The tax man groweth: franchising adds up for Jackson Hewitt

Entrepreneur, Dec, 1996 by Holly Celeste Fisk

John T. Hewitt had seen H&R Block competitors come and go by the time he founded Jackson Hewitt Tax Service in 1982. So what made him imagine he could create a franchise system that could compete with such a household name?

"I brought a number of things to the table that no one else did," says Hewitt, 47.

For starters, Hewitt began his career at H&R Block, becoming its youngest regional director in the country before he left in 1981 to develop a proprietary tax software program, called Hewtax, with his father.

The two were still developing the software when Hewitt purchased the six-store Mel Jackson Income Tax chain in 1982. Even then, he had no qualms about tossing his hat into the ring with his former employer. "In fact, that was our goal from day one," says Hewitt.

And he immediately recognized the advantages he'd created for his new company with Hewtax. The program walks tax preparers through the tax preparation process, guiding them in asking the right questions, making good decisions and doing the math. The comprehensive software allowed Hewitt to concentrate on hiring good employees without requiring them to have extensive backgrounds in tax preparation.

"Traditionally, accountants are boring," says Hewitt. "We can hire people who have more personality because of the extra foundation we're giving them, based on the computer program."

The customer service Hewtax allows him to provide is key to Jackson Hewitt's success. "There's no question in my mind that whoever offers the best service is going to win," says Hewitt. He's confident Jackson Hewitt will "win" in the next 10 to 15 years. "It depends how quickly [H&R Block] reacts to our competition."

That competition comes mostly in the form of franchisees. Indeed, so sold on franchising is Hewitt that only about 90 of the 1,600 or so Jackson Hewitt outlets are company-owned - and, if Hewitt has his way, that won't last for long. "We think of [the company-owned units] as a sort of inventory, waiting to be sold to a quality entrepreneur," he says.

And plenty of quality entrepreneurs are recognizing the advantages of the tax preparation industry. "Some people look at this industry and say you can't make money because it's only seasonal. Our systemwide revenue is $70 million a year," says Hewitt. "It isn't hard to calculate that it's better to get that in three months than it is in 12 months. Normally, when you start a business, you have to work 70 to 80 hours a week, 52 weeks a year. In this business, you only have to do it for a few months. The rest of the year, believe me, is not very taxing."

Hewitt believes franchising gives his company the edge it needs to be a serious competitor. "Most of our stores are franchised," he says. "So if I have one of my franchisees facing one of [H&R Block's] corporate representatives, I have an advantage. Certainly someone who owns their business is going to try harder than someone who's a corporate employee."

Hewitt's philosophy is summed up in a quote from a favorite book, Carl Sewell's Customers for Life: "If you're not improving, your competitor is gaining on you."

And Hewitt has no plans to stop improving his company - especially if it means gaining on his biggest competitor. "We're the Avis to their Hertz," says Hewitt. "We're number two, so we try harder."