Starting an H&R Block Franchise

Starting your own franchise

Are you interested in owning your own franchise? If you do happen to have that entrepreneurial spirit, one of the fast growing areas to start is the tax preparation services business. One of the advantages to starting a tax services business is that everybody needs this service. While the tax season is mainly limited to 4 months, there is still great potential to make money. Tax planning, counseling, working with small businesses to file quarterly returns, process payroll, accounting, working with employee benefits, and all the other necessary paperwork that needs to be filed quarterly are just a few of the ways that tax experts are able to make a living in “the offseason”.

If you are indeed interested in taking the next step to owning a tax services business, one of the most heralded franchise opportunities is with H&R Block.

Tax Preparation

Do you have what it takes to open a tax services franchise?
Do you have what it takes to open a tax services franchise?

H&R Block: Basic Franchise Information

Why Chose H&R Block:

H&R Block is a well-known company throughout the United States. It has one of, if no the strongest brand in the tax services business. They currently have over 14,000 offices worldwide and prepare over 24.5 million tax returns prepared worldwide. H&R Block has been around for over 50 years, and in addition to continually opening up corporate locations, have their own business financing for new and existing franchisees. In terms of start-up costs, H&R Block is one of the lower priced options available. They are highly regarded for their initial and continual training of franchise owners and their staff, including individualized public relations, marketing, and a strong national advertising campaign (which requires no additional funding from franchise owners). According to Entrepreneur Magazine, in 2012, H&R Block was named the #1 Franchise in the Tax Services Category, as well as the #1 Low Cost Franchise. They were also award the #5 Fastest Growing Franchise, #7 Global Franchise, and #8 Franchise in the United States.

Initial Costs and Financing

Initial Costs: Aside from a $2,500 security deposit, there are no initial fees to get started with your very own H&R Block tax office. This, however, does not include the expenses of renting and furnishing an office space. The initial costs of renting office space (or buying, if you have the means) is largely dependent on the area you wish to open a branch. Certain areas such as New York and Los Angeles are obviously much more likely to incur larger start-up expenses due to the increased value of real estate, as well as the average cost of living. You will want to make sure that you pick a location with good traffic for high visibility. Expenses for furnishing your office is largely up to the franchisee, however phone lines, computer equipment, fax, copy-machines, and other standard equipment can also be fairly expensive.

Financing: There are currently two different options for financing the purchases of an H&R Block Franchise. The first is a revolving, secured commercial line of credit called a Franchise Equity Line of Credit (FELC), and the second is an Annual Payments, Adjustable Rate, Term Loan (APARTL). Both options are offered through H&R Block Affiliate, Franchise Partner, Inc.. Financing for new franchisees depend on 3 criteria:

1. Ability to repay the loan: determined by the business plan and such factors as the expected price (or value) of the business, ability to grow the business, controlling debts and business expenses, and other personal supplemental income streams.

2. Down payment amount: How much money you are personally risking with the H&R Block Franchise

3. Debt history: A strong credit history of repaying debt. The lower obligations, the better chance you will have of financing.

Potential concerns about starting a tax preparation business

Over the last several years there has been exponential growth in the digital tax service arena. It is becoming increasingly more common for individuals to file their own taxes online with the help of automated software that asks questions and prompts the user for various financial inputs. H&R Block also has it’s own version of online tax-preparation which could potentially be cutting into your profits as a franchisee. While there will always be a need for qualified tax professionals, it is difficult to say right now exactly how much of an impact the digital tax preparation business will have on brick and mortar businesses like H&R Block.

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Comments 3 comments

bankscottage profile image

bankscottage 4 years ago from Pennsylvania

Nice hub summarizing the issues costs involved with getting a tax preparation office up and running. But, as a tax preparation franchise owner, I can tell you it is a very competitive business. Like any business, there is potential and there is risk. If I may, I would like to expand on your final section.

You can make money and do well, but you have to work hard at it. While there is only a limited tax season, the hours during the season can be long. Also, you will have to have the store open at least a few days a month during the off-season to take care of the tax issues that come up all year long.

Competition comes not only from other franchises but also from mom and pop shops in the area, on-line services and software programs. In addition, there are numerous agencies that offer to do returns for free. In fact, the IRS website even promotes some sites that offer free preparation services.

As I see it, besides the competition risks, there are 2 other facts that can affect the success of tax preparation offices in general. First, right now the tax code is very complex creating a need for tax preparation services. It the tax code is ever simplified, that could adversely affect your business.

Second has to do with government regulations and oversight of these businesses. At the present time, every preparer must have a PTIN to identify them to the IRS as the person that prepared a particular return. The number must be renewed each year. To obtain a PTIN for next year, the preparer will have to pay for and pass a competency test and take continuing education courses. This will add additional expenses and may limit the pool of potential employees. The up side of this would be that clients would be reassured that their return was prepared by a knowledgeable preparer and is more likely to have been prepared correctly.


MeanGreen profile image

MeanGreen 4 years ago Author

That is great info... if you can expand this or write a similar small hub about competition risks of starting a tax preparation service, I will definitely link it in this article... I like looking at franchises and saw how H&R Block was rated so highly in Entrepeneur magazine and wanted to get a lot of that information together for interested people.


bankscottage profile image

bankscottage 4 years ago from Pennsylvania

Thanks. I'll think about it. You can find a lot of information as to why you should start a franchise or any business for that matter. It is a lot harder to find the counter, the risks. It is best to talk to someone in the business you are interested in. If you decide to go into the business they may become your mentor. They may be able to help you navigate the "traps" the promotion for the franchise never mentioned.

It is interesting that Entrepeneur magazine had H and R Block as a top tax franchise. Forbes had a different opinion. If you are interested in franchises, check out this link: http://www.forbes.com/sites/jjcolao/2012/02/08/top... I would love to have a Panera Bread or even a Dunkin Donut franchise (I'd even take a Dunkin Donut Express) but they cost a couple of bucks more than a tax preparation office. And, of course, I'd have to take my own advise and find out the down side of owning these franchises.

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