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
Hello All,
First of all, thank you all for your help, it's great to see such input so easily, for which even money couldn't buy.
I have an offer to buy a JH from an acquaintance, who has shown me his financials, which states that in the past years, and even the 10-11 tax season he made an average $200k consistently.
If he has made that much money, how much do you guys believe will be lost based on the new developments in the tax preparation business. I understand a lot of websites are now filing online and JH has been hurt, but i assume JH will still be in business for at least the next few years. As long as they have wal-mart backing them i don't think they will go under.
Their will always be a market that doesn't want to prepare their own taxes or don't have the time or education to do so.
Any help would be HIGHLY appreciated.
Alex
all tax businesses are based on the individuals trust in the preparer- how much of your volume is the man's long term clients?
My location (a walmart) was 45% returning clients, and my returning customers were virtually all home owners. Transits are difficult to make money off of.
Everybody- CPA, EA, and franchisees are expecting a major fight for customers- look for major price chopping! Next year (2013) the paid preparer exam will knock out a lot of people so I suspect price erosion will halt then- for 2012 I'm not so sure.
What is your customer base? (take retention and multiply % times gross sales) That is your anticipated revenue base
What will Jackson hewitt charge you for posters and other worthless crap they say you must buy- I'll bet its at least $10/return.
Your own local advertising will be huge and you need to push YOURSELF as a tax expert- don't expect JH to co-op you unless they used canned ads which lists you and every other JH office within 20 miles. I figure it will take me $50 per return in advertising just to get started. That means on the $38 returns you stand to lose at least $20.
200K sounds like a lot of $$; my wal mart only did 77K on 383 customers.
Without a ral product I don't know how you can possibly charge $300 for a return when CPA's and enrolled agents charge $175-200.
Big Al brings up some big problems.
He has 45% retention? He does a couple of hunded of balance due 1040$.
No he does 90% REFUND$. Home owners are in debt and live REFUND to REFUND.
30 million REFUND$ are done online. MR EA has yet to get off his EA A$$ets and realize it is the REFUND people want. The BIGGER the better.
Wal Mart has a year to year agreement with JHTS. I have a real shot at being there next year. I could buy JHTS out of BK and be there too. Not a good buy.
Just wait till the iW-2 kills every non registered ghetto preparer.
REFUND$ is where you want to be.
Never ever associate with a retail TAX firm when you can be a REFUNDER.
As EA AL where on his EA website you can do your REFUND online?
McDonald's 400,000 employees are owed $1 Billion from IRS.
Wal-Mart employees are owed $3 Billion.
So EA AL how many balance due returns did you do and get paid for TAX EA?
Mr. Weagle,
What is a $38.00 return?
$38 REFUND???????
Jackson Hewitt charges $38.00 for a simple 1040EZ . Be careful with these- remember "assisted refunds" your ($38 fee taken out of tax payer's refund) result in 12-30% of these returns (my average was 16%) the IRS keeping the entire refund. If an individual has child ordered support payments statistics say 78% will have at least part of their refund confiscated. If it was a partial you usually will still get paid.
In a walmart I did 383 returns and about 90% were assisted refunds.
Those are extremely high numbers. Our tax practice is an independent in a middle-class neighborhood. Our assisted refund rate was 18% and the non-pay due to IRS keeping the refund was about 2%. 1040EZ's are less than 10% of our business. It all depends on your target market.
Mr. Weagle,
What % of your returns are prepared by Feb 15th?
Buying someone else's business:
I would hire a professional to review his financials and to get advice on how to best protect yourself if his fees fall off in the first 2 years.
One more question on the $38 return:
The $38 return. Is that all a customer pays?
I have seen ads for the free 1040 ez from Block, but I have never seen ads for the $38 return.
Sounds like that's where a good price challenge could come from. Major ads to bring in people on free or cheap.