Why Happy Tax Won't Get Invite to H&R Block's Holiday Party
Mario Costanz, Happy Tax founder, wrote a nasty-gram to H&R Block.
The CEO of Miami-based Happy Tax, Mario Costanz, threw down a load of chutzpah this week in an open letter to H&R Block’s board of directors that blasts current management at the behemoth tax preparation franchise.
“What has happened at your company over the past decade is appalling,” wrote Costanz, in a show of either foolhardy hubris or courageous truth-telling, depending on your point of view.
The letter begins: “Your namesake Henry Bloch is one of my all-time favorite entrepreneurs. Most boys grow up idolizing baseball or football players—I looked up to innovative business leaders,” Costanz wrote. He then goes on to offer 10 “suggestions” for the board to fix the business.
In an interview, Costanz said he’s followed Henry Bloch’s company for years, and they used to have an entrepreneurial franchise opportunity that he admired. “I just watched them kind of crumble. It’s sad to watch.”
In the last couple of weeks, rumors have swirled that H&R Block will be sold, and Costanz said a private equity firm approached him to discuss buying H&R Block and bringing on a new management team, possibly Costanz. Although he knows that’s a long shot, it’s nonetheless “very exciting, even being considered.”
Costanz decided to write the letter to get into the conversation about H&R Block, and to offer advice he believes could help the company and, in turn, help himself and other shareholders. “Everyone has a right” to make their voices heard, he said. “I’m a small shareholder in H&R Block, and I know as much about the tax business as anyone.”
He pointed out another investor who isn’t shy about speaking out against management, albeit in a much bigger way. “I have followed Carl Icahn, who looks to companies doing the wrong thing” and activates to change them.
Plus, he figures, the letter is a way to draw attention to his franchise opportunity, Happy Tax, which he started in 2014 and now has 50 franchises. H&R Block has 12,000 company-owned and franchise locations, according to its website.
One of his prescriptions for H&R Block is to “fix your franchisees morale and increase their expansion and engagement. Charging your franchisees 30 percent royalty so that you can dump tons of money into expensive television advertising that doesn’t even work is not something that your franchisees are happy with,” Costanz said.
Had Costanz gotten a response from H&R Block? “No, I have not yet. We’ll see,” he said on Tuesday, the day after he posted the letter. The next day, Wednesday, H&R Block was the worst performer in the S&P 500 after it reported a loss of 55 cents per share, and revenue below the estimate.