UnhappyFranchisee.Com – Are you familiar with the Jackson Hewitt tax franchise opportunity? What do you think? You’re invited to share a comment below.
According to the Jackson Hewitt website, Jackson Hewitt Tax Service Inc. (NYSE: JTX) is an industry leader providing full service individual federal and state income tax return preparation through more than 6,400 franchised and company-owned offices throughout the United States.
After its rapid rise to the #2 position in the industry, Jackson Hewitt has had some rough years and myriad problems. According to Wikipedia:
“The 2007 Department of Justice investigation, poorly constructed financial products, and a company-wide tax law compliance initiative that many insiders believe did more harm than good combined to erase nearly 50% of the company’s market share over merely four years.
“Additionally, the company negotiated out of a default on its debt in May 2009 and technically defaulted for several days in May 2010 (though an agreement with creditors was announced within one week of the ‘default’).
“During the 2010 tax season, Jackson Hewitt was not able to provide its flagship refund anticipation loan product in 50% of its stores, placing it at a operational and marketing competitive disadvantage. The company’s current agreement with creditors requires that it secure refund anticipation loan funding adequate for 100% of its stores by September 30, 2010 and that written commitments from lending institutions be made available to creditors by November 15, 2010. Failure to do either will place the company once more in default.
“The debt indicator is a significant part of the provision of refund anticipation loan funding and its lack of availability is expected to increase the cost of such products to consumers and decrease the level of their availability.
“This IRS change significantly reduces the probability that Jackson Hewitt will be able to comply with its renegotiated loan covenants as discussed above. The stock currently trades below one dollar*.”
* The Jackson Hewitt stock price is listed at $1.11 today
Unhappy Franchisee has received numerous complaints about the rival Liberty Tax Service (see LIBERTY TAX SERVICE Franchise Complaints).
Is Jackson Hewitt franchise have worse problems?
How is the franchisor doing in helping Jackson Hewitt franchisees weather the storm of operational & marketing challenges, and adverse publicity?
Is this simply a franchise (Stock? Tax preparer?) to avoid at all costs?
WHAT DO YOU THINK? SHARE A COMMENT BELOW.
Company responses, clarifications or rebuttals welcome. Contact the author/site admin at UnhappyFranchisee[at]gmail.com.
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View Comments
I almost bought a Jackson Hewitt right before last tax season. Thank God i did not since bankruptcy seems to be coming very soon.
The management of Jackson Hewitt Tax Service is clueless. The industry is changing before JTX Management's eyes and they couldn't see it before and certainly cannot see it now.
Franchisees are either failing left and right or in outright survival mode. MANY, if not shackled by their one-sided franchise agreements, would leave the system and do much better to survive on their own.
I heard there is no way they will be able to offer RAL is the same 50% of office that did not offer them last year. How can they ever compete with the firms that do?
If the franchisor cannot offer a RAL this year, a large number of franchisees which are not renewed will simply go independent.
Michael,
Wouldn't they have non-competes for like 2 years even if they don't renew?
John;
1. I am assuming that if there is no RAL, then the franchisor is going into some sort of court supervised reorganization.
2. Many of the JH franchisees live in states which many enforce the non-competes.
3. If the franchisor is taken over by a trustee, then I am not sure that they are going to spend any money trying to enforce some non-competes.
This is legal information and not legal advice, please contact your own franchise attorney.
Wow, seem like it is a mess! I would hate to be one of the previous successful franchisees who will be hurt from this, through no fault of their own.
What happens to franchisees if Jackson Hewitt files for bankruptcy? Will they be able to use the name Jackson Hewitt and continue to do business that way or will they lose their business?
Not sure. They would not lose their independently owned and operated businesses, but they may have to (or want to) flip their signs.
When a franchisor is in either liquidation/receivership/bankruptcy, then franchisees must be very careful to honor their franchise agreements, get competent legal advice, and organize beforehand.
Virtually all of your actions are going to be scrutinized by a Court, so don't engage in self help remedies.
For example, Herb's suggestion that the franchisee would have to take down their signs is wrong and may involve contempt of Court.
Get good legal advice from an experienced attorney as a group.