SOLVING THE OVEREXPENSE PROBLEM

Mr. John T. Hewitt is the CEO and founder of the Liberty Tax Franchise, and has a nationally recognized name in the tax and accounting fields.  He has been in the business for more than 38 years, and is the founder of two major tax preparation firms—Liberty Tax Service and Jackson-Hewitt—and is a former regional director with H & R Block.  All of his accomplishments put him head and shoulders above anyone else in the fast tax preparations industry.  Accounting Today magazine called Mr. Hewitt one of the accounting profession’s top 100 most influential people for 4 years running.

John T. Hewitt’s upward mobility was due to his hard work and forward-looking attitude about what the tax industry could be and where it could go.  He embraced the technological revolution, and had the foresight to imagine what the tax preparation industry would look like 10, 20 years hence.  He, along with his father, developed the “Hewtax” way of preparing tax returns, a tax interview software program that revolutionized the professional tax preparation business.  His software, along with a working knowledge of the tax code, gave almost anybody a chance to become a competent tax preparer.  This was the first program of its kind and he  had hoped he could market it to his employer. ( A few years later the IRS developed a similar program.)  H & R Block, however, was not exactly enamored with Mr. Hewitt’s innovative style, and eventually John was obliged to move on.

Mr. Hewitt saw clearly what the future had in store for the professional tax preparation business,  and he was not about to let the stubbornness of a huge monopolizing company with a strangle hold on the industry stymie his dreams.  He found a small incoime tax service in Hampton Roads, VA, with only six local offices.  It was just what he had been looking for.  So, in 1982, he and a few other investors bought the Mel Jackson Tax Service.  That was the beginning of the Jackson-Hewitt Tax Service, and the first time the “Hewtax” tax interview program was used, the first time any program of its sort had been used in the professional tax preparation business.  It was a big success.

As indicated above, Mr. Hewitt had developed the “Hewtax” program with the anticipation of marketing it to H & R Block.  But, for whatever reason, H & R Block was not interested.  Ultimately Block had to develop its own software program otherwise it could not have competed in today’s market.  Mr. Hewitt, the innovator that he was, had come up with a few new ideas by then, and was moving fast to implement them.    Before purchasing  the Mel Jackson Tax Service, he already knew from where its clientele would come, and started establishing tax preparation offices all around the edges of the working poor and blue collar neighborhoods.  When Congress passed the law allowing refundable credits for the poor and underprivileged taxpayers (EIC, for the most part) Jackson-Hewitt was well positioned to take full advantage of the new law.  And take advantage they did.  Even Mr. Hewitt was surprised at how fast this target market responded to his new company.  In 1992, Inc. magazine named Jackson-Hewitt the fastest growing private company in the country.  In 1994 Jackson-Hewitt went public, and was sold in 1997 for 483 million dollars.

Because of the non-compete clause in the sales agreement with Jackson-Hewitt, John T. Hewitt waited three years before getting back into the tax preparation business.  But his head was teaming with new ideas.  He saw a way to build a new company even faster than he had built Jackson-Hewitt.  Finding a small tax firm with 126 operating tax preparation offices all in Canada, he began preparing for his return.  In 1997, when John Hewitt left Jackson-Hewitt, JTH Tax, Inc. bought U&R Tax Depot that same year.  The next year the name was changed to Liberty Tax Service, and the following year the non-compete period ended. When his moratorium was over, he was free again to pursue his passion.  In 2000 the Liberty World Headquarters took up new residence in the old building where the Jackson-Hewitt headquarters used to be at 4575 Bonney Road, Virginia Beach, VA.

Though he still thought of the customer first, it was the advertising campaign strategy that made Liberty Tax Service the recognizable brand name that it has become.  It was simple and to the point.  First, let H&R Block and Jackson-Hewitt do all the demographic surveys and studies, and he will just follow their lead.  All of his new offices opened up near a well established H&R Block or a Jackson-Hewitt flourishing office.  The Liberty offices have these big beautiful marquee signs out front, glowing day and night.  At the beginning of each season, they send out mailers all around the area, offering discounts and coupons, etc.  Signs would be placed wherever legal at strategic points to steer taxpayers to the Liberty tax offices, and telemarketers would be calling taxpayers list constantly.  But most importantly, they would hire people from Labor Ready, or some other labor providing company, to dress up in Lady Liberty outfits and walk around outside the office building or location where the Liberty Tax franchises were housed, waving to the passersby to come on inside and get their taxes prepared.  This, more than anything, is what makes their franchises so successful starting in their first year of operation.  In the North-East, it is common place to see these franchises gross in excess of $100,000.00 the first year in business.

My name is William Morgan, founder and CEO of the Main St. Tax Franchise.  Let me say right away, I do not claim to personally know Mr. John Hewitt.  I doubt if I’v ever seen him in person.  Couldn't pick him out of a line-up.  But let me say this, I know Mr. Hewitt.  I have studied this man for years.  I have gotten into his head and extracted his way of thinking. I have tracked his background, followed in his footsteps.  Yes, I’ve taken the H&R Block tax course and worked for H&R Block, and I ran a tax preparation office for H&R Block more than ten years ago.   I’ve taken the Liberty Tax Service tax course, and worked for Liberty Tax one year.  And I have also taken the Jackson-Hewitt tax course.  That would make me pretty familiar with all the “big three.”  So, like Mr. Hewitt, I have had experience with all three of the major fast tax services with which he was involved.  I have learned as much as I could from John and as much or more from the big three.  When I founded Main St. Tax Service, I think I was prepared to take Mr. Hewitt’s innovative energy to the next level, and we think we have done that with Main St. Tax.

We here at Main St. Tax Franchise have adopted John T. Hewitt’s advertising campaign strategy mentioned above in its entirety.  That is, we have left nothing to the imagination.  We have copied his plan to the letter. Everything they do, we do.  However, instead of Lady Liberty walking around outside waving to passersby, we have our man at Main St. dressed in his Uncle Sam uniform and top hat outside beckoning taxpayers to come on inside and get their taxes prepared.  In fact, we have one uped Liberty; we also have a statue of Uncle Sam outside directing taxpayers to our Main St. Tax service location.  Other than that, we have maintained in tact the Liberty Tax Service advertising campaign strategy, but we have added a few wrinkles of our own, which have taken us far beyond any dream even Mr. Hewitt could have had.  But we have teken it to the next level and added our own little unique contribution, which draws more attention than even lady liberty or Uncle Sam. 

As you know, fast tax preparation is a seasonal business.  There are only three months out of the year to make money in this business. (A fast tax franchisee is really working five or six months out of a year, but we’ll get into that later).  Nevertheless, nine months out of the year is down time. During this period the franchisee is making no money.  But we still have bills to pay.  This is one of the biggest fears a prospective owner of a fast tax service has--how he will pay the bills the other nine months.  The rent still has to be paid each month, the gas & electric bill, the phone bill—and all the myriad of bills he had to pay while working preparing tax returns.  Those expenses do not go away just because he’s not working.  And that’s the problem.

Solving that problem is the biggest advancements the fast tax industry has had since its inception.  Well, we here a Main St. Tax Service have found the solution to that problem.  We have taken Mr. John Hewitt’s inspiring trailblazing style to a whole new level, to the final frontier of his genius in the evolution of the fast tax industry; and the manner and atmosphere in which fast tax operations are conducted have changed forever.  First, we have figured out a way to have our franchisees pay the rent, utilities, phone bills, etc. only for the months they are working, whether that’s three, four, five—whatever number of months.  Our franchisees pay only for those months.  And even at that, we have come up with a plan to have our people pay each month of the tax season only about one third of what their counterparts with other franchises will pay.  But we didn’t stop there.  We  have added a number two.  If our franchisees want to work the off season, they will have a means to make as much or more money during the off season as during the tax season.  All of this and more will be revealed to you once you are committed to working with Main St. Tax.

But to give you an idea of the difference between a Main St. Tax Franchise and other franchises in the fast tax business, below is a comparison of the profit you can expect to earn your first year in business.  These are the relative numbers taken from an actual prospectus of a Liberty Tax Service franchise sold in New Jersey last year.  In fact, this is the tax franchise where I worked the year prior to the sale.   (The numbers below are relative, taken from the actual sale of that New Jersey Liber Tax Franchise; the figures may differ in other states.)