Do you want to open a tax preparation business by buying H and R Block franchise? If YES, here is how much it cost to open a H and R Block franchise successfully. H&R Block is a major tax service provider that employs 100,000 tax professionals and has prepared over 500 million tax returns throughout its years of operation. Tax preparation is a daunting task for many, so H&R Block offers assistance.

Whether customers want a face – to – face assistance with preparation, a second pair of eyes to check over returns they have done themselves, or just an online software to make self-preparation even easier, H&R Block provides all these options to clients. It also gives customers a maximum refund guarantee and free audit support should the IRS have follow up questions.

Currently, opportunities are available to join the H&R Block franchises or purchase existing franchises from other owners. Also note that H&R Block does offer financing assistance through a Franchise Equity Line of Credit. Franchisees go through a training program and receive continued support from the corporate offices to ensure continued success.

Out of all the major tax companies in the franchise industry, H&R Block has one of the lowest initial investment costs. You can start and run an H&R Block franchise for no initial fee, other than a fully refundable $2,500 security deposit. Also, you don’t pay any additional costs for national advertising. Of course, the expenses of furnishing and running an office are your responsibility.

Immediately you open the doors of your new office, you will not be on your own. Aside from having the strength of the H&R Block brand behind you, you also get the company’s continuing support for marketing, communications and technology.

In addition, H&R Block boasts of a solid field management team that is equipped to provide you with the personalized service and resources you need to help ensure your success. H&R Block also spends significantly more on national marketing and advertising than, maybe, all other national tax service franchise.

That translates into marketing dollars that will directly benefit your business, and it’s all at no additional cost to you. To also help with local marketing activities, H&R Block also has a dedicated staff at the company’s headquarters that provides free, individualized public relations and marketing support to help promote your business within the local community.

Financial Requirements of Opening an H & R Block Franchise in the United States

According to the company’s FDD, here are fees you are expected to pay as you acquire and run an H & R Block Franchise in the United States.

  • Initial Deposit: $2,500 –  $2,500
  • Real Property (Estimated cost total is for 3 months): $1,400 –  $30,000
  • Leasehold Improvements; Construction Costs: $0 –  $50,000
  • Signage: $1,200 –  $5,000
  • Furniture and Decor Items: $15,000 –  $23,000
  • Equipment: $8,000 –  $12,000
  • Opening: $500 –  $1,000
  • Pre – opening Salaries, Travel and Initial Training: $1,500 –  $3,000
  • Start – up Supplies: $500 –  $500
  • Insurance: $477 –  $798
  • Zoning Expenses: $0 –  $500
  • Utility Deposits: $50 –  $300
  • Architect Design: $0 –  $4,500
  • Professional Fees: $0 –  $2,500
  • Additional Funds: $430 –  $12,000
  • Applicable Business Licenses, if required: $0 –  $1,800

ESTIMATED TOTAL: $31,557  –  $149,398

Other Fees may include

  1. Royalty
  • Generally, 60% of the first $5,000 of revenue received by the Franchised Business during each calendar year for Authorized Services (includes Required Services and Optional Services), less applicable sales taxes collected and remitted to appropriate taxing authorities, and less revenue from the sale of products or services subject to a Product Specific Royalty Rate, incentive rates paid to the franchisee, or otherwise designated as royalty free. However, all revenue in any calendar year that is in excess of the average revenue of the franchisee for the 2 previous calendar years is subject to a Royalty Fee of 20% if paid to the franchisor not later than 4 days after the end of the Reporting Period to which the royalty relates.
  • Revenue from business services is subject to a Product Specific Royalty Rate of 15% (10% if paid to us within 4 days after the end of the reporting Period to which the royalty relates and no other amounts payable are overdue). Revenue from fees charged for a Second Look review is subject to a 20% Product Specific Royalty Rate. Revenue from the sale of certain products is royalty free.
  1. POM Extended Service Plan and POM Protection Plan
  • The Peace of Mind Extended Service Plan (POM) is a required service and franchisees must participate in the POM Protection Program. Each POM unit sold will be subject to both a 20% Product Specific Royalty payable to the franchisor and a designated – premium charge. Claims are subject to a $50 deductible per claim only after notification of claim approval. All costs associated with POM are charged and collected by H&R Block, its affiliate or third parties and are subject to change. The premium costs are determined annually based on annual actuarial evaluations and will be released to you each year prior to the Tax Season.
  1. Transfer: $2,500
  2. Audit: Cost of inspection or audit.

How to Open an H & R Block Franchise in the United States

Indeed acquiring a tax preparation franchise is an exciting endeavour, but you want to be sure that you are making a good commercial decision. Below are six key things you should do to ensure you make a wise investment with H & R Block.

  1. Perform your Due Diligence

Just because you like the company doesn’t mean a H&R Block Franchise will suit you well. Even the company suggests that you get as much information as you can about current and likely future demand for its tax products or services. Research and seek the company’s data on sales, outlets, growth, marketing plans. Talk to existing franchisees and ask crucial business questions. Business wise, always remember that even if there is strong demand at the moment or in the past, this does not guarantee strong ongoing demand.

  1. Read and Understand the Documents

It is very necessary that you read and understand all the documents provided to you, including the franchise agreement. Always ensure you fully understand the operational and financial obligations you will be under if you purchase H&R Block Franchise. Properly analyse the contractual rights of the franchisor, such as rights to determine sources of supply and supply prices, control over marketing and advertising, ability to direct the way in which services are rendered.

Note that you will also need to be clear on the grounds on which either party may terminate the contract. Remember, the franchise agreement is a binding legal contract once signed. Given the amount you are thinking of paying for the franchise, it makes very concrete sense to pay for good professional advice on the terms of the agreement. Professional advice can save you from making a very bad and costly business decision.

  1. Know your Obligations, Strengths and Weaknesses

The franchise agreement will define what aspects of the business are your responsibilities and what aspects are the parent company responsibilities. Indeed all franchise arrangements are different, but H & R Block claims to be better. You need to be clear about what your obligations are and whether you have the skill set to perform those obligations.

Indeed you may be experienced at customer service but not understand basic financial management or accounting. You can make the arrangements with H & R Block to handle all the financial and accounting requirements and provide the system for you to use. Consider carefully whether you have the necessary skills to do all the things required of you in the franchise. If not, you will need to factor in the costs of outsourcing those functions if you proceed with the purchase.

  1. Key in the Numbers and Assess the Risks

With H & R Block you are not landing a job, instead you are buying a business opportunity. It’s your responsibility to make the franchise successful within the terms of the agreement. You must thoroughly understand the commercial elements of the franchise agreement.

What determines what you must pay to the company once the franchise is operating? If the business is not as successful as you hope, note that it doesn’t affect the fee you pay to the company. You might not have exclusivity in a locality and might have to compete with nearby, significantly reducing your potential customer base. All in all, get professional financial advice to help you understand the commercial aspects of the franchise agreement, and assess the financial implications if key variables change.

  1. Know your Exit Options

What are your medium and long term objectives? If you plan to sell the franchise once you’ve built its business success, be clear on your contractual rights to do so, and any limitations or requirements set by the company. Note that the longer the term of the franchise remaining, the more valuable the business is likely to be. Since H & R Block operates from leased premises, have it in mind that an effective exit will require an exit from both the franchise agreement and from the lease – two separate legally binding contracts which may be with two different entities. H & R Block will encourage you to seek professional advice and spend time understanding the opportunity.

Joy Nwokoro