When setting up a new business, there are a range of different structures you might choose to implement. Services and facilities business structures have been historically popular with health providers and dentists. However, more businesses are deciding to set up under a services and facilities model – from hairdressers and tattoo artists, to co-working space providers. This article will detail some of the key features of the services and facilities model. 

How Does a Services and Facilities Model Work?

Under a services and facilities model, businesses generally agree to provide access to their business premises to practitioners who service their own clients. The practitioners will generate revenue based on the number of clients that each brings in. They will then pay either a flat-rate or percentage-based fee to the business which operates the space. 

Sometimes, the business which operates the space will also provide equipment and shared services, such as receptionists.

How Is This Structure Different to Having Employees? 

Usually, if you are a business owner who has employees, you need to pay them a salary or hourly wage. As the employer, you are responsible for finding clients and will need to pay staff even if the business is struggling. You are also responsible for the actions of your employees, and your insurance will typically cover them. However, if you engage workers as employees and they generate a lot of revenue for your business, you can keep all of that revenue (minus their salary). 

This structure typically involves a lot of responsibility and control over your employees. This may not be right for you if you would rather the practitioners take a more proactive approach to bringing in clients. 

However, if you want to implement a services and facilities model to avoid your responsibilities as an employer, you could get in trouble with the ATO or the Fair Work Commission. So, you should always seek legal advice before implementing this business structure. Here, you must make sure you have a clear and comprehensive contract which sets out the terms of this business structure.

What Will a Services and Facilities Agreement Contain?

You will need to provide a contract to all of the practitioners who use your space. This contract will need to outline important information about your relationship and what each of your responsibilities are. Some of the crucial information to detail includes:

Payment Structure

Your services and facilities agreement will need to detail how you will pay the practitioners. For example, you need to outline whether:

  • your facility will accept payments and distribute them to practitioners; or 
  • the practitioners take their own payments and then pay a fee to you.

Client Bookings

Your agreement must outline:

  • who will arrange client bookings;
  • if there is a centralised system where your facility books the clients and distributes them to different practitioners; 
  • if practitioners are responsible for booking their own clients; and
  • what sort of availability the practitioners need to service clients.

Use of Your Facilities

Within your services and facilities agreement, you must detail how practitioners can use your facilities. This includes information on whether:

  • you will be offering anything besides a physical space to the practitioners;
  • there be a shared receptionist; and
  • you provide any furniture or equipment.

Conduct

Your services agreement must outline how the practitioners must conduct themselves. If they conduct themselves poorly, it will have a negative reflection on your business. You must detail:

  • how practitioners must behave and conduct themselves on the premises;
  • when they can access the space; and
  • that practitioners cannot solicit your clients or employees. 

Key Takeaways

A services and facilities business model allows individual practitioners to run their own business at your premises. Sometimes, all you will need to provide is the space, but in other situations, you could provide equipment and shared staff. Either way, it is crucial that your contract with practitioners clearly details how the arrangement will work. If you have any questions about a services and facilities business model, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.
Blythe Dingwall

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