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
Rob:
I have attempted to keep my comments on a professional level, and suggest to anyone who is looking at purchasing a franchsise, that LTS is only interested in their own development, not their franchisees. If you can give some facts that counter that arguement, I would love to hear it. All I have heard is that there are successful locations, most of which can be credited to the hard work of the franchisee, not LTS. Meanwhile JTH continues to promise gold while the franchisees get straw. I would really love to hear from anyone where someone from LTS has actually spent either time, effort or money to help a franchisee be successful.
Rob:
And oh by the way, Entrepreneur magazine now rates Liberty at #28 (in 2009 they were #3), below H&R (#6) and right above Instant Tax (#29) on the top 500 list. JTH needs to wake up and realize you can only screw your franchisees so much before it comes back to bite you.
Entrepreneur magazine means very little too me. Thats fine if you want to spend all your time letting Liberty frustrate you no matter if its true or false. It sounds like you need a "Job" not a business. When buying a Franchise you are not buying a "Parent" or a "Big Brother" who is going to hold your hand and ensure you do everything exact. The largest issue with Franchising is too many prospects do not understand their role as business owners and too many is expecting the Franchisor to hold their hand and give them a succesfull business. Not only have I become sucessful with Liberty I have developed quite a few succesfull Zs. I practice what I preach and I have always been willing to put my money where my mouth is. Liberty has a solid model and will be even more succesfull in the upcoming years. You will never agree and it appears you have decided to dedicate alot time blaming them instead of growing your business. Thats your right and in a free country thats the great thing you have the freedom to do what you want and I can do what I want. If you ever decide to take controll of your business and come up with solutions I am always available and would be happy to speak and do what I could confidentialy with growing your business.
I think this thread is way past dead and at an impass so I have decided to focus elsewhere. There are a group of people who are so focused on convincing anyone and everyone that Liberty is bad and no amount of evidence or proof would stop that. My goal here is not to do anything except try to be as honest as possible and possibly help several people and show that this is a great opportunity. I fully understand your posistion and the only thing I would suggest quit giving anyone this much power over you when your success and falure is completely up to you? I do wish you the best and everyone else but I see no need to continue a discussion that will never end and that will always be at a stalemate.
Not only am I convinced Liberty is a good opportunity I think its a tremendous one over the next 5 years and plan on expanding much more!!! I made that decision because I can find no other business that gives me the opportunity and reward as Liberty does. Good luck to all!!
Rob,
"It sounds like you need a "Job" not a business."
So unfair. My top 100 office prepares 1300+ returns and after discounts nets $180,000. Liberty suggests you net 30% of that. I work about 100 hours in the pre-season and 1000 hours during the season plus DMA meetings etc...
The average person works 1800 hours a year and get 401k + vacation time and paid public holidays.
So you think my $60,000 for 60% of a "normal" years work is a better lifestyle. I earned over 100k + perks before I got a "job" with Liberty. After 6 years I also have a huge debt of $100,000+ I'm still paying off and a "job" would have saved me that.
Don't kid yourself that owning a Liberty franchise is a lifestyle change for the better..
In your best year with one office you could net $100,000. Even Corey Hughes who prepared 1600 returns in his first year had more than 500 free returns or so I was told. And he was almost the best first year store EVER.
Having a job is not so ignoble as you allude to. I could be earning $100,000 and not be carrying a massive debt and worry for nine months of the year.
And at least wth a job you aren't concerned if the IRS, banks and the franchisor is going to screw your business so you lose a large chunk of your revenue as was the case with many zees this last tax season.
Just worth thinking about.
If you only net 180k on 1300 returns and you are a 6th year store, you have a problem. Sell me your territory and all your debt will go away and you can go land your 100k+ per year job.
Funny. 340 free returns due to the economy (trying to help out as Steve Tyler would say - usually minimum 120-150 to meet franchise agreement and bank products rebate) and 970 paid. In a state with no state return so my net fee was $185+
And btw there aren't any New Jersey zees in the top 100 offices report so who are you to talk? Office 100 prepared 1166. Which means.... that's right.. you're not even there! So keep your comments to yourself okay rookie.
And have you every heard the story on how to start a NJ zee in a small business?
Give him a big business and wait.
I must of struck a nerve. Offer still stands to buy your fledgling office. If you hate it so much just sell it and move on?
Rookie, that's funny. I suggest you refrain from name calling when you are admitting to the world you left a "high paying" job with benefits to be miserable in your Liberty business. No matter what names you call me, I don't have 100k+ debt from my Liberty business, actually now that I think of it I have $0 debt with Liberty.
I won't play into your disgruntled attitude, my offices fair just fine in terms of returns, profitaility and cash flow.
With all that being said I commend you on 1300+ returns, with that base I'm sure 1500+ is in your sights.
My goal with Liberty is to make much more than $100K a year. I currently make well in excess of $100K a year in my day job, but my goals are much loftier than that. And yes it is very possible when you own multiple stores. This upcoming season will be our 3rd year with Liberty and my wife and I are opening up our second store this year (she runs Liberty full time for us). By the way, JH has helped us tremendously and given us a great opportunity to purchase an existing store, so yes Corporate does help Zees. If I didn't think it was possible, I would just stay with my day job and continue to make more money every year and get paid a good salary. Your opportunity to significantly increase earnings with Liberty with multiple stores is a great opportunity in my opinion. Once you have mastered how to sucesfully operate one store the opportunities are endless.
To NJ Zee could you please tell me what demograhics your store is in? It must be a major urban area. I was in the same general area as most Philadelphia and NJ Zees, and with the exception of 1 zee in the Philadelphia market, I knew of know one in the SJ area that was pleased with the technical support or the ADs. At the time I was involved (4 years) there where maybe 13 stores in SJ this includes 1 store in Burlington and the rest in Camden, Gloucester & Atlantic County. Of the 13 stores in this area 4 closed completely and 1 became a company store. This total does not include the store owned by a relative of JH who just walked away or the store in the Vineland area that was open for all of about 4 weeks. .
To Mike, I agree that the way to go would be with multiple territories if you can duplicate the success you are having in your first store and be profitable. Again I would like to ask you what are the demographics for both stores? How many returns did the 2nd store do last year? What was that stores retention rate? How many free returns?
As for corp. helping you. I would be glad to lend someone money at 12% rate of return knowing that it will be you expending your money to promote the business and based on the terms of the contract if your not successful the store comes back to me. On top of that there is a minimum franchise fee of 5,000.00 1st year 8,000 2nd year and 11,000 3rd year.
It is my personal opinion John Hewitt's main goal is not just to sell franchises but to surpass H&R Block as the biggest tax preparation service. However I do think it is interesting when you google the name of any of the three tax services only with Liberty does Liberty Tax franchise appear ahead of the tax preparation service.
Bill - To answer your question. The demographic for the first store I opened up (just finished its 2nd year) has a household AGI around $50K-$50K which is actually higher than your typical Liberty store I think. Our 2nd year store did 775 returns with 90 of them being free (including those that defaulted on bank products). Our store retention rate was 43-44%.