by Roger Russell
Although Kansas City, Mo.-based H&R Block is concentrating more on its company-owned stores than expanding its franchise business, the other major tax preparation franchisors are aggressively seeking new locations.
Last year, Block had 9,210 offices in the U.S., over half of which are company owned. At 3,800 locations and 800 franchisees, Parsippany, N.J.-based Jackson Hewitt looks to reach half the number of Block locations within the next one to two years. Approximately 400 of its locations are owned through Tax Services of America, its wholly-owned subsidiary. Virginia Beach, Va.-based Liberty Tax Service will have more than 800 locations at the start of next year’s tax season, with 600 individual franchise holders. Fiducial, the French-owned international firm, has 698 U.S. locations.
For most small entrepreneurs, the advantage of operating a business as a franchisee rather than going it alone is that the franchise system has weeded out the mistakes commonly made by startups, so the business owner can "hit the ground running." The structure, the advice, and the presence of someone to fall back on, is what makes the franchise fee and royalty payments worthwhile.
"It’s worth it," said Wayne Novitch, an enrolled agent with five Jackson Hewitt locations in the Scranton, Pa. region. "You need the expertise of the franchisor. They take care of the marketing and give you a name."
Company president Mike Lister agreed. "Jackson Hewitt brings value to the tax business and makes you more powerful - this is simply based on our experience. People are used to, and trust, a brand because they know there are so many things behind that brand -- what we provide are the things behind that brand."
"The value we bring to the franchisee includes marketing support, technology - not only our proprietary software but related tools and the support that goes with it, franchise services, education, tax schools for the local employees - all these things are designed to getting customers and keeping them so the entrepreneur can build a business."
Jackson Hewitt’s main competition is not H&R Block, according to Lister, "but the tens of thousands of individual practitioners out there - there are still 30 to 40 million returns being prepared by individual operators, and these are our main competitors."
Liberty Tax Service president John Hewitt said the primary goal of his company "is to have happy successful franchisees. We’re totally franchisee oriented.
"The key difference between Liberty and Block," according to Hewitt, "is that our goal is to franchise offices, while theirs is to run company locations."
"Part of the value Liberty adds to its franchisees is that I’m on the team - and I’ve had the most success in competing with Block," said Hewitt. "I’ve been doing this for 21 years with two companies in two different countries. I have 14 conference calls with our franchisees each tax season, and several more during the rest of the year. I get intricately involved in the training of the franchisees."
Lisa Baker, a Liberty franchisee with locations in Maryland, Tennessee and Virginia, said she’s fortunate that she entered the business as early as she did. "This will be the first year that I make enough during tax season to not work the rest of the year," she said.
A number of accountants augment their traditional practice by becoming a franchisee. Bill Forness, an Orlando, Fla.-based CPA, operates 21 Jackson Hewitt locations in central Florida in addition to his 10-member "boutique" accounting firm.
Larry Novick, a Holliston, Mass.-based Fiducial member, said that the advantage of being a part of a franchise system is worth the cost of the franchise fee and royalties he pays. "You get a brand name, and that leads to credibility down at the local level," he said. "You also get a lot of input and ideas from the franchisor."
For Novick, an additional advantage of being a part of a franchise system is the interaction with others in the same boat. "The camaraderie is the best part - you come away from meetings with other franchisees and you learn what they’re doing for marketing and how they run their offices. You always come away with one or two ideas that will make you money."
Fiducial entered the U.S. market by acquiring Triple Check in 1999 and Century Small Business Solutions in 2000. Its primary markets are middle- to upper-middle income individuals and the small business owner, according to Howard Margolis, field operations and development manager.
"We’re more of a one-stop resource than the other franchises," he said. "In addition to tax, we have four other business lines that generate revenue - financial services for individuals, accounting and back-office services for small business owners, business counseling services and payroll services."
Margolis said that Fiducial would begin aggressively rolling out new franchises under the Fiducial brand name and a new franchise plan in August.
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