You Should Not Sign A Salon Lease Until You Can Answer These Seven Questions

A commercial lease can look like a stack of paperwork, but it is really a long-term financial decision that can make or break a salon. We walk through the lease terms that matter most and translate the jargon into plain English, because “base rent” is only the starting point and the real monthly cost often includes triple net (NNN) charges like CAM, property taxes, and building insurance.

We talk about why the letter of intent (LOI) is where the most important negotiating happens, and why you should not assume the final lease will magically improve terms you forgot to lock in early. We also look at the clauses that quietly change your cash flow: rent escalations over a seven- to ten-year term, tenant improvement (TI) allowance details, what “free rent” actually covers, and the exact language that sets your rent commencement date while you are still building out.

Then we get into risk and flexibility: personal guarantees and how a burn-off might reduce your liability, renewal options that protect the value of your build-out and clientele, and the unglamorous but expensive section on repairs and maintenance like HVAC. We also cover practical protections for operators, including permitted use so you can add services later, exclusivity questions to avoid a direct competitor next door, signage rights for visibility, and assignment and subleasing terms for your exit strategy. Along the way, we repeat the most important disclaimer: we are not attorneys, and a qualified commercial real estate attorney should review the final lease before you sign.

If you are opening a salon and want a simple checklist, we end with seven questions you should be able to answer confidently before committing to hundreds of thousands of dollars. Subscribe, share this with a future salon owner, and leave a review so more people negotiate their leases with open eyes.

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Transcript

Why The Lease Matters Most

SPEAKER_00 0:00

You know, if you're thinking about opening a salon, one of the biggest commitments you're going to make isn't your equipment, your payroll, or even your build-out. It's your lease. And if you've ever read a commercial lease before, let me warn you, it can feel like it's written in another language. You've got base rent, you got triple net, you got CAM, you got personal guarantees, tenant improvements, rent commencement, renewal options. What does it all mean? Well, today I'm going to break down the most common parts of a commercial lease in plain English. And more importantly, explain what you should be paying attention to before you even sign one. And just a disclaimer: I am not an attorney. I'm just a salon owner sharing what I've learned from negotiating commercial leases over the years. Always have a qualified commercial real estate attorney review your lease before you sign it. Before

Negotiate Hard In The LOI

SPEAKER_00 1:01

you even get that big ass giant 60-page lease, you're going to usually negotiate something called an LOI or letter of intent. Think of it as like the outline of the deal. It basically has how much rent you're going to pay, how long the lease is going to be, your annual rent increases, tenant improvement money if you get any, free rent if you get any, your renewal options, your personal guarantees, when does your rent actually begin? And what you're allowed to use the space for. The letter of intent is where a lot of the negotiating happens before the lease even starts. And here's something that's super important you might want to pay attention to. Don't assume something will magically get better when the actual lease arrives. If something matters to you, you want to make sure you're negotiating it in the letter of intent before you even get to the lease stage. If that air conditioner that might be 20 years old and you think it might be on his last leg and you don't want to replace it, you better have it in your letter of intent that you want the landlord to either replace the HVAC system, I doubt if they will, or at least have it in good working order and maybe have them promise that if it goes out within the first year of your business, that maybe they'll take care of the cost. I don't know. Put something in there if that's one of your concerns. Another concern might be how long do you want to build out? Do you want some free rent when you're building out? Do you think your build out's gonna be three months, six months? Negotiate that in. See if you can get some free rent while you're actually building out and not producing income. That is huge. Now you'll probably have to pay the cam fees, the triple net, things like that, and we'll get into that. Like you're going to write a letter of intent to the property management or the landlord, whoever you're dealing with, saying, I'm interested in this spot. Here's what I plan on doing, here's what I would like to see, things like that. They'll come back with to you with their letter of intent, and then you could go from there.

Base Rent Versus Real Monthly Cost

SPEAKER_00 3:28

Okay, number two, your base rent isn't necessarily actual rent. This is probably one of the biggest surprises, especially for first-time commercial rentees or tenants. You might see a space advertised like $30 per square foot, and you think, okay, I can calculate my rent. Well, not quite, because commercial rent is actually quoted as an annual price per square foot. So if say your space is 2,000 square feet and it's $30 per square feet, you would take $2,000 times 30, that equals $60,000 per year and divide that by 12. That's $5,000 per month. That's just your base rent, though. You might still have some additional expenses on top of that, which brings us to triple net. What does NNN or triple net lease mean? This actually means that you're going to be paying rent plus your share of three additional property expenses: property taxes, building insurance, and common area expenses. These common area expenses are often referred to as CAM, C A M, or common area maintenance. And these can include things like your parking lot maintenance, landscaping, exterior lighting, snow removal, trash, property management, maintenance of shared areas, all kinds of things. Okay. So if your base rent is $5,000 a month, your actual occupancy cost might be $6,000 or $6,500 a month after your triple net expenses. That's why I never want someone asking what's the rent. I want you asking, what's my total estimated monthly cost? Huge difference. Okay. You also

Escalations And The Long Game

SPEAKER_00 5:40

want to watch out for the annual rent increases. This is huge. I remember one of my salons, I guess I just didn't catch it. We had, well, I think we we did our annual rent increases. We we capped it at 3% every year, but we forgot to cap the triple net and it went up probably every quarter. I tell you what, that first year in that space, I was losing my mind. I actually had this graph that just kept going up, up, up, up, up. Ugh, ugh. Anyway, your starting rent isn't necessarily what you're going to be paying five years from now. There is, I I've only had one lease in my 35 years of doing hair that my rent didn't increase. They were wonderful landlords. I mean, and and I think we were great tenants too. And they didn't have cam fees either. They just had a base rent. Very rare. Very rare. Okay. So most commercial leases include some kind of annual increase called escalations. That's the word you want to look for. And it could be just, like I said, 3% every year. And that doesn't sound like much. But over seven or 10 years, it starts adding up. You think about it. 3% on this year, it goes up to this. 3% on this year goes up to this. 3% on that year goes up to this. So don't just calculate what you can afford in year one. You want to look and forecast out year three, year five, year seven, and make sure that your business model still works.

Tenant Improvement Money Explained

SPEAKER_00 7:24

Tenant improvement allowance or TI. This is one of my favorite things to negotiate. You'll usually see it as tenant improvements, TI. Basically, the landlord gives you money toward improving the space for your business. So if you're opening a salon, you're going to look need plumbing, electrical, flooring, lighting, walls, bathrooms, HVAC modifications. Maybe your ceiling needs work. That can get very expensive very quickly. A landlord might offer you $25,000, $50,000, $75,000, or just calculate the allowance based on the square footage. But understand exactly how this works up front. Is it paid up front, or do you submit invoices and get reimbursed? When is it paid? And what improvements qualify? Do you have to use their contractor? Is there a deadline? Those details matter. Number

Free Rent And Rent Start Dates

SPEAKER_00 8:30

six, free rent doesn't always mean free. So you might negotiate six months free rent. Great, right? But ask this question: free from what? Sometimes it's six months of base rent abatement. But you're still responsible for the cam fees, the taxes, and the insurance. That triple net, right? So you're not actually paying zero. So you need to budget for the triple net if you get six months free. So when does your rent actually start if you get six months free? This is a big one if you're building a salon. Let's say you get possession on the first of the month, September 1st, in this case, okay? But you need to get permits, you need plumbing, you need electrical, you need inspections, you have construction, you've got equipment to order and install. What happens if you can't open until January? Are you going to be paying full rent while you're still under construction? Your lease should clearly define your rent commencement date. Ideally, you want enough time to complete your construction or your build out without paying your full rent. This is an area where the exact wording in your lease becomes extremely important.

Personal Guarantees And Burnoff Options

SPEAKER_00 9:57

Now, what about that personal guarantee? This is something that every business owner needs to understand. You may be creating an LLC to protect yourself legally, right? But then the landlord says, great, now personally guarantee that lease. What does that mean? If your business can't pay the lease, the landlord may be able to come after you personally, depending on the terms of that guarantee. And on a long commercial lease, that's potentially a very large obligation. That doesn't necessarily mean you shouldn't sign one, but personal guarantees, they can sometimes be negotiated. For example, you might negotiate a burnoff. And a burnoff, that just means that you've successfully paid your rent for three years without defaulting on anything, and the personal guarantee goes away. Or perhaps the amount you're personally responsible for decreases over time. Don't just see personal guarantee and assume it's non-negotiable. Ask. The worst they can say is no, right? All right, what about those renewal options? Okay.

Renewal Options And Future Rent

SPEAKER_00 11:09

Let's say you build an amazing salon. Okay, wonderful, right? And you spend hundreds of thousands of dollars and you establish a clientele, and then seven years later, the lease expires. Now what? That's why I like having renewal options. You want to negotiate these up front. You might have one five-year option or two five-year options. That gives you the right to potentially remain in the space under the terms established in your lease. Okay. But look carefully at how that rent's going to be calculated during those renewal periods, okay? Now, who is responsible for what?

Repairs And Maintenance Surprise Costs

SPEAKER_00 11:54

This section can get expensive. Who fixes the HVAC if it dies? Have you thought about that? Who repairs the plumbing? Who's responsible for the roof? How about the electrical, the windows, the doors, the structural problems? Don't assume, don't assume it's their building, so they'll fix it. Mmm, that'll catch you. Commercial leases don't actually work that way. The lease may make the tenant responsible for things that you don't normally expect to be responsible for. And replacing a commercial HVAC can be very expensive. Trust me. I know. So

Permitted Use And Service Expansion

SPEAKER_00 12:35

what are you actually allowed to do in the space? This is called permitted use. If you're opening a salon, don't make this too narrow if you can avoid it. Okay. Today you might only offer hair services, but what happens three years from now, if you want to add extensions, scalp treatments, makeup, other beauty service, waxing, maybe you want to add on um uh facials or massage? You don't want to discover that your lease prevents you from expanding your services if you wanted to. Think about the business you're building and not just the business you're opening.

Exclusivity Clauses And Competitors

SPEAKER_00 13:15

Okay, how about exclusivity? This is another great question to ask. Can your landlord rent the space next door to another salon? What about a blow dry bar or a color bar or a beauty concept? Sometimes you can negotiate an exclusive use clause that prevents the landlord from leasing to a direct competitor, if you will. Okay, because you don't want another salon right next door, but sometimes you can't. But again, you gotta ask for these things. You'd be amazed how many things in a commercial lease are negotiable if you just ask. Okay.

Signage Rights And Visibility

SPEAKER_00 13:59

How about signage? Okay, never assume you can put whatever sign you want up on a building. Find out where can your sign goes? How large can it be? Who approves the design of the sign? Who pays for it? Are there monument signs? Can you put graphics on the window? What does a shopping center allow if you're in a shopping center? And what does a city allow? Visibility matters so much. So you want to make sure that you understand your signage rights right up front. Here's

Assignment, Subleasing, Exit Strategy

SPEAKER_00 14:35

another one people skip over. It's assignment and subleasing. What happens if you decide to sell your salon? Can the new owner just take over your lease? Can you assign the lease to them? Does the landlord have to approve the buyer? What if you want to sublease part of your space? You may have no intention of selling today. However, you need to think about your future and your exit strategy before you even begin. Just make sure there's something in there that says you're allowed to do this.

Default Clauses And Disaster Scenarios

SPEAKER_00 15:07

Okay, what happens if you default on your lease? Meaning maybe something goes wrong and you can't afford to pay your rent. Oh, nobody wants to talk about this, right?

unknown 15:19

Nope.

SPEAKER_00 15:20

Because we all go in there thinking, no, this isn't gonna happen. But you need to read it anyway, okay? What happens if your rent's late? How many days do you have to correct the problem? What constitutes a default on your rent? What happens if your business closes for whatever reason? What happens if your building is damaged, like a tornado or flood or hurricane? What happens if you can't operate for an extended period? Remember COVID? I don't think I have to remind anybody, but the time to discuss this is before the problem arrives. Sometimes you could, you know, you might have a great landlord, and I know when COVID hit, I had two different leases. And one let me not pay the lease through until we were open, and one I had to. So it it varies so much.

Everything Is Negotiable Until It Isn’t

SPEAKER_00 16:14

Okay. The biggest lesson is that everything is negotiable until it isn't. Here's probably the biggest thing I've learned from negotiating commercial leases. Ask for what you need. They don't have to agree. And you don't have to agree. It's a negotiation, right? And we're trying to create a deal that's best for both parties, right? Remember, you're not just negotiating $5,000 or $6,000 in monthly rent. You are signing a seven-year lease, a five-year lease, a 10-year lease. And it could be, you could be easily committing to hundreds of thousands of dollars. Treat this decision accordingly. So

Seven Questions Before You Sign

SPEAKER_00 17:03

here are seven questions to ask before you sign any lease. I want you to be able to answer these questions. Number one, what is my total monthly cost? Not just my base rent. Number two, how much will my rent increase every year? Number three, exactly when does my rent begin? Number four, what is the landlord contributing toward the build-out of my salon? Number five, what repairs and maintenance am I responsible for? Number six, what am I personally guaranteeing? And number seven, has a commercial real estate attorney reviewed the final lease? If you cannot confidently answer all seven, you are not ready to sign yet. Look, I know because I'm going through this, right? Opening a salon is so exciting.

Build A Profitable Salon Long Term

SPEAKER_00 18:05

There is so much to be done. You start imagining the stations and the color bar and your team and your clients and that opening day when everything just finally comes together, right? But before any of that happens, you have to make sure that the business underneath of it is financially sound. And that starts with the lease. So don't be intimidated by a commercial lease or commercial real estate terminology. Learn what the words mean. Ask questions, negotiate, run the numbers, and surround yourself with professionals who understand commercial real estate. Because the goal isn't just to open a beautiful salon. The goal is to build a salon that is profitable enough to stay open for a very long time. And remember this when you know better, you do better. And if

Subscribe And Follow The Build

SPEAKER_00 19:10

you're following along as we build our salon, Panach and Company, make sure you subscribe to this channel because I'm documenting the whole process, including all the decisions that have to be made. And as I'm doing this right now, we are just waiting for our letter of intent to come back so we can go into the final stages of that lease that I'm talking about. So make sure to subscribe, make sure to like this, and I hope that you learn things along the way, just like I'm doing. Thanks for being here.