Health and beauty franchises have soared in popularity in recent years. From hair and nail salons to spas and tanning studios, it seems that every shopping center has at least one outlet in the beauty sector.
For individuals seeking to cash in on America’s multi-billion-dollar beauty industry, buying a franchise may seem like the logical choice. A franchise offers instant brand recognition, proven operating systems and procedures, and the support of a franchisor that (generally speaking) has already found success in the industry. However, buying a franchise also comes with certain pitfalls, and entrepreneurs considering beauty franchises must carefully consider the risks before signing a long-term franchise agreement.
Risks Involved with Beauty Franchises
All franchise opportunities carry financial risks, and beauty franchises are no exception. Since most beauty franchises involve hands-on interactions with customers, they present certain additional legal risks as well. Some of the top risks for individuals contemplating beauty franchises are:
- The Initial Investment – A typical storefront beauty franchise will require payment of an “initial franchise fee” to the franchisor as well as an upfront investment in real estate, equipment and products, and all of the other necessities for operating a brick-and-mortar business. Beauty franchise owners may also need surplus capital to cover employee compensation and operating costs as the business gets up and running.
- Ongoing Payment Obligations – In most beauty franchises (and most franchises in general), franchisees’ obligations to pay royalties and marketing fund contributions begin on day one. These obligations continue throughout the term of the franchise agreement, and in some cases even apply after termination.
- Limited Termination Rights – Speaking of termination, most beauty franchisees have only limited rights to terminate if their business turns out to be unsuccessful, if they have any termination rights at all.
- Competitive Restrictions – Upon termination, beauty franchise owners will commonly be subject to “non-competition covenants” that prohibit them from operating competing businesses in their former franchised territories. This could mean being forced to meet the franchisor’s requirements for renewal, or else pursuing a completely different business opportunity when your franchise expires.
- Civil Liability – Finally, what happens if a customer gets injured on your premises? You might get sued, and you will need to make sure that you have taken appropriate measures to limit your liability as much as possible.
Beauty Franchise Opportunities
A random search of leading beauty franchises identified online brings up the following:
- My Salon Suite – A beauty franchise that follows the FLAIR principles of Fun, Love, Creativity, Inspiration, and Entrepreneurship.
- Seva Beauty – A top-ranking beauty franchise offering a wide range of spa services and products.
- Spavia Day Spa – A growing luxury day spa franchise opportunity.
- Sport Clips – A top-ranked hair cutting and barber shop franchise that is among the fastest-growing brands in the industry.
- Waxing the City – A beauty franchise offering “head-to-toe” waxing services for women and men.
Mitigating Risk for Your Beauty Franchise
While it is not possible for franchisees to avoid these risks altogether, there are steps franchisees can take – before and after opening for business – to mitigate the risks of a business failure or lawsuit leading to bankruptcy. These steps include:
- Hiring a franchise lawyer to review your Franchise Disclosure Document (FDD) and franchise agreement.
- Having your lawyer negotiate the terms of the franchise agreement with your franchisor.
- Understanding and negotiating the terms of your financing agreements, leases and other contracts.
- Conducting thorough franchise due diligence.
- Establishing a corporation or limited liability company, and purchasing adequate insurance coverage.
Contact National Franchise Lawyer Jeffrey M. Goldstein
If you are considering a beauty franchise, contact the Goldstein Law Firm. With more than 30 years of franchise law experience, franchise lawyer Jeffrey M. Goldstein represents new and existing franchisees nationwide. To learn more information about our flat-fee franchise reviews or to get started with a free consultation, call (202) 293-3947 or inquire online today.
Disclaimer: The identification of any franchise or company on this website is not an endorsement of any aspect of that entity in any regard, nor should it be taken as one.