TAX FRANCHISES: Biggest Winners & Losers of 2010 Learn which tax prep franchise chains have grown – and which have declined – in the past three years.
Every January, Entrepreneur magazine publishes the Entrepreneur 500, its ranking of what it deems the top 500 franchise companies.
The Entrepreneur 500 is a pretty big franchise advertising event, as franchisor’s will tout their inclusion throughout the year as proof of their legitimacy (I never understood why companies considered being #476 – with 475 companies ahead of you – the basis of bragging rights).
While the rankings themselves are in many cases are suspect, the Entrepreneur 500 nevertheless provides year-over-year data about franchise companies.
The tax franchise data below are from Entrepreneur’s 2011 Franchise 500. Is the data accurate? Tax preparation franchisees and other insiders are invited to add their insights via the comment section below.
According to Entrepreneur, the number of tax preparation franchises remained stable at just under 10,000.
The total number of tax franchises listed in the Entrepreneur 500 has remained relatively stable throughout the past 3 years. In 2008, Entrepreneur listed a total of 9517. In 2009, they listed 9491 tax franchise locations, a decline of 26. For 2010, they listed 9533 tax franchises, an increase of 41 units over 2009 and an overall increase of 16 units over the 3 year period.
No mention of Jackson Hewitt.
Noticeably absent from these numbers – and from the ranking itself – is any mention of Jackson Hewitt. Jackson Hewitt marketing materials reference being named Entrepreneur 500’s #1 tax franchise for 15 years straight. Yet, the Entrepreneur 500 has made no mention of Jackson Hewitt since January, 2008 and their last franchise numbers are for 2007 (5778). It’s not clear whether the troubled Jackson Hewitt chose not to participate, or whether they were dropped from the list by Entrepreneur.
While the total number of tax franchises may appear stable, that doesn’t mean that there hasn’t been significant turmoil, closings and turnover of franchises in the tax preparation sector. Entrepreneur’s numbers suggest there have been some big losers and some big winners in terms of unit growth.
Biggest Losers: Instant Tax Service, H&R Block, ExpressTax
In terms of the total decline in franchise units, the biggest losers in the Franchise 500 are Instant Tax Service (-308), H&R Block (-261), and ExpressTax (-246).
In terms of the greatest percentage of unit decline, the biggest losers are ExpressTax (-48%), Instant Tax (-26%) and H&R Block (-5%).
(If included, Jackson Hewitt may have represented a decline of about 347 units, or -5%, from 2007- 2010).
It’s worth noting that these percentages should not be misconstrued as failure rates. Failure rates could be much higher, as new franchise sales and resales could be masking franchise failures.
Biggest Winners: Liberty Tax, Tax Centers of America, Roni Deutch
In terms of total franchise unit growth, the winner by several lengths is Liberty Tax, which boasts an increase of 701 locations (28%) since 2008. In the 2nd and 3rd spots are Tax Centers of America (+57) and Roni Deutch Tax Centers (+56).
In terms of franchise system growth, the winners are Smart Tax (800%), Eagle Tax (733%), Roni Deutch Tax Centers (350%), and Tax Centers of America (47%).
| Franchise | Ent. 500 Ranking 2011 | # Franchises 2008 | # Franchises 2009 | # Franchises 2010 | # Change franchises 2008-2010 | %Change 2008-2010 |
| Liberty Tax | 21 | 2579 | 2940 | 3280 | 701 | 27% |
| H&R Block | 27 | 4833 | 4502 | 4572 | -261 | -5% |
| Tax Centers of America | 187 | 122 | 128 | 179 | 57 | 47% |
| Eagle Tax | 413 | 3 | 17 | 25 | 22 | 733% |
| Roni Deutch | 418 | 16 | 59 | 72 | 56 | 350% |
| Colbert/Ball Tax Service | NR | 252 | 252 | 236 | -16 | -6% |
| Daniel Ahart Tax Service | NR | 22 | 20 | 25 | 3 | 14% |
| ExpressTax | NR | 509 | 376 | 263 | -246 | -48% |
| Instant Tax Service | NR | 1181 | 1197 | 873 | -308 | -26% |
| Smart Tax | NR | 0 | 0 | 8 | 8 | 800% |
| The Tax Refund Store | NR | 0 | 0 | 0 | 0% | |
| Totals | 9517 | 9491 | 9533 | 16 | .168 % | |
| Franchises not in Ent. 500 | ||||||
| Jackson Hewitt | 5431* |
Your comments and insights wanted.
How accurate are the Entrepreneur 500 numbers and rankings?
What factors affected the growth – and decline – of these franchise companies?
What factors will affect their viability in 2011 and beyond?
No doubt, 2011 will be a volatile year for tax franchises. Who will be the biggest winners?
Who will be the biggest losers… and why?
Please share your industry insights and opinions below.
* Source: Jackson Hewitt 2010 Annual Report
All other data is from Entrepreneur Magazine, January, 2011
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View Comments
The tax industry is going through a tremendous time of change. Some of these changes are positive and some are negative. With the increase in regulation and with further regulations coming in the next several years the Tax Industry will continue to evolve and change.
Liberty has won mainly because John Hewitt has been able to calculate what was going to happen and position Liberty to take full advantage of situations plus Liberty continues growing at a rapid pace further making there performance numbers look better and better. HRB will appear to be the biggest looser by the end of Feb but as the season ends I feel HRB will be flat to slightly down overall. Liberty will be a huge winner this year without doubt.
I feel in the future we will start to see considerable consolidation in the Paid Preparer arena. I also feel that the online tax prep companies enjoying much success now will soon run into a period of scrutiny causing them to stumble but in no way fail but in now way will they ever replace paid preparers.
After this season we will be able to see who survives another year and what other major changes are coming down the road. I gurantee this it will not be boring.
Rob,
you are an area developer and are a successful franchisee, however most franchisees are not successful. If they where they wouldn't need operating loans from JTH. According to the 2010 financials JTH Tax had to loan $32,488,000 in operating loans to its franchisees. Based on the 3,280 stores listed on this web site that breaks down to $9,904.88 per store. This shows the stores don't generate enough cash flow to stay open. With the exception of certain stores the only winner in this is JTH Tax.
As far as JH being such an innovater why doesn't Liberty have a bigger piece of the on-line tax filing business?
Will JTH Tax go public?
The operating loans are mainly used for expansions. Please get your facts straight before you post disparaging information on a public forum.
You probably don't know this but a company must have a quiet period before any planned IPO for up to 3 months. Even if Liberty were planning on going public, they couldn't talk about it until it was officially announced. If you are talking so much trash about Liberty why are you concerned when their shares will be publicly available?
Operating loans are just as they say they are. Just go on Liberty Tax Services website, under investors information and look at the financial statements. It explains that Notes are for the sale of the franchise, are colleteralized by the undrelying franchise, quaranteed by the franchisee and payable back in 5 years. The operating loans are for working capital or equipment loans and are payable within 1 year. Both notes carry a 12% interest rate.
My job on this website is to present the facts and the information I gave comes right from the company's financial statements.
I know for a fact that there are a ton of territories paying minimum royalties rather than opening a storefront. So when you read that Liberty supposedly has 3280 franchises, I would bet the actual number of store fronts is significantly less than 3000. And next year there will be even less. Let's get real, this is a lousy time to own a tax franchise. Even the H&R folks are finding it rough, and the fallout there will be significant also.
Instant Tax Service is one big PONZI scheme. They offer a buy back and use money from new franchisees to off the old ones
Why are there son may lawsuits pending and judgement against Instant Tax Service but the owner, Fesum Ogbazion is living high on the hog.
Hey Fez, pay your debts and your franchisee buy-backs. Your Ponzi-Scheme is over
STAY AWAY. Don't let their sales smiles fool you. Yes they will deny this but I wouldn't take the time to write this if it wasn't true.
They say it's cheap to start a Smart Tax but don't tell you about all the crazy over priced products they force you to buy. Besides every new store lately has been an outright failure loosing thousands and thousand with owners going bankrupt when they find they are money pits.
Their support sucks, when you call in the middle of tax season with a client in front of you and an important question, their "support" staff is actually doing returns for the main branch's customers at the same time. Very often you her them say things like "sorry I'm with a client I'll call you back" and they don't even call back half the time.
It's too new of a company and lacks the proper support especially since they spend their time and funds on selling more franchises and not helping the poor franchisees. Heck why should they care they get minimum fees from your office whether it gets a single customer or not. Plus they make you buy all kinds of Smart Tax crap at a premium like umbrellas, pens, envelopes, $1,000 plus murals, posters, mats, etc, etc, etc.
Very unprofessional and they control all the funds, always threatening not to pay or let you operate from your office unless you put up with their unethical ways.
When company decisions are made it's not in the best interest of the clients and franchisees but the owner of the franchise and his main men.
STAY AWAY don't let the small start up costs fool you, they will take you to the cleaners. If you doubt this you should call individual franchisees. Beware though the franchisees are cautious of the Smart Tax spies calling them. You should still be able to sense when you call, aside from his main men Joe and Jorge every one is miserable.
Smart Tax went down from 27 stores in 2011 to 27 stores in 2012. The company's goal was to grow to 50 by now but many franchisees closed shops after the relatively new start up model not being as successful as anticipated.
Smart Tax went backward NEGATIVE 22%. They went from 27 Stores in 2011 to 21 Stores in 2012. Some went out of business. Is that a good business model? They take 23% of the gross revenue by year two.