Spiralling labour costs and hyper rents are cutting into Toni & Guy's Irish profits, according to managing director Alan Boyce, who owns a 74 per cent stake in the business here.

The British-based Toni & Guy hairdressing chain has seven hairdressing salons here and pays £100,000 (€126,973) rent per year. Rates on its 5,000 sq ft Clarendon Street premises in Dublin's city centre are £14,000 (€17,780) per year. This compares to rent and rates of £77,000 sterling per annum for Toni & Guy's Regent Street salon in London, and £48,000 sterling per annum for its Knightsbridge branch - just two of its 150 branches in the UK.

"The key money required to open up in Dublin city centre is ridiculous. You can pay up to £200,000 (€253,950) which means it costs £350,000 (€444,410) to open a salon. It costs a maximum of £150,000 (€190,460) to set up anywhere in the UK," according to Alan Boyce.

The wages threshold in the UK salons is about 35 to 38 per cent of the turnover, compared to around 50 per cent here.

"A legitimate hairdressing salon should be making 10 to 15 per cent profit, So, if we turn over £1 million (€1.27m) here, then £150,000 (€190,460) of that is profit," says Boyce.

"Around half of the turnover goes on wages and then the taxman takes his cut. We are aiming at mass turnover, so we have to keep opening up shops and providing an efficient service."

The chain part-franchises its branches to staff members, some of which trade under other names, like Essensuals in South Anne Street.

The introduction of the minimum wage has been a major contributor to overall costs. Toni & Guy has 250 trainees nationwide - some of whom may defect to other salons after graduation.

"One previous trainee turned out to have his own salon in partnership with his wife. Afterwards he went back to work in his own business. In the UK they have to stay with us for a year afterwards or we can recoup the money we have invested from them."

Staff poaching by other salons is also a problem. "I know one salon in Cork that takes staff and then pays them under the table. It ruins things for those of us trying to run a legitimate business."

Likening Toni & Guy to "the Gap or Marks & Spencer" of hairdressing, which provides "a good standard without the frills", Boyce says this approach has allowed the UK salons to survive and grow during the recession - from eight shops in 1988 to 150 today. He believes that hairdressers charging £60 to £70 (€76-€88) a haircut may be "cutting their own throats" in the long-term.

"If there is a recession, I imagine they will be the worst hit. We have celebrities who don't want to be treated like VIPs. They want good service and a good consultation process. In this Celtic Tiger economy, most people have to go to work and don't have time for a 25minute head massage."

While Dublin rents are steep, they do compare favourably to Belfast, where Toni & Guy has a 1,500 sq ft salon and pays rent and rates of £92,000 sterling per annum. According to Boyce, they were one of the first in Belfast to pay key money - of £15,000.

"It is a good location facing the City Hall, but rents are very high for a city with a relatively small population. The authorities there need to consider this if they want to attract businesses from the south of Ireland and the UK."

Jenny McDermott, marketing manager of Peter Mark - which has been 40 years in operation and now has 66 salons nationwide - believes that high rents charged by landlords are "short-sighted " and threaten to drive hairdressers out of town.

"People often come to a shopping centre, for example, for a total experience. They want to shop, have their lunch and maybe get their hair done. If personal services are driven out, the shopping centres are ultimately going to lose out."

There has been a noticeable migration of hairdressers from Grafton Street, where rents are in the region of £250 (€317) per sq ft. Peter Mark once had three salons on the street and now has only one remaining, of which it owns the freehold.

Although the chain would not disclose the rents it currently pays in the city centre, industry sources say it is known for negotiating hard deals. Peter Mark has two salons on the first floor of the St Stephen's Green Shopping Centre, where rents are pitched in the region of £75 to £80 (€95-€101) per sq ft and a hairdressing academy on the second where rents are about £30 (€38) per sq ft - although it is likely the company is paying less than this.

Its two high-profile salons on Grafton Street and St Stephen's Green, where some of the chain's top stylists are based, charge a minimum of £26 (€33) for a ladies' haircut, with the rest charging between £19 to £22 (€24-27). The next rent review at the St Stephen's Green centre will be in September 2003, according to Jenny McDermott. "We will spread the cost of the rent review increase into the cost of our services over several years.

"We have fought to stay affordable. Even our top stylist, Gary Kavanagh, only charges £45 (€57). But landlords have become increasingly bullish in recent years and we face high rents and rates and service charges. It is a struggle, but we feel that clients will not accept it if we suddenly put up our prices."

Rents are also substantial in the high-profile suburban shopping centres like Blanchardstown, at about £140 to £150 (€177-€190) per sq ft. Peter Mark is also due to open a 2,500 sq ft unit in the Pavilions shopping centre in Swords.

With a training budget of £1 million (€1.27 million) per annum, it currently has 500 trainees. "We provide an internationally-recognised qualification, but with no Government circumvention. The minimum wage has made it more difficult, and other salons have cut back the numbers they are training. We have to ask ourselves if we can continue to do this. In two or three years there will be a bottleneck of skills, which in our industry is a tragedy.

"Peter Marks is feeding the market and staff are being taken by those with less overheads who can spend money on their profile."

The chain has nine salons in Northern Ireland which are assisted by a Government contribution of £4,400 sterling per trainee over a two-year period, and are exempt from the minimum wage for apprentices.

Fintan Tierney, of Lambert Smith Hampton commercial agents, does not agree that rents are exorbitant. "Rents are ultimately a function of the footfall in a shopping centre; if there is a disparity between the footfall and the rent, then tenants will leave. I haven't seen any mass exodus."

Another industry source commented: "In principle a salon is not going to be able to pay as much as a prime fashion retailer, but look at the amount of prime locations Peter Mark has. Landlords regard them as desirable and they do not have a lot of organised competition."

However, according to Jenny McDermott, "It may look like we are everywhere, but we are not in the Jervis Centre or in the Omni Park Shopping Centre in Santry. We are not in every centre in Ireland and we lost two of our salons in Grafton Street."