H&R Block Franchise Disclosure Document Analysis

Exceptionally High Royalty Rates Consume Most Franchisee Revenue

The standard royalty rates of 60% on the first $5,000 of annual revenue and 40% on revenue above $5,000 are among the highest in the franchise industry, leaving franchisees with a very narrow margin before accounting for any other operating expenses.

Source: p.14

Non-Exclusive Territory Exposes Franchisee to Direct Franchisor Competition

Franchisees do not receive an exclusive territory, and H&R Block explicitly reserves the right to operate company-owned offices, license other franchisees, and sell services via the internet and other electronic channels directly within the franchisee's approved territory.

Source: p.35

Franchisee Termination Triggers Substantial Penalty Payment to Franchisor

If a franchisee voluntarily terminates the FLA, they must pay H&R Block 25% of Gross Sales for the prior three years (or 100% of the prior year's Gross Sales if in business less than three years), which can represent a very large financial penalty.

Source: p.51