$328

Business Description

H&R Block Tax Services LLC, a Missouri limited liability company, organized in the State of Missouri, is the franchisor in all states in which franchises are granted. All business is conducted under the name of H&R BLOCK® (“H&R Block”). H&R Block Tax Services LLC is referred to as “we”, “us”, or “our” in this disclosure document. We maintain our principal place of business at One H&R Block Way, Kansas City, Missouri 64105.

Prior Experience

Since July 1, 2008, we have offered franchise licenses to operate offices that offer income tax return preparation, related products and services, bookkeeping, payroll services, and training (the “Franchised Business”). Our affiliates own and operate businesses that offer the same products and services as the Franchised Business under the name of H&R Block. Your direct competition from national and local tax return tax preparation firms will include our affiliates (see Item 12 Territory).

Business Offered

We offer a franchise agreement, the Franchise License Agreement (“FLA”), attached as Exhibit F-1 to this disclosure document, that grants you the right to operate the Franchised Business using the Proprietary Marks and the System in a given territory for a specific term. You may operate the Franchised Business from any location approved in writing by H&R Block (“Approved Location”) within your Franchise Territory. There are various ways you may become an H&R Block franchisee, all of which are subject to our sole discretion and approval. The various ways to become a franchisee are described below. One franchise opportunity is to open a new retail office located within a defined Franchise Territory. We will provide training and support for you to open and operate your Franchised Business. With our approval and support, you will: (1) select an office location, (2) hire and train your staff, and (3) set up your office with furnishings, signage, computers, and other office equipment according to our specifications and requirements. Our marketing materials will be available to help you welcome and attract new clients to this new location. Another franchise opportunity that may be available is to purchase a furnished and equipped, companyowned, retail office that is currently operated by our affiliate. The Franchise Territory may be offered as a defined or mapped area or as a specific office address. If you purchase a former company-owned, retail office, you will be: (1) authorized to solicit and serve H&R Block’s previously established client base for that office, and (2) provided a list of trained tax professionals previously employed in that office to consider when making your own hiring decisions. Offices available for purchase may change over time, and we may discontinue offering company-owned offices for sale. If you purchase an office formerly operated as a company-owned retail office, we may not be able to assign the lease for that location. We cannot guarantee that the landlord will consent to assigning the lease for the same space where the company formerly operated the office or that the terms of the lease will be acceptable to you. You are ultimately responsible for negotiating and complying with the terms of your own lease. A third type of franchise opportunity that may be available is the conversion of an existing tax preparation business to an H&R Block Franchised Business. This type of transaction includes our purchase of all right, title, and interest in your existing client list and all associated Client Data through our Franchise Conversion Agreements that are attached as Exhibit G-1 Franchise Conversion Agreement and G-2 Franchise Conversion Agreement with Option to Sell to this disclosure document. This type of franchisee is referred to as a “Conversion Franchisee.” The Conversion Franchisee will receive compensation from H&R Block in exchange for the sale of their client list and other assets associated with the existing business. At the time of conversion, all Client Data and any other assets purchased by H&R Block will become H&R Block’s trade secrets and proprietary information. As a Conversion Franchisee, you may be granted the right to continue operating a tax preparation business under the terms and conditions specified in your FLA and Conversion Agreement. If we approve you as a Conversion Franchisee, in addition to executing the FLA, you may also sign an Addendum to Franchise License Agreement Conversion Royalty Credit, attached as Exhibit F-6 to this disclosure document. Since this opportunity will be offered at our discretion only to prospects currently operating independent tax return businesses, your eligibility for this amendment is not guaranteed. Subject to conditions described in the amendment, we will credit you for royalties you would otherwise owe on revenue received from clients that you previously prepared and filed a tax return for prior to converting to an H&R Block franchisee, if these clients return to your Franchised Business in subsequent years. This credit is not transferrable and will expire at the end of your FLA term. At our sole discretion, H&R Block may provide certain computer equipment at no cost to the Conversion Franchisee as a condition of converting the existing business to an H&R Block Franchised Business. Your eligibility to qualify for computer equipment is not guaranteed, and we are under no obligation to provide you with this offer. If you are offered a franchise opportunity as a Conversion Franchisee and you operate a bookkeeping or payroll business in addition to tax return preparation, H&R Block may purchase all right, title, and interest in your existing bookkeeping or payroll business client lists and all associated Client Data. See below for more details regarding the H&R Block Small Business program. In addition to any Approved Location in which we authorize you to operate a Franchised Business, you may also be offered an opportunity to operate an H&R Block office in certain national or regional retail stores or military bases or installations located within your Franchise Territory under any applicable agreements between H&R Block and national or regional retail businesses or military or other government installations. We may offer an assisted acquisition program to existing franchisees that we determine in our sole discretion to be qualified. Under the assisted acquisition program, we provide financial assistance to franchisees that purchase existing, independent tax return businesses. Your Franchised Business will prepare federal, state, and local tax returns, principally during the period from the first weekday after January 1 through April 15 (or the last date on which individual federal income tax returns may be filed without receiving an extension of time or incurring any penalty for late filing) of each year (“Tax Season”). Preseason hours will be required and, under certain circumstances, you may be required to sign an amendment to extend your Preseason office hours. The Amendment to Franchise License Agreement Extension of Preseason Hours is attached as Exhibit F-3 to this disclosure document. The tax preparation business is well developed. You may have to compete with national and local tax return preparation firms including other H&R Block offices, Block Advisor offices, bookkeeping services, accountants, and lawyers, and with the Internal Revenue Service and governmental agencies in certain states that offer free assistance to some individuals in the preparation of their federal or state tax returns. In addition, a substantial number of people prepare their own tax returns using software, the internet, or other means including software and internet services offered by us or our affiliates.

Initial Fees

Initial Franchise Fee You must pay us an initial franchise fee of $2,500 in a lump sum when you sign the FLA. Conversion Franchisees may authorize us to pay this fee from funds they receive when H&R Block purchases their existing client list. If authorized, this payment is made contemporaneously with the sale of the existing business. The initial franchise fee under the FLA is fully earned when paid, is not refundable under any circumstances, and is charged uniformly to all new franchisees. Training Fees We will provide New Franchisee Introduction (for Conversion Franchisees) or New Franchisee Transfer Training (for franchisees acquiring an office by Transfer) prior to the first Tax Season, and New Franchisee Training for Conversion Franchisees prior to the second Tax Season (collectively, “Initial Training”). All new franchisees and designated management personnel will be required to attend Initial Training. We will provide Initial Training and related materials at no charge. You are responsible for the cost of travel, meal, and lodging expenses for yourself and others while attending Initial Training. We will provide additional training for preparing tax returns to you and your employees, some of which may be mandatory or involve an additional fee. Currently, you and your employees may take any training that we offer for a $35 annual fee per participant. You may be responsible for any expenses or costs related to your employees’ training, such as labor expenses. All training fees and costs are non-refundable.

Financing

We are unable to estimate any financing terms or whether you will be able to obtain financing for all or any part of your investment. Except as described below, we do not offer, directly or indirectly, any arrangement for financing your initial investment or the costs associated with the initial operation of your Franchised Business. Our affiliate, Franchise Partner, Inc. (“FPI”), offers commercial financing to H&R Block franchisees, subject to credit approvals. No payment is required to H&R Block Tax Services LLC or to any affiliate for the placement of financing with FPI, and H&R Block Tax Services LLC receives no monetary benefit if you take out a loan with FPI. The full terms of FPI’s standard loan product are set forth in the Annual Payments Adjustable Rate Term Loan (“APARTL”) attached as Exhibit H to this disclosure document. FPI’s APARTL may only be used to acquire an H&R Block franchise, another tax preparation business, or for use on brand office standard upgrades. You are prohibited from using any loan proceeds for any noncommercial purpose unrelated to the operation of your Franchised Business. FPI may also offer programs under different terms for targeted purposes. The maximum loan amount is determined by FPI in its sole discretion, but is generally limited to a maximum of 60% of the business’ net revenue from the prior tax season. Loan amounts depend on a variety of factors, including: (1) your credit bureau report, (2) your cash investment in the Franchised Business, (3) your balance sheet, (4) FPI’s estimate of the value of your Franchised Business, (5) the expected cash flows generated from the operation of your Franchised Business, (6) analysis by H&R Block Tax Service LLC, and (7) your equity in other H&R Block franchises. In most states, the interest rate charged on the APARTL is 6.25% over the preceding month’s Prime Rate. For instance, on June 1, 2018, the Wall Street Journal, in the Money Rates section, reported that the Prime Rate was 4.75% on the last business day in April. The interest rate is 11% (4.75% + 6.25%) and this rate will be used in the monthly billing cycle from May 7, 2018 to June 5, 2018. In addition, the APARTL has a 2% administration fee on loan amounts. Unless required by state law, there is no cap or floor on APARTL interest rate fluctuations. The term of the standard APARTL may vary, but is generally 5 to 10 years. The APARTL’s minimum required annual payments vary. FPI may adjust the required annual payment to an amount sufficient to repay the unpaid principal, interest, and fees by the maturity date at the interest rate that was in effect each year. The APARTL’s minimum required annual payment may be changed at FPI’s sole discretion. There is no prepayment penalty on the APARTL and it may be prepaid at any time. APARTLs are secured by the property used in the operation of your Franchised Business, whether now owned or later acquired by you during the operation of your Franchised Business. FPI does not require a personal guarantee from you; however, Franchisee’s Associates (defined in your FLA to include Franchisee’s spouse, and the affiliates, officers, directors, and any individual with an ownership interest in the franchise entity) may be required to be designated as a Borrower under the terms of the APARTL and will be responsible for the timely payments and the obligations of the loans. A breach of any of the terms of the loan documents (“Credit Documents”) is an Event of Default. Upon the occurrence of an Event of Default, FPI has the right to (1) declare all amounts owed immediately due and payable, (2) exercise any of its rights and remedies under any of the Credit Documents, including the right to foreclose on your Franchised Business property, and (3) as permitted by applicable law, increase the interest rate. An Event of Default is a breach of the FLA and an Event of Default on any other loans with FPI. The Credit Documents require you to (1) waive the defenses of presentment, demand, protest, notice of protest, or other notice of dishonor of any kind or of non-payment of the note, and (2) agree to pay all costs of collection, including attorneys’ fees. FPI does not have a practice or intent to sell, assign, or discount to a third party all or part of any franchisee financing arrangements. Franchisees are not required to obtain financing from FPI and are permitted to obtain loans with third-party lenders. H&R Block is included on the U.S. Small Business Administration (“SBA”) Franchise Directory as a brand that is eligible for SBA financial assistance. If you plan to work with a lender to obtain an SBA loan, direct your lender to the SBA Franchise Directory . The SBA requires a signed addendum (SBA Form 2462) as a condition for obtaining its financial guarantee.

Franchisee Revenue and Profit

We do not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance information or projections of your future income, you should report it to franchisor’s management by contacting Robert J. Moretti, H&R Block Tax Services LLC, One H&R Block Way, Kansas City, MO 64105, telephone number 816-854-4621, the Federal Trade Commission, and the appropriate state regulatory agencies.