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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Potential Franchisee:
Please read all the post on this site. There is a lot of good information/experiences posted here.
Keep in mind everything that is being said on this site has to do with people who made a financial commitment to LIberty Tax Service. The ones who are still involved whether their successful or not 'want to succeed.". The frustration for those who/or have followed the system and struggled is that their AD and JTH continue to insist that they really didn't follow the system. It's a "catch 22".
Unfortunately, the ones who are speaking out so strongly against the struggling franchisee's are individuals who paid Liberty Tax Service a fee to have rights to sell individual stores in a defined area. Rob and NJ Zee are two such individuals but for some reason they don't want to acknoweldge or in Rob's case don't want to believe it's necessary for potential franchisees to know that they have an additional motive for talking "positively about Liberty Tax Service.
As I have stated in my earlier post, my whole reason for posting here is to present a fair and honest view of being a franchisee with Liberty Tax Service. I encourage potential franchisee's to write in and ask questions. This will give everyone an oppurtunity to respond.
Well said Bill.
Proceed with all caution.
I would like to join any lclass action lawsuit being taken against LTS, for ripping off those signed uo and didnt even open, and still cant leave until they sign off and give up their entire money, its a very different scenario considering those that did open
Sunil sapra,
I am confused, why did you not open up as the agreement you signed said you should? Why you you expect to be able to leave an get your money back without them signing off? Just not sure i understand, please explain.
FYI. Comments invited. New Liberty Tax post:
LIBERTY TAX Offers Franchise Test-Drive Opportunity
"What do you think? Is the Liberty Tax “Franchise Boot Camp” an innovative, risk-free way to enable franchise prospects to make more informed decisions regarding the Liberty Tax franchise opportunity?
"Or is Liberty Tax “Franchise Boot Camp” simply another slick franchise sales ploy meant to turn employment seekers into Liberty Tax franchisees?"
A friend and fellow franchisee was encouraged to purchase three territories. He opened the first but with the heavy financial burden and a store which only prepared 600 returns (100+ free) he struggled to open the second and was in a worse state after the second year with two offices (the second prepared 400). He was unable to open the third and was forced to pay minimum royalties regardless. Needless to say he was unable to open the third territory the third year, his first store in fact dropped from 700 (second year) returns to 550+ in the third. He sold her territories to a local CPA who planned to pay $50,000 by the end of the first tax season. Which he didn't. In fact I understand he did not even pay his royalties and the territories were taken back by Liberty and my friend lost everything.
MoneyPit,
He did 600 returns his first year with his first office? That sounds really good!
I am not sure I understand how anything that happened to your friend was anyone else fault but his own. Why buy 3 territories right off the bat, especially when you are not well funded. The fact that he sold his business to someone that didnt pay him and he lost everything shows that your friend is not a good business man, and would have failed at any business he would have gotten into. Sorry but that is what i get from your post.
Barilla,
You just said:
"He did 600 returns his first year with his first office? That sounds really good!"
And you followed that up with:
"The fact that he sold his business to someone that didnt pay him and he lost everything shows that your friend is not a good business man, and would have failed at any business he would have gotten into"
His AD encouraged him to do this and said if he wasn't paid he'd just get his territory back. He had no remaining equity in his house due to falling price of housing and this was his only offer made late in the year. The result was that he wanted the territories back but corporate said they were no longer his because he signed them away.
No emails concerning the AD/zee were made. All by phone hence he had no recourse.
Yes, he made this error. But as you cannot understand, the point is that he was not singularly responsible.
The drop in numbers of office one was based road works.
Never recovered and was approached by a CPA. The rest is history.
And you're a dick... :)
Money Pit,
I am a dick to you because the truth hurts. Your friend sucked at owning his own business. I am sure that friend is you and that you are mad you lost all your money and want to blame anyone else but your self!
i sold my territories for a profit.
Anyone who know me knows this is true.
And anyone who knows me also knows who this other franchisee is and how they got screwed.
You on the other hand, we don't know. No franchisee by that name appears anywhere.. Google... zeenet etc... An AD maybe?