HR Block 2005 Annual Report Download - page 11

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Letter t o Shareholders
Taking a Client-Focused
Approach to Service >>>
H&R Block has the largest retail tax office
network in the country, so why did you add more
than 1,200 new locations this year?
Convenience is a key factor for our clients. They
want to find an office convenient to their home or
work that provides quick, efficient and accurate
service. That’s why we opened more than 1,200 new
locations this tax season, including company-owned
and franchised offices and approximately 400
new Wal-Mart locations. The availability of more
sophisticated market data allows us to pinpoint the
optimal cities and neighborhoods for these new
locations to help ensure their success.
This was the first phase of our expansion program,
which we plan to continue in tax season 2006,
opening approximately 500 to 700 new locations. In
addition, we recently launched the largest franchise
expansion in the company’s history, which is an
effective way to build our office network.
Were you pleased with the performance of your
new tax offices this year?
They met our expectations, enabling us to serve
more clients during our peak periods, accounting for
nearly 250,000 incremental clients over the prior
tax season. As these new offices mature, they will
continue to increase their client base and significantly
contribute to future growth. Equally important was
our ability to undertake such an extensive network
expansion and open all offices on time and staffed
with skilled tax professionals.
Do you sacrifice quality for quantity with such
an extensive expansion?
While increasing our retail network was a key
initiative, so, too, was improving the service our
clients experienced. From new research, we learned
what was most important to them and then used
that information to enhance our tax professional
training and service in our offices.
We took a three-pronged approach to improving
client experience and satisfaction. We worked to
make our clients feel more connected to their tax
professionals and to H&R Block, confident in the tax
and financial expertise received, and championed in
that we go above and beyond their expectations.
Delivering this kind of experience builds client loyalty
and keeps clients coming back year after year.
By focusing on improving our client experience, we
enhanced the quality of our service while growing
our retail network. We experienced significant
increases in client satisfaction, including improvements
in clients’ perception that our services are a good
value for the money and that they intend to return
to H&R Block next year.
How did your retail office expansion impact
operating margins?
We made a significant investment in expanding
our office network, but view this investment as
building for long-term growth and shareholder
value. As expected, our U.S. retail expansion efforts
decreased our tax operations’ segment margin,
excluding results from international operations, by
90 basis points from the prior year. However, the
decline was partially offset by improved margins
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H&R Block
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