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When it comes to running a successful salon or spa, one of the most important decisions you’ll make is how to structure your business model.
The choice between booth rental and commission-based models can have a huge impact on your day-to-day operations, bottom line, and the vibe of your business.
Each approach has its pros and cons, and finding the right fit for your business is key to building a thriving, sustainable salon or med spa.
We’ll break down booth rental vs. commission so you can make an informed decision that aligns with your goals, your style, and your long-term vision.
What is booth rental?
OK, so you’ve probably heard the term “booth rental” or “chair rental” floating around in the beauty industry, but what does it really mean?
In the simplest terms, booth rental is a business model where stylists, therapists, estheticians or cosmetologists rent space within your salon or spa.
Instead of being an employee, they’re essentially running their own business within your space. You provide the location, equipment, and sometimes products, and in exchange, they pay you a flat rental fee.
Here’s how it works:
- Flat rent: The stylist or therapist pays you a set fee (daily, weekly, or monthly) to rent their space. You get a steady income, but you don’t get a percentage of their earnings.
- They keep what they earn: After paying rent, they keep all the money they make from their own clients.
- They’re in charge: They’re self-employed with their own prices, handle bookings, and manage their own clientele. They use your space, but they’re responsible for their business.
Key characteristics
- Independence: Booth renters control their own schedule, pricing, and clients. It’s perfect for those who want to run their own business without the overheads and legislation that comes with owning a salon.
- Steady income: You get a fixed rent payment each month, no matter how busy your renters are. It’s a predictable source of income.
- Less control over clients: Since renters manage their own business, their clients are their responsibility. You won’t have as much say in their clients, which can be either a plus or a downside, depending on your goals.
What is a commission-based model?
Now, let’s talk about the other side of the coin — commission-based employment.
In this setup, your stylists or estheticians are employees, and you pay them a percentage of the services they perform. It’s a great way to encourage collaboration, and it gives you control over the overall success of your business.
Here’s how it works:
- You pay a percentage: Instead of rent, you give employees a cut of each service they perform, in additon to their base salary (commission rates are usually 40%-70%, depending on experience and demand).
- Earnings vary: Employee pay depends on how busy they are. If they have more clients, they earn more. If it’s a slow week, their earnings will be lower.
- You cover overhead costs: As the business owner, you’re responsible for running the salon, providing equipment, handling client bookings, and most of the marketing. You’ll also likely cover training costs and potentially offer some benefits, like product discounts.
Key characteristics
- Team environment: Commission-based models often give a sense of teamwork since stylists and therapists are working under your leadership. You’ll have more control over how services are delivered, and the salon’s reputation depends on everyone’s performance.
- Less risk for the employee: They don’t need to worry about rent or getting enough clients, they can simply focus on delivering great service.
- Your profit depends on team performance: Since your team’s income is tied to performance, there’s an incentive for everyone to push for a high standard of service and to market themselves within the salon.
Advantages and disadvantages of booth rental
Now that we’ve covered how booth rental works, let’s take a closer look at its pros and cons. Every business model comes with its own set of advantages and challenges, and booth rental is no exception.
It can be a great fit for some, but may not be the right choice for everyone.
Advantages
1. Lower financial risk for salon owners
One of the biggest perks of booth rental is the steady rental income you get. Once the stylist or therapist pays their rent, you’re guaranteed that money, no matter how busy they are.
This can help you maintain a stable cash flow, without worrying about fluctuating income.
2. Autonomy and flexibility for stylists/therapists
Booth renters enjoy more control over their work schedule, pricing, and client relationships. This can attract highly skilled professionals who prefer to work independently without the overhead or risk of running their own business.
Happier stylists often translate into better service and a more positive salon environment.
3. Reduced management responsibilities
Since booth renters are their own bosses, you won’t be as involved in day-to-day operations, like managing client schedules or handling customer complaints.
This means fewer headaches for you as the owner, allowing you to focus on the bigger picture, like growing your business or improving the salon experience.
Disadvantages
1. Less control over brand consistency and service quality
Since booth renters are independent, they manage their own business practices.
This can sometimes lead to inconsistencies in service quality or the client experience, especially if renters don’t align with your brand’s values or standards.
2. Independent contractors manage their own stuff
Booth renters are responsible for their own taxes, marketing, and insurance. This means you don’t have to worry about these costs, but it also means they’re operating independently.
So, if they aren’t marketing themselves effectively or handling their taxes properly, it could impact their business and, ultimately, your salon’s reputation and profits.
3. Potential for competition among renters
With multiple booth renters, there can be a sense of competition for clients, especially if everyone is offering similar services.
This could create tension, and without careful management, it might impact the overall vibe of your salon – and that may impact customer experience.
Advantages and disadvantages of commission-based models
While booth rental has its appeal, some salon owners might prefer to go the route of commission-based pay.
This model offers a different set of benefits and challenges, so it’s important to understand how it could work for your business.
Benefits
1. Greater control over branding, pricing, and customer experience
As a salon owner, you have more influence over the overall brand and customer experience when your team is on commission.
You can ensure that your stylists and therapists deliver consistent service that matches your salon’s standards, which helps with customer retention and brand loyalty.
2. Team-building and training
When everyone works under one system, it’s easier to implement consistent training programs and foster a sense of teamwork.
This can lead to a stronger, more unified salon culture where your staff is motivated to help one another and grow together.
3. Potential for higher earnings (if your salon is busy)
If your salon or spa is thriving, commission-based models can be highly rewarding, which in turn motivates them to work harder and bring in more clients.
You can offer them commission on both services and retail sales so they’re motivated to deliver a great experience to clients, every time.
This could mean higher overall sales for the salon, and if the business is busy, your stylists’ success directly impacts yours.
Challenges
1. Financial risk for the salon owner
With a commission-based model, you take on the financial responsibility of covering payroll, supplies, and marketing costs. When business is slow, you’re still on the hook for these expenses.
It’s a bigger risk compared to booth rental, but it also comes with the potential for bigger rewards if the business is performing well.
2. Less flexibility for employees
Commission-based workers generally don’t have the same flexibility in setting their schedules as booth renters do.
They’re employees, so they have to adhere to the salon’s policies and hours. This may be challenging for those who prefer a more flexible work-life balance.
3. Increased administrative responsibilities
Running a commission-based salon means you’re taking on more management duties. From handling payroll and benefits to overseeing employee performance and maintaining quality control, there’s a lot more administrative work involved.
You’ll need to stay on top of it to keep everything running smoothly.
📱This TikTok video explains how you really need to know your numbers as a business owner. You can only pay your staff the commission fees – 50%, 60%, whatever that is -that you can afford to pay!
Key factors to consider when choosing a model
As a salon or spa owner, there are several important factors to consider that will impact not just your business, but the experience you want to offer to your team and clients.
Business goals
First, think about your business vision. Do you want a hands-off approach where stylists manage their own schedules and clients? If so, booth rental is a good fit. It offers a steady income with less involvement.
If you prefer a team-focused environment with more control, a commission-based model might be better. It allows you to oversee operations and build a collaborative culture.
Budget and financial stability
Booth rental offers predictable income with less financial risk. Commission-based models require covering payroll, supplies, and marketing, so ensure you have the resources to manage the financial fluctuations.
Brand control
If you want to be in control of key decisions on pricing, services, and the client experience, a commission-based model gives you more power.
It’s your business and your brand, so you get to decide on what the customer experience is like, what your marketing strategies are, and so on.
With booth rental, renters set their own prices and services. If consistency is important to you, the commission route might be the better choice.
Target audience
Does your clientele prefer personalized, independent services? Booth rental might be the right choice. If they seek a cohesive brand experience and consistency, commission-based might align better with their expectations.
Stylist/therapist expectations
Consider what your future hires value.
Do they want independence and to run their own business? Booth rental might appeal to them. If they prefer a structured job with guaranteed income and support, commission-based might be a better fit.
Knowing what your stylists or therapists want will help you attract – and retain – the right people to your business.
Streamline your spa or salon’s operations with Pabau
Choosing between booth rental and commission models depends on your goals and what fits best with your business.
Whether you prefer the independence of booth rental or the team-focused approach of commission, both models come with their own advantages.
But no matter which you choose, organization and efficiency are essential.
That’s where Pabau can help. Our all-in-one practice management software can help you with bookings and scheduling, client record management, marketing, and lots more. We also have a whole suite of staff management tools.
- Commission: Apply fixed or percentage-based commission
- Scheduling and rota management: Plan and organize your diary
- Staff payouts: Pay your staff directly from the system
- Permissions settings: Restrict access to using role-based authorization
- Timesheets and wages: Take care of clock-ins and clock-outs (coming soon)
Book a demo today and see how we can help!
