Liberty Tax Service Franchise - Interview with Founder and CEO, John Hewitt

Date: JUL 6th, 2010

Topic: Interview with a CEO

John Hewitt’s roots in the tax industry date back to 1969. While a college student, he enrolled in a non-curricular course that would change his life, and have a profound effect on the tax industry. He took the H&R Block tax course, and described it as “the most interesting course I’ve ever taken.” Hewitt started as a tax preparer, and then began his climb up the H&R Block management ranks. He became assistant manager for Block’s Buffalo district the following year. After a stint as a district manager in Elmira, New York from 1975 until 1980, Hewitt advanced to a position as regional director, the youngest ever in the Block operating system. Hewitt managed over 2,000 preparers in 250 offices in one of Block’s largest districts.

Hewitt embraced the technological revolution, and had the foresight to imagine the future and evolution of computerized tax preparation while at H&R Block. In the early 1980’s, he and his father developed a decision-tree tax interview program that generated individual responses to tax interview questions. It was the first PC tax software of its kind in the industry. Anticipating the impact of this potential new tax revolution, Hewitt was optimistic that he could market this futuristic product to his present employer. H&R Block was not a taker, so Hewitt took steps to start a new tax company. Jackson Hewitt Tax Service was founded in Hampton, Roads Virginia in the early 80’s. The company utilized its own unique “Hewtax” tax interview program. By 1986, IRS personnel also had designs on the positive effects that computerized tax preparation could have on the filing process. This was the first year that the IRS tested the electronic filing process to allow taxpayers to directly file their taxes, bypassing the mailing of returns entirely. The timing was right. Hewitt took Jackson Hewitt public in 1994. The company, a solid second to Block, subsequently sold for $483 million in 1997. When Hewitt left Jackson Hewitt in fiscal 1997, the company was operating 1,345 offices. Jackson Hewitt was the first successful national industry competitor against H&R Block.

BeTheBoss - What’s the story behind Liberty Tax Service?

John Hewitt - You could say, it started on a napkin. I was with a group of people, who would become key managers in this future endeavor, and we scribbled ideas on a napkin while in San Diego, California in 1996. I was under a non-compete when I left Jackson Hewitt, but there was nothing to prevent me from starting another tax company in Canada. The name “Liberty” stuck after seeing the Statue of Liberty in a shopping center in Las Vegas, and the fact that I would truly ‘be free’ to start another venture. We also thought about the great marketing advantages it would offer.

Within four months, I had assembled a team of investors. We raised over $1,000,000 in start-up capital and purchased a Canadian tax company, U&R Tax Depot. We opened for business in June of 1997. In 1998, U &R Tax Depot became Liberty Tax Service, and opened 5 U.S. offices. In tax season 1999, Liberty expanded its United States operations to 35 offices, in addition to 214 Canadian offices. We now have over 3,300 offices in the United States, and 250 in Canada.

BTB - What made you decide to franchise?

JH - After founding one tax franchise, the challenge became when could I start a new tax franchise and where. In 1996, after leaving a tax franchise that had incorporated my name into its title, I was challenged to improve upon that and other existing tax franchise business models. I envisioned a new company that would be the biggest tax preparation service in the world, recognized for excellence in computerized tax preparation, and adaptability to the constantly changing tax technology and tax code. Employees could “have fun,” while constantly improving, and franchisees could have a superior system to grow their businesses and enjoy success.

BTB - Tell us a little about the industry?

JH - With taxes a certainty of life, what other industry offers a perpetual product and a ready market? This year, over 60 percent of Americans preferred to outsource the tax preparation task to paid professionals. The tax industry arena, unlike the food industry where there are thousands of players, has been dominated for over 50 years by one major player--H&R Block.

The tax code is always changing, along with the filing methods. Online filing is the new frontier of the tax filing market. There have always been consumers who prefer to prepare their own returns. They’ve become more technically savvy and look for brick-and-mortar alternatives.

As more banks exit the RAL (Refund Anticipation Loan) business, major tax companies and mom and pop companies face challenges to offer refund anticipation products. There are more than 13,000 small business owners who are going to be without a refund loan product next year. As it stands right now, Liberty Tax Service and H&R Block are the only national tax companies able to fully service their customers with a refund loan product.

The IRS will impose stricter standards on tax preparers in the next few years, which will protect consumers and add to the overall integrity of the tax industry. With a tax preparer certification process in place since 2007, we have been planning and moving ahead. Liberty Tax Service took a proactive approach toward professional standardization, customer satisfaction and maintaining the integrity of the Liberty Tax brand by creating our own innovation three-tier skill examination for preparers.

As the “Granddaddy of the Tax Industry” with 41 years of income tax industry experience, I am the most seasoned tax service CEO. I was a regional director with H&R Block during an explosive growth period when the company office count went from 4,349 to 9,076. As the Founder and CEO of Jackson Hewitt Tax Service, I grew the organization to 1735 locations in less than 15 years and took Jackson Hewitt public in 1994. The company, a solid second to Block, subsequently sold for $483 million in 1997. As the Founder and CEO of Liberty Tax Service, my aspirations are to grow this company to the largest and most respected in the universe by 2020. We welcome others, to our franchise system, who share the Liberty Tax vision to become the #1 tax service, and are dedicated to our missions on this journey.

BTB - What have some of the challenges been in growing your franchise?

JH - The challenges were many: launching a company in Canada, a country with a completely different tax code than the United States. Then, how to out-muscle and out-perform two solid brand-name competitors with vast industry resources and deep pockets for advertising dollars? The answer for us was to utilize the creative and aggressive marketing of our famous Liberty icon.

We launched our most effective marketing technique, costume wavers in the United States and Canada, to effectively build our brand. Liberty Tax offices employed over 5,000 wavers, company wide, during the most recent tax season. We encourage additional marketing responsibilities for Lady Liberty and our marketing teams with business-to-business visits, and grassroots community involvement. Some of our marketers become front-page news.

In addition, Liberty Tax Service and all tax services face a seasonal business, and an ever-changing tax code. We must quickly react to the latest tax changes and incorporate them into our technology and operating systems to stay on the industry’s cutting edge. Tax filing represents life’s ultimate deadline, and the importance of quicker online filing methods and ability to offer refund anticipation loans remain ongoing challenges that Liberty Tax continues to meet to stay competitive.

BTB - Who has been your greatest inspiration?

JH - My father, Daniel Hewitt, co-founder of Hewtax the progressive decision-tree software that was the cornerstone of the tax industry revolution in the 80s.

BTB - What are some of the advantages of being a Liberty Tax franchisee?

JH - Liberty Tax offers low start-up costs and the certainty of taxation, which provide an enticing business opportunity entrenched in the “American Way of Life.” With more than 60 percent of Americans preferring to outsource their tax preparation tasks to paid professionals, it is an industry that will not become obsolete.

Our team of resourceful people and technological support systems provide quick answers to our franchisees’ questions on marketing, taxes, office operations and every facet of running an office. You are never alone in a business situation, when you’re part of the Liberty team. With over 3, 300 offices under the Liberty Tax Service umbrella in the United States and Canada, we are able to take advantage of economy-of-scale for mass purchases from our vendors.

BTB - What do you do in your spare time?

JH - I enjoy spending as much time as I can with my family.

BTB - What advice do you have for someone looking to acquire a franchise?

JH - Do your homework and thoroughly research any franchise opportunity that looks appealing. Talk to current and past franchisees for their perspectives on the operating system and feedback on how they are running their operations. Harmonious franchisee - franchisor relationships should be evident with open communication systems in place.

Investigate the viability of a franchise system’s products, services and brand-name recognition. You will also want support levels to back the facets of the franchise operating system and help you open your doors in an A-plus location.

BTB - In your option, why do you think that Liberty would be a great opportunity for someone?

JH - Starting any franchise can greatly minimize the risks of starting a small business totally on your own, and sets you free to be your own boss. Partnering with Liberty Tax means reaping the advantages of an established brand and franchise system with international recognition. Our franchise operating system is in place to address every facet of running a successful tax business from marketing to tax preparation to lease negotiations.

It’s a system based on over 600 years of tax industry experience among the managers and home office staff. Following our proven system allows our franchisees to concentrate on growing their offices, increasing their volume of returns and being the CEO of their business rather than starting from scratch. Each year, with feedback from our franchisee, and our experiences, we get better at what we do, which is creating the best tax preparation experience.

This is a great time to consider a Liberty Tax franchise. The most recent tax season results speak for the dynamic course that Liberty Tax is blazing as the fastest- growing international tax service ever. Liberty Tax Service is the only top three tax company to demonstrate overall system growth during the challenging economic climate of 2010.

We reported a steady increase in tax returns and revenue for the most recent tax season. Throughout this decade, Liberty Tax Service has demonstrated solid gains in an industry formerly dominated by tax giant H&R Block. For the eighth straight year, we have grown by more tax returns than both Jackson Hewitt and H&R Block combined. I believe as strongly today as I ever have in the power of franchising, and the ability of the Liberty system that has allowed over 2,000 franchisees so far realizing their dreams of success.