Rental Agreements
Rental Agreements
If you do not own your own business premises a significant portion of the expense of running a salon or barbershop is the rent. There are two kinds of rent:
- A fixed rent is a set dollar amount paid each month to the building owner. A fixed rent allows you to predict your monthly expenses.
- A variable rent includes a set dollar amount paid per month PLUS a percentage of the total monthly income. Variable rents are common in malls and large shopping centres. However, with the small percentage of profit earned by an average salon, a variable rent could be a serious mistake. If you are looking at this option, ensure your accountant predicts the results of a variable rent system before you sign any lease.
Normally a lease will be for an agreed term. The length of term will determine the frequency of rent reviews. It would also probably not be profitable to set up a salon for less than five years due to the time needed for your new business to grow and the cost involved in setting up. You should negotiate for all or part of any capital improvements to be paid by the owner of the building. This is a reasonable request as capital improvements will stay in the building when you move out.
It is common for salons to need extra water pipes, larger water cylinders, additional power points, washing and drying facilities. These will probably have to be paid for by the lessee (you). However, you can arrange for the repairs and maintenance of normal building equipment, such as air conditioning/heating, plumbing etc, to be the building owner’s responsibility.