UnhappyFranchisee.com asked: Are LIBERTY TAX SERVICE Franchise Owners Happy? If you’re familiar
Entrepreneur magazine has ranked the Liberty Tax Service franchise #3 behind McDonald’s & Subway. However, some commenters who claimed to be former Liberty Tax franchisees left stern warnings on the Franchise-chat forum.
This post was originally published
BostonTax wrote:
I’m a former Liberty Tax Franchisee
I hope you are ready for a little enlightenment! I held a successful Liberty Tax Franchise for 5 years until I decided to let the franchise agreement lapse. I did this for a few reasons:
1. The royalty fees were outrageous! 14% went to normal royalty while and ADDITIONAL 5% went for so called advertising royalties. The ad royalties were supposed to be put back into your local market to build the brand name. This was never done! All advertising in addition to the ad royalty I had to pay for because it did not fit into Liberty’s concept of advertising. I don’t know exactly what the concept was because our AD could not give an answer and the approved methods changed by the week.
2. Corporate was totally unresponsive to the needs of the franchisees. The AD system is designed to recruit anyone who can write a check for 100K. No other skills or ability required.
3. The minute you are behind in a royalty payment, they send you a notice to cure. After that, if you don’tpay, they try to terminate your franchise agreement.
4. Upon termination, Liberty enforces through legal proceeding a 2 year, 25 mile radis non compete clause that is in the franchise agreement. This is enforceable in the Eastern Division of the Federal District court, where, at least 2 Liberty friendly judges preside.
5. Liberty does not recognize chargebacks for bad debts as an adjustment for your royalty fees. All royalties are based on your gross, not your net collectable. This was an ongoing issue with them and the accounting department did not have the ability or the inclination to resolve!
My best advice is do not go with these guys, they are bad news. If you like to have people collect royalties and provide no support, then this is the franchise for you! It is very expensive to get into, the initial fee is around $32K just to buy the territory plus those pesky royalties. You can’t make money on this concept.Most of the surviving franchisees I’ve talked to in the last 2 years have experienced great difficulty not only in making a profit, but in the corporate support or lack thereof.Remember, 19% of your gross is getting kicked back to Liberty, which is excessive by any standards. Please do yourself a favor and call former franchisees ,those that are currently getting sued (they are very likely to talk, as I found out), and current ones to try to get the straight poop.
Barbara Green wrote:
I too was a Liberty Tax Franchisee and I agree with everything you said.
The only reason for purchasing any franchise is because the business model is a proven marketing success as evidenced by the profitable franchisees. That is why you pay a license fee of $25,000. Being profitable is not in the cards for a Liberty Tax franchisee. Liberty Tax’s market/ business model is aimed at individuals who have very simple tax returns, i.e one W-2 and standard deduction which is why they were very successful in Norfolk, Va. That market is full of military people with one w-2.
Liberty will sell anyone a franchise at any location, in any georgraphic area, even if there is not a chance in hell of the franchisee being successful.
At one time, I too owned a Liberty Tax Franchise for one tax season. It was only one season because of the behavior of the Regional Manager who called me on January 15th demanding and screaming “Why had I not generated 200 tax returns and that maybe this business was not for me. I was stunned and confused since employers are given until January 31st. to give w-2’s to employees. Apparently, he thought that I was in Norfolk, Va. where that is possible.
It only goes downhill from there. The bottom line is I lost all of my investment in this businees (approx. $80,000) because I closed it rather than becoming a victim of this unethical company. NOthing would make me happier than to be a part of a class action lawsuit.
WHAT DO YOU THINK? DO YOU OR HAVE YOU OWNED A LIBERTY TAX SERVICE FRANCHISE? ARE LIBERTY TAX SERVICE FRANCHISEES HAPPY? WHY OR WHY NOT?
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View Comments
NJ Zee you are correct and I misread because of the way the post read. That is my bad and I do appoligize. Frustrated had responded to both of us and I mistook it to be your post. My Bad.
Rob,
You have been forgiven.
Thanks Rob.
People trust you guys to do their taxes? Seriously?
LLM:
It has been pointed out to me several times that Liberty is not interested in changing their way of doing business. It works for enough franchisees, that they have no interest in other points of view. Unfortunately Liberty will continue to see fallout in many areas because they are not willing to adapt to changing conditions, or other types of areas that do not fit their "mold", so you will continue to see the postings like the ones above. All I can say is you can either go to Vegas, or buy a Liberty franchise, as your odds are about the same.
Tony - To be honest I would certainly have to disagree with you on Point # 2 as it doesn't even make any sense. As to Point # 1 part of the reason that I have been successful is the fact that I have met may great Zees that have been willing to help me along the way. I wouldn't have received that support if I opened up an independent shop and to me the network I have developed with other Zees is invaluable to me. As to your comment that Liberty Corporate provides no support I would have to disagree with that as well. In fact, I have had multiple dinners with John Hewitt (the CEO) and I only own one store at this time. People at Corporate are responsive, you just need to know the right ones to reach out to.
As far as other comments about Liberty being like going to Vegas I would again respectfully disagree. Too many people want to blame Corporate for their failures and fail to take their own responsibility to not performing well. Rather than complaining about how you have not yet succeeded I suggest you spend some time focusing on your business.
Troy:
We need to stick to the point here. Are there successful LT's out there? The answer is yes. But there are a ton that have failed. If you are reading this and thinking about investing in either LT or some other franchise, what are your chances of success ? Not high. The idea behind franchsing is to lessen the chance of failure. LT's philosophy is like yours, you must not have followed the plan. Well I can show you four stores, owned by four different franchisees that are for sale because they cannot get enough business to continue. Are you going to suggest that none of them followed the plan? I can also show you failed stores that were owned by Top Guns who couldn't make it. Are you going to tell me they too did not follow the plan? The issue or point here is that too many fail, and all LT does is resell the territory. The next franchisee fails and they sell it again. Does LT do a good job of understanding why, NO. There are some very fundamental issues that need to be addressed at LT to make this a good investment. Right now it is not. They understate the start-up costs, they overstate the number of returns to expect,, and give little to no support from corporate or otherwise. Look through these postings and read the thousands of $$ that have been lost by people trying to run these businesses. The losses are staggering. Are you going to tell me none of them followed the plan or were all poor business people ? Give me a break. Stop drinking the kool-aid and the next time you have lunch with JH, ask hiim why LT is not addressing the high failure rate of their franchises. His answer will be they didn't follow the plan. Well I can suggest that there is a lot more to it than that.
You need to put things into perspective. The failure rate on small business owners in general is extremely high. When someone opens up a business there are clearly risks involved in it, whether it is a franchise or not. The bottom line though is that the business owner chose to open up his/her business. Nobody forced their hand to open their business. Just because you open up a franchise does not mean that you won't fail - like any other business you are responsible for achieving success with that business. The same goes with Liberty. As it relates to Liberty it also depends on where the owner decides to open up their store which encompasses many factors (demographic opened up in, proximity to other tax stores, visibility of the store, etc). In addition to these variables however is the owner himself. Can the owner deliver exceptional customer service, did the owner hire the appropriate staff, is the owner properly executing the marketing plan. To single Liberty out doesn't make alot of sense as their are failures every single day for all small business owners including franchisees. People need to take responsibility for their actions and stop blaming Liberty for their own failures and shortcomings.
Mike, You are missing the most critical element in your comment.
Small business owners open an independent nail salon, hardware or tanning salon. Sure they risk it all but those of us ALSO paid a franchise fee up to $40,000 ON TOP of our set up fees to receive the support and expertise to be successful. In addition to that we also pay 19 percent in royalties. That's a BIG chunk of change that should at least ensure some high level of support. 19% DOES NOT PAY FOR THE BRAND NAME of LIBERTY. Which in itself is higher than most franchise fees. Please don't compare to HRB or JH or Instant Tax as franchisee fees are based purely on the franchisor and clearly there is a sense of collusion here.
If my office makes $200,000 (making my one of the best offices in the country then I pay $28,000 in franchise fees to Liberty .... FOR WHAT?!! The software? Buy it direct for $1200-1900 for as many computers as you like. Apply direct to River. Chase etc.. for bank products.
5% for advertising? What frikkin advertising? Most pays for the marketing team at Liberty or Valpak/Advo which is just as cheap if you advertise with them yourself! I did!
What this forum is about is the INTELLIGENT decisions made by prospective franchisees to purchase a Liberty Tax territory. Both sides have to agree to that.
The following two tax season determine if that decision was a GOOD one or a DISASTROUS one. Hence the two sides to the argument.
Liberty can help you sell your business for a premium. Then there's the transfer fee of $5000 per territory in addition if you sell.
If you have seen (as I have) how many territories are listed for sale with Liberty, you would be alarmed as at my last viewing I saw at least 200. And that was when there were less than 2400 stores. Says something don't you think.
Right buy you were aware of the $40K prior to purchasing the franchise correct and you were aware of the royalty percentages correct? So why did you choose Liberty over opening up an independent store then?