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Tax Preparation Franchises - Myths vs. Facts

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Franchising has been around in one form or another since the beginning of commercial enterprises. A franchise is a legal and commercial business arrangement where the franchisor of a business concept grants the franchisee the licensed right to own and operate a businesses based on the franchisor’s business concept, using its trademark.

The franchisor provides the business expertise - marketing plans, management guidance, site location, training, etc. The franchisee pays an initial franchise fee, ongoing royalty fees, advertising fees and other fees to the franchisor. The franchisee must raise the money to start the franchise and must manage its day-to-day ongoing operation.

An important step in the small business startup process is deciding whether or not to go into business at all. Starting a new business can be risky. Most studies show that over 90 percent of new businesses fail within three years. On the other hand, starting a tax preparation business involves only a minimal risk because tax preparation businesses rarely fail. But remember that hard work, dedication, entrepreneurial spirit, and sacrifice are essential to the success of any business venture, including tax preparation.

Many people dream of being an entrepreneur. By purchasing a tax preparation franchise you can often have instant name recognition and can obtain training and ongoing support to help you succeed. But be cautious - like any investment, purchasing a tax preparation franchise is not a guarantee of success. Unfortunately, too many over-eager, first-time franchisees leap in without understanding the in's and out's. If the potential franchisee doesn't know what he’s getting into, it may be years before he begins to see any return on his investment capital.

Consider all the costs...
While buying a tax preparation franchise may reduce your investment risk by enabling you to associate with an established company, it can be costly. You also may be required to relinquish significant control over your business, while taking on contractual obligations with the franchisor.

In exchange for the right to use the franchisor’s name and assistance, you may pay some or all of the following fees:
  • Initial franchise fee and other expenses - your initial franchise fee may cost several thousand to several hundred thousand dollars.
  • Continuing royalty payments - you’ll have to pay the franchisor royalties based on a percentage of your gross income.
  • Advertising fees - you may have to pay money into an advertising fund.
Additionally, franchisors typically control where franchisees conduct business. Restrictions on your geographical franchise area will limit your business to a specific territory. While these territorial restrictions may ensure that other franchisees will not compete with you for the same customers, they also could impede your ability to open additional offices or move to a more profitable location.
What our customers are saying… you can take their word for it!
The facts about tax preparation franchises...
If you are set on working for yourself in the tax preparation business but are not sure whether you should attempt it on your own as an independent or buy a tax preparation franchise, you should consider all the "pros and cons". The costs and differences of owning a tax preparation franchise vs. building your own business from the ground up are many. We've listed a few here that you should find interesting... 
Item Franchises  Independent Businesses
Name Recognition A primary reason for purchasing a tax preparation franchise is the right to associate with the franchise company's name. You will have the right to use an established trade name, trade marks, and logo. With an established franchise, you get the benefits of marketing an established brand. The more widely recognized the name, the more likely it will draw customers who know its services.  Because most taxpayers have their tax returns prepared by the most convenient preparer, usually within five miles of their home, national name recognition may be of little or no value.

You will need to establish your own name. Your name will not be recognized nationally, but customers will be aware of your local ownership. In some cases this can be a big plus - especially if you have a positive, high profile, in the community. 

Should one office in the franchise network become tarnished, you could lose substantial business through no fault of your own.

Known Service Your service will be known by the public. This is a benefit if the franchise network as a whole has a solid reputation, but is a drawback if other franchisees have bad reputations.  Ordinarily, it takes a long time to establish a service and build up public acceptance. However, most taxpayers are already familiar with tax preparation and the process.
Training Training is essential if you are changing careers or hiring tax preparer employees, by providing you and them with the ability to use technology, and you the skill required to operate a tax preparation franchise.  WorldWideWeb Tax offers extensive, instructor led, online training. This can result in a shorter learning curve.
Established Track Record
As a tax preparation franchisee you become part of a proven system of operation. You have history to learn from and to help you predict your own future. Your particular business will be unproven. However, WorldWideWeb Tax has thousands of successful users coast to coast who share their knowledge and experiences.
Advertising National advertising will be undertaken by the franchisor and generally, local advertising is up to you. 

You often must contribute a percentage of your income to an advertising fund even if you disagree with how these funds are used.


Franchisees rarely have any control over how the advertising dollars are spent. How much of the fund is spent on national advertising? Is any of the fund spent on advertising in your area? Do you need the franchisor's consent to conduct your own advertising?

As an independent business you can select where and when the advertising budget is spent.

WorldWideWeb Tax provides a complete advertising and marketing system, including co-op advertising and a free web site.

On-going Help & Support

You will have the benefit of a trouble shooting service from the franchisor when required. Field staff may also visit franchisees and help prevent the build-up of problems.

As a franchisee, you will generally receive valuable, ongoing business support, including site selection, training, marketing, new technology and more. Franchisers will assist you in developing a business plan, in learning the best ways to hire and manage personnel, and in how to profitably manage your business.

WorldWideWeb Tax offers a full range of practice management and technical support programs.
Location The franchisor will come on-site and select, or advise you, on the location that is right for your tax preparation franchise business. The franchisor may also assist directly in lease negotiations. You are free to make a good or bad choice of location. Best Bet: Locate your tax preparation business where there's a lot of drive-by traffic - as signage and banners will draw many taxpayers to your business. Office buildings perform terribly. Strip shopping centers perform fantastic.
Less Risk Your chances of failure are lower with a franchise operation, because of the experience, expertise and proven resources that support you in your business. Franchises succeed at the rate of 90%. Independent tax preparation businesses rarely fail. Without the financial burden of franchise costs and expenses, independents succeed at the rate greater than 90%.
Ownership There may be limitations on your ability to sell or dispose of the tax preparation franchise business. The franchisor may have rights to purchase and terminate your contract under terms defined in the franchise agreement. Ordinarily, you own the franchise business for a fixed period of time, with the right to renew. You own your business. You are totally free to sell or dispose of the business to anyone, at any time. No one else has the right to terminate the business. 

Escape Clause/Cancellation
Depending on the franchise agreement, there may be major legal issues involved in a franchisee terminating the agreement.  Our software is purchased on an annual basis. While over 95% of our users renew each year, you are free not to do so. There is no long term obligation.
What about the competition?
You should also consider the following: What is the level of competition in your community? How many franchised and company-owned tax preparation offices does the franchiser have in your area? How many competing companies sell tax preparation in your area? Are these competing companies well established, with wide name recognition in your community? Do they offer the same service at the same or a lower price?
Our price builds relationships that last a lifetime!
Consider becoming an independent tax preparer. Our system is a steal compared to the $50,000 to $100,000 that the national tax preparation franchises charge. At WorldWideWeb Tax we don’t just build a first class tax software program, we build relationships that last a lifetime!
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