Franchise Buying Guide

Franchise Gurus Speak Out

Taxes Pay
Presented by Guidant Financial
Guidant Financial specializes in helping entrepreneurs purchase new franchises using their retirement funds.

As the founder of two tax preparation service franchises--Jackson Hewitt Tax Service and Liberty Tax Service--John Hewitt knows what it takes to build established franchises in a competitive industry. He started by learning the ropes at H&R Block, where he worked for 12 years. In 1981, Hewitt and his father created a tax interview software program that they believed would revolutionize tax preparation. H&R Block didn't share the sentiment. With the encouragement of his father, Hewitt decided to take a chance and launch his own franchise company, Jackson Hewitt Tax Service, which later became a public company. In 1997, to Hewitt's chagrin, shareholders decided to sell the company for $483 million, of which Hewitt received 5 percent. Hewitt took his earnings and bought a Canadian tax company that same year. In 2000, that company became Virginia Beach, Virginia-based Liberty Tax Service.

Wilson: What mind-set should franchisees be in when they start their journey?

John Hewitt: Most [new franchisees] say, "That sounds great. Let's seize the American Dream." But when it gets right down to it, it's a very scary thing. God didn't put anyone on earth to skate through without difficulties. There are going to be problems. You have to be able to live with the fact that there's no one to depend on but yourself. When you're theentrepreneur, it's make or break.

What's the best way for franchisees to ensure success?

Hewitt: The key is, you're buying a provensystem. The most important thing about acquiring a McDonald's, for example, or a Liberty Tax Service, is following the system. So you must be prepared to listen to others who have blazed the path for you. It sounds simple, but human beings don't listen to their doctors, their dentists, their parents or their spouses. They don't listen to anyone. Even the smartest people learn by their own mistakes. It's very difficult to learn by the mistakes of others.

How can potential investors determine whether a franchise is right for them or is a solid investment?

Hewitt: Nothing can replace talking to the owners, to the people who have been there. We have 1,200 references--not only all our existing franchisees, but also everyone who has been a franchisee. People prove how they feel by their footsteps. They stay. I certainly wouldn't invest in any franchise system without talking to the people who are part of that system.

If you were starting either Jackson Hewitt Tax Service or Liberty Tax Service today, what would you do differently?

Hewitt: One of the things H&R Block pioneered back in the '50s when they first started was an area development/master franchises concept. I didn't copy that. I was worried [that] if we had a franchisee serving another franchisee, it would be doubly hard to get the franchisee in his office to follow the system. I didn't try that at Jackson Hewitt or when we started Liberty. And then I decided to at least try a few, and if it didn't work, to scrap it. It has been the most phenomenal program we've ever done. Now we have 80 area developers. It's like there are three entrepreneurs in every territory: a unit franchisee who runs the office, a master franchisee or area developer that supports them, and me. We're all three trying to get market share in that territory. It really gives us a competitive edge.

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This article was originally published in the September 2006 print edition of Entrepreneur with the headline: Show Me the Way.

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