Money Matters

Making Booth Rental Work

In a special focus group, NAILS talked to booth renters and salon owners about how well booth rental works in their salons and how to head off conflict over setting prices, maintaining quality standards, and paying for advertising.

Publisher’s note: In an effort to better understand how booth rental really works in the nail industry, NAILS invited a group of independent contractors and salon owners to discuss booth rental issues openly at a focus group in Detroit, Mich. NAILS editor Cyndy Drummey selected the participants and moderated the discussion.

NAILS Magazine wishes to thank OPI Products (North Hollywood, Calif.), who underwrote the cost of this research forum. Although OPI Products made this project possible, the company did not choose the participants, attend the meeting, or write this article.

The salon owner/nail technician relationship in a booth rental situation resembles the husband/wife relationship: it’s a constant struggle between control and compromise. Nail technicians struggle to defend their independence; salon owners try to create a cohesive workplace.

Our focus group discussion revealed that, although the IRS has very strict guidelines defining exactly what a salon owner is and isn’t allowed to do, salons do not follow these guidelines with any consistency. The goal of our focus group was not to determine whether laws are being broken, but to discover how salon professionals make booth rental work. How does a salon owner maintain service and performance standards if she isn’t legally allowed to tell her technicians how to do nails? Who does the IRS go after if taxes are not paid? How are prices determined in a salon setting where everyone is an independent businessperson? How are sanitation procedures enforced?

We invited the group participants to share with us specifies about their salon operation. Because we wanted them to feel comfortable openly discussing such issues as salon management, finances, and working relationships, we agreed not to use their names,

VIEWPOINT: BOOTH RENTER

Clearly, booth rental provides a certain freedom available only to those who run their own business. An independent contractor (or booth renter) can set her own hours and follow her own rules. But with freedom comes responsibility, and a booth renter is responsible for paying all her own business expenses, including advertising, insurance, and often, phone service. Our focus group technicians all agreed that the indisputable advantages of booth rental are freedom and terrific income potential.

Said one technician, “With booth rental you can triple or quadruple what you’d earn with commission. I started out a year ago as a booth renter and I paid all my own business costs. Within three months, I was earning triple what I earned with a 50/50 commission split.”

Said another technician, “Most salons charge about $100 a week for rent. I make that before lunchtime! The rest of the week is pure profit.”

The technicians noted that booth rental can either provide the means to unlimited income or it can lead to an unambitious attitude. “There’s a personality change when you go to booth rental,” said one booth renter. “Booth renters say, ‘You can’t tell me what to do.’ They don’t want to work very much; they use their open time to play.”

VIEWPOINT: SALON OWNER

The salon owners who rent out space agreed that the advantages to them of booth rental is easy accounting (no need to worry if a technician is giving you your fair share of her income) and financial savings (most agree that the cost of operating as an employer is higher because of employment taxes and insurance).

However, one salon owner whose salon is currently staffed only by booth renters said she will soon convert to a regular employer/employee operation. She said she lacks control over the quality of service in her salon under her present system and is frustrated with her staff’s unprofessional attitude and lack of conscientiousness. “I take care of everybody I work with and I feel I’ve somehow handicapped my people. In reality, they’re already employees; I just don’t provide products. I feel like they have no commitment, even though I’m doing so much to help their business. I spent $7,000 on advertising over six months.”

Although this salon owner has calculated that converting to an employer/employee operation will cost her an additional $2,500 a year in taxes and other fees, she feels it’s worth it if it means she will regain control of her salon.

“Technicians come and go so much that we actually have to turn away walk-in business. One day we turned away four clients because no one was there to service them. If one of my technicians has an open spot in her book, rather than trying to drum up business, she leaves the salon and goes shopping or does errands. I can’t run a business with absentee technicians.”

SETTING HOUSE RULES

The IRS makes it very clear that an independent contractor is a self employed businessperson not subject to the rules and regulations (or whims) of an employer. We asked our group members how a salon can fun smoothly with so many independent people looking out for their own interests.

Many salon owners do enforce a few basic house rules that all staff members – whether independent contractors or employees – must abide by. Although some of those owners may be walking a fine line with regard to the IRS, they have found that rules are necessary for orderly business.

At one salon, the owner requires that technicians keep her apprised of their work schedules. She wants to know how to reach them if they’re not in the salon and what hours she can count on them working. Although individual technicians don’t have keys, the owner will arrange to let in anyone who wants to service clients early or late.

At another salon, work schedules have become a source of conflict. “My best technician is a former salon owner. I have allowed her to come and go as she pleases, but it’s had an effect on the other technicians,” she says. “They saw the freedom she had and wanted it themselves. But I can’t have everyone working their own private schedules.”

WHO SETS PRICES?

If ever there was an area of booth rental that’s ripe for chaos, it’s service pricing. How can you operate a business with individuals setting their own prices for the same services? How do you respond to clients who call asking for prices? What do you tell walk-ins? How can you print a price list?

“We have regular staff meetings,” said a nail technician in the group, “and we agree to keep to our prices within a few dollars of each other.” Another technician said that at her salon all booth renters agree to use the salon’s prices.

All of our group participants explained that pricing, among other issues, is addressed at regular salon meetings. They all agreed that open, ongoing communication is critical to maintaining productive working relationships.

MAINTAINING STANDARDS

Paradoxically, a salon owner cannot require independent contractors to follow certain rules about how things are done, yet the owner is responsible for ensuring that standards are maintained. Especially in the area of sanitation and disinfection, owner and independent contractor must be in accord on salon requirements.

Our group concluded that the best way to enforce good sanitation practices is to set an example instead of rules. Explains one nail technician: “Clients see other techs disinfecting properly, and if you’re not doing the same, clients look at you like you’re not as professional.

Keywords:   booth rental     compensation systems  

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