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Liberty Tax Offers Trial Franchises with Pay

VIRGINIA BEACH — Liberty Tax is offering a trial franchise for would-be franchise owners. Interested franchise buyers will be paid a salary and work in one of 40 company-owned tax offices for seven weeks. If they choose not to buy the office, they are free to end the job with no further obligation.

"This is a 'win-win' for both parties: our approved candidates can try us before they buy, and Liberty Tax has a report card on their ability to run a successful tax office before they enter our franchise ranks," commented CEO John T. Hewitt on this inaugural franchise training program.

The company says that the ideal candidate will live in the same market as the company-owned office. However, Hewitt adds that Liberty Tax is willing to temporarily move a candidate to a city with a company-owned office. "We'll pay for their lodging and housing while they are learning on the job, and hopefully getting ready to take over the location," says CEO Hewitt.

Actor poses as the Statue of Liberty for Liberty Tax
Liberty Tax actor poses as Statue of Liberty, photo/Jeff Dugan

The approved candidates will receive in-depth instruction on marketing, management, hiring, budgeting, tax preparation and other aspects of running a Liberty Tax office. After operating an office, the candidates can either apply their newly gleaned experience by purchasing and operating the office, or finish the job with no further obligation.

Each year Liberty Tax reacquires a handful of offices that it wants to refranchise. Hewitt says that the company has tried to incentivize company store managers to replicate the results of franchise owners, including the opportunity of gaining equity in the business. After dozens and dozens of tries, Hewitt declares, "I finally gave up."

"Nothing replaces the sense of actual ownership," he says.

At least one 30-year franchise consultant thinks Hewitt's strategy is costly. "It is very difficult to put a round peg into a square hole," declares Craig Slavin, president of Franchise Navigator. The process Slavin invented is sort of the of franchising, matching a candidate's profile to a given franchise system. "There are safer ways to achieve the same results," concludes Slavin. He thinks what Hewitt needs is best assessed through behavioral profiling tools, instead of spending $70,000 in hard money to see if the candidate is a good fit.

But Mr. Hewitt also has a deep background in franchising. Besides being the founder, CEO and chair of Liberty Tax Services, in 1983 he founded Jackson Hewitt Tax Service (NYSE: JTX), a chain that now has 6,763 offices. "We have a clear road map," he stresses.

Hewitt emphasizes that working day in and day out in an office is a great way for a candidate to know deep down that they are satisfied that the Liberty Tax franchise is right for them. The tax preparation franchise must also be satisfied with the candidate. "At that point, we give them a no-money down deal where they can become a franchisee. They own the location with no money out of pocket," says Hewitt.

When asked whether these candidates will be mentored by franchisees in the system to help them succeed, Mr. Hewitt replies, "They will be mentored in the sense that our people at corporate headquarters will be talking with them every day." Liberty Tax has operating benchmarks on how many customers, tax filings and hours of labor should be done each day. Hewitt adds, "These candidates would get the same information as a franchisee would."

Harold Kestenbaum, who has the dual role of being both a franchise attorney with the law firm Ruskin Moscou & Faltischek and a business consultant who helps design start-up franchising firms, says, "I would be concerned with the stealing of trade secrets from candidates who walked away." He adds that a franchisee who finds one of these candidates competing by opening up across the street under another brand name would understandably be angry.

But Liberty Tax isn't worried that the franchise candidates will steal their proprietary operating know-how. Hewitt states, "We have 2,000 franchisees and 50,000 seasonal employees. These franchise candidates have access to the same thing that 50,000 people have access to."

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