Risk Score
Pending analysis
Investment Range
$33,824 - $158,344
Franchise Fee
$2,500
Total US Locations
8,764
Business Summary
H&R BLOCK franchisees operate tax return preparation businesses. They have the option to offer related products and services such as bookkeeping, payroll services, and training. The core business primarily involves preparing federal, state, and local tax returns, with significant activity during the Tax Season from January to April. H&R BLOCK also requires franchisees to offer various financial products and services through approved banking partners, including the H&R Block Emerald Prepaid Mastercard, Refund Transfers, and Refund Advances. Additionally, franchisees must offer H&R Block guarantees like the Peace of Mind Extended Service Plan. Franchisees can choose to open a new retail office or purchase an existing company-owned office.
Corporate History
H&R Block Tax Services LLC, a Missouri limited liability company, operates as the franchisor under the H&R BLOCK brand, providing tax return preparation and related financial services. The company is an indirect, wholly owned subsidiary of H&R Block, Inc., which was incorporated in Missouri on July 27, 1955. H&R Block, Inc. initially developed the distinctive system for tax preparation businesses and began franchising offices in 1957. In 1993, H&R Block Tax Services, Inc. was established as the predecessor to handle franchise operations. This predecessor granted franchises until July 1, 2008, when it merged into the current franchisor, H&R Block Tax Services LLC, which has been offering franchise licenses since then.
Financial Overview
Investment Range
$33,824 - $158,344
Franchise Fee (Low)
$2,500
Franchise Fee (High)
$2,500
Royalty %
60%
Marketing %
1%
Equipment Costs (Low)
$26,200
Equipment Costs (High)
$98,500
Working Capital
$6,215
Audited Financials
Yes
Offers Financing
No
Audit Opinion
Unqualified opinion
Financial Health Notes
The auditors have issued an unqualified opinion on H&R Block, Inc. and its subsidiaries' financial statements, confirming their fair presentation of the financial position and results of operations. They also reported effective internal control over financial reporting as of June 30, 2024. While the report highlights critical audit matters related to income taxes for uncertain tax positions and goodwill impairment assessment for the Wave reporting unit, these are noted as involving significant judgment but do not indicate an overall material adverse effect or impairment. H&R Block, Inc. appears to maintain a strong financial standing with no 'going concern' qualifications mentioned by the auditors.
Financing Details
H&R BLOCK does not directly offer financing for the initial investment or operational costs. However, its affiliate, Franchise Partner, Inc. (FPI), provides commercial financing to H&R BLOCK franchisees, subject to credit approval. FPI offers two main loan products: 1. Term Loan: This loan can be used to acquire an H&R BLOCK franchise, purchase another tax preparation business, buy out a partner, refinance a U.S. Small Business Administration loan, or fund brand office standard upgrades. The interest rate is typically 3.0% over the Prime Rate (e.g., 11.25% as of June 30, 2024) and includes a 2% administration fee. Repayment terms generally range from 4 to 10 years, with annual payments that may be adjusted at FPI's discretion. There is no prepayment penalty. 2. Short-Term Loan: Available annually from September 1 to April 30, this loan is designed to help cover operating and related expenses before the end of each Tax Season. Credit limits can be up to 20% of the prior year's net tax preparation revenue, and the loan must be fully repaid by April 30. Both the Term Loan and Short-Term Loan are secured by the property used in the Franchised Business. In case of default, FPI can declare all outstanding amounts due immediately, increase the interest rate by 4%, and may foreclose on the business property. Franchisees are not obligated to use FPI for financing and can secure loans from third-party lenders, but they cannot use client data or other confidential information as collateral.
Performance Metrics
Total US Locations
8,764
Franchised Units
2,135
Corporate Units
6,629
Avg Square Footage
1,000
Franchising Since
1957
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
No
Litigation Count
7
Litigation Summary
H&R BLOCK has been involved in several class action lawsuits concerning refund anticipation loans and checks, consumer protection violations related to compliance fees, and issues with tax form transmission. These cases were primarily filed between 2011 and 2013 and were settled or dismissed by 2018. More recently, H&R BLOCK is involved in an administrative complaint filed by the Federal Trade Commission in February 2024 regarding its DIY tax preparation services, which is currently pending appeal. Additionally, H&R BLOCK initiated one lawsuit against a franchisee in fiscal year 2024 to enforce restrictive covenants.
Bankruptcy History
H&R BLOCK states that neither the company, any parent, predecessor, affiliate, officer, nor any person with management responsibility for franchise sales or operations has been involved as a debtor in any proceedings under U.S. Bankruptcy Code or foreign bankruptcy laws that are required to be disclosed.
Agreement Terms
Initial Term
10 years
Renewal Conditions
H&R BLOCK does not offer automatic renewal of franchise agreements. Upon the expiration of a franchisee's current agreement, H&R BLOCK may, at its sole discretion, offer a new franchise agreement for the existing territory or a portion of it. The terms of this new agreement may be significantly different from the previous one, and franchisees would be required to sign the then-current H&R BLOCK Franchise License Agreement.
Training & Support Program
Franchisor Assistance
H&R BLOCK offers a range of assistance to its franchisees. Before opening, they may provide advice on site selection (requiring written approval), furnish the proprietary System and software for tax preparation and electronic filing, grant access to the Operations Manual, and help establish an operating plan. During operation, H&R BLOCK provides guidance on management and business operations, reviews annual operating plans, supplies specialized internal reporting forms, conducts promotion and advertising efforts, and provides standard or alternative signs. Training includes an initial program for new franchisees (or their designated managers) with both in-person sessions in Kansas City, MO, and virtual components, covering office operations, products, client service, and compliance. Ongoing tax preparation training, like the Income Tax Course, is also available, with some annual mandatory training provided free of charge (franchisees cover employee labor costs). Additionally, H&R BLOCK administers a local marketing assistance program with a budget allocation and offers pre-approved marketing materials, while also providing discretionary ongoing maintenance, repairs, upgrades, and updates for the business's software systems.
Initial Training Hours
51
Training Location
Kansas City, MO / Virtual
Ongoing Support
H&R BLOCK provides franchisees with ongoing support through management and operational advice, annual operating plan reviews, and specialized internal reporting forms. They also conduct continuous promotion and advertising efforts, and supply standard or replacement signage. For employee development, H&R BLOCK offers ongoing training opportunities, including the Income Tax Course and additional classes on tax preparation, with some mandatory annual training provided free of charge (though franchisees cover employee labor costs). Franchisees also benefit from local marketing assistance through a Brand Management Budget and access to pre-approved marketing materials, as well as discretionary ongoing maintenance, repairs, upgrades, and updates for the business's software systems.
Franchise Requirements
Industry Experience Required
No
Management Experience Required
No
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
Retail
Owner Participation
Supervisory
Territory Type
Non-Exclusive
Staff Count
6
Territory Size Requirements
H&R BLOCK defines its franchise territories by the municipal boundaries of a city, town, or village for rural locations, or as a specific office address or mapped area for metropolitan locations. The minimum territory granted may be limited to just a specific address.
Staffing Notes
H&R BLOCK requires franchisees to have qualified employees and staff to assist in operating the business, with the franchisee or their designated 'Principal' (if a business entity) providing sufficient supervision and completing initial training. Franchisees must ensure compliance with all obligations, procedures, and applicable laws, and are prohibited from hiring individuals suspended from the IRS Electronic Filing Program. Furthermore, H&R BLOCK requires employees in supervisory roles or those preparing tax returns to sign non-competition agreements.