Hi-I hope I can be of some help. Our CT has been renting costumes for over 30 of our 50 years. I manage our shop. First things first, yes, your non profit status is something to look into. You will need legal advice on how to set it up. Many theatres can run the CS separate from the CT to keep the CT non profit. I'm no lawyer, so have someone look into it for you. If too much of your income comes from rentals and not from your mission, it can require you do the bookkeeping separately. If many of your items are donated that helps you out too...really, you will want to double check with your lawyer or arts council. DO check into it though, our shop provides much needed money for running our building.
Handling payments is really up to you. We use a contract. Show customers are rented differently than walk-in customers. Here's a tip though: Costumes will NOT always be returned in good condition. They will not always be returned. Not all un-returned costumes will end up being paid for. There will be loss and damage every year. The trick is to keep it as minimal as possible.
I know some theatres have a volunteer to handle rentals, and some do it by the show, some rent by the piece, designed to measurements. Some ship, some don't. How will the costumes get cleaned (again with the state and federal regulations--there are rules about how and when...)? Where will they be cleaned? It really all depends on how much time you have, and if you're running on staff or volunteers.
Is it more hassle than it's worth? It can be. It depends on how you manage it. Ours grew quickly and well. We do have staff. One full time manager, and two part time assistants (two in fall/spring, one in summer), and one part time seamstress. With all of our expenses we still manage to make some decent money each year to help with the theatre. But costume shop managing is a burn out job. It's hard to find employees. It's hard work, and frustrating when people don't bring things back.
You can check out my website for information on how to organize a costume shop, as well as other fundraising ideas. We started a fundraiser online with auctions, selling off items that we didn't need anymore, that's been easier to manage than a full rental program. I also suggest looking into a bookselling business. You can ask for donations of books, list them on Amazon and sell them. It's something one person can do, no washing, no worries of damage or loss to your inventory, and actually an easy way to make decent money once you get the hang of it.
I plan on adding a question and answer section to the costume organizing site, you're welcome to contact me through that site or through here if I can answer any questions for you. You can also check out the yahoo group for the costumer's manifesto, lots of great info there from costumers around the country.
Good luck-I wish you the best of luck in finding your extra funding!
------------- http://www.dramaticallycorrect.com - Dramatically Correct Cast Gifts
http://www.freewebs.com/costumeorganize - Costume Shop Organization Tips
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