Franchise Deep Dive: H&R Block's Franchise Costs, Fees, Profit and Data

One of the top tax preparation businesses in the country, this brand offers a lucrative return for offering the community necessary services.

By 1851 Staff1851 Staff Contributions

Updated 8:08AM • 02/11/23

LAST UPDATED: December 27, 2022

FRANCHISE WEBSITE: https://www.hrblock.com/corporate/tax-franchise/

NUMBER OF LOCATIONS: 9,300+

REPORTED COST TO GET IN: $31,557 – $157,898

ESTIMATED ANNUAL PROFITS: $32,665 – $45,731

H&R Block is one of the nation’s go-to tax preparation concepts, having assisted taxpayers in filing more than 800 million returns since its founding over 65 years ago. The company has significantly expanded over the decades, changing its development strategies but always remaining a steadfast force in the industry. Competitors of H&R Block in the tax and financial franchise space include Liberty Tax Service and Jackson Hewitt Tax Service.

How Many H&R Block Locations Are There?

There are presently about 9,300 H&R Block locations around the world, predominately in the United States, Canada and Puerto Rico. At the close of 2021, 6,601 locations were company-owned and 2, 752 were franchised units located in all 50 states.

The number of locations has dropped in recent years, with VettedBiz data showing H&R Block closed more than 700 units between its high of 10,106 locations in 2019 and the close of 2021. This accounts for more than 5% of the system.

Part of the changes in footprint also had to do with the brand’s efforts to buy out small business owners and take on more company-owned stores. Over the last two years, H&R Block has added over 220 corporate offices, offering great exit strategies to independent tax professionals.

However, this shift in location numbers has not affected profits: H&R Block has steadily grown sales lately. Company earnings were over $416 million in 2019, but that increased 53.73% to $640 million in two years.

What is the H&R Block Model?

H&R Block Tax Services LLC allows investors to own a tax return preparation business out of retail space under the corporate name. The company has offered a few different models of franchising in the past, from new spaces to acquiring a company-owned store or converting an independent office into an H&R Block. All franchise agreements are for a 10-year term.

New franchisees undergo extensive training procedures once they pick a business model, sign an agreement and pay the franchise fee. There are approximately 52 hours of combined classroom/online training and on-the-job instruction. The brand requires that owners be full-time operators that are present in the day-to-day.

How Much Can H&R Block Franchise Owners Make?

The company does not disclose earnings in its Franchise Disclosure Document and therefore does not have a fleshed-out Item 19. However, VettedBiz estimates that the Average Unit Volume in 2021 was $130,661 per location; with a 30% profit margin that will net franchise owners approximately $39,198 per year.

Considering the investment range for an H&R Block starts at just above $30,000, this means there’s a quick return on investment. Even with the midpoint investment of $94,727 or a high of $157,898, owners are getting that money back fairly fast.

How Much Does it Cost to Open an H&R Block?

The total investment to open an H&R Block location ranges from $31,557 – $157,898, depending on the model of the agreement involved. For operating businesses with build-out done, the cost is on the lower end. For new outlets, there are higher costs involved with the real estate phases.

These listed costs are a part of the initial investment:

Real property: $1,400 – $30,000
Leasehold improvements; construction costs: $0 – $50,000
Signage: $1,200 – $6,500
Furniture, Fixtures, Decor Items: $15,000 – $30,000
Suppliers Equipment: $8,000 – $12,000
Opening: $500 – $1,000
Pre-opening salaries, travel, and initial training: $1,500 – $3,000
Start-up suppliers: $500
Insurance: $477 – $798
Zoning Expenses: $0 – $500
Utility deposits: $50 – $300
Architect design: $0 – $4,500
Professional fees: $0 – $2,500
Additional Funds: $430 – $12,000
Business licenses: $0 – $1,800

Ongoing Costs and Fees include:

Royalty: 60% of the first $5,000 of revenue received for services during each calendar year and 40% of the revenue received during each calendar year above $5,000. This percentage goes down for owners who make fast payments within a few days or those with increasing sales patterns. Revenue from business services has a royalty rate of 15%, and revenue from Second Look Review fees is charged at a 20% rate. Select product sales are royalty-free.
POM Extended Service Plan and POM Protection Program: All franchisees have to provide the Peace of Mind® (POM) Extended Service Plan and take part in the POM Protection Program. POM unit sales have 20% royalty rates, with claims allowing a $50 deductible each.

What is the Franchise Fee for H&R Block?

The franchise fee for H&R Block is one of the lowest in the entire franchising industry. Entrepreneurs are able to partner with the trusted brand for a small fee of only $2,500. This is an upfront fee paid to the franchisor at the time of the agreement’s signing.

Who is the Leadership of H&R Block?

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Franchise Deep Dive: H&R Block's Franchise Costs, Fees, Profit and Data

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