Chapter 1 Salon and Spa Types and Their Locations
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Transcript Chapter 1 Salon and Spa Types and Their Locations
Chapter 1
Salon and Spa Types and Their
Locations
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All Rights Reserved.
Licenses/sublicenses
Alternative or
special licenses
© Copyright 2012 Milady, a part of Cengage Learning.
All Rights Reserved.
© Milady, a part of Cengage Learning. Photography
by Dino Petrocelli
Setting Up Your Salon
and Spa Business
Setting Up Your Salon
and Spa Business
Read and follow the licenses required for
business ownership
Write all salon and spa services you wish to
offer in the establishment
See what licenses are needed
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What Type of Salon and
Spa Do You Want?
Hotel salon and spa
Department store/fitness center salon and
spa
Mall/shopping center salon and spa
Freestanding salon and spa
Medical spa
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Hotel Salons and Spas
Hotel offsets remote location by expanding
salon and spa into a day spa
Extensive range of services:
– massage, makeup, hair removal, body wrap, Botox
injections, manicure, acrylic nails, pedicures, false
eyelashes, permanent makeup, etc.
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Hotel Salons and Spas
Additional services may be controlled by:
– cosmetology/barber board
– medical board
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Hotel Salons and Spas
Leasing
Potential unusual clauses
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sign placement
cleaning and maintenance
charge system through the hotel
hours of business
decorating
subcontractor clause
customer dispute settlement
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Department Store/Fitness
Center 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
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Department Store/Fitness
Center Salons and Spas
Chain salon and spa supply distribution
– mass purchase of salon and spa supplies
– salon and spa contacts home office for supplies
Accounting and auditing system
Base rent plus a percentage of profit
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Department Store/Fitness
Center Salons and Spas
Considerations:
– compatible image
– clarify advertising
– customer complaint process
– style shows
– details of employee benefits, accounting
procedures, etc.
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Department Store/Fitness
Center Salons and Spas
Benefits:
– store lunchroom
– employee discounts
– paid vacation/sick pay
– group insurance
– profit-sharing
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Mall/Shopping Center
Salons and Spas
Convenient location
– stores surrounding a center atrium
– strip center allowing customers to go directly into
your business
Rent
– flat rent plus a percentage of sales
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Mall/Shopping Center
Salons and Spas
Rent varies based on:
– location
– type of mall
– economy
Negotiating rent
– consider demographics, traffic patterns, seasonal
considerations, etc.
– hire an attorney/business consultant
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Mall/Shopping Center
Salons and Spas
New location
– will have floor, walls, ceiling, toilet, heat/air
capabilities, electrical connections, display
window
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
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Freestanding Salons 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
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Medical Spas
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
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Sole Proprietorships
Advantages
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least expensive
complete control
keep all income
profits flow to owner’s personal tax return
easy to dissolve
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Sole Proprietorships
Disadvantages
– unlimited liability and legal responsibility
(personal assets are at risk)
– limited funding
– employee benefits are not directly deductible from
business income
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Partnerships
Advantages
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easy to establish
increased ability to raise funds
partnership opportunity may attract employees
complementary skills
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Partnerships
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 a limited life
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General partnership
Limited partnership
and partnership with
limited liability
Joint venture
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© Milady, a part of Cengage Learning. Photography
by Dino Petrocelli
Types of Partnerships
to Consider
Corporations
Considered by law to be a unique entity
Can be taxed, can be sued, and can enter
into contractual agreements
Owners are shareholders
Shareholders elect a board of directors
Remains even if ownership changes
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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
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Corporations
Disadvantages
– more time and money than other forms of
organization
– monitored by state and federal agencies
– higher overall taxes
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Subchapter S Corporations
Shareholder can treat the earnings and
profits as distributions and have them pass
through to his or her personal tax return
If there is a profit, the shareholder has to pay
himself or herself wages
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Limited Liability Company
(LLC)
Owners are members
Time limit can be continued at expiration if
desired
Must not have more than two of the four
following:
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limited liability to the extent of assets
continuity of life
centralization of management
free transferability of ownership interests
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Franchised Salons and Spas
Successful due to marketing and
organizational strengths
Offers standardization
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Franchised Salons and Spas
Advantages
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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
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Franchised Salons and Spas
Disadvantages
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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
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Employee-Owned
Corporations
Employee owns stock in the company
Only works if the personalities are compatible
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Employee-Owned
Corporations
Advantages
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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
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Employee-Owned
Corporations
Disadvantages
– falling morale if share price falls
– administration costs
– dilution of share ownership
– unrealistic expectations
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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
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Leased Space and
Booth Rental
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
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Leased Space and
Booth Rental
Disadvantages
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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
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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
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© Milady, a part of Cengage Learning. Photography
by Dino Petrocelli
Naming a Salon and Spa
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
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Summary
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
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