The hair and beauty industry is in danger. The hair salon business model is failing. It is failing for no other reason other than we can’t compete with a growing business model that encourages underground economies and lack of oversight. This letter is a call to action to render the playing field level on which true competition can arise.

The salon business has always been a service model. Not only are we in service of the client, but our staff as well. We train and develop them to become professionals in their field. We provide opportunities in education and advancement where we can. We are held accountable to our local, state and federal government and agencies. We are often under scrutiny for operating with integrity and professionalism. We pay taxes, worker’s compensation and benefits. We ensure a safe working environment.

Salon Suites and Booth Rental is a real estate model. The business owner is only concerned about their vacancy rates. Once the lease is signed there is no quality oversight, no education and certainly no loyalty. They are meant to fill a space and keep the spaces filled to ensure their profitability. They are not in business to serve or be of service. They require the individual practitioner to behave with integrity and professionalism.

What we are discovering is that this is not happening at least not pervasively. We are discovering that quality is on the decline, income is being sheltered and oversight is non-existent.

UNDEGROUND ECONOMY

In a direct conversation with the representative of a salon suite in our region, I was informed that many of the stylists they solicit are “encouraged to request cash payments”.

According to California Department of Consumer Affairs, the average stylist salary is $27,000 per annum and a little over 45% of all stylists report their income as independent contractors who pay rent. The average stylist in our salons earn almost double that number. The discrepancy points to the probability of significant revenue being sheltered. Taking the argument that approximately $5,000 in revenue is being sheltered per renter, our calculations show approximately $54 million in revenue every year. This results in underpaying approximately $9 million dollars in taxes and social security every year. And in my estimation, that is conservative.

PROFESSIONAL DEVELOPMENT

Our business and our industry is based on mentorship and apprenticeship. The journey of a stylist, until recently, has been to get your license, find a salon that provides education and provides for your needs, become successful and then join the development team that pays it forward. This is the team that partners with the salon owners in developing the next generation.

The rapid growth of salon suites and booth rental has slowed the progress of this model. In fact, the prevailing advice proffered on comment threads is: “Find a salon, get educated, build your chair and then take your clientele to a rental environment.” Essentially, the common advice proffered to young stylists is to use a salon owner to get what you need and then walk out before rewarding them for their contribution.

As a result, fewer students leaving cosmetology school are being hired in an environment where they will be actively mentored. The cost is too high, there are fewer commission salons than before and the return on investment is lost due to a lack of loyalty. We are now seeing a decline in quality and service across the board. We hear horror stories daily about practitioners who are unprepared.

OVERSIGHT AND ACCOUNTABILITY

Who bears the brunt of that responsibility? Commission salon owners. We need to pay on every dime and report every commission in payroll. Right out of the gate, we are at a disadvantage. It is the one area we could never compete. We keep our salons open to be reviewed by the State Board of Barbering and Cosmetology. Salon Suite owners can conveniently shut out review boards from their smaller boutique environments particularly when they discover a representative has entered their environment.

As business owners, we are subject to guidelines these suites are not. We are in service of our clients. We bear the responsibility of the work provided by all of our staff. We cater to each and every client – we can’t pick and choose because their experience reflects on the brand as a whole – not on the stylist. We must adhere to the limitations set forth by our lease that are common in small business commercial leases. We have support staff expecting to have work when we schedule them that requires a certain flow in revenue.

CALL TO ACTION

We need help now. We are calling on:

State Board of Barbering and Cosmetology: I have attended Board Meetings in which this subject has been discussed. For over 6 years now, the Board has entertained ideas to increase oversight, create measures for rental environments, independent contractors and free lancers. Yet not one idea has been pursued and not one new action taken. We need to know that our Board is protecting the consumer and the industry against this threat.

EDD/Franchise Tax Board: Millions of revenue resulting in millions of tax revenue has been lost due to a lack of oversight. Underground economy in the beauty industry is now so common it is discussed in broad daylight. We are either collectively working within the system or we are not at all. A choice needs to be made so we business owners who have suffered for our integrity can begin to reap the rewards of working alongside our government.

State and Local Legislators: Current policy surrounding the subject of “EMPLOYEE VS INDEPENDENT CONTRACTOR” is a mess. The lines are blurred and as a result anyone working with transparency and integrity is suffering. We need a clear definition of the two models, enforcement where needed AND clear policy restricting the use of independent contractor within certain industries including Hair and Beauty. We can’t claim the need for oversight and yet ignore the many egregious infractions.

If you would like more information or you would like to speak to someone about our cause, please email us at [email protected].

Thank you for your consideration.