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The pros and cons of working with a tax franchise
When Henry Bloch packed his bags and drove from Kansas City to New York in October 1955 in his brother's borrowed car, the seeds were planted for an expanding business that would come to dominate America's tax landscape.
Bloch was there to scout out possible locations for the tax return business he and his brother Leon had started several years earlier. He found the right locations, and the 1956 tax season was a success. However, since neither brother wanted to cast off their Kansas City roots, they decided to sell the seven offices to two local CPAs. The buyers wrote a check for $10,000, and agreed to pay 2 percent of future revenues. So began the tax preparation franchise business.
Currently, Block has 10,992 offices, of which 4,471 are franchises and the rest are company-owned, according to spokesman Gene King. "Roughly 40 percent of our office locations are franchise locations," he said.
There are now more than a dozen franchise operators willing to sell their system to entrepreneurs, but the two closest to H&R Block in terms of number of locations and volume of returns were both started by John Hewitt, a former Block regional manager.
Jackson Hewitt, formed in 1982, has 6,800 franchised and company-owned locations throughout the U.S., including 2,800 located in Wal-Mart stores, and more than 400 Sears stores in the U.S. and Puerto Rico.
The benefits of being part of a franchise system have never been clearer, according to Mark Steber, chief tax officer at the major franchiser. "Because of increased regulatory oversight, attracting and retaining a qualified workforce in a competitive environment will be more difficult for the stand-alone office," he said. "There won't be that many qualified preparers. In order to attract and retain qualified preparers, you'll have to offer them a career path, benefits and training. Preparer registration and the new oversight dynamics of...