Business Overview


A formal wear rental business is a company that buys expensive suits, dresses, and accessories and lends them out for important events, such as proms and weddings. A tuxedo or wedding dress is an expensive thing to buy for an event that only takes place once in a lifetime. While formal wear can technically be used again, it is likely to sit in a closet for many years to come. Rental wear businesses are excellent investments because even when money is tight, people still tend to spend money for special occasions. While the industry does face threats, like cheap, inferior suits made overseas, the market is still projected to grow over the next few years.

Who is this business right for?

The best owners will be those who understand formal attire and current trends in formal wear. Sizing, fashion, and customer service will all play major roles in how successful an owner is. Entrepreneurs do not necessarily need to be a tailor, but it helps to understand how the alterations process works.

What happens during a typical day at a formal wear rental business?

Owners are generally in charge of overseeing all operations, including:

  • Selecting and purchasing items to rent
  • Managing employees
  • Sizing customers
  • General sales floor duties
  • Setting prices (including specials during busy times)
  • Promoting different uses for formal wear (e.g., job interviews)
  • Determining and recognizing new trends in formal wear

What is the target market?

The ideal client is someone who understands they’re not going to wear an expensive suit or dress enough to justify its full cost. You want parents looking for suits and dresses their kids will grow out of immediately, high school students who can’t spend thousands on one dance, and hard-working people who need formal wear for big job interviews and weddings.

How does a formal wear rental business make money?

Companies make money by renting formal wear at a comfortable profit margin. An average tuxedo may cost around $1,000, and the average tuxedo rental is $196. After just 10 rentals, the suit will have generated around $1,000 in profit (minus the cost of dry cleaning and upkeep.)

What is the growth potential for a formal wear rental business?

There is only so much one brick-and-mortar formal wear rental business can grow, based on the demographics of the town. People generally won’t travel too far to pick up a rental, so you’re somewhat limited to the location you choose.

There are plenty of ways to grow if you choose to franchise. You may either want to choose an established company to franchise from, or you can start your own franchise after the success of your first independently-owned store. There are also ways to rent your clothing online, which can drastically increase your sales.

Getting Started


What are some skills and experiences that will help you build a successful formal wear rental business?

Formal wear sometimes gets a bad reputation because the quality of the clothes may be low while the prices are high. People complain of outdated fashions, and signs of wear and tear like ripping and fading. Owners will need to work with customers to build their trust, and stay attuned to their specific needs. For example, Jim’s Tuxedos and Men’s Clothing Warehouse in Michigan saw success with a camouflage vest and tie that attracted hunters who were in the market for a rental.

What are the costs involved in opening a formal wear rental business?

Exact costs will be based on where you choose to open, and how much space you need. If you choose to franchise, you’re paying not just for the name and methodology of an established company, but marketing, general support, and (potentially) inventory. Gingiss Rental places the low-end estimate at around $95,000 and the high end at around $243,000. If you choose to open on your own, you may have much lower numbers, but you’ll likely end up spending the rest of the money in marketing and outreach campaigns.

What are the steps to start a formal wear rental business?

Once you're ready to start your formal wear rental business, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:

  1. Plan your business. A clear plan is essential for success as an entrepreneur. A few important topics to consider are your initial costs, your target market, and how long it will take you to break even.
  2. Form a legal entity. Establishing a legal business entity prevents you from being personally liable if your formal wear rental business is sued.
  3. Register for taxes. You will need to register for a variety of state and federal taxes before you can open for business.
  4. Open a business bank account. A dedicated checking account for your formal wear rental business keeps your finances organized and makes your business appear more professional to your customers.
  5. Set up business accounting. Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
  6. Obtain necessary permits and licenses. Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
  7. Get business insurance. Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
  8. Define your brand. Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
  9. Establish a web presence. A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.

Select your state below for an in-depth guide on completing each of these steps in your home state.

Where can I find a business mentor?

One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.

Having a support network in place to turn to during tough times is a major factor of success for new business owners.

Recommended: Fizzle.co offers video courses and a supportive online community of like-minded entrepreneurs. Try one month membership for for free.

What are some insider tips for jump starting a formal wear rental business?

Late spring is a good time to make a splash because it’s both prom season and the kick-off to wedding season. You’ll especially garner attention if you open in an area with limited rental options. Owners need to pay close attention to what’s hot in the rental business. There are a variety of companies that make it easier for both men and women to find the fashions they’re looking for without the hassle. Give people a reason to come visit your store, whether that’s a special discount, a bigger selection, or designer labels.

Growing Your Business


How to promote & market a formal wear rental business

One way to market your company is to franchise your business from a larger company. Big-name companies will already be doing much of the marketing for you. When they advertise at the corporate-level, you benefit without having to do any additional work.

If you choose to open your own company, you’ll want to take advantage of both online, print, and television ads. Use your advertising budget wisely by figuring out what newspapers your clients read, what websites they’re on (e.g., prom fashion websites), and what television shows they watch.

Recommended: Get started with local advertising for your business with a $300 credit from Yelp.

How to keep customers coming back

The best way to attract customers is to offer the fashions they most want to be seen in. The best way to retain customers is to offer superior service at every step of the way, and to never let a person leave in a suit or a dress that could be perceived as ‘second-hand.’ You should also cater to your client’s schedules (within reason), including rush orders when possible.

When working with customers, it is important to educate them about the work that you are doing for them. Tell them how things are supposed to fit, and show them that you are fitting their clothing the proper way. This will reassure them that you are well-educated on the service that you are offering, and it will increase their satisfaction. This satisfaction will lead them to share their experience and  promote your business to others.

How and when to build a team

A small rental shop may only need one employee to stay afloat. Owners could potentially operate based on appointment only, or keep limited business hours. As long as the community is serviced, there is some flexibility in terms of how and if you build your team.

However, if you choose to open a franchise or larger business, you’ll want to start hiring managers and sales floor employees right away. Consider hiring someone in every demographic you wish to serve. For example, a high school student can you tell you what’s hot with their friends and classmates.

Legal Considerations


State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate a formal wear rental business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, check out our informative guide, Sales Tax for Small Businesses.

Certificate of Occupancy

A formal wear rental business can be run out of a large or small storefront. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO).  A CO confirms that all building codes, zoning laws and government regulations have been met.

  • If you plan to lease a storefront:
    • It is generally the landlord’s responsibility to obtain a CO.
    • Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a formal wear rental business.
    • After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
  • If you plan to purchase or build a storefront:
    • You will be responsible for obtaining a valid CO from a local government authority.
    • Review all building codes and zoning requirements for you business’ location to ensure your formal wear rental business will be in compliance and able to obtain a CO.

Reduce Personal Liability

Structuring your business as a limited liability company (LLC) ensures your personal assets are protected in the event your business is sued.

What is an LLC?

Form an LLC in 5 easy steps

Earning Potential


How much can you charge customers?

Most people are willing to spend up to $200 for a rental, especially considering buying a tuxedo can be 6 times that cost. However, you are limited by the area you sell in. If you’re charging $200 per rental when the average income in the area is $25,000 a year, then you could end up being pushed out of the market quickly. In these circumstances, you may want to focus on building profit through high-volume sales.

Open up shop in an affluent area, and you can charge up to $500 for a designer suit. You will also need to include ways to recoup your costs if the rental comes back damaged (e.g, by holding onto a credit card until the formal wear is returned in good shape.)

What are the ongoing expenses for a formal wear rental business?

Owners will need to continually update their styles to keep up the demand. In addition, owners will have the following expenses:

  • Store maintenance and yearly license fees
  • Inventory cleaning and repairs
  • Employee salaries
  • General clothing supplies ( mannequins, racks, hangers)
  • Office supplies
  • Advertising costs
  • Website upkeep and potential online rental expansion

How much profit can a formal wear rental business make?

Formal rental wear companies will have different profit margins based on where they choose to operate. Whether a business specializes in high volume at lower profit margins or the other way around though, there is the potential to achieve a healthy bottom line when pricing is managed correctly.

How can you make your business more profitable?

Your business may benefit from offering custom tailoring or alterations for clients, as it will be impossible to size for every body type. You may also want to consider renting online if your company finds a niche market that can be expanded to other parts of the country (e.g., formal wear for football enthusiasts.)

Next Steps

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