219 - Discovering the Mindset of a Franchise and Tax Industry Maverick with Loyalty Brands' John Hewitt

Welcome to Listening with Leaders. I'm Doug Noll, lawyer turned peacemaker. I teach executive leaders how to listen to emotions rather than words so that they can become the leaders everyone wants to follow. And I teach those same leaders how to be authentically present, available, and connected to their families despite being insanely busy. I have learned that we are 98% emotional and only 2% rational. Learning how to listen to emotions is, in my experience, the foundational skill of life. Stick around to the end of the show and I'll reveal how you can be on our next guest in 15 to 20 minutes. So let's get started.

John Hewitt, welcome to Listening with Leaders. I am honored by your presence. You are famous in both the franchise world and also in the tax world because you were the co-founder of Jackson Hewitt Accounting Services, which is all over the place. And then after you sold Jackson Hewitt, I think in '97, rather than— you went to Canada and started Liberty Tax. And so we see Liberty Tax people with their Uncle Sam things and signs all around tax day, all over the place. And now you're— now in 2018, you went to a company called Loyalty Brands, which is where you are now. As presumably a franchising expert, but we'll find out more about that in a moment. So thanks so much for taking some time outta your day to be with me.

My pleasure.

A little bit of a backstory. Tell us, tell my, tell all of us, my audience, myself, a little bit about how you got into tax and what led you to where you are today.

I was blessed in so many ways in my life, and actually I was a student at the University of Buffalo and I was in school to be a mathematician, and I don't know what I would have been. I don't know what a mathematician does, but my dad tried to buy an H&R Block franchise, and he had always wanted to be an entrepreneur, but he had too many children too quickly and never had the money to— or time to do it. So now, by then, he was ready, and he thought I would run the H&R Block franchise for him. And they said, as a matter of fact, we're going to open a company store in the suburb of Buffalo where you and your son live. So maybe he could take our course and work for us. And that started my journey. I took the H&R Block tax course, 1969, 55 years ago, and loved it and knew what I wanted to be the rest of my life. 12 years later, I was running 250 H&R Block locations.

So were these company stores or franchise operations?

They were both. They had a mixture. H&R Block, back when I started, H&R Block was 95% franchise, and now they're, they're about almost 80% company owned. They bought, built most of them back over the years.

Wow. And if I understand your story correctly, you began to see the potential for technology back in the '80s before anybody saw what was coming down. The IRS was thinking about going to tax— digitally file tax returns. Tell us about it.

Yeah, actually in 1978, my dad now was the CFO of a public company and he bought one of the first Apples by mail and he loved it better than the mainframe that was running his public company. So he decided we should build tax software for an Apple computer. So in 1981, we both quit our jobs and built the first tax software for an Apple computer. That Apple is so old, it's in the Smithsonian.

Wow. And I remember those days. Did you guys do the coding yourself?

I did. I learned enough about coding to do it myself. Yes.

That had to be a real project. Back in the day.

It was, it was.

Quarters, cassette tapes, right? Remember that?

Oh, this is, this is hard. We had disks, floppy disks.

Floppy disks.

We didn't, we did not use tapes. We started with floppy disks.

That's good. When I started programming in 1969 at Dartmouth, we used punch cards and punch tape on a mainframe.

And that's how I thought I took a course in college, one computer course in college where I used punch cards.

Yeah. Crazy, huh? So you built the software and then what led you to leave HP and form Jackson Hewitt?

The, once I quit H&R Block to build the software.

Okay.

And so I tried to sell my software to H&R Block and they just laughed at it and said, people ask us why we don't computerize. We say, why should we? Customers don't care. It doesn't save any money. We're never gonna computerize.

Uh-huh.

That's how visionary H&R Block was in 19—

Famous last words.

So, 10,000 offices later, I showed them the value of technology.

So when you started, I'm assuming you were co-founder of Jackson Hewitt.

I actually bought a company called Mel Jackson. He had died.

Oh, he—

So a lot of times my people say co-founder. But I'm the founder of Jackson Hewitt.

You were the founder.

Okay. Yeah.

And I take it that the central premise of Jackson Hewitt was taking automation to a new level in the tax preparation services industry.

We led the way for— it took H&R Block. I started in August of '82 and it took them 10 years or 11 years to catch up to me.

Wow. How did that competitively, how did that work? H&R Block was much, much bigger than your company, but how you were still able to compete? How were you able to do that?

What we did is every one of our offices had computers.

Okay.

And not only was H&R Block not visionary, but they, um, were very cheap, and they didn't put technology— even when the technology became important, they didn't move as quickly to put computers in every office. So I always had a computerized office against sometimes non-computerized offices.

So you were able to compete just on the technology.

And also I was in the right place at the right time in this sense. When I started, Jeff, they started at 9,000 locations and the second largest had 200.

Wow.

There was obviously a vacancy for a number 2 player that doesn't exist in very many industries.

No.

I filled that niche very quickly.

And you grew, obviously grew the company very quickly.

Yes. We became a half a billion dollar company in 15 years.

And you sold it. I think you sold it in '97.

Correct.

And then what happened?

Then, um, had a 3-year non-compete, but my non-compete didn't cover Canada because Jackson Hewitt had never gone to Canada. It never has still to this day.. And having grown up in Buffalo, I had done Canadian tax returns. I knew how successful H&R Block was in Canada and it was wide open. So we opened Liberty Tax in Canada.

And then when the non-compete expired some years later, you moved down into the United States.

3 years later, my non-compete expired, came back in. Now I had to compete not only against H&R Block, but my own name, my own software, my own people, my own system. And yet we grew faster than both of them combined.

Wow. So what happened to Liberty Tax?

Liberty Tax grew to be in 12 years. It took me 15 years to make Jackson Hewitt a half a billion dollar company. Took me only 12 years to make Liberty a half a billion dollar company. And again, I sold it and then started Loyalty Brands.

All right. So that brings us to Loyalty Brands. Tell us about that. That company?

Yeah, Loyalty Brands, unlike the first two times that were only in tax and only one company, Loyalty Brands has 8 different franchise systems. And I'm also in tax, but actually my fastest growing brand is a mobile dog grooming. Just going, it's just going wild and going crazy.

So what got you into the, moving out of tax and expanding into these other franchise opportunities? What motivated, especially as you're getting, most people are retiring about the time you're thinking about doing this. What kept you going?

Yeah, I started when I was 69 years old.

Yeah.

What happened is I had a non-compete from Liberty Tax and I couldn't compete in either United States or Canada in tax. And I happened to be having drinks with one of my former employees who was a franchise attorney. He had been a franchise attorney both at Jackson Hewitt and Liberty with me, and then he'd gone on his own and he had 35 different franchise companies. And he said, why don't you get out of tax? You've been doing that for 50 years. Why don't you get out of tax? I have, for example, one company that has a great system, a great name, but they can't grow. They— in 13 years, they only have 13 branches.

Wow.

So why don't you partner with them and build in other industries? And so we tested that and liked it. And so we've tested a few, and right now we're focused on 8 different brands.

So you have different franchisors, companies that you essentially represent as Loyalty Brands. Is that how it works?

Yes. And we take part ownership. So sometimes we own a majority, sometimes 50/50, sometimes a minority, but we take, we take part ownership in each franchise that you—

that is created.

Yes.

And how does that benefit the franchisee?

I bring a lot of things to the table that no one else does. We're a differentiator. Number one is I'm— my mentorship. There's no one in the history of the United States or the world that's developed 2 of the top 100 chains in the United States.

Right.

And the reason we call it loyalty is I have so many people with me that have been with me 20 years or more.

Wow.

I have dozens of people, some, one guy, 54 years, 3, 35 years, 5, 30 years. So I've had incredible experience building franchise chains. So that's a start. Number 2 is I'm great at bringing in new franchisees. I brought in 5,200 franchisees and I— there may have been someone else that's done that. I don't know them, but I brought in more franchisees than almost anyone. They have over 100,000 employees. So in addition to being able to bring in new franchisees, that ability, I also have people all over the United States and Canada. In every town of more than 30,000 people, there's a Jackson Hewitt or a Liberty, and the people that worked with me before. So I have an incredible reputation and following. So when you go to, when you go to Salt Lake City or to Juneau, Alaska, you're going to find people that have worked with me before that, that are interested in either being my customer my franchisee, my employee, some capacity. So we bring a lot that no one else has and can do because they weren't, they haven't accomplished, been fortunate enough or blessed to accomplish what I've accomplished.

So you're 75 years old. What is it that gets you up in the morning these days to keep you going and get you excited?

I saw a Facebook and this totally shocked me. It was just in, in the last 5 week or 6 weeks, I saw Denzel Washington and what he said surprised me until I thought about it. He said, the most selfish people in the world are the people that help others. And I said, wow, what's he talking about? But he said, and then he went on to say, because they're so rewarded and so they're so happy. There's nothing more satisfying in life than helping other people and improving lives. And when I was a kid, when I was a teenager, I was just as self-confident, as cocky as I am today. And I knew I was going to be a millionaire. No clue as I was poor, no clue as to how, but I knew positively I was going to be a millionaire. And I thought, I immaturely thought that, oh, I'll just get rich and retire. And then along the journey, I realized what would I do? Uh, you know, I'm a life master bridge player and chess player, and I was a great tennis player, and, but changing lives and business is more fun than anything. My philosophy is, thank God it's Monday. On Monday morning, if you're, if you're going to work and you're not looking forward to it, you're going to the wrong place. Yeah. So to me, not thank God it's Friday, thank God it's Monday.

And you've probably helped a lot of people make a lot of money.

I've had, I've created over 1,000 majors.

Wow. Amazing. So what do you think it is that's unique about you that you bring the table to the table that has made you so successful?

There's a lot of unique things about me, right? And I'm an oddball. I'm not, I find out that I find that most people are sheep and want to be part of the herd. But I, and I've never ever walked that line. I've always been a maverick. I've always been out an outlier. I've never been part of the crowd. So I'm in the, the worst insult you could ever say to me is, is you're normal or you're average, or I walk the tightrope of insanity. I'm crazy. When we, so one, it starts out with with an incredible self-confidence that when we started Mel Jackson Tax Service and he had 6 stores, 6, each in our block had 9,000. And we said audaciously, incredibly audaciously said, we're going to be number one, we're going to be bigger than Block. Jackson knew it never got to number one, but they got to 6,000 offices. And a billion-dollar company. And there's not that many people in the United States that have founded billion-dollar companies. So my first major venture is a 6,000-unit billion-dollar company. So it starts with being audacious and cocky and self-confident, but then the most— and then you have to, when you grow something exponentially, that from 6 offices to 6,000, You have to— the most difficult part is managing your income against your resources. If you have too much resources without enough income, you go bankrupt. If you have too much income without enough resources, you flop for bad service. You're not supporting your organization. So the management of those two pieces, just a simple when you hire, when, again, when you start, we started, I was, I had myself and my ex-wife when I started Jackson Hewitt. And then we had ended up with 500 employees and you have to know when you're going to hire an employee. You can't hire 500 on day one, right? You have to have the income to support it. So it's a self-confidence. It's the managing those two. 2 difficulties, the income and the expense. And one more thing is you have to have the ability to have a fairly accurate vision and convince others. I had to convince my investors, my employees, my franchisees, my customers, my vendors. You got to be able to— you got to be persuasive. You have to have a fairly accurate view of the future. And you have to be persuasive in getting others to jump on board. They have to be able to, because you can't do all the work, right? I've had thousands of employees. If it was one guy, then I wouldn't have accomplished very much at all. I had to have lots of believers.

And you didn't go to school and get an MBA. You learned all of this along the way, I presume from the school of hard knocks.

That's exactly what I was going to say. The, there's no CEO school in this country. There's only one school and that is the school of hard knocks.

And you managed to overcome them, I'm sure the thousands of mistakes that you've made over the years. And how do you, when you came up to something like that, something really difficult, how did you overcome it? What was your mindset?

First of all, you're right that people that are the most successful have made the most mistakes. So to, to be arrogant and think you're not mistaken is you're gonna fail, right? You're gonna fail because you're gonna make a lot of mistakes. And realizing that in advance, that there's no one that's allowed to skate. God doesn't put anyone on the planet just to skate to success. I've never met anyone, no matter how successful, that didn't face adversity. So you're gonna face adversity. The difference is The losers, when they get knocked down, they stay down. And the people that are a little bit better than losers get up most of the time. The ultimate winners, the best of the best, always get up. They never stay down. So my mindset is never say die, never give up, fight to the last drop. They, they have to kill me to stop me.

Mm-hmm. Interesting. So it's persistence. And discipline and tenacity more than anything else.

Perseverance is the one most important attribute of success. Perseverance.

Sticking with it even though things look really bleak and gloomy out there and you just wonder, how the heck am I— how the heck are we ever going to make it? How am I going to make my next payroll?

There have been many days like that in my past. Yes.

Oh, you're saying I got a payroll. What am I going to do?

Exactly.

Just get up at 9:00.

Fortunately, those are long ago, but, right. But, um, I remember those days. We almost went bankrupt at Jackson Hewitt twice.

Wow.

But you managed to make it through.

Yes. I, there wasn't any question. Even if every employee quit, I was going to, I was gonna get a few people to work for nothing and continue on.

Right. Because you saw the vision of what, what could be.

A billion-dollar company, right?

And when you reach that milestone, you've got a billion-dollar company, what's— tell me what it feels like inside yourself to reach that milestone.

As you hit milestones, 50, 10 million, 50 million, 100 million, 250 million, 500 million, a billion, you— it's anticlimactic. It's the treasure at the end of the rainbow. What I learned like when I was a kid and, and was not smart enough to understand the journey is the joy, not the, not the treasure at the end of the rainbow. That's just a one-time hit. Okay, here's your check, right? Here's your check. That's a 5-minute event, 5-second event.

Yeah, right.

It took 15 years to get there. That's what you have to enjoy.

Exactly right. I, I learned that long ago when I was a civil trial lawyer. And every day today, I see it's the journey, not the reward, that really makes it all worthwhile, especially in the work that you're doing, uh, where you're actually helping people serve others and they're making money while they're doing it. And so the more people you can put into that position to make money serving others and helping others, that's where the gratification is, not in the ultimate benchmark of success.

Exactly right.

All right, Stephen, this show is called Listening with Leaders because I no longer practice law. I'm a peacemaker these days, and I teach people how to never have a fight or argument again in their life. That's what I teach. And I also teach leadership empathy. I'm curious about that. Leadership empathy is something that's being talked about more and more, but it's really how do you relate as a leader to all those stakeholder groups that you have?

Because you, you already listed them off.

You had your franchisees, you've got your employees, you've got your vendors, you've got investors, you've got the customers of the franchisees. You've got a, a large number of stakeholders, all of whom need attending to. Tell me what you've learned over the years about how you manage those stakeholders and especially how you manage stakeholder conflict.

Well, I've been blessed as long as I can remember and I'm sure there are other people like this, but never talk to them about it. But I've always been blessed that in any relationship, in any situation, I always want what's best for the other person.

I—

most people I found are— there's givers and there's takers, and a lot of people are selfish. And when they come on to a situation, upon a situation, and they want what's best for themselves. Bringing in new franchisees or customers or vendors or stockholders, I always want what's best for that other person. That has served me incredibly well. That, and I haven't lost too many great people, not only a handful in all my years, but if someone comes to me, even my best employee, and says, I want to go work at some other company, I feel called to do that. I want to become a priest or an airplane, an airline pilot or something. God bless you, right? Life's too short. You have to, you, so I've always wanted what's best for every person. And that, that is when I listed the secrets of my success, that would've been the next secret of my success is caring about other people. And you can't, I learned a long time ago, you can't outgive God. The more I give, the more I give, the more I receive.

Exactly. So how do you give without being, feeling like you're being exploited?

Oh, I am exploited. I'm exploited 90% of the time. Tell me about that. 90% of the time people don't agree. They're even my own children, even my own children. I have 6 spoiled rich kids, right? And I'm fighting with one of them now because I want— they want more money. I, I find that people are just short-sighted and they care about themselves. And if you only did things to be appreciated, you would stop the first day. You would stop the first day. 90— at least 80 or 90%, if not 95% of the people that I help at the end of the day do not appreciate it, in my opinion. Adequately. But it's— to me, raising children is the same thing. I find children to be annoying most of the time. My children, my 6 children, I find them to be annoying most of the time. But when they're not, they make up for the, the time they're annoying, right? When they're not, they're rewarding. And that reward in the 5 or 10% of the time when they really get it and they do something that shows you their love and their appreciation, it makes up for all the bad times. So a few people make up for all of the multitudes that do, in my opinion, do not appreciate what I've done with them.

Yeah, I can relate to that. I can see how the reward of being— of somebody— of really shifting somebody's life in a really transformational, profound way. And having them express gratitude for that makes up for all of the disappointments that are inevitable in life, in business life as well as in personal life. Because knowing that you've served, I think knowing that you served is itself its own reward, whether or not—

remember I quoted Denzel Washington earlier. He said serving others and helping others is selfish. That's exactly why. It's so gratifying. It's so gratifying.

Imagine. Yeah, exactly. And that's why when young people talk to me about what do I do, do I want to go into law? What do I want to do? I said, the most important thing you do is figure out how to serve other people in a way that is really deep and meaningful. And I didn't, it took me a long time to learn that lesson. I think it was when I got in, started the Prison Project with Prison of Peace Project with my colleague Laurel Kaufer.. And we started training lifers and long-termers how to stop prison violence, where we— pure service, which is going— we're not even getting paid for this. We're going to these maximum security prisons teaching these people that society has discarded how to be peacemakers and mediators. And watching them transform, I think that's when I really learned about the importance of service to others. It was really an incredible—

yeah, I didn't learn until I really had the capacity to give a lot. And so I, began to get wealthy.

Yeah.

And then I saw, I would do something for someone. Now they never ever did as much for me as I did for them, but something else good would happen to me.

Right, right.

The, when you say it, when I say I got more than you receive, it's not from each person.

Right.

It's something good, right? Something good happens to the company. Yeah. Someone else does something for me or some other, we signed a deal with Walmart, right? And I did this good thing here and now Jackson Hewitt, for example, is in 3,000 Walmart. Wow. They do $100 million worth of business out of Walmart. And because, and, and that came from giving things to other people.

I think that's a hard lesson for people to, to get. I think that it's, it's hard for people to see having a giving and service mentality, serving mentality. Expands the universe in ways that causes something completely unrelated to open up and come to you. And I don't know, I've always wondered how to explain that to people in a way that— especially younger people who—

I, I find younger people— as a matter of fact, I saw a study that was frightening on the news last night or two, and they talked about Happiness. And they said that people, and they went with happiness over 40, 30 to, or 30 to 40, 18 to 30. And most of the 18 to 30s are not happy.

Right.

And whatever this generation is, they're just not happy. They just don't get life. They don't get the only happiness. The only happiness is God and giving.

Yeah, that's right. I don't know, maybe it takes maturity. Maybe it just takes a lot of years to figure that out and get through life. I'm not wealthy like you are, but I am extremely happy. And I had the big car and the big house and all the big stuff. And today I don't, I live very modestly, but I live in a beautiful place with an incredible wife.

And what, what state are you in?

I'm in California. Okay. And I live in Central California, just south of Yosemite National Park. And I, I live on beautiful 10 acres in the Central Sierra Nevada foothills, and it's incredible here, you know?

And so when you see the movie, what's the movie? Yellowstone. You can relate to that kind of, that kind of scenery.

Yeah. Except that I'm down in the oak savanna. I'm not up in the forest. The forest is 15 minutes up the high, up the road. So from where I am to 5,000 feet, it's about 20 minutes, but I'm easy to get, easy to get there. Very easy to get there. And I'm above the fog and below the snow, although this year the snow got a little lower. We almost snowed here. But to be blessed with something like that, it's not material. It's in the heart, I think. And I guess that's— you've had the same experience. And that's something that I wish we could figure out a way to inculcate more people about that. And I guess it's just experience learning is the way that people get it. Either they get it or they don't. And when they get it, it's because they've done it. I don't know.

I just every day change more and more people's lives. I, yeah, I just try, try to bring 'em in.

How do you instill these values in the people that follow you, your employees?

Yeah, that's, that's difficult. I was in church about 30 years ago and the minister said, every one of us sins every day. And I said, wow, I get that I do, but he's admitting that he does. And it didn't occur to me until I had an epiphany about 3 months later, and it occurred to me that, wait a minute, wait, if every one of us is going to violate God's principles, then I was with Jackson Hewitt then. Who's going to follow Jackson Hewitt's principles, right? Everyone's going to violate Jackson Hewitt's principles.. And so I came upon a new strategy. I have invented a few things, maybe a couple dozen. And what I did is we would give every employee a pad of paper. And it would be— and on each sheet of paper, the tear-off pad, and each sheet was the 10 principles. And there's a place to write their name. And we call them mission moments. And so if you saw someone that that was honoring the principles, and then you would write them up and explain what they did. And if you saw someone violating the principles, you would write them up and explain what they did. Of course, human nature, two-thirds of them were positive because no one likes to get or give a negative one. But it worked well. It, it highlighted— because I know that again, if you're not going to listen to God, you're not going to listen to John Hewitt. And, but as a leader, it starts out, you have to set the example, right? The, the number one most principled person in your organization is gonna be yourself. So if you don't have principles, no one else is gonna have principles. You set an example and then spread the word.

And walk your talk because the way you walk your talk is what everybody's gonna model.

Exactly. Doesn't matter what you say.

That's right. Especially if you say one thing and do something else. Then you're in trouble.

That's, yeah, yeah.

That's a hard thing for a lot of people to get. I think people, especially in large corporate America, CEOs get to where they are, they feel like they've been anointed and oftentimes they don't know what their values are and they don't know how to, they're beholden to the stockholders and to the financial analysts and the quarterly returns and they lose perspective, which causes—

I call, I call that CEO disease.

Yeah. Very poor decision-making, which causes a lot of problems for people.

Yep.

Really interesting.

I knew this was gonna be an interesting conversation. One more thing, John, and I'll let you go. What's one thing about yourself that we'd never know unless you revealed it to us?

Wow. I have, again, I have some several unique traits, but one thing I'll say is that I don't do anything unless I'm great at it. I had a, um, girlfriend one time who said, you're good at everything. And I said, no, I only do what I'm good at. So if I'm not good at cooking, I'm not good at fishing, I'm not good at golfing, I don't do those things. I only do what— and I'm, I've been blessed. I'm extraordinary. I'm a life master bridge player and a master chess player and a tennis player. I can do some things extremely well. But if I can't do it extremely well, I don't waste a minute of my time on it.

I'm, I'm curious. I'm, I have a similar attitude, but we all have to be beginners at one time or another in bridge or chess or whatever. How do you start with a beginner's mindset? Or do you make, how do you decide? Do you say, I want to become a life master bridge player, and then you devote whatever it takes to become that?

I haven't started anything new in a long time.

Right.

So all of my hobbies and all of my things I'm good at, I've done for a long time. I am, I am getting ready to try pickleball.

Oh, okay.

So what I'll do is I'm good at all paddle sports or racket sports, good at ping pong and tennis and everything, tennis. And so if I go out and I'm not good right away, then I won't waste time on it.

You won't invest time in it.

Okay.

Right.

Yeah.

The only difference between you and me is I'm exactly like you. I will not spend, waste my time on things I'm not good at. However, when I decide I wanna do something, I will take, do whatever it takes to get good at it. And I'm really bad for a long time until one day I'm really good at it. And that's my process.

I, I gave up that in my 50s.

I still like the humility of being a beginner at something.

Oh, God humbles me daily.

There you go. John, this has been a great conversation. I know my audience loves it, and thank you so much. You're really a fascinating guy.

Thank you. It's been my pleasure. Thank— thanks for having me. You're welcome.

Doug Noll here. Thank you so much for listening to Listening with Leaders. If you are a successful executive leader who would like to be on this program, please visit podcast.dougnull.com/podcast. If you got something out of this interview, would you please share this episode on social media? Just do a quick screenshot with your phone and text it to a friend or post it on the socials. If you know someone that would be a great guest, tag them on the social media to let them know about the show and include the hashtag #ListeningWithLeaders. I I love seeing your posts and guest suggestions. We are regularly putting out new episodes and content. To make sure you don't miss any episodes, go ahead and subscribe. Your thumbs up ratings and reviews go a long way to help promote the show and mean a lot to me and my team. Want to know more? Go to my website, DougNoll.com, or follow me on LinkedIn, Facebook, and Instagram. That's @DouglasEnoll. Thanks for listening, and we'll see you on the next show.