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
Liberty Tax has 4000 offices....
testipira;
I would suggest you confirm the actual number of offices with Liberty Tax corporate, and post it on this site. I know for a fact that many offices have closed and can suggest what you are presenting is only an uneducated opinion at best.
Based on facebook it has 3,868 office this year I think last year they had 3294 offices. The year before that I believe they had 3133 offices and the year before that they had 3184 offices. In an effort to gild the lily and make this year's numbers impressive for their IPO they offered territories with only 2500.00 down and a higher royalty. The problem with that is the franchise fees they collected was a large part of their cash flow. Looking forward to see this years financials.
Imagine all the 1st year franchisees who only had to put 2500.00 thinking what I good year they were going to have. Only to have the airwaves, the internet, radio and print ads all claiming free returns. I believe with the step-up in competition from competitors, the loss of RALs (only 1500) this year and the high unemployment rate for low income filers, Even with its increase in number of stores, I see Liberty's market share staying flat.
Buyer beware!!!
Corporate just send a marketing newsletter celebrating the 4000th office that opened....
LIBERTY TAX SERVICE NOW HAS 4000 OFFICES
(City, ST) Liberty Tax Service marked another milestone as the company held a grand opening for its 4000th office in the Tampa Bay area recently. Since its inception in 1997, Liberty Tax Service has grown to 4,000 offices in the United States and Canada. When rival tax companies reached fifteen years, H&R Block (NYSE:HRB) had 1,700 offices, and Jackson Hewitt (PINK:JHTX) had 1,300 offices. Liberty Tax surpassed the 1000 office mark in 2004. All Liberty Tax offices are open and ready for the tax season, with familiar costumed Lady Liberty wavers signaling that tax season is here.
The 4000th office is located at 927 Lithia Pinecrest Rd, in Brandon, Florida. The owner-operator is Joanna Parichkov, who has 9 Liberty franchise offices in the Tampa Bay area.
“This year has been an exhilarating time of record growth in many areas for Liberty Tax. As we hit the mark of 4000 offices in our operating system, we continue our quest and drive to be the number one tax company in the industry,” said John Hewitt, CEO and Founder of Liberty Tax Service. For the eleventh consecutive year, Accounting Today has named Hewitt one of the Top 100 most influential persons in the tax industry. He has founded two of the top three franchised tax companies.
About Liberty Tax Service
Liberty Tax Service is the fastest growing retail tax preparation company in the industry’s history. Founded in 1997 by CEO John T. Hewitt, a pioneer in the tax industry, Liberty Tax Service has prepared over 9,000,000 individual income tax returns. With 42 years of tax industry experience, Hewitt stands as the most experienced CEO in the tax preparation business, having also founded Jackson Hewitt Tax Service. Each office provides computerized income tax preparation, electronic filing, and online filing through eSmart Tax. Liberty Tax Service has been ranked on Entrepreneur magazine’s annual “Franchise 500” every year since 1998.
Testpaira;
So now I am confused. From the last time I looked, Liberty had sold over 4500+ territories. Some territories have multiple stores, so there are probably at least 1500-2000+ empty territories, most likely from people who have failed? And you think this is something to be proud of ?
F&D,
Why are you mad that Liberty has reached 4000 territories... Obviously, you want them to fail so you can feel good about yourself. Give it up! A lot of people including myself, have bought a bunch of territories but we have a 3 or 4 years before we must open them. I just bought them to secure them now instead of when they will be going for $80k.
testaipira:
I personally don't want individual franchisees to fail, I want JTH Inc. to fail. I don't think one franchisee would cry if they had to go it alone.
thank you for the information on the 4000 store which includes the stores in the US. and Canada. Liberty has always been good at coloring the facts.
Based on Liberty news releases at the end of the 2010 (2009 tax year) tax season Liberty said they prepared over 8,000,000 individual returns and after the 2011 (2010 tax year) tax season they prepared over 9,000,000 returns so we can guestimate they prepared around a 1,000,000 to 1,200,000 returns. If we use the high figure and divided it by the number of stores that season (3294) we come up with an average of 364 returns. Take out the 100 free returns per store and that leaves an average of 264 returns. This is much lower then the 600 average Liberty has their first year stores budget for.
The fact of the matter Liberty grew too fast for its own good. It should have developed a strong regional present and built brand loyalty. Instead it sold franchiees to anyone, anywhere regardless of the ability of the individual or the quality of the territory. There is no methodology in place that can insure that all franchisees are trained approprately to provide consistent and quality service across the board. This is based on believing that JTH truely wanted to build a business to compete with HR Block.
The reality is it's all about selling franchises and now John Hewitt is going in for the payoff by having an IPO. Unfortunately he dosen't know what he's doing just like he didn't know what he was doing when he bought e-smart.
No one in this current investment enviroment is going to invest 90,000,000 in a business model that is outdated. The future of the tax industry is with the technology that Intuit and HR Block are displaying this year. Libery's presents on the internet is through facebook a place for unhappy customers and here a place for Unhappy Franchisees.
Buyer beware!!!!
testaipira:
As could have been expected, your numbers don't add up. It's good you use software to do income taxes, but be careful, from experience, Liberty software is often wrong. I do not want people to invest in a business that the chances of succeeding the first year is close to 50/50. Liberty's business model is a loser, and people should know it.
The amount of territories for Liberty do not determine how many unhappy franchisees there are. The royaly fees are huge and eat into the ability to make a profit. You can work at a tax office and learn the business in a season or two and save yourself the franchise fee and thousands of dollars in royalties.