Atax Franchise
Audited FinancialsRisk Score
Pending analysis
Investment Range
$101,450 - $524,000
Franchise Fee
$90,000
Total US Locations
35
Business Summary
ATAX offers area representative franchises. An ATAX Area Representative recruits and supports unit franchisees who operate businesses providing retail tax preparation and related services. The Area Representative's role is to find, solicit, and recruit these unit franchisees within a designated territory and then provide them with ongoing marketing and operational assistance. ATAX Area Representatives are compensated through a percentage of the initial franchise fees and ongoing royalty fees paid by the unit franchisees they manage. ATAX Area Representatives do not directly provide tax services; this function is exclusively performed by the unit franchisees.
Corporate History
ATAX LLC, operating as ATAX, was initially formed as Saber Tax LLC on February 20, 2019, changing its name to ATAX LLC on February 18, 2020. ATAX has been supporting unit franchisees since August 2019. The company acquired the assets and intellectual property of ATAX Franchise, Inc., ATAX Software Solutions, Inc., and ATAX Cloud Bookkeeping, Inc. on July 15, 2019. ATAX Franchise, Inc., a predecessor, offered income tax preparation franchises from 2007 until July 14, 2019. ATAX Software Solutions, Inc. resold tax preparation software from 2005 to 2019, and ATAX Cloud Bookkeeping, Inc. offered cloud-based bookkeeping franchises from 2016 to 2019. ATAX has been offering Area Representative franchises since July 2019.
Financial Overview
Investment Range
$101,450 - $524,000
Franchise Fee (Low)
$90,000
Franchise Fee (High)
$500,000
Equipment Costs (High)
$2,000
Working Capital
$1,500
Audited Financials
Yes
Offers Financing
Yes
Audit Opinion
Unqualified opinion
Financial Health Notes
ATAX LLC has maintained positive working capital in recent years, indicating its ability to cover short-term obligations; for example, it had approximately $1.56 million in working capital in 2024. However, the company reported a significant net loss of $720,920 in 2024, a notable shift from its net incomes in 2023 and 2022. This decline in profitability also led to negative cash flow from operating activities in 2024, contrasting with positive cash generation in previous years. ATAX LLC restated its financial statements for 2023 and 2022 to correct an error regarding income tax provisions and deferred tax assets. Significantly, state regulatory agencies in Maryland, Illinois, Virginia, and Washington have required ATAX LLC to defer the collection of initial franchise fees until pre-opening obligations are fulfilled, a measure often imposed due to concerns about a franchisor's financial condition. ATAX LLC also has substantial notes receivable from its Area Representatives and franchisees, with a considerable allowance for credit losses, and engages in significant transactions with related parties. Despite these points, ATAX LLC's independent auditor's report does not raise substantial doubt about the company's ability to continue operations.
Financing Details
ATAX offers direct financing to its Area Representatives, primarily for the Initial Franchise Fee. ATAX may, at its discretion, finance all or a portion of this fee, up to 100%. These loans come with an interest rate of 12% per year, and the repayment period can vary. For instance, a $250,000 loan repaid over 48 months at 12% interest would result in monthly payments of approximately $6,583. Area Representatives will need to provide a personal guarantee for any debt, and if the franchisee is a business entity, its owners must also personally guarantee the debt.
Performance Metrics
Total US Locations
35
Franchised Units
35
Corporate Units
0
Franchising Since
2019
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
No
Litigation Count
11
Litigation Summary
ATAX LLC and its personnel have been involved in 11 disclosed legal matters. One case is currently pending: a lawsuit filed in December 2023 by ATAX against a former franchisee and competitors, alleging trade secret misappropriation, breach of confidentiality and non-competition agreements, unfair competition, and tortious interference. A permanent injunction was granted in ATAX's favor, but the former franchisee has filed a counterclaim. Several concluded actions primarily involve the franchisor's CEO, John T. Hewitt, and his previous company, Liberty Tax. These include a lawsuit from 2021 by Liberty Tax against ATAX and Mr. Hewitt for confusingly similar signage and tortious interference, which settled in December 2021 with ATAX agreeing to pay $545,000 and close certain locations. Other past cases from 2010 to 2018 involved Liberty Tax, John T. Hewitt, or their affiliates, addressing claims such as fraudulent tax returns, breach of contract, defamation, and shareholder derivative suits alleging breach of fiduciary duties related to misconduct by Mr. Hewitt. These past matters were all settled or dismissed between 2013 and 2019. Additionally, there is a governmental action requiring John T. Hewitt to disclose a consent order related to a 2019 DOJ complaint against Liberty Tax concerning franchisee compliance issues.
Bankruptcy History
ATAX has no bankruptcy history required to be disclosed in this item.
Agreement Terms
Initial Term
10 years
Renewal Term
10 years
Renewal Conditions
ATAX Area Representatives who wish to renew their agreement must provide ATAX with at least 90 days' written notice before the current agreement expires. They must also sign a general release of any claims against ATAX and enter into ATAX's then-current Area Representative Agreement. While the new agreement may have materially different terms and conditions, ATAX will not reduce the Area Representative's percentage of initial franchise fees or royalties upon renewal.
Training & Support Program
Franchisor Assistance
ATAX provides new Area Representatives with a four-day initial training program, offered either live in Virginia Beach, VA, or online. ATAX does not charge for the training itself, but Area Representatives are responsible for their own travel and living expenses. ATAX provides an Area Representative Operations Manual for guidance. During the operational phase, ATAX calculates and pays commissions for unit franchises sold in the Area Representative's territory and offers operational support. ATAX also provides or makes available electronic copies of its latest Unit Franchise Disclosure Document for the Area Representative to use. ATAX may offer and require attendance at advanced or other training, for which Area Representatives cover travel and living expenses. ATAX may conduct general marketing and advertising, but does not have a marketing fund or require a marketing fee from Area Representatives, nor does it guarantee advertising spend in a specific territory. Area Representatives may use their own approved advertising materials. ATAX may issue specifications for computer systems, software, equipment, and supplies.
Initial Training Hours
32
Training Location
Virginia Beach, Virginia, or online
Ongoing Support
ATAX provides ongoing support to its Area Representatives by making available its latest unit Franchise Disclosure Document as required. ATAX may also provide, and require attendance at, advanced or other training sessions, which could be offered at select locations or online, with Area Representatives covering travel and living expenses. ATAX does not provide ongoing maintenance, repairs, upgrades, or updates for computer systems; Area Representatives are responsible for maintaining their own computer systems.
Franchise Requirements
Industry Experience Required
No
Management Experience Required
No
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
home-based
Owner Participation
supervisory
Territory Type
non-exclusive
Territory Size Requirements
ATAX Area Representative territories are defined by specific zip codes, political boundaries, or geographic boundaries as detailed in Schedule 1 of the Area Representative Agreement. A typical ATAX Area Representative Territory is designed to encompass 10 to 50 Unit franchise territories. Each individual ATAX Unit franchise territory within an Area Representative's domain is sized to include a population of approximately 30,000 to 33,000 people, with population data sourced from the U.S. Census Bureau or other reliable services.
Staffing Notes
ATAX Area Representatives are not required to hire employees. The Area Representative must personally provide the services or ensure they are provided under the direct supervision and control of a general manager. If an ATAX Area Representative uses a general manager, that manager must attend and successfully complete ATAX's Initial Training program. This general manager is not required to have an equity interest in the Area Representative's business but must sign an employment contract with confidentiality requirements and a covenant not to compete, to the extent permitted by law.