WHAT YOU NEED TO KNOW BEFORE SIGNING YOUR SALON LEASE
By Jade Start
Signing a lease and planning a fitout is a huge milestone for any salon or clinic owner. It’s the moment your vision starts to take shape; the sleek interior, the welcoming atmosphere, and the promise of happy clients walking through the door. But the excitement can quickly fade if you overlook some crucial details. Hidden fees, budget blowouts, and unfavourable lease terms can leave you working harder than ever just to make ends meet.
These pitfalls are avoidable with the right knowledge and preparation. I am a lawyer with years of experience working for property developers negotiating leases for major retail precincts. I’ve seen the challenges from both sides of the table; landlords trying to maximise their returns and tenants struggling to secure fair terms. I use that experience to help salon and clinic owners avoid costly mistakes and build profitable businesses.
Let’s break down what you need to look out for and how to navigate this exciting stage of your business journey while keeping your profits protected.
The Hidden Costs Lurking in Your Lease
Leases are full of fine print, and some of them can cost you thousands if you’re not careful. Many of these hidden fees benefit the landlord, leaving you to foot the bill. Here’s what you need to watch out for:
Landlord’s Legal Fees: Did you know landlords often pass their legal costs onto tenants? These fees can add up quickly. Insist on a clause stating that each party covers their own legal expenses. It’s a small detail that can save you thousands.
Designer Fees: Many landlords charge approval fees for your fitout designs, even if the review is done by their in-house staff. This fee can feel like a slap in the face when you’re already spending a fortune on the fitout itself. Negotiate for these costs to be absorbed by the landlord.
Lease Registration Fees: In Australia, leases must be registered with the Land Titles Registry, and the associated fees are usually passed on to you. While it’s rare to get landlords to cover this, make sure it’s factored into your budget.
Council Approval Fees for Signage: If your signage is visible from a main road, council approval is often required—and it’s not cheap. Find out what approvals you’ll need and their costs before signing the lease, so you’re not blindsided late
How to Stay Ahead: Before you sign anything, ask for a detailed breakdown of all costs. Create two lists: the non-negotiable items that must be in your favour as part of lease terms (like the below terms) and areas where you’re willing to compromise (like these hidden fees). Having a clear plan will help you approach negotiations confidently.
Lease Terms That Will Set You Up for Success
Not all leases are created equal, and some key terms can make a big difference to your business’s long-term profitability. These are the ones you can’t afford to overlook:
1. No Personal Guarantees
Landlords often ask for personal guarantees to limit their risk. If you sign one, your personal assets (your home, savings, and other investments) could be at stake if your business struggles. This can also impact your ability to secure future loans, as banks view these guarantees as liabilities.
To protect yourself, sign the lease as a company, not as a sole trader, and negotiate to provide a three-month bond instead of a personal guarantee. This can be a tough negotiation point, but it’s worth holding your ground. You never know when circumstances outside your control might force you to close, and the last thing you want is to lose everything you’ve worked so hard for.
2. Exclusivity
Imagine opening your dream salon, only to have a competing business set up shop two doors down. This isn’t just frustrating; it can dilute your client base and even lead to mix-ups with reviews or complaints.
When negotiating your lease, include an exclusivity clause that prevents competitors from offering similar services in the same complex, or any nearby properties owned by the landlord. Think ahead, too: if you’re planning to rent out space to complementary businesses (like a cosmetic injector or a nutritionist), make sure their services are also covered under your exclusivity clause and be sure to have subleasing clauses in your lease.
3. Incentives
Landlords often offer incentives, such as fit-out contributions or rent-free periods, to attract tenants, but they rarely volunteer this information. It’s up to you to ask, so put your best foot forward early in the negotiations. This will give you a base from which to negotiate.
A good rule of thumb is to aim for incentives equal to 20–25% of the total rent for the first lease term. For example, if your rent is $80,000 per year and you’re signing a five-year lease, negotiate for up to $100,000 in combined incentives. This could include a rent-free period of 6 months and a cash contribution toward your fitout.
How Much Rent Can You Afford?
Here’s a quick rule to keep in mind: your rent should never exceed 15% of your total projected income. For instance, if you’re estimating $500,000 in annual revenue, your rent should be no more than $75,000 per year.
Anything higher, and you’ll find yourself struggling to stay profitable. Before you commit, prepare a detailed cash flow forecast that includes your sales targets, operational costs, and any loan repayments. This will help you understand if the lease is truly affordable.
The Fitout Trap: A Common (and Costly) Mistake
Fitouts are exciting, but they’re also one of the easiest ways to blow your budget. Builders often provide vague quotes with ranges or “starting from” prices, which rarely reflect the final bill. Without careful planning, you can end up spending far more than you anticipated and paying for it for years.
Here’s how it plays out:
You spend $150,000 on your fitout and take out a loan to cover it.
Over a 5-year lease, this means $30,000 per year in repayments.
If your business generates $500,000 annually with a 10% profit margin, your yearly profit is $50,000.
Of that profit, 60% goes directly to loan repayments.
This leaves just $20,000 to cover all of your taxes like GST and income tax which isn’t enough.
How to Avoid It:
Get itemised, fixed quotes from reputable builders.
Include a 20% buffer for unexpected expenses.
Focus on functional, cost-effective designs that fit your budget.
Why This Matters for Your Bottom Line
Most beauty and aesthetics businesses struggle to earn 10% profit; however, the aim should be to have a profit margin of 20–30%. Overspending on rent or fitouts can quickly erode any profits you plan to make. If your fitout costs eat into the profits of your entire lease term, you’re essentially working for free for 3–5 years.
Key Takeaways
Read the fine print: Don’t let hidden fees catch you off guard.
Negotiate smarter: Insist on no personal guarantees, exclusivity, and incentives that will give you breathing space.
Know your numbers: Keep rent below 15% of your income and stick to your fitout budget.
Plan for success: A well-negotiated lease can set the foundation for a thriving business and give you a great asset to sell in the future.
Your lease and fitout don’t have to be stressful. With the right strategy, you can open your dream space without sacrificing your profits or your peace of mind.
About JadeStart
JadeStart is a dynamic business consultancy dedicated to helping aesthetic and beauty business owners achieve freedom, however that looks for them. With a focus on strategic brand development, market positioning, and profitable business acceleration, JadeStart provides tailored solutions to guide clients through every stage of their entrepreneurial journey. Whether you’re looking to refine your business model, increase your market visibility, or secure sustainable growth, JadeStart offers expert coaching, innovative tools, and a results-driven approach to achieve long-term success.
