What is a Barber Shop Chair Rental Agreement?
Barber Shop Chair Rental Agreements are agreements wherein a commercial landlord allows a barber, hairdresser or beautician to rent a chair within the landlord’s premises. The barber or stylist is responsible for servicing the chair and the costs associated therewith. The landlord, although providing the chair, typically does not have any liability to the barber or stylist for the services provided to the client including, but not limited to, injury, negligence or other claims.
Barber Shop Chair Rental Agreements are entered into by all types of barber shops, including barbershops, hairstylists and beauty salons. These types of barber shops range from the basic little corner barber shop to the large corporate multi-store units. As such , the terms and conditions of the Chair Rental Agreement can vary.
A Barber Shop Chair Rental Agreement is typically for an indefinite term and the tenancy continues until the barber or hairstylist or beautician provide notice to terminate the agreement. The benefits for the parties are as follows:
(a) For the landlord, it provides a steady stream of income with little or no risk;
(b) For the hairstylist or beautician, it provides them with the ability to be in business and earn a steady income rather than working for an hourly wage. They are able to use the fulsome facilities of the landlord’s barber shop and on their day off a colleague or friend can rent the chair. If they want to leave the barber shop for a period of time (i.e. wintering in Florida, teaching at the local barber college), they can simply terminate the agreement.
Essential Elements of a Rental Agreement
As is the case with almost all business agreements, it is important to ensure that any rental agreement includes the appropriate terms and details. Common components include the following:
Term of Rental. A rental agreement should include the term, or the period of time in which the arrangement is expected to take place. Are the parties entering into long-term or short-term agreement? If the agreement is long-term, does it set out when it can be terminated, either with or without notice?
Rental Payment Terms. A rental agreement should clearly outline how much the renter will be paying and how payments will be made. A rental agreement should also outline how and when annual increases will be implemented where applicable. Will the payment be a flat monthly rate or based on a percentage of the renter’s service sales? When will it come due each month? Are cleaning fees included as a part of the monthly fee or separate and additional? Does the barber shop have the right to apply a late fee if payment is not made by the due date? With all of these issues, it is best to be very specific in writing, particularly if you consider the terms to be exceptions to general business rental terms.
Rental Space. To the extent that the renter does not have exclusive use of all of the rental space, the rental agreement should outline how the barber shop and the renter will share the space, with appropriate terms for both parties’ use of space. If applicable, the agreement should also address whether solo or shared sinks, towel service, storage space, and/or utilities are included as part of the rental agreement or fees that must be paid in addition to the base rental fees. Will the renter match the barber shop’s $10 service minimum? Who will be responsible for restocking the waiting room coffee, reading materials, etc.? It is important to think through each of these details and include them in the rental agreement to prevent uncertainty about each party’s rights and responsibilities.
Barber Shop and Renter Responsibilities. In addition to the space considerations above, if the barber shop will maintain barber equipment, storage, and utilities, the rental agreement should clearly outline those responsibilities. Similarly, if the renter will be required to make some improvements to the barber shop or additional storage space (e.g., installing their own sinks or making improvements to the common areas), the contract should clearly outline those details, responsibilities, and associated costs.
Barber Shop Rules and Regulations/Services. A solid rental agreement should also outline any rules or regulations that apply to renters and the services they provide. For example, should the agreement cover whether the renter is allowed to perform any non-hygienic procedures like ear, nose, or hair follicle waxing? Multiple online papers have shown damage to eardrums and other health risks exist with barber ear waxing, and ICERW strongly discourages the use of these instruments. If the barber shop allows it, are there any specific conditions (e.g., proof of licensure, required training, etc.) that the barber must fulfill before providing the service? Should the agreement also outline whether the barber will be required to sell products? To whom and in what manner (e.g., no mention on price tags, but efforts to promote the product when a customer asks about it)? From where must the products be purchased?
Advantages of Chair Rental for Barbers
Chair rental agreements provide the barber with several advantages, not the least of which is the opportunity to make money. Financial independence is perhaps the primary benefit of chair rental, allowing the barber to keep all of his or her hard-earned tips. Financial independence also makes it possible for the barber to work as much or as little as he or she wants, without the constant threat of being downsized or let go, especially during times of economic downturn. Moreover, as sole proprietor of his or her own barbering business, the barber has the ability to establish his or her own hours of operation and make the decisions that need to be made to keep the business running smoothly. Not having the overhead and financial obligations associated with a barber shop establishment allows for a significant amount of flexibility for the individual barber, the most significant being the ability to relocate and have portable job skills. If the barber is moved by a spouse, partner or significant other to another area, or if business slows down regardless of location, cutting hair is practically always a skill that is in demand everywhere.
Benefits for Barber Shop Owners
The positive aspect of these agreements for the owner of a salon is the generation of an immediate and consistent stream of revenue. A hair salon usually has the floor space to accommodate several stylists. By collecting rent from each rented chair, a shop owner creates a monthly income equal to the number of rental spots leased out.
Because the individual barbers are responsible for attracting and maintaining their own clientele, there is no need for an owner to spend time and money on advertising or marketing efforts to fill empty chairs.
A rental arrangement also relieves an owner of some significant management responsibilities including:
Finally, because the individual barbers are independent, the owner of a salon may be able to work less and simply enjoy the benefit of its success.
Legal Aspects of Chair Rentals
The issue of chair rentals is a legal topic that intertwines with many other areas of law, business and tax considerations. For example, depending on which state you are located in may dictate the method in which you can utilize chair rentals, if at all. While most states permit chair rentals, states like Oklahoma and New Jersey have banned the practice all together. Additionally, the IRS has been granted the authority by Congress to levy taxes on chair rentals. While there are different taxes that can be imposed, one example is the Unemployment Insurance Tax, which assesses a fee against both employers and employee . While not every state requires an employer to pay for unemployment tax insurance covering a self-employed person, many times the tax can be avoided if the self-employed person operates the business in such a way as to be considered an employee under the law. Chair rental agreements can also have important contract or enforcement issues that differ depending on how the agreement is structured. For example, certain states will not interpret chair rental agreements as contracts where there is an actual exchange of services and thus will not enforce them. Typical contract enforcement requirements such as consideration in exchange for services, a mutual beneficiary in the agreement and intent to be legally bound may be evaluated differently by the court from state to state.
Common Mistakes and Solutions
- Not Updating Agreements – Missing signatures, out of date information or improper wording can all make your agreement seem temporary or informal, which can lead to a host of problems later. If in doubt, have a lawyer look it over and sign it.
- Leaving the Relationship Unclear – Have all details, including expectations of tenant responsibilities and tenant rights, written into the contract in a way that is easy to understand, so both parties know their duties from the beginning.
- Overcharging for Rent – It may be tempting to set a high rent price to compensate for the potential for wear and tear on your chair and tools, or because your location and client base are desirable but it is really better to set a fair price so you don’t scare potential tenants away.
- Setting a High Price for Tools and Products – If you are running a chair rental, you shouldn’t be asking your tenants to pay top dollar for scissors, brushes, clippers, chemicals, or any other products. If they have to buy the same products used by the rest of the shop, it turns their opportunity into a tough deal, not a great career opportunity.
- Creating a Tenancy that is a Tax Liability – A barber shop chair rental relationship is not a true contractor agreement. Technically, they are still your employee, so the IRS still wants their withholding and self employment tax on the account. This means your barber shop chair rental agreement should look more like an employment agreement and have more tax risk for the employer/owner.
How to Create Your Own Agreement
The following is intended to be a guide only:
- For a qualified attorney to review your prior to use, send the agreement to them, so he or she can review it.
- Set forth the names / addresses of the parties, including the business.
- Specify the rent and payment obligations (such as in advance, during the last week or month of employment, the amount, when payment is to be made each month).
- Specify what is included in the price of the rent (for instance, is electricity and heat included in the rent or is it an additional fee? Is it divided up by usage or square footage of the space?).
- List the responsibilities for utilities – (i.e. is the independent contractor responsible for telephone and fax lines, fax machine, internet connection, computer lines, photocopier, fax machine, back bar supplies, hair color, perms, sales tax, business licenses, and some products).
- List whether a booth rental is entitled to paid vacations or sick time.
- List what the independent contractor must do with booth fees (for instance, a landlord may require the booth renter to pay cash weekly, or to make weekly payments until a total amount is reached, after which a person is owing nothing).
- Specify that if there is more than one renter, every renter is responsible for the rent.
- Specify that there is an independent contractor status (i.e. person is not an employee).
- Require a copy of pertinent licenses and insurance faxed to you at least 30 days before the expiration date.
The Future of Chair Rental Agreements
The barber shop industry is constantly evolving, and chair rental agreements are no exception. As we move into a more modern era of hairstyling and grooming, there are several potential trends that may shape the future of chair rental agreements for barber shops.
One potential trend is the increased use of technology in the industry. Many barbershop owners are already beginning to use software to manage their appointment schedules, track inventory, and handle payments. In the future, we may see this technology being integrated into the chair rental agreements themselves. For example, barbers may be able to schedule their own shifts and make payments through a digital platform, rather than writing physical checks every week. Additionally, the integration of technology may allow for more transparency in the terms of the agreement, as well as easier tracking of commission and payment history.
Another potential trend is the move towards more flexible rental agreements . Many traditional rental agreements require barbers to commit to a fixed schedule, often for a full year. However, as the industry continues to shift to meet the needs of a new generation of consumers, there may be a move away from such rigid agreements. This could mean shorter terms, different pricing structures, or more flexibility in scheduling.
In addition to these technological and structural changes, there may also be future trends in the regulations surrounding barber shop rental agreements. For example, there has been a push from some leaders in the industry for more standardization in the agreement process. This could result in more oversight on the rates charged by barbershop owners, or even the creation of a mandated rate schedule that barbers must adhere to.
Future trends in the barber shop industry will undoubtedly continue to affect chair rental agreements. As new technologies continue to change the way we do business, it is important for both barbers and owners to stay informed about the latest developments.