Each year, Jackson Hewitt Tax Service goes through a
binge-and-purge ritual. More than 3,000 Jackson Hewitt Tax Service
centers fill their coffers as an onslaught of tax business begins
in earnest in January and disappears in April-then the rush is
over. In fact, according to Bob Schiesel, the leader of a
250-member franchisee association that remains unrecognized by the
franchisor, "The majority of our sales take place between
January 20 and February 9 of each year."
Moreover, Jackson Hewitt Tax Service centers serve customers in
the lower income brackets, and the behavior of those customers is
as predictable as a salmon run. Those who expect refunds hit the
tax centers early and take full advantage of tax refund
anticipation loans, while the procrastinators get around to facing
their issues closer to the April 15 deadline. As a franchisee, your
challenge is to learn to prosper during this cycle and cut expenses
during the majority of the year. Since all the Jackson Hewitt
locations are run by only about 600 franchisees, the ability to
prosper appears to be dependent on casting a wide net during tax
season.
Jackson Hewitt has created some innovative ways to take
advantage of its business cycle. For example, when you buy a
Jackson Hewitt territory, you're permitted to open any number
of approved locations in that territory without paying additional
initial franchise fees. This has encouraged the development of
sites placed in Wal-Mart and Montgomery Ward stores, where
franchisees pay rent during tax season and then remove their
business presences until the next year. The centers may also be
found inside other major businesses-these "affinity"
locations spring up in corporate headquarters on a temporary basis
as a service to the employees trapped inside.
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One of the secrets of buying into this franchise is that the
territory boundaries are fully negotiable. Company president Daniel
Tarantin reluctantly admits the fact and states that the size of a
given territory is determined by "a number of factors,
including population." The current version of the
franchisor's UFOC states that "most territories have at
least 10,000 people, according to the 1990 census." If you do
a little homework, you'll find most territories have far more
than 10,000 people. You stand to gain from a larger territory,
considering you pay no initial franchise fee for subsequent
locations within the prescribed area. It's certainly something
to ask existing franchisees about.
When you're speaking with franchisees, also find out what
they pay for the seasonal workers who assist in the preparation of
tax returns. In fact, the UFOC states that your success depends a
great deal on your ability to hire, train and supervise additional
personnel. Item 7 of the UFOC states that the range of the initial
investment runs from $47,430 to $75,205, but this total doesn't
include royalties (15 percent of gross), advertising ($5,000 for a
grand opening, then 6 percent of gross), electronic filing fees,
bonuses for your hourly workers or your salary. In addition, the
estimate only allows for $1,275 in site improvements. It's easy
to see that your "real" opening costs will be higher.
You should evaluate these costs in light of the company's
earnings claims stating that the average office open for one year
completed 254 tax returns. Stores do tend to grow in volume over
time, but potential franchisees should decide whether they can
survive that first year with less than 300 tax returns' worth
of work.
The bottom line: Before purchasing any franchise, you should
investigate the system in general and speak to existing franchisees
in particular.
Jackson Hewitt is actively recruiting franchisees in the
Northeast United States as well as in the Ohio River Valley and on
the West Coast.
Todd D. Maddocks is a franchise attorney and small-business
consultant. You can reach him at TMaddocks@aol.com.
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