility to have his/her alarm code changed at their expense? If the alarm code isn’t changed and the alarm system goes off thinking the client has been robbed, who would be responsible for the false alarm? There may be a fine from the fire department.
Insurance: Does the salon owner require renters to have "Professional Liability Insurance"? If so, this would need to be discussed prior to signing the agreement as the insurance company may need to certify the insurance company. This may increase the insurance premium significantly depending on the state.
Consult an attorney to draft a salon rental agreement or use an online legal service.

Regulatory Considerations for Salon Rental Contracts

Depending on the governing jurisdiction, salon rental agreements may be governed by state statutes regulating salon facility requirements, local ordinances, and zoning and licensing requirements, as well as, applicable federal laws (e.g., for discrimination in employment, health department requirements etc.). Careful attention should be paid to the statutory and regulatory requirements that could affect insurances, scope of practice requirements, consent and disclosure requirements and, most importantly, protections against claims of misclassification and improperly structured employment relationships.
Laws in this category include, but are not limited to, the following:
Although the socio-economic and industry standards may differ from one municipality to the next, the business practices between the two models of hairstyling (e.g., employee vs. booth rental arrangements) are relatively the same. Salon owners/delegated beauty salon managers should consider consulting with a professional to ensure his/her business practices are compliant with their specific state and local law requirements.

Advantages of a Clearly Stated Salon Rental Contract

A good, detailed rental agreement is beneficial to both the salon owner and the renter. It provides everyone with a clear and defined set of ground rules and expectations, as to what is expected from each party. Failure to specify rules can lead to misunderstandings between the salon owner and the renters, which can then lead to negative outcomes in terms of relationships, reputation and even legality.
Both the salon owner and the renter are taking a risk when they enter into a contractual agreement. The salon owner is allowing the renter to run their business within their space, and the renter is relying on the owner to provide them with a suitable working environment where they will make sufficient profit. But unless there is a well-defined rental agreement in place, the renters have no guarantee that the owner will continue to allow them to occupy the space. By having a solid set of rules there will be a secure and stable environment for the renters. This also protects the salon owner by allowing them to have solid control over their business.
The salon owners primary interest is to make as much money as possible, but having a rental contract in place helps them out by giving them an added layer of protection against the endeavors of less-scrupulous stylists. Without a contract, a stylist that leaves without proper notice would end up with a salon with badly damaged chairs and a significant loss of income without a proper warning. With a rental contract, the salon owner can protect their business from damages.
A defined contract can also help create a strong bond between the stylist and the owner. When the owner enacts a policy change, such as a new charge for cleaning services, the stylist cannot complain because it was agreed upon as part of the contract. This stability can benefit everyone involved by creating and maintaining a stable environment where the owner and stylist can communicate openly.

Salon Rental Contracts: Common Pitfalls

One of the most common errors we see is a failure to check in on whether your rental agreement is protecting your business from liability. Many salon owners do not mandate that their employees have their own insurance, and they assume that since the employees are licensed barbers or cosmetologists, that they will be responsible for their own work and thus safer on the premises. This is not the case. It is always a good idea to insert an indemnification clause, and it is even better to make sure all your booth renters have their own insurance, and that they have signed agreements assigning liability to their own insurance policies in these indemnification clauses. Many times the barbers, cosmetologists and nail technicians working in your salon do not have their clients sign any agreements, and in the event that something goes wrong, such as burned hair or an allergic reaction, and a customer has records of treatment and contacting your salon, they could very well sue your salon instead of, or in addition to , the barbers or cosmetologists. Here is an example of the sorts of things we are talking about based on things clients have been sued for who did not think they needed written agreements with their employees.
Client was involved in a salon that had barbers and hair stylists renting space. There was no written agreement with the people running the chairs. One day, someone came into the salon and knocked over a bottle of hair coloring product. The color spilled on the floor, and as the salon owner was walking away, he slipped and fell on the dye and hurt himself. He claimed that the dye caused an allergic reaction and he had to go to a doctor, who would not treat him because he suspected the dye was the reason for a bad reaction. The salon owner had no protection from this sort of claim, nor did he have any insurance that covered this type of accident. Furthermore, the landlord of the commercial space decided he did not want to keep his tenant because the lease said that the landlord could not have the tenant’s business operate in a manner to interfere with other tenants in the center, and the small claims judge found that to be a serious concern, given the tenant’s reputation, and allowed the tenant to find another place to operate his business.

How to Make a Salon Rental Contract

When drafting salon rental agreements, there should be important steps taken along the way to ensure that are as ironclad and legally sound as possible. Meeting with employees to discuss the implications of a rental arrangement is one of the first steps taken, as this allows the salon owner and those working in the space to come together in a neutral setting to avoid any misunderstandings. Throughout the early stages of a rental relationship there needs to be open dialogue between both parties to avoid future disputes. In many cases, an attorney will be sought out to draft the agreement itself, as this is a legally binding contract between the owner and the renter and accuracy is imperative. That being said, if you don’t have the funds to spend on an attorney, there are some templates found online that can serve as a rough starting point. Be sure to read through the template carefully and consult a legal professional if there are any questions or statements that seem out of place. Finally, have the agreement reviewed by a legal professional once more before having both parties sign. This ensures that all clauses, rights, and responsibilities are correct and that the entire contract is mutual among all parties. When done correctly, drafting a salon rental agreement can be a relatively simple process, but it does need to be approached with care and caution to help avoid issues with employees later down the road.

Revising and Reviewing Your Salon Rental Contract

Heeding the old adage about the need to review and update your estate plan, it is equally as important to regularly review and update your salon rental agreement. Insolvency filings by hair stylists can often be attributed to holding over outdated agreements. Conversely, when there is a new practitioner in the studio or salon, an updated agreement will ensure there are no misunderstandings about each party’s rights and obligations.
For example, even though your last agreement was drafted or updated less than five years ago, if a significantly new law has been passed since that time, it is likely that your agreement needs to be updated to ensure compliance with such new laws. Otherwise, an old agreement not reflective of current law can put you at risk of an insolvency filing and/or a lawsuit.
It is also good practice to review your studio or salon agreement , when implementing procedures for your business that could impact existing agreements. For instance, you may be using a credit card processor widely used by the salon industry that requires your studio or salon to gather and maintain customer zip codes, they may also require that you have a privacy policy in place to protect the collection and use of customer information. Depending on what information you are collecting, your existing studio or salon rental agreement and/or house rules may have to be updated to include provisions requiring the removal of any confidential information from the premises, the confidentiality of such information and references to your studio or salon’s privacy policy and practices.