The Inspection Boys Franchise

Financing Details

The Inspection Boys® offers direct financing to franchisees for the initial franchise fee and any additional territories purchased. Franchisees can finance up to 100% of these fees, although the specific down payment may vary. The interest rate for this financing is 12% per year, and the repayment period is 36 months, with payments due on the anniversary of each year. A personal guarantee from the franchisee's owners is required as security for the debt.

Litigation Summary

John T. Hewitt, who is the Chief Executive Officer and Chairman of Loyalty, LLC (a parent company of The Inspection Boys®), has been named in several lawsuits. In 2021, JTH Tax LLC (Liberty Tax Service) sued Hewitt and an affiliate, ATAX LLC, alleging tortious interference with contracts and the use of trade secrets. This case was settled in December 2021, with Hewitt and the other defendants agreeing to pay $545,000 over six years and to cease certain competitive activities. Additionally, in 2017, two separate lawsuits (K&A Publicidad, Inc. and Kirke Franz Szawronski) were filed against Hewitt and Liberty Tax entities for breach of contract and defamation; these cases settled in January 2019 for a total of $50,000. Also in 2017, two shareholder derivative actions (Asbestos Workers' Philadelphia Pension Fund and Erie County Employees Retirement System) were filed against Hewitt, alleging breach of fiduciary duties. These were consolidated into one matter, "In Re: Liberty Tax, Inc. Stockholder Litigation," which settled in March 2019, leading to Liberty Tax agreeing to policy changes and Hewitt agreeing not to solicit company employees. Another shareholder derivative action, RSL Senior Partners, LLC, filed in 2018, was dismissed in 2019 as part of the broader Liberty Tax settlement. In 2018, Bablu Shahabuddin sued Hewitt and Liberty Tax entities for breach of purchase agreements and fraud; this case settled in November 2018 for $775,000 plus a portion of future revenue. Separately, John T. Hewitt is subject to an active Consent Order with the California Department of Financial Protection and Innovation. This Consent Order requires Hewitt to disclose an earlier 2019 federal case (United States v. Franchise Group Intermediate L 1, LLC d/b/a Liberty Tax Service) which, while not naming Hewitt as a party, alleged that Liberty Tax failed to control its franchisees and prevent fraudulent tax returns. As part of that 2019 settlement, Liberty Tax agreed not to rehire Hewitt. The Consent Order related to this governmental action is ongoing due to its continuous disclosure requirement.

Renewal Conditions

To renew the Area Representative Agreement, franchisees must provide written notice at least 120 days before its expiration. They must also sign a new Area Representative Agreement, which may contain materially different terms and conditions, and execute a general release of all claims against The Inspection Boys®. Currently, there is no renewal fee.

Staffing Notes

The Inspection Boys Area Representative Business requires the Area Representative or a fully trained and qualified manager to personally supervise and participate in the day-to-day operation. While the Area Representative may designate a Business Manager, they remain responsible. The Business Manager must have complete decision-making authority, act on the Area Representative's behalf, and successfully complete the Initial Training program, along with ongoing advance training. All owners of The Inspection Boys Area Representative Business must guarantee the obligations under the Area Representative Agreement and are subject to non-compete and confidentiality requirements.