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Why Salon/Spa Employees Leave for Suites or Booth Rental
January 27, 2020 | By Neil Ducoff | 7 Comments
I began my career in the salon industry in 1970. Back then, booth rental was more of an oddity found mostly in the Midwest and Southern California.
Back then, the prevailing salon business model was as follows:
- Hire a stylist
- Give them some clients
- Pay them a commission (at the time, it was 50% to 60% or higher)
- Tell them to build “their” request rate to build “their” clientele
- Raise their prices when they’re booked solid (sometimes increase commission rate with prices)
- Offer little-to-no employment benefits
- Get pissed when they leave with “their” clients
The salon game was simple. Fill enough chairs with busy stylists and, by all appearances, you had a successful salon.
Owners that picked a commission rate below 50% had a better chance of creating profit than those that picked 50% or higher.
Enter the “Product Cost Deduction”
As the cost of rent, products, equipment, insurance, etc., increased, many owners started implementing “product cost deductions” from each stylist’s gross service sales and paying commission on the balance.
- No matter how cleverly disguised or justified, product cost deductions is a tactic to lower commission.
- In reality, implementing product cost deductions is really a pay conversion.
- Many salons suffered turnover and stylist walkouts.
Lack of Leadership and Systems
The vast majority of owners started as, or continue to be, service providers. The challenge is that leading a labor-intensive business like a salon or spa, is vastly more complex than most owners realize.
To truly succeed and endure, a salon/spa must be systematized in every possible area of customer contact, employee performance, and the execution of work — especially teamwork.
FACT 1: Systems cannot exist without leadership.
FACT 2: Leadership cannot exist when the leader is afraid employees will leave if they don’t like a new system or change initiative — even if that system or change will help the company perform better.
FACT 3: If nothing changes, there is no opportunity for employees that want to advance their career. Resentment builds. The culture gets contaminated. Employees leave.
Building a Brand vs. Independent Suites and Booth Rental
FACT: If your salon or spa is clinging to the antiquated business model of building individuals and paying commission, you are essentially growing the independents that suites and booth rental want.
Once suite franchises entered the industry in mass, they glorified “going independent” by easily attacking employee-based salons/spas with the following:
- “Why build someone else’s business when you can build your own?”
- “Why put up with all the drama?”
- “Why take a percent of your sales when you can keep 100%?” This is only true if you don’t pay rent, buy products, pay for insurance, credit card processing, and of course, income taxes.
- “Why work a set schedule and follow a bunch of rules when you can do what you want?” In this business, if your hands aren’t working on a client, you’re not making money.
Building a salon/spa brand requires, leadership, systems, structure and a level of teamwork that is diametrically opposite of building individuals that are paid on piecework alone. Commission IS piecework. Piecework (I/me/mine) and teamwork (we) don’t mix. Period.
Building a brand means building client loyalty to your salon/spa and all it stands for. It means every team member puts the needs of every client first. It means the coordinated delivery of customer service. It means all employees are skill certified.
Building a brand means that all employees know and understand the monthly service and retail goals of the salon/spa. Daily huddles and scoreboards are non-negotiable.
Building a brand means income and career growth for employees. A strong brand is financially healthy and able to offer raises for individual performance and team bonus for team performance. A strong brand can offer benefits that most salons/spas cannot afford.
The Bottom Line
Employees leave salons and spas for suites or booth rental because they see little difference between coming to work and doing “their” clients to get paid a piece of what they do, and servicing “their” clients in a suite or booth in hopes of getting a much bigger piece.
- Employees leave to be independent because they feel stuck in a salon/spa that isn’t going anywhere. No exciting growth initiatives.
- They leave because owners are disengaged.
- They leave because owners are more about the money they bring in.
- They leave because of drama and funky cultures.
- They leave because of a lack of transparency and double standards.
- They leave because they don’t feel like they’re part of something special.
Here’s my challenge to you: The battle line between employee-based salons and independents was drawn long ago.
The problem is that the old salon/spa business model of building individuals and paying piecework (commission) has barely changed.
FACT: Commission-based salons and spas are fighting the war of employee retention with the very weapons that create the independents suites and booth rental want.
Suites and booth rental want “service providers with followings” because they have the ability to pay rent. And that’s exactly what the old business model creates — service providers with followings.
I’ve been teaching Team-Based Pay (TBP) since the late 70s and for over 26 years at Strategies. If it didn’t work, I would have stopped long ago. We wouldn’t have started our Team-Based Pay Conference six years ago. We wouldn’t have any owners entering our annual TBP Awards.
My big mistake was calling it “Team-Based Pay” because “changing pay” is scary for many owners.
I should have called it the “Team-Based Business Model” because that’s exactly what TBP is — a business model for building a strong brand.
The Team-Based Business Model is leadership and systems driven. It requires the owner/leader to commit to a collection of best business practices. It requires the owner/leader to be fiscally responsible. It requires the owner/leader to be transparent and trustworthy. It requires the owner/leader do what’s best for the company, its employees and its customers.
The Team-Based Business Model works. It builds strong salon/spa brands capable of standing up to the lure of suites and booth rental — if the owner/leader fully embraces it.
If you think you know the Team-Based Business Model, but never researched it — you don’t.
If you think you’ll lose staff — you don’t understand the integrity of the conversion process. If you’re losing employees now, your company is telling you it’s time to rethink your business model.
Categories: Staff Retention