Opening any business requires hard work, determination, and huge risks. While owning a hair salon is actually a really lucrative business venture, there are many factors you must consider before you begin running one. One decision you have to make is whether you want to purchase a hair salon franchise or start your own. Ask yourself: Which decision is best suited for my personal wants and needs?
So, should you buy a hair salon franchise or start your own? Whether or not you should buy a hair salon franchise or open your own hair salon as an independent business owner depends on a few factors, such as how much freedom you wish to have in your business’s operations and decisions and your experience and knowledge of a what it takes to build a successful business.
Inexperienced entrepreneurs may wish to purchase a hair salon franchise because they have the backing of an already established brand plus many more perks, like built-in marketing and training for employees. More experienced entrepreneurs or those who wish to have full control over what their business sells and offers may opt to open their own hair salon.
Looking at opening your own home salon? Check out our guide to this venture!
Opening a Hair Salon: How to Decide Between Buying a Franchise and Becoming an Independent Owner
In 2016, “American consumers spent $57 billion at beauty salons” across the country, which was a billion dollars more than was spent than the year before. This growth is not expected to stop, either. Hair salons are truly a smart business venture in today’s economy because the salon industry has surpassed the general U.S. economy for most of the past 15 years.
That said, there are some strategic business decisions you must make before opening a salon, whether you choose to buy a franchise or open your own. When it comes to the success of hair salons, there are specific considerations that are paramount to their success. Your location, your business model, your licensing, and your equipment will all play a huge role in determining your salon’s success.
Location is important to the success of a hair salon because your business needs to be in an area that women are known to frequent and that they feel is safe enough for them to venture into alone. Salons do not only serve women, but the largest part of their business comes from women. So, making sure that women can find your salon and are willing to visit it is important.
Additionally, you need to look into the neighborhood that the building is located in to see if there are any future plans for change, and if those changes will benefit or harm your business. If your salon will be located in a building that has other businesses within it, you should scope out the businesses to make sure there will be no issues with them.
Traditionally, there are two different kinds of business models that hair salons use – commission-based and chair or booth rental. A commission-based business model pays your employees a commission based on the work that they do.
A chair or booth rental business model requires each of your stylists to pay rent to you each month in exchange for using the space in your business.
Neither business model is a bad choice, but it is up to you to choose the business model that will fit into the kind of business that you want. Keep in mind that purchasing a franchise will come with a predetermined business model that you will have to follow.
Licensing is necessary for your salon to function legally. You will have to require licenses for all services offered in your hair salon.
For instance, if you want to offer skin care practices at your salon, you must have someone that is licensed in all of the skin care services your business offers to perform them. If someone that is unlicensed in a service performs the service, your business could suffer because of it.
There are sometimes licensing requirements for buildings and locations, as well. Make sure to look into any licenses that your business requires and obtain them before opening your doors.
Equipment is the bread and butter of your salon. If you have old, outdated equipment that constantly breaks or doesn’t work well, your business will suffer because of it.
If you are purchasing an old salon or a franchise, you may also be inheriting equipment with your building. Make sure to check out the condition of the equipment before committing to using it. It may need to be repaired or replaced.
If you are purchasing an empty building, you will need to obtain equipment. If you are looking at expensive purchases or upgrades, you can look into financing your equipment.
In addition to salon-specific business considerations, there are general business precautions you should consider before deciding on a place as well.
What do the financials look like? Existing salons that you are considering for purchase can provide financial records from their business for you to look at. It is an unwise business decision to purchase a salon that has been losing money for an extended amount of time. New buildings require a bit more research and drawing up financial predictions to see if your investment will be worth it.
Why is the business being sold? If you are buying an existing salon from someone who is retiring or moving on to a better opportunity, then you can most likely build a great business at the location. However, if someone is selling because they have gone into debt because of lack of business, it’s unwise to invest in the location.
Don’t do it all yourself. When you are seriously looking into investing in any business, you should not try to make all the decisions because so many different aspects are involved in a business’s success.
Build a team of professionals to help you. You can hire a business broker, an attorney, an accountant, and a commercial real estate agent to help you make the best decision you can in regard to your new business venture.
Once you have looked into these business facets and considered all of your options, you can begin to decide whether you want to purchase a hair salon franchise or start a hair salon as an independent owner.
The Pros and Cons of Buying a Franchise
Just because you purchase a hair salon franchise that you know to be successful does not automatically mean that your particular salon will see success. There are many pros and cons to consider when it comes to becoming a franchisee.
|You are potentially inheriting an established brand and customer base.|| You pay have to pay large initial costs|
between the franchise fee and start-up
costs. Some franchises have initial costs that are more than starting your own business.
|You often receive marketing support.||You will have to pay royalty payments to the franchisor, which can reduce your profits.|
|You are automatically connected to reputable suppliers.||While you do receive help with marketing and advertising, you often have to pay fees for it.|
|You receive business support with a network of franchises.||You have very limited room for creativity and flexibility because franchise contracts are incredibly strict and often offer no room for freedom.|
|You often have access to management and technical training.||You are only allowed to purchase your supplies from places that the franchisor approves.|
|You often receive financial assistance from loans that are offered by franchisors.||Even if you find your business failing, you are required to finish your contract.|
|You get access to the franchise’s trade secrets.||Your business will directly suffer because of any negative issues that arise with the franchisor.|
|You get access to new products and up-to-date research and development.||You may go into your franchise purchase with a false sense of confidence or high expectations that are not guaranteed.|
|There is a bit of a reduced risk because you are not building a business from nothing.|
Becoming a franchisee may be limiting, but it offers an opportunity to own a business that already has established and proven products, services, business models, marketing, and advertising.
It is a great option for someone who does not have any experience in running a business or an entrepreneur that feels more secure investing in an already successful franchise.
While signing a contract with a franchisor will lock you into a certain amount of years at the location and will lay out the majority, if not all, of your business’s details, the contracts can also provide you with constant marketing and technical support, product development, and assistance with many aspects of your business such as site selection, the grand opening, hiring, and long-term strategic planning.
The Pros and Cons of Opening Your Own Hair Salon
Just like there are pros and cons of purchasing a hair salon franchise, there are also pros and cons of opening your own hair salon.
|You have the freedom to make all decisions regarding your business.||You have to take responsibility for and fix any and all bad business decisions.|
|You get to choose your own location, décor, type of equipment, building size, and more.||It can sometimes be difficult to find funding for a start-up.|
|There is a strong possibility that it is cheaper than purchasing a franchise.||You may not bring home much of a personal income for a while as your business gains a foothold.|
|You choose your own employees based on your own personal standards.||You could potentially work very long hours until your business becomes established.|
|You don’t have to pay royalty fees||Many business decisions can pull you away from being able to focus on running the business.|
|You often get to choose your own hours.||You are responsible for all employee details, like hiring, training, vacation and sick days, payroll, taxes, and insurance or benefits.|
|You own the business space completely and can host things like classes and events to help further your business.||You are responsible for all risk management, like employee accidents, crime, fire, and liability issues.|
|You are responsible for all renovations, restocking, and equipment.|
Becoming the individual owner of your own hair salon allows you to create the salon environment that you want to create because you have complete freedom as the sole owner. You can develop your own trade secrets and signature services or products. You can choose one of the traditional business models, combine the two, or invent your own. The choice is all yours!
Starting a business from the ground up can be challenging, so this option may appeal to those that have experience running a business or in cosmetology. With the freedom comes responsibility, and you have to market, advertise, and staff your salon, among many other business-related factors. However, if you have always had a knack for managing, your salon investment could be a literal gold mine.
The Types of Hair Salons and How They Can Affect Your Decision
Knowing the type of hair salon that you’d like to run can help you decide between a franchise and individual ownership. For instance, many salon franchises only offer very basic services, so there is an incredible lack of creativity involved. On the other hand, some individually owned salons can offer a specific type of salon experience to cater to a chosen clientele.
There are 11 types of hair salons that all offer different experiences, products, and services.
- Booth Rental Hair Salons allow for a variety of different products and services to be offered because each stylist in the salon pays their own rent for their space and provides their own supplies. Each stylist determines their own pricing and offers the services that they are licensed to provide. These salons can cater to many different kinds of clientele.
- Salon and Spa combinations are made to offer extensive pampering with services and products that address hair, skin, beauty, and nails. They can be fancier than other salon types and are great for days out with girlfriends and wedding party pampering sessions. Some of them are even licensed to sell alcoholic beverages.
- Commission-Based Hair Salons offer a more uniform list of products and services because the stylists are paid salary, hourly, by commission, or a combination of a set pay plus commission. At these salons, products tend to be pushed because selling the products helps with the commission that a stylist makes. Typically, the entire salon will use the same brand to promote the same lines of products.
- Specialty Salons hire different stylists that have specialty training in different types of services. For instance, one stylist may specialize in cuts and color while another specializes in formal hairstyling and another specializes in putting in hair extensions. This type of salon provides high-quality services to a wide range of clients.
- Boutique Salons are catered to women and offer salon services for hair, skin, and nails while also having a small boutique with items like clothing and handbags. Normally, the salon and the boutique are in separate areas of the building.
- Retail Outlet Hair Salons are like Super Cuts, and they are commonly owned by franchises. They usually offer only basic hair cutting services, accept walk-in appointments, and require their stylists to work scheduled shifts each week. At retail salons, all stylists receive the same training, so they can all perform the same.
- In-Home Hair Salons are salons that are operated by licensed cosmetologists from their homes. To operate a salon like this, you have to run everything yourself, you perform all services yourself, and you have to make sure to follow all licensing, application, and fee regulations.
- Scholar Hair Salons are salons that feature cosmetology students as their stylists. The students must pass all of the prerequisite classes first, and they are then allowed to cut and style clients’ hair while being supervised by their instructor.
- Up-Scale Hair Salons are notably different from other salons because they offer a huge range of services to their clients, including cuts, colors, perms, conditioning, curling, reconstructing, and weaving for hair and even reaching into nail and skin services like manicures, pedicures, facials, and body waxing. These salons are by appointment only and are much pricier than other salons. They tend to have modern, fashionable décor and are meant to give an entire experience to their clientele.
- Barbers cater to male clients and specialize in cutting, grooming, styling, and shaving. Barbers actually have to get a different, more intensive training in male hair and facial hair care but do not often offer many complicated services in their salons.
- Mobile Salons can be operated in two different ways – either the stylist travels to clients’ homes to do their hair or the stylist drives around a vehicle that has a workstation inside of it. This type of salon requires special licensing and permits and liability insurance. While this salon may seem odd, it’s a blessing for homebound clientele.
There are many different factors that can affect your decision of whether you will purchase a hair salon franchise or open your own hair salon. Ultimately, it is a personal decision that is based on what you specifically want from your business ownership. They both have their pros and cons, but both franchise and independently operated salons can be very successful.