Open Your Own Salon, or Rent a Booth?

Your own salon is appealing, but even for a small cosmetology salon, the starting investmen is substantially greater than renting a booth in an established salon.

Cost:

For most people, the starting investment cost is the most important factor, and often the deciding factor. Renting a booth is definitely a more affordable option than opening your salon, your initial outlay is the booth rental cost plus the cost of your equipment and supplies. Opening your salon requires purchasing or leasing your own space, which by itself is often a substantially larger initial cost than renting a booth. On top of this, owning a salon requires a larger initial investment for things like equipment, products, staff, insurance, and advertising. Licensing is an expense that the salon owner has to absorb, most of the time the business license applies to those renting a booth in the salon, so renting a booth will not incur this expense. You do, however, need to keep your own license current, just like you would as an employee.

As a salon owner, you decide when to open, you decide when to close, as well as what services the salon offers.

Independent Control

When you rent a booth, you agree to the rules that the salon owner has established. The owner decides the hours the salon is open, and while you will have some degree of freedom to create your own space in your booth, there might be some established policies that your would have to follow. When you open your own salon, you establish your own set of rules, you are the boss. From deciding the hours the establishment will be open, to which services will be offered in the salon. You, the salon owner, will set the fees the salon will charge, the hours each technician will work, the business’ policies, in short, you are in charge, and you make all the decisions. This independence carries some risks, if the location you select is not conducive to a successful cosmetology salon, or if the hours you decide to be open are not the best for the location, for example if you want to work during the week and not on weekends, but the area is more suitable for weekends operation, then the salon might not thrive and could even have to close down. As a booth renter, you can go to another location without much expenses, but the salon owner can lose the large initial investment.

With your own salon, yo can create and promote your own brand. If you rent a booth, you are helping the owner promote her own brand.

Creating and Promoting Your Own Brand

When you own and operate your cosmetology salon, your reputation, and that of the business, is always on the line. Creating your own brand, and managing it effectively, creates opportunities to establish your name in your community, and if a growing business is what you are looking for, you can establish your name and your brand, one location at a time, while renting a booth will limit you to one location. On the other hand, renting a booth can provide you with referrals from other specialists who would otherwise turn down clients because it is not their specialty without having to advertise or do anything else, except being a good technician and maintaining good relationships in the establishment..

Legal Matters

Opening your own salon requires not only the financial investments. To open your salon will will need to take care of

  • City Permits: Cities have laws and regulations on where businesses can be established, what type of business can be located in which zone, what building codes are required for a salon, what kind of architecture is permitted in the area, including limits on store signs size, and a few more.
  • State Laws and Regulations: Each state has its own laws and regulations regarding businesses and professions. The owner of a cosmetology establishment is required to have a sales tax ID number, and either a DBA certificate (Doing Business As), an LLC certificate (Limited Liability Company), or incorporation documents, depending on the type of legal entity the owner has decided to use. Cosmetology establishments are required to be licensed. Installations must be to code, and they are required to pass inspections. After licensing, all operators must have proof of continuing education in order to renew their license. Other than this last one on continuing education, a booth renter will not have to worry about regulations, only about keeping her license in order.
  • Federal Regulations: A cosmetology salon owner will need an EIN (Employer Identification Number) from the IRS and follow all regulations for filing income taxes. If the salon is registered as a corporation, income taxes must use the EIN. If the business is registered as a LLC, most of the time the owner can decide to file taxes as a separate entity, or as an independent business. If the salon is registered using a DBA, then all tax regulations are followed under the owner’s name and SSN. While this applies to both salon owners and technicians who rent a booth, most of the time the booth renter has the business in her name and taxes are filed using her SSN (Social Security Number)
Among the important things to consider when making a decision on the type of entity to use when opening a cosmetology salon is the tax repercussions, talking to an accountant is highly advisable before making the decision.