Spa Owners: Raising your independent contractors rent
I am wondering what other spa owners or people who rent space to independent contractors (if your the only one on the building lease) go about raising rents.
1. What amount do you raise
2. How much?
3. When you raise the rent is it yearly?
4. What do you tell the renter when they ask why the increase?
I have in my contracts that every year there will be a 3% increase. I am thinking I need to rewrite that part of my contracts. How are you writing it up your contracts?
**Also I never really liked my contract (copied it from a full service salon years ago) so if anyone can help me with rewriting a "solid" contract I would REALLY appreciate. My renters consist of 1 esthetician and 3 massage therapists.
I just want to get a great contract for once and all with no grey areas. Maybe even if your open to the idea of emailing me one of your contracts I would be so ever grateful!!!!
Thanks cyber esthy family!
Tags: contractor, independent, owner, renter, spa
Views: 358
Replies to This Discussion
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Permalink Reply by coldsalineplexus on
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I'd be interested in seeing others' contracts as well. I do have renters but they have not been with me a full year, so it has not come time to think about increases just yet.
My gut instinct would be to give them 2-3 months notice of the raise, and announce the rent increase at the same time you are introducing something good you have done for business (new feature in the spa, new marketing push, etc.) that will bring them business. You could also let them know about the increase at such time as you are considering reprinting menus, so they can decide if they want to up any of their prices.
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Permalink Reply by Marty Glenn on
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Diane
You have your own space within the building right? IF not then its the same but it makes a slight difference. Then there is common area they EVERYONE uses. Then there is the renters area that they basically own for the term of the lease.
Have your accountant come up with a formula based on those items and each year if you get an increase from your land lord, you will have a formula to base your increase off of. See that? That formula would take into account all aspects of your financial goals dealing with renting space.
As for your current lease or renters contract, if you want you can send it to me at: martyg@skincarescience.com and I will redline it for you. I'll send it back in a word document with a legal disclaimer :)) I don't need to get in trouble, but help. I would love to help.
Christine touches on some good points and basically they are just good business consideration(s) and as a salon owner trying to make the salon more profitable, that takes money and that investment trickles down to your renters.
Marty
SkinCareScience.com
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Also... doing it by formula makes it sound to me like your renters know how much the total rent is? Hopefully that is not the case. I don't know what my building owner's mortgage payments are, nor should I... I find it very strange when spa owners clue their employees/IC's/renters in to their total rent amount. 1) You are in business to make money... buy low sell high applies to your space as well as products and services. 2) The average commercial rates for your area absolutely do not apply when you are talking about a space that is already built out as a spa, which provides utilities and amenities. When calculating your renter's rent, you really need to be taking EVERYTHING into account... At my spa, my renters are not only renting the space that they use and access to the communal spaces, but are also buying in to receptionist services, wifi, laundry, our outrageous electric bill (make sure you are calculating on a year-round average), cleaning supplies, tea/coffee station for clients, online scheduling app, monthly deep-clean of the whole spa, as well as benefitting from the way I keep the space (plants, furnishings, music, alarm system, and more) and all of my marketing efforts. Not to mention in my space, they are renting a fully equipped room... and finally, the stability of renting within an established, stable business with TRAFFIC. A LOT goes into making your space profitable for everyone who works in it. Rather than basing your renter's payments on the proportion of your space, you need to take all of this into consideration in order to determine what they would be paying out on their own. You may be surprised with the real worth of your space.
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Another good calculation is to figure out what you would be making if they were commissioned employees or IC's. Also, don't neglect the headache factor for all possible arrangements when doing your calculations.
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Permalink Reply by Miss D on
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Thank you Christine! Very helpful and you tapped in on a few items I didn't even think about including. This is very helpful.
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Permalink Reply by Relax & Rejuvenate on
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Be careful with your language.
Independent contractors don't pay rent. Lesee's pay rent. You have a lease agreement or a services contract.
Don't mix apples and oranges -- it could cost you big with the board of labor or in court.
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Hi R&R- in my lease in never states the word independent contractor. It's leasee or leaser. :)
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Christine has it right!!
one great advantage of having a lease agreement instead of a contractor agreement is you have much greater flexibility in a lease agreement.
For example, you cannot provide equipment or supplies to an IC, but you can provide them for rooms you lease and charge a "rental fee" for them, either per treatment or as part of the monthly
You can't tell an IC what products to use in their treatments -- that is considered "controlling the work" and can qualify them as an employee. In a lease agreement, you can make a condition that the space will be rented for the performance of skin care services using "XYX" products ONLY.
Also, there is plenty of precedent in existing commercial leases to cover things like receptionists, utilities and marketing. One of our spas is in a commercial center run by one of the biggest retail REITs in the country. We pay $1 per square foot per year to the general marketing fund of the center -- which may or may not promote out specific business.
pretty much anything is fair game to include in a lease agreement. You can state required hours of operation/being onsite which you could never do with an IC
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Diane
One thing I should mention and it was another post that made this point come to mind and the post had a point. Letting your customers know your profit is not always a good idea and the point is valid but - It appears that you have a soft hart and maybe a little harder business mind would be a better fit here.
What I mean is you care a lot and maybe have a take it or leave it attitude would be better. If you have this frame of mind, your questions really don't matter because you don't care who comes or goes, just that they make money, you make money and the business model works.
Something else, most people in general do not appreciate what they have until it is taken away and in my experience very few people DO NOT take and take and take. They always feel the owner is rolling in it and on top of it do not understand or appreciate what stress there really is and most are not willing to pay for the relief of it by renting or leasing a space and dealing with the high cost of renting / leasing.
What your really talking about is the difference between those who have the GUTS and those who don't and protecting those who don't from the REAL cost of doing business. Maybe your big heart just cannot protect them. :))
I hope I am understanding this correctly and my posts help.
Marty
SkinCareScience.com
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Very true! When I took over my current space, I had some rental MT's who just HAD to go. It was a give-an-inch, take-a-mile situation.
At the same time, you do want to make sure you have renters that you can work with amicably, refer wholeheartedly, and who you feel represent your business well. These are not always easy to find, so as with any other customer (and your renters are your customers, like Marty points out), you do want to work to keep the ones who are benefitting your business (referring their clients to receive your service, proactively marketing themselves, and respecting and even improving your space). I have a pair of manicurist renters now who I feel do all these things. Still, it is business, and as Marty says, it is not my job to protect anyone from the real cost of doing business... on the contrary, it's my job to make MY business profitable.
R&R also has a great point about the things you can require and outline within a rental agreement that you cannot control with IC's.
For me the main point is to grow my business while being gracious and supportive of those who work around me.
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