H&R; Block Is Sued by 24 Franchisees

The growth strategy of tax-preparation giant H&R; Block Inc. is rankling some of its oldest and largest franchisees, prompting them to go to court. In a lawsuit filed in a Kansas circuit court, 24 franchisees claimed that Kansas City-based H&R; Block is unfairly competing with them and breaching long-standing contractual agreements by distributing tax-preparation software on the Internet and through retail outlets. The franchisees also alleged that H&R; Block’s rapid acquisitions of regional accounting firms located within the franchisees’ territories, which stretch from Florida to Oregon, violate their agreements. In 1998, H&R; Block had 10,128 offices, with 4,789 of those as franchised locations and the rest company-owned. An H&R; Block spokesman said the company considers the suit without merit. H&R; Block is not stealing away customers from its franchisees but is developing new customer segments, he said. H&R; Block’s shares rose 44 cents to close at $48 on the New York Stock Exchange.