THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Sunday, January 19, 1997 TAG: 9701180838
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: 149 lines
After six and a half months on the job, Keith E. Alessi is slowly imposing his stamp on Jackson Hewitt Inc.
Three former officers of the Virginia Beach-based tax-preparation service have departed, including the company's founder.
At least two other officers have new responsibilities, and two new directors have been named to the company's board of directors
More changes are likely later this year.
``I didn't want to make widespread changes and then have them haunt me during tax season,'' Jackson Hewitt's president, chairman and chief executive said.
Alessi left the post of chief financial officer at the regional supermarket chain Farm Fresh last June to become president and CEO at Jackson Hewitt. He assumed the additional title of chairman when founder John T. Hewitt departed late last year.
After losing money in fiscal 1995 and suffering severe cash-flow problems, Jackson Hewitt was financially crippled. It bounced back during the 1996 tax season and posted healthy earnings for the fiscal year that ended last April 30. But the company's board already was searching for someone to replace Hewitt, the CEO.
Hewitt, who started Jackson Hewitt in 1982, had put together a system by which franchisees could start a tax-preparation business with a modest investment.
Under his direction, Jackson Hewitt had expanded across the country, becoming the second-largest tax-preparation chain with almost 1,400 stores in 40 states. It has 67 offices in Hampton Roads and northeastern North Carolina and handled 52,579 tax returns in the region last year.
``He's responsible for building Jackson Hewitt to what it is today,'' Rick Telberg, editor of the accounting and tax newspaper Accounting Today, said of Hewitt. ``He's entrepreneurial. He moves fast and he's creative, and because of his success, he could be impatient.''
Hewitt attributed his departure to the dissatisfaction of a venture-capital investor who bought a 10 percent stake in Jackson Hewitt in the early 1990s. A severance agreement with the company barred him from elaborating on his differences with the investor and his departure, Hewitt said.
Alessi offered a different perspective: Jackson Hewitt had become the classic case of an entrepreneurial, rapidly growing company that lacked the organization necessary for sustained expansion. Jackson Hewitt's slim financial resources also made it vulnerable to unexpected blows, such as the Internal Revenue Service's delayed payment of tax refunds two years ago, Alessi said.
``This business had reached a point where it needed a different style to grow,'' said Alessi, who had joined the Jackson Hewitt board in late 1995 while still working at Farm Fresh. ``There were plenty of bright ideas, but things weren't executed well.''
Meanwhile, Jackson Hewitt's management faced increased pressure to improve the price of its stock, which had fallen sharply from its peak in mid-1994.
Friends and business associates have asked Alessi why he left Farm Fresh for a much smaller company. Part of the appeal was the opportunity to run a publicly traded company with a nationwide presence, Alessi said.
Another attraction was the prospect for substantial personal gain. While taking a hefty pay cut to become CEO at Jackson Hewitt, Alessi received a lucrative package of stock options.
The 41-year-old Detroit native arrived at Jackson Hewitt's headquarters on Bonney Road near Independence Boulevard last summer with a lengthy background in accounting and finance. He studied accounting as an undergraduate at Wayne State University and later earned a master's degree in business administration at the University of Michigan.
Before joining a large grocery cooperative in Chicago, he worked as a certified public accountant for a major accounting firm.
What was attractive about accounting?
``I knew I wanted to be in business, and I saw accounting as the quickest way to advance,'' Alessi said. ``Financial people were not constrained by age.''
While working as chief financial officer at the Chicago grocery co-op, Alessi crossed paths with Mike Julian, a veteran in the grocery business who was working as a consultant with the co-op.
Julian later became chief operating officer at Richfood, the Richmond-based grocery cooperative, and asked Alessi to become the co-op's chief financial officer.
``Cooperatives are difficult businesses to manage because your customers are your owners, but Keith managed that process very well,'' Julian said.
After moving to Richmond, Alessi helped convert the cooperative to a corporation and then worked on the initial public offering of Richfood's shares in 1988. Julian later moved to Farm Fresh, where he became its chief executive. Alessi joined him and became the grocery chain's chief financial officer.
For almost a decade, Farm Fresh has struggled under the heavy debt from a leveraged buyout in 1988. With Alessi's help, Farm Fresh managed its financial resources better than most companies could have done, Julian said. ``He's been a big part of holding that together,'' the chain's CEO said.
``At Farm Fresh, he was literally my partner. I never viewed him as a subordinate.''
Julian was one of the two directors named to Jackson Hewitt's board earlier this month. The other was Harry W. Buckley, the president and chief executive of H&R Block's U.S. tax subsidiary from 1988 to 1995.
In a modestly furnished office at Jackson Hewitt's headquarters, Alessi joked that the pressure of his toughest day at Jackson Hewitt didn't compare with a routine day at Farm Fresh. Still, there's no scarcity of challenges in his new post.
One is the prospect of sluggish demand for tax-preparation services in future years. With the proliferation of home computers, more individuals are able to complete their own tax returns with inexpensive software.
To supplement their tax-return revenues, some chains are moving into financial planning and selling investment products.
``The growth is in tax planning and investments,''said Telberg of Accounting Today. ``A tax preparer has someone's 1040, which provides incredible insights into a client's retirement needs.''
Alessi insisted that Jackson Hewitt has untapped opportunities in its traditional line of business. In attractive markets where it lacks a presence, Jackson Hewitt may expand by buying existing chains of tax-preparation stores, he said.
``You don't go from 1,400 to 8,000 offices one office at a time,'' Alessi said. ``We've got to find ways of attacking entire metropolitan markets.''
Jackson Hewitt's major competitor is H&R Block Inc., with more than 8,000 stores in the United States.
Another route for expansion will involve recruiting a different type of franchisee. Instead of seeking individuals who want to start a business by opening one or two Jackson Hewitt stores, the company will pursue people with the managerial experience and resources to operate several stores in a region.
It's a tactic that other tax-preparation chains already are using.
``The most likely franchisee prospect isn't somebody already in tax preparation,'' said Telberg of Accounting Today. ``It's somebody coming out of corporate America and sick of working for someone else. They are familiar with forms and numbers and can follow procedures.''
Alessi's most immediate goal is to boost the productivity of existing Jackson Hewitt offices. For the fiscal year that ends April 30, his plan calls for a 10 percent increase in the number of tax returns per store from the 538 average last year.
To accomplish that, the company has begun advertising in Hispanic communities and has sought ways to bring customers into its stores later in the tax-filing season.
The bulk of Jackson Hewitt's customers arrive in late January and early February seeking a rapid refund and a refund-anticipation loan. Providing the high-interest loans has been especially profitable for Jackson Hewitt, but by late March or early April, many offices are under-used.
A longer term issue for Alessi is the languishing price of Jackson Hewitt's stock and indifference in the investment community. In the midst of booming stock market, Jackson Hewitt's shares rarely trade, and their price has fallen sharply from a peak in 1994.
When he talks to securities analysts about the company's stronger earnings and debt restructuring, he is greeted with skepticism, Alessi said. The typical response, he said, is ``We've heard this before.''
``I would characterize our shareholders as extremely patient,'' Alessi said. ``I don't know how long we can try their patience.'' ILLUSTRATION: Color photo by STEVE EARLEY, The Virginian-Pilot
Keith E. Alessi, in Jackson Hewitt's Virginia Beach headquarters, is
the firm's president, chairman and chief executive officer
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