What is a Booth Rental Agreement for a Barber?
Barber booth rental agreement is an agreement between the barber and the person renting the booth to work in the shop. This agreement should detail the job description for the barber, the responsibilities of being a barber, and the responsibilities or rules of the shop owner. Checklist needs to be signed by both parties and documented properly. In Texas, this is very crucial to the business and a business killer if not done correctly . I have been in twenty-seven legal consults with barbers on legal matters and found that the majority of them did not have an agreement or properly executed one prior to commencing the barbering business. The four main issues that are major problems are:
- IRS Violations
- Independent Contractor Violations
- Legal Actions
- State Board Violations
It is best to have an agreement signed and executed by all parties including all employees in the shop. This should be included on the checklist for employment.
Essential Components of a Barber Booth Rental Agreement
A well-structured barber booth rental agreement should contain various essential components to protect both parties. The following elements are crucial:
Rent Amount: Clearly state the exact rent amount per week or month and specifies how (for example, weekly or monthly) and when the rent is to be paid.
Payment Terms: This includes if there is a security deposit, what forms of payment are accepted (checks, credit, etc.), the consequences for failing to pay rent on time, and whether utilities are included (utilities could be reflected in the overall cost of rent or charged separately based on usage).
Lease Duration: State the duration of the lease (yearly, six-month, month-to-month, etc.) and terms for renewal or termination of the lease.
Use of Facilities: Specify what facilities are included in the rental agreement (restroom, laundry, parking, storage, etc.), any additional fees for using certain facilities, the responsibility for cleaning and maintaining the facilities used, and any limitations on the use of the facilities (hours of use or restrictions on proximate clients).
Inclusion of the terms above provides both the barber and the landlord with clear guidelines. However, no matter how many details are spelled out, disputes may arise. Having a comprehensive written lease agreement in place will only make it easy for both parties to avoid potential misunderstandings.
Legal Clauses in a Booth Rental Agreement
There are certain legal considerations that must be looked at when drafting (or signing) a booth rental agreement. Since state laws can vary, it is imperative to work within the confines of applicable state laws. For instance, in some states there are licensing requirements and specific recordkeeping requirements in order to maintain control over your booth renters (add link – legal issues article for state by state comparison). Regardless of the state, there must be a thorough written agreement wherein it is clear that the tenant is an independent contractor; which means the salon has no liability for acts or omissions of the tenant. Remember, a junior independent contractor is still a tenant regardless of the booth rental arrangement. As long as the junior independent contractor is a tenant, the liability issues remain the same.
As the landlord and the sole judge of profitability and success, rental booth property owners have certain expectations of their tenet. First, you expect an honest good faith effort to build and maintain the clientele. Second, you expect that the tenant will not be employing breaches of privacy, unfair competition or solicitation. Regardless of the state laws on this issue, the booth rental agreement should have a dispute resolution clause. With respect to barbershop or salon tenants, these disputes can be addressed before the Board of Barbers and Cosmetologists (add link to CA Barber Board). Otherwise, mediation is preferred, followed by arbitration and lastly litigation on the issue here the tenant’s income will be lost and perhaps the goodwill of the salon.
Benefits of Booth Rentals to Barbers and Barber Shops
While booth rentals offer a unique arrangement, the parties involved often wonder if this is the right fit for them. Here, we will outline the advantages that booth rentals provide to both the barber and the shop owner.
Your Own Schedule
As a booth renter, your schedule is your own. You are free to establish your working hours and schedule as you see fit. In most cases, you are not required to book your appointments through the shop owner, which means that you can also choose your clients freely. This arrangement also gives you the independence to grow and market your own business.
Stability and Higher Income Potential
For shop owners, booth rental arrangements make economic sense. By renting booth space, fewer overhead costs are involved for the shop owner, who is guaranteed a rent payment each month (irrespective of turnover) and more independence from what a commission arrangement might involve. In most cases, booth renters are responsible for their own tools and supplies, including linens, thus reducing this expense for the shop owner. In addition, because you as a booth renter are independent, you have greater control over your workday and schedule committed to clients, as discussed above, meaning that you will be able to optimize revenue, whether that is charging prospective clients what you feel is appropriate or expanding hours for the day.
Flexibility and Control
Regardless of the type of work being performed, being your own boss appeals to many, and booth rentals allow for this independence to be fostered. An opportunity to control your own destiny and business needs are what booth rental arrangements work to promote. You have a greater say on where to take your business and how you chose to market it to best appeal to the clientele you have and hope to gain in the future.
Common Mistakes in Barber Booth Rental Agreements
Even though both the booth renter and the booth owner have similar interests, that doesn’t mean everything is rosy when it comes to drafting a barber booth rental agreement. Often, the booth owner’s attempts to exercise its oversight over the booth renter either runs afoul of applicable employment laws or causes friction with other renters in the shop. Even where the booth owner scrupulously follows the law, its attempts at oversight can cause tension within a shop and lead to disagreements. The following are some common pitfalls to avoid.
Misunderstanding the law. A number of states, including California, prohibit discrimination on the basis of a protected characteristic for groups of a certain number of employees. However, some shop owners have attempted to require booth renters to comply with a set dress code that gives preference to an owner’s gender or sexual orientation. Other shop owners have tried to impose work hours that only are enforced against booth renters with protected characteristics. Both are outside the bounds of acceptable behavior and cause anxiety on the part of the booth renter.
Not having a contract. While a contract is not needed to create a legal landlord-tenant relationship for booth rental, it is possible for a booth renter to leave a shop without advance notice . That could cause economic harm to the shop owner that could have been avoided by advance notice of the impending departure. Even where a contract is not deemed to be necessary, it can be helpful to have one if the relationship sours. In that event, the terms of the relationship will be memorialized.
No term. Booth rental agreements that do not set a duration for the tenancy and instead are terminable at will can create conflict within the shop. A booth renter who does not have a clear understanding of the termination provisions may upset the balance of the shop by quitting without notice just before the weekend.
Not having a procedure. Like any business, rules and procedures need to be put in place for how disputes involving booth renters are amended. Otherwise, the shop’s rent collection process may be interrupted by arguments between the shop owner and the booth renter.
Withdrawal from the contract. Because the agreement for rental of the booth is independent of the lease agreement for the shop, a booth renter’s breach of its obligations to the shop owner may not be grounds for terminating the lease to the shop. Similarly, the inability of a booth renter to operate under the contract may not be grounds for lease termination.
Strategies for Conceiving a Favorable Booth Rental Agreement for Barbers
When both parties approach the topic of booth rental in a cooperative and open manner, negotiating a mutually beneficial booth rental agreement can actually become one of the most enjoyable tasks when opening a new barber shop. Start the process by asking for current booth rental agreement forms from the state Department of Labor and the barber shop’s present owner (if applicable). Then, the barber or barber shop owner can negotiate from an informed position.
Some of the most important aspects to include in a booth rental agreement, and key points to consider, are:
• Independent Contractor: Make it very clear in the agreement that the shop owner is an independent contractor, and not an employee of the barber shop.
• Shop Rules: Specify the shop rules that apply to all of the barbers, and how violations of the rules will be handled.
• For Sale/Going Out of Business Signage: Is using "For Sale" or "Going Out of Business" signage permitted? Some states have restrictions that barbers should know about.
• Competitor Proximity: If an apartment above the barber shop is being rented by a competitor, can that barber work in or move to the barber shop being opened?
• Tax Liability: Clarify which party is responsible for collecting and maintaining taxes.
• Dress Code: Will any style of dress be prohibited, and are there any other grooming requirements?
• Liability: If the shop is going to carry liability insurance, find out if the carrier requires that barbers maintain their own insurance. It may be acceptable to get insurance from a third-party agency.
• Promotion/Food/Drink: Are promotional, food and drink sales permitted?
• Pawnbroker Pawning: If items are being pawned in the barber shop, how will this affect lease terms?
• Record Keeping Indexing: Specify if index cards and/or records are to be kept on file.
• Termination Dates: Are termination dates of ten years too long for a first-time barber shop owner?
• Theft and Vandalism Prevention: What measures are being implemented to prevent theft and vandalism inside and outside of the shop? Will the tenant contribute money to a fund to reduce these incidents?
• Early Termination: What provisions are in place for early termination of the lease?
• Guest Establishment: Can the barber shop be a guest establishment for those who need haircuts prior to attending appointments at the establishment next door?
• Paid Vacations: Can the barber shop owner pay for three paid vacations in one year?
• Negotiation Techniques: It is up to the individual broker or barber to negotiate strong financial terms that reduce the likelihood of extended vacancies, tenant turnovers, and other high-cost events.
Barber Booth Rental Agreement Examples
This agreement is made and entered into on this [Start Date] by and between [Owner’s Name], hereinafter referred to as "Owner" and [Barber’s Name], hereinafter referred to as "Employee".
- Location of Subject Premises. Owner hereby leases to Employee space at Owner’s location in [Location/Address], hereinafter referred to as "the Premises."
- Term. The term of this lease shall commence on the [Start Date] and will continue until either party terminates this agreement.
- Rental Amount. Employee agrees to pay to Owner the below stated rate for rent for the term of this Agreement, which rent is due on a weekly basis:
a) Daily Rate: $____
b) Weekly Rate: $____
c) Bi-Weekly Rate: $____
d) Monthly Rate: $____
- Security Deposit. At the time of signing this Lease, Employee shall pay the amount of $____ and this will act as a security deposit. The security deposit shall be returned at the end of the term, less any damages caused by Employee. The parties further agree that up to $_____ of the deposit will not be refunded to cover the last days rent.
- Utilities. Electricity, water and any other utilities will be paid by the Owner.
- Use of Premises. The Premises will be used as a barber shop and for no other use without the prior written consent of both parties . The Parties agree that this is a lease to provide space to the Employee only and will in no way allow for the Employee to bring any tools of the trade into the Ownerships property. The Employee further agrees that no signage will be used during the term of this agreement and understands that there are additional legal obligations before signage can be placed in the window of the Premises. The Employee agrees that they will not use any products on the Owners property, including but not limited to bleach, color, or any other chemical. The Owner agrees that they will provide all necessary tools and equipment to the employee for service on clients.
- Maintenance. The Premises will be maintained in a neat and clean condition at all times. Employee shall keep the tables, chairs, washbasin and other furnishings, fixtures, and equipment in good order and condition. Employee shall promptly report any maintenance issues to Owner.
- Termination. This agreement may be terminated for any reason by either party by giving the other party ___ days written notice.
Agreed to and signed as of the above date.
[Owner’s Name] ___________________________ Owner
[Barber’s Name] ___________________________ Employee