Salon and Spa Types and Their Locations
Entrepreneur: A person who have possession of a new enterprise, venture or idea
and assumes significant accountability for the outcome and risks.
Sublicense: A license given the rights to occupy a rented space to a person or a
company.
Place of Business: A fixed establishment, temporary location or place.
What type of salon do you want?
 Hotel salon and spas: its focus on the unique character of products and
their high quality should be considered another great advantage that
contributes to the evolution of the brand and its becoming popular.
Additional services may be controlled by:
–cosmetology/barber board
–medical board
 Department store/ fitness center salons and spas: Usually contract with a
Nation-wide chain of salons and spas.
Salon and spa relies on department, store/fitness center for clients and
marketing, Operates in a leased space area, Often contracts with a chain
salon or spa
 Mall/ shopping center salon and spas:
1.New location
will have floor, walls, ceiling, toilet, heat/air capabilities, electrical
connections, display window
2. Existing location
you will have to work with what you have, but it may be more cost
effective as much of the work has been done
 Freestanding salon and spas: Corporation/partnership owns the property
– “rent” goes to pay for the property
–landlord/salon and spa owner arrangement
–if owner lives in the structure, possible tax deductions
Medical Spas: Was introduce by a group of doctors in 1997. Western and holistic
medicine combined with spa services
Must have a physician’s license or partner with a physician
Services may include Botox, laser hair removal, chemical peels, Restylane, and
dermatological services
Who Own the Salon and Spa?
 Sole Proprietorships: A single member owns all the assets of the business
Advantages: least expensive, complete control, keep all income, profits flow to
owner’s personal tax return, easy to dissolve
Disadvantages: Unlimited liability and legal responsibility (Personal assets are at
risk), Limited funding, employee benefits are not directly deductible from
business income
 Partnerships: Two or more people share ownership of a single business
Advantages: easy to establish, increased ability to raise funds, partnership
opportunity may attract employees, complementary skills
Disadvantages: Jointly and individually responsible for the actions of the other,
profits must be shared, decisions must be shared, which may cause
disagreements, may have limited life
Types to consider
1. General Partnership
2. Limited/ Limited liability
3. Joint Venture
 Corporations
Advantages: shareholders have limited liability, shareholders can only be held
accountable for their investment in stock of the company, can raise funds through
sale of stock, can deduct cost of benefits to officers and employees, S
corporations can be elected
Disadvantages: more time and money than other forms of organization,
monitored by state and federal agencies, higher overall taxes
 Franchised Salons: Successful due to marketing and organizational
strengths, Offers standardization
Advantages: strong consumer marketing, group purchasing power, uniform
bookkeeping systems, centralized training, noncompetition from same franchise,
exclusivity of product line, help with interior design, legal and business assistance
programs, group insurance rates, group health insurance
Disadvantages: high initial costs, restrictions in franchise agreement, franchisor
might go out of business, other franchisees could hurt your reputation, may be
difficult to sell, profits shared with franchisor, high continuing costs
 Employee-Owned Corporations: Employee owns stock in the company,
only works if the personalities are compatible
Advantages: motivated employees, align employees’ interests with shareholders
recruit/retain key employees, compensate for lower salaries, pay employees in a
tax, efficient way, increase loyalty, raise working capital, realize owners’
investment
Disadvantages: falling morale if share price falls, administration costs, dilution of
share ownership, unrealistic expectations
 Leased space and Booth rental: Owner contracts a given area of space,
Owner subdivides the space into several areas, each space is rented to a
different practitioner
Advantages: you do not pay workers’ compensation or federal and state
employment taxes, you do not offer training and education, you do not provide
liability insurance, you do not advertise for new customers, you do not manage
employees
Disadvantages: minimal or nonexistent business growth, high staff turnover,
unable to manage and educate staff, no quality control, lack of teamwork,
exposure to audits, unable to sell other salon and spa services
Naming a Salon and Spa
Your salon and spa name must:
–be easy to spell
–be short enough that people can remember it
–clearly identify services offered
Your salon and spa name should not:
–be so trendy that it becomes outdated
when trends change
Summary
Each state has its own laws for salon and spa ownership
All technicians need to be licensed by the appropriate board
There are five types of salons and spas
Salons and spas can vary in types of ownership
Corporation style of ownership offers greatest financial security against lawsuits
Franchised salons and spas allow for easier startup
Your salon and spa name should be easy to spell and remember