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GROWING
YOUR ACCOUNTING PRACTICE WITH FRANCHISING
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INTRODUCTION

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INTRODUCTION IN THE NEWS

2 Financing Challenges Remain for Franchises 2 Tax Preparation Industry Report 2011: Tax Preparation Industry at a Glance 2 Accountants, Small Businesses Finally See Growth 2 Top 10 Tax Firms: From our ranking of the Top 100 Firms, here are top rms and companies in the tax profession

THE MANY FACETS OF LIBERTY TAX

2 Facts and Figures 2 Diversity and Minority Friendly 2 Frequently Asked Questions

RESOURCES
2 Articles from John T. Hewitt, Founder and CEO of Liberty Tax Service 2 Video Testimonials: Faces of Franchisees 2 Next Steps

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INTRODUCTION:

Opportunities for those with an entrepreneurial spirit

oing into a new business venture is a major life decision, as well as a major ongoing commitment. Yet, its one that tugs at the soul of many CPAs and accountants who are tired of laboring for a large corporation or an owner who reaps a good chunk of the benets they generateand for others who are looking to accelerate growth of their existing accounting practice. Fortunately, tax preparation is a unique business with a lot of opportunity due to the underlying fact that every adult American, regardless of income or stature, is legally obligated to le an income tax return every yearthats a lot of potential customers for the taking. If youre in the accounting or tax business, youre probably someone who likes numbers. Well, here are a few (compliments of FranchiseHelp Holdings LLC) that might interest you: 2 Approximately 144 million individuals and 2.4 million corporations led returns last year 2 82 million returns are prepared by paid professionals, 23% of which are handled by franchises 2 32,000 tax preparation rms generate approximately 7 .7 billion in revenue 2 The majority of the rms that prepare tax returns are small, with less than 10 employees 2 The tax prep industry is expected to grow by 4% compounded annually from 2010 to 2015

What franchising has to offer

Despite calls to simplify the tax code, it most likely will remain more complicated than the average taxpayer is willing to tackle on their own. The trick is getting them to come to you for preparation services. One of the greatest benets of becoming a franchisee is brand recognition. A familiar name has a way of drawing customers more quickly because they already have a sense of comfort that they will receive a certain standard of service. The franchise, quite honestly, has already done a lot of the hard work in creating their reputation, and theyre not going to allow their name to be used unless theyre also comfortable that the franchisee is going to deliver the promise that goes along with their name. So how does the franchise guarantee a certain level of service? Entrepreneurs who become part of a franchise family receive a proven plug-and-play system with established rules and standards as well as a pre-developed shopping list of everything needed to open and successfully operate a tax preparation business. This should include help with site selection, hiring and training of employees, marketing and promotion, technical and software issues, income tax preparation, and any other problem that might arise. In addition, being associated with a reputable franchise often helps secure the necessary capital needed to start a new businessa

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major consideration, especially in todays economic climate. Ongoing continuing education is important too in the constantlychanging tax industry. For example, starting this year, all tax preparers must have an identication number called a PTIN and an electronic ling identication number called an EFIN if they plan to e-le returns. Preparerswhether its yourself or an employee also now need to pass two upcoming IRS competency tests before the end of 2013.

A long-term relationship
Entering into a franchise agreement is much like entering into a marriage. Its important to make sure there is a good t on a personal leveland there needs to be plenty of passion. Every company, franchises included, have their own culture and style but even the strongest of franchise names cannot guarantee success unless the owner is passionate about what they are doing. This enthusiasm is not only appreciated by customers but is also absorbed by employees and reected in the quality of work they produce and present to potential clients.

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The economy has yet to fully recover, but franchising is showing signicant opportunities that dont exist in many other business segments.

Financing Challenges Remain for Franchises

BY ACCOUNTING TODAY STAFF WASHINGTON, D.C. (MARCH 23, 2011) ,

ver 80,000 new jobs and over $10 billion in economic output could be lost in 2011 unless credit ow to franchised small businesses increases, according to a new report.

The report, The Small Business Lending Matrix and Analysis, Vol. 3, prepared by FRANdata for the International Franchise Association Educational Foundation, shows demand for franchise business growth in 2011 far outpaces the ability of franchise businesses to access nancing, despite a more positive business climate and increased investor interest for franchise expansion. Franchising, due to its structure and demonstrable track record of 40 percent growth over the last decade, offers the most promising vehicle to accelerate widespread job creation in this country, said International Franchise Association president and CEO Steve Caldeira, in a statement. Yet without sufcient nancing, franchise businesses will continue to struggle to become a true locomotive for job creation, which it has been historically.

The report says franchise businesses will require $10.4 billion in new lending capital to fulll 100 percent of the forecasted demand for new and transfer units in 2011, but credit ow may fall short by 20 percent. The gap is a slight improvement over the estimated gap of 23 percent in 2010 due to increased investor demand for franchises, unconstrained franchisor capacity for growth, increased lending by banks to franchises due to increases in the Small Business Administration loan guarantees passed last year, and the estimated pace of economic recovery through 2011 and beyond. Even with the estimated shortfall in lending, the report estimates that more than 33,000 franchises, both new units and transfers, will create or maintain more than 250,800 jobs and generate $32.5 billion of annual economic output in 2011. Lenders are faced with sharp declines in the value of borrowers collateral, a strict regulatory environment and long-lasting recordhigh unemployment rates. Many businesses have also faced

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Franchising, due to its structure and demonstrable track record of 40 percent growth over the last decade, offers the most promising vehicle to accelerate widespread job creation in this country.
declines in sales volume, forcing them to operate at less protable margins. To address these challenges, the IFA has partnered with the Consumer Bankers Association, CIT Group, the National Association of Government Guaranteed Lenders, the National Restaurant Association and others to develop solutions that increase credit ow to small franchise businesses. The organizations co-hosted a Small Business Lending Summit Thursday, April 7 2011, in Washington, , D.C., to identify solutions to enable increased lending to small franchised businesses and speed up the economic recovery. http://www.accountingtoday.com/news/FinancingChallenges-Remain-Franchises-57743-1.html

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Tax Preparation Industry Report 2011: Tax Preparation Industry at a Glance

ax preparation is unusual in that more so than any other industry, it provides a service which assists with a process that legally every adult American is required to dosubmit an income tax return. Because of that, tax preparation is big business. 38,287 rms operated in the eld last year, generating 7 billion .7 in annual revenue. Because it is required, tax preparation tends to be recession resistant. Of the 82 million returns prepared by paid preparers, franchises handled 23 percent of them.

is to diversify and enter other related elds. Some such as Listo provide additional accounting and payroll services. Others, like FedUSA are involved in the insurance industry as well as tax preparation. RALs, or refund anticipation loans, have been a recent controversial issue in the tax preparation business. These loans, which have been around since the 1980s, but have become increasingly popular with electronic ling, give a short-term loan to consumers secured by their eventual tax refund. Generally this is done through the tax preparer, and the bank who issues the loan and hosts the account in which the loan is deposited charges a fee. In 2008, 7 million people received RALs. This practice has .2 become controversial because these are high interest, low risk loans which are geared toward poorer people, and there have been several lawsuits brought by government entities charging tax preparer rms with predatory lending practices regarding these loans. To address this, the IRS in 2011 decided to stop providing tax preparers with the information they needed to issue these loans, at least temporarily ending RALs, and putting some smaller tax preparation rms, which relied on RALs for much of their revenue, out of business.

Tax Preparation Industry Background

The vast, vast majority or tax preparers are small37% were run by a single person, while 53% were operated by less than ten. There were 128,393 total employees in the eld last year. There were plenty of tax returns to go around. Approximately, 144 million individuals led returns as did 2.4 million corporations. One of the most notable aspects of the tax preparation industry is how seasonal it is. The industry only comes into being for essentially the four months before April 15, the day on which income tax returns are due for individuals. Because of this reality, those interested in a tax preparation franchise such as Liberty should be those looking for a part-time opportunity. It will not provide year round business, and this can be a unique benet for those looking for extra work for a couple of months, but a detriment to those looking for more of a full time franchise. One approach some tax preparation businesses take to avoid the stark seasonality of the tax preparation business

New Licensing Rules

Another aspect of tax preparation that is not present in many other franchises in the need for licensing. Until this year, only Oregon and California required tax preparers to be registered and licensed.

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However, the IRS very recently passed new regulations. Starting in 2011, all tax preparers must provide a PTIN, or preparer tax identication number, with every return. Preparers must submit an online or paper application and pay a fee to acquire a PTIN, and they must take one of two competency exams offered by the IRS, either in person or online, and pass it, before the end of 2013; the tests are just coming available now. They must also keep up with continuing education classes. In addition, those wishing to electronically le must also apply for an EFIN, or an electronic ling identication number. Preparers who reasonably expect to le 100 or more returns are required to e-le and thus apply for an EFIN. The new regulations were put into place to prevent both fraud and preparers who simply make errors too frequently, particularly in regard to smaller rms and individuals. Between 2006 and 2008, the IRS began 600 investigations into the fraudulent actions of tax preparers, which led to 356 convictions, many of these resulting in prison sentences. In 2006, the Government Accountability Ofce investigated tax preparers by posing as taxpayers needing returns led, and out of nineteen cases, found that ve made signicant errors. These new procedures have the potential danger to lead to higher costs, as it could be more difcult and costly to pay licensed preparers.

and remains poised as a serious competitor to professional tax preparers for years. It is also now possible to le taxes through the websites for Turbo Tax and other programs. In order to counter that, tax preparers have begun to operate their own websites. These generally contain web forms which consumers ll out and the preparer les electronically, and they offer a middle ground between paying a tax preparer to le by hand, and computing their own taxes at home. Liberty Tax Service provides computerized income tax preparation, electronic ling, and online ling through eSmart Tax.

Tax preparation is unusual in that more so than any other industry, it provides a service which assists with a process that legally every adult American is required to dosubmit an income tax return. Because of that, tax preparation is big businessand tends to be recession resistant.
In order to accommodate this growing online practice, tax preparers must focus on data security, which is extremely important, by making sure their computer and network security is appropriately beefed up. In addition, because of constant changes to the tax code and regulations, tax preparers must make sure their software is up to date. Also, many taxpapers have complex returns which often lead to their being more likely to go to professionals. The other

The Future of the Tax Preparation Industry

The main competitor for tax preparation industry is personal nance software, such as Quicken and TurboTax, which allows people to le tax returns by themselves from their homes. Fifty million people used these products in 2010Intuit, the company which makes these leading software programs, made over $3 billion last year

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potential competition for seasonal tax rms is from full-service accounting rms which might provide other services in addition to ling tax returns, though most individuals are unlikely to need other services throughout the year, so this is more of an issue regarding businesses and higher net worth individuals. Despite vociferous politicians occasionally clamoring for a at tax, income taxes remain as complicated as ever. Because of this complication, there will always be a demand for tax preparers, even as computer software becomes more complex and sophisticated. The industry, including other accounting services, is expected to grow by 4 percent compounded annually from 2010 to 2015. Andrew Weber is an Analyst for FranchiseHelp.com and is a graduate of New York University and New York University School of Law. http://www.franchisehelp.com/industry-reports/taxpreparation-industry-report

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Accountants, Small Businesses Finally See Growth

BY MICHAEL COHN, MOUNTAIN VIEW, CALIF | FEBRUARY 23, 2011 .

ccounting professionals and small businesses are poised for progress as long as they continue to invest in new technologies, marketing and advertising, and face-to-face time with clients, according to a new survey. The survey, by Intuit, asked accounting professionals and entrepreneurs about the challenges they face in growing their businesses, maintaining the accountant-client relationship and remaining competitive in the marketplace. The ndings also include a snapshot of both groups economic outlook and their thoughts on the use of new technologies, online applications and engaging with customers. In a considerable showing of resilience, 65 percent of accounting professionals and 54 percent of small business owners said their companies grew in the last 12 months. Despite this growth, however, 75 percent of the accounting professionals and 80 percent of the small business owners surveyed rate todays economic climate as just fair or poor. Both groups expressed optimism for the future, with 94 percent of accounting professionals and 87 percent of small business owners seeing opportunities to grow their businesses in todays economy. In ranking the major factors behind growth, 77 percent of the accounting professionals who were surveyed said access to

industry news and/or trends is the most important, while investing in new technology ranked second. Seventy-three percent of small business owners placed marketing and/or advertising as the most important; 57 percent said they plan to focus on expanding their range of offerings. When asked what keeps them up at night, 32 percent of accounting professionals said keeping clients happy. For 26 percent of small businesses, paying bills is their number one concern.

In a considerable showing of resilience, 65 percent of accounting professionals and 54 percent of small business owners said their companies grew in the last 12 months Both groups expressed optimism for the future, with 94 percent of accounting professionals and 87 percent of small business owners seeing opportunities to grow their businesses in todays economy.

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Accounting professionals and small business owners are extremely adaptable and exible individuals, said Shawn McMorrough, lead research manager of Intuits Accounting Professionals Division. Despite feeling the pinch in this challenging economic environment, they are optimistic and continue to weather the rapidly shifting business environment. Their unrelenting passion for serving their customers helps accounting professionals and small businesses succeed in the face of any challenge the market presents them. In 2010, a total of 39 percent of accounting professionals and 35 percent of small businesses invested in new technology to help maintain their success and grow their businesses. In addition, 84 percent of accounting professionals used technology to reduce operating costs and expand their client base, while 79 percent of small businesses used technology to market their business and expand their customer base. Accounting professionals are more open to using online applications than small business owners. Some 74 percent of accounting professionals believe online applications will be integral to accounting rms in the future, and 38 percent already use them to access accounting and nancial information through the Web. Among small business owners, 60 percent see the use of mobile phone applications to communicate with customers or accounting professionals as important to future success, with 29 percent currently using online applications to access their accounting or nancial information.

The survey also asked accounting professionals and small businesses how they communicate with each other. While e-mail (60 percent) and telephone (54 percent) were cited as the most common ways the two groups communicate, 64 percent of small business owners value face-to-face check-ins with their accounting or nancial professional. In addition, 75 percent of small businesses owners say their accountant or nancial professional shares information with them in person. http://www.accountingtoday.com/news/Accountants-SmallBusinesses-Finally-See-Growth-57380-1.html

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The Top 10 Tax Firms:

From our ranking of the Top 100 Firms, here are the top rms and companies in the tax profession.
ACCOUNTING TODAY STAFF | MARCH 24, 2011

y and large, it was not a great year for tax rms. Two of the three biggest tax prep chains, H&R Block and Jackson Hewitt, reported noteworthy declines in revenue, citing problems with refund anticipation loans and sustained unemployment among their core client bases. (That said, the other major chain, Liberty Tax, continued its relentless growth, and surpassed Jackson Hewitt for the rst time to become the No. 2 chain in the country.) For rms that provide a wider range of tax services, the results were mixed, a combination of mostly minor declines in revenue and the odd slight uptickwith the notable exception of Texas-based tax services rm Ryan, which managed growth of over 10 percent, aided, in part, by its expertise in international tax issues.

Liberty Tax Service, based in Virginia Beach, Va., realized $291.69 million in revenue from tax. The company earns 100 percent of its revenue from tax. Liberty, under CEO John Hewitt, achieved a 20.29 percent increase in revenue over the previous year. The tax prep chain has 3,359 ofces. http://www.accountingtoday.com/photo_gallery/2_3/photo/ Top-Tax-Firms-57751-1.html

Liberty, under CEO John Hewitt, achieved a 20.29 percent increase in revenue over the previous year. The tax prep chain has 3,359 ofces.

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THE MANY FACETS OF LIBERTY TAX

A wise entrepreneur once said, Choose your business partner more carefully than your husband or wife. Heeding those words of wisdom, the rst step with any new venture is getting to know who the people that stand behind the business you are considering. To make this due diligence step simpler, information about tax prep franchising and the opportunities afforded by Liberty Tax are highlighted below.
Facts and Figures
Liberty Tax is consistently rated one of the top franchises in the country by industry experts such as Forbes and Entrepreneur magazines. http://www.libertytaxfranchise.com/top-franchise.html

Diversity and Military Friendly

The business model used by Liberty Tax is appealing to a diverse group of go-getters, many who are looking for more control of their destinies during a tough economy, and has been recognized by many publications including Black Enterprise, Poder (formally known as Hispanic Enterprise), GI Jobs Magazine and others. http://www.libertytaxfranchise.com/top-franchise.html

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Frequently Asked Questions

FOR THE BUSINESS OWNER: in the day. Liberty Tax will offer other classes later in the fall.

What would happen to my current clients if I open a franchise?

We charge a $5 per le grandfathered client fee per existing account. You will not be charged royalties on these people. Other than that you would continue to service them as before

How much does it cost to take the classes?

Theres a minimal charge for books.

Am I obligated to work for Liberty Tax after taking the class?

There is no obligation. While we do hire many students from the class, others take the class to learn more about tax preparation. We dont promise a job, and you dont have to sign anything obligating you.

I already own a CPA rm, can I keep my personal accounts or business clients?
Yes if you open a Liberty in another territory or grandfather them into the system (see above) FOR POTENTIAL EMPLOYEES:

What are the advantages of taking a tax class?

The companys ten-week tax school can help students learn personal tax-savings advantages and strategies as well as a new skill that may lead to certication and employment. Liberty Tax is hiring 40,000 tax preparers and does recruit from the pool of tax school students. Students may uncover mistakes they have made for several years and uncover overlooked deductions and credits. They may then amend their returns up to three years back and claim any refunds due for those years.

Ive never prepared taxes. Can I still take the class?

Yes. No previous tax experience is required. Anyone and everyone can take our classes. The main requirement is the willingness to learn individual tax preparation and apply the tax code to many situations.

What will I learn in Liberty Tax classes?

Instructors cover all schedules, credits and forms associated with individual tax ling. Students apply their tax knowledge to prepare returns on paper and on the computer. Libertys basic income tax preparation classes educate consumers about the latest tax changes and more.

Are there advanced classes?

Yes! We offer intermediate and advanced training both in our ofces and online for anyone that is interested in pursuing additional tax knowledge.

How long are the classes?

Class schedules are exible with day or evening classes available twice a week for ten weeks. Most classes are 6-9 at night or 9-noon

Will this class qualify me to pass the IRS Competency Exam?

We fully expect our Basic Income Tax Course to prepare you for the IRS exam.

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RESOURCES
Anyone, regardless of their nancial means or level of education, needs support. Herein are resources specically designed to help a business owner be successful. Articles from John T. Hewitt
FOUNDER AND CEO OF LIBERTY TAX SERVICE 2 2 2 2 2 DAVID and GOLIATH: The Power of Organizational Tuning Surviving in a Hypercompetitive Environment Without Having to Cross Your Fingers! Transforming From Within: A Simple Survival Guide From Melting Pot to Salad Bowl: Diversity at its Best Fanaticism Equals Success!: Creating an Extraordinary Company

Video Testimonials: Faces of Franchisees

Liberty franchisees are come from all walks of life and with a wide range of backgrounds, educations and experiences. But they all share common passionsthe need to help others, be their own boss, take control of the destiny, and have fun. Meet a few of them yourself by watching these video recordings: http://www.libertytaxfranchise.com/faces

Next Steps
Golden opportunities dont have to be difcult to grab. In fact, at Liberty Title, pursuing the dream of nancial independence is only a four step process. To learn more today, visit http://www.libertytaxfranchise.com/franchise-opportunities.html

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Liberty Tax Service is the fastest growing international income tax service ever, and is supported by an experienced management team and headquarters staff with over 600 combined years of tax, franchise, technical, marketing, and management experience. Many have worked previously for other competing tax franchisors, and the company has demonstrated its exibility by continually adapting to the constant changes in the tax industry. Libertys founder and CEO, John Hewitt, is a nationally recognized name in the tax and accounting world. He is a veteran of 42 tax seasons, the founder of two top tax preparation rms, and a former H&R Block regional director. In 1982, Hewitt founded Jackson Hewitt, the second largest tax preparation company, and started its franchise operations in 1986. Under Hewitts tutelage, Jackson Hewitt grew from a local six-ofce operation to 1,345 ofces when it sold in 1997 for $483,000,000. Hewitt established Liberty Tax Service in Canada in September of 1997 when he acquired a Canadian tax franchisor. In tax season 1999, Liberty operated 35 ofces in the U.S. Liberty continues to focus on the future, with over 3,800 ofces in 2011. Liberty is currently the third largest tax franchise company in the world. Liberty has been recognized as the fastest growing retail tax preparation company in the industrys history having led over 5,000,000 individual income tax returns and currently operating over 2,700 ofces throughout the United States and Canada. Accounting Today magazine named him one of the accounting professions top 100 most inuential people for last ten years. The International Franchise Association (IFA) recognized Hewitt as Entrepreneur of the Year, an honor presented to an individual currently building a successful business venture who exemplies the entrepreneurial spirit that franchising represents. And Entrepreneur magazine ranked Liberty Tax in the top 20 of their Franchise 500 and listed it in Inc. 500 Top privately-held companies. Hewitt is also the only CEO in the tax industry history who has made the Top 100 List for most inuential people while heading two different companies, Jackson Hewitt Tax Service and Liberty Tax Service. Hewitt is a highly regarded national speaker, writer and expert in the tax industry, as well as entrepreneurship and management growth strategies. John Hewitt Founder & CEO of Liberty Tax Service