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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For those of you who haven' t yet figured it out...........People like Honestly and Guest have received some type of favor or kickback from LT, hence they are defending a bad investment from a company that has no business being in business or selling franchises. This organization does not understand the tax business which is why they are getting the comments above. To all thinking of buying at Liberty Tax franchise. STAY AWAY. THESE PEOPLE ARE A DISASTER AND YOU WILL END UP LIKE THE PEOPLE WHO HAVE LOST THOUSANDS. I GUARANTEE IT.
Frustrated and Disgusted you are comical. I am not defending anything and your message looses its validity when you claim that any Z that does not blame Liberty for everything is a company plant or is being paid. Liberty has done many things I dont like and I do not defend them but I also do not blame them for everything.
As far as them doing favors that just shows how much you know about how Liberty operates. Trust me they would not do anyone a favor or pay them for posting, they do not want any posts on here at all!
If you want your message to be heard you need to stop being so radical and realize that Liberty is not at fault for everything including the assassination of JFK or the disappearance of Hoffa. Would I suggest someone with no experience and that has no business knowledge to run out and buy a Liberty, No!, but I wouldnt suggest they buy any franchise. I believe that this entire and very lengthy thread needs to be a word of caution and tell people that they need to do tons of soul searching and investigating before buying any franchise.
If you do buy and fail then I also suggest you be prepared to take the blame not blame Liberty. The information is out there and anyone that still thinks opening a tax office is 100 percent guaranteed to show profit first year is just foolish. If you do your homework and believe you can make it then go for it and it is possible to make a profit but it will take work and more than delivering food products but you should know that if you did do your homework.
I do not disagree with many of the items you say Frustrated but I grow tired of you claiming that people are plants or being paid. I think if you would put some of your natural talent toward obtaining a profit instead of trying to damage Corp you would be happier. I do not say that to defend corp either. I state that because the way your going about trying to damage them is not going to work. Yes some of there practices will be called into question and may result in fines or people leaving but if I was you I would spend more time on your own financial future. It is not impossible to get a store to respectable profit levels. It is not easy but not impossible.
Just this last season, on one of the "New" Zee conference calls. Cory H_G__S said that "you (meaning all new zees) should have 3 budgets, one for 600 returns, one for 800 returns and one for 700 returns." this way you will be prepared for one of the likely scenarios-- he is a propogandist! It should have been 200,300,400 which would be a lot more realistic. (DONT FORGET NEW ZEES are required to get 200 FREE RETURNS NOT 100!) When I heard this conference call, I said to myself 'wow a lot of new zees are going to be very disappointed at the end of the season!!
Re: Honestly - It is clear you have bought the JTH line of rhetoric hook, line and sinker. Unfortunately I have heard it all before. Blame it on the franchisee who didn't follow the system, or has poor business skills or etc. , etc. etc. However you want to justify it in your mind, you will live in fantasy land forever. I know different because I have met and talked to many, many franchisees. These are smart intelligent people with good business skills who wanted to own their business, either for personal or professional reasons. They were lied to at the Meet and Greet, they were given theoretical BS when they went through EOT, and when they went through their first year, they realized that this was a scam. A big one. Unfortunately the franchise laws make it difficult to individually fight back. I am going to make every effort to shut this scam down, so other people don't get financially hurt. I would like you to do something, go look at yourself in the mirror and ask whether you have sold your soul to the LT devil.
Frustrated and disgusted writes "People like Honestly and Guest have received some type of favor or kickback from LT, hence they are defending a bad investment..."
F&D makes 2 assertions here, both of them wrong. Sorry, but
1) Not everyone with a different point of view is being paid to disrupt Whinefest 2011
2) I'm neither defending nor promoting the Liberty Tax franchise or any other franchise. In fact, I agree that those who are complaining shouldn't have bought this franchise and probably shouldn't have gone into business at all.
Speaking of looking yourself in the mirror, perhaps Frustrated & Disgusted, Mike, Bill, Antonio & First year zee in NC can share what mistakes THEY made that led them to signing and agreeing to adhere to Liberty Tax franchise agreement?
How many Liberty Tax franchisees did you speak to? Should you have spoken to more?
Should you have worked for a season at for a Liberty Tax franchise location before sinking your money and time into a franchise?
If you were given bogus projections by LT and its minions, should you have independently verified their accuracy? Or do you still believe anyone who tells you you can "do as many returns as you want" like new zee?
I'm sure LT salespeople easily dismiss even your valid points by branding you as whiners who don't take responsibility for their own actions. Your points might be a little more credible if you acknowledge that you should have done things differently rather than simply claim to be an innocent victims of the "LT devil"
GUESS & HONESTLY,
You could not have responded any better to Frustrated blaming his problems to "LT Devil" and the bigot " New Fanchise zeew" .......... They both must be Sarah Palin supporters and part of the Tea Party too..... Blame everything on illegal immigrants or anyone is is a shade darker than them.....
Re: guest
Your comment: If you were given bogus projections by LT and its minions, should you have independently verified their accuracy? Or do you still believe anyone who tells you you can “do as many returns as you want” like new zee?
You prove my point better than I ever could. In other words, go out and give a franchise organization $40K and 19% of your gross, but don't trust anything they say. I'll bet there are a lot of people who would love to sign up for that opportunity.
Frustrated, your last post was finaly dead on!!! Do not trust anything and verify everything. You are putting down and making accusations at people who do agree with many of the points you make?
I have no illusions about what Liberty is and what Liberty isn't. But in the end being a small buisness owner for many years I cannot put all the blame on them without taking at least an equal amount of responsiblity myself. It has been a very expensive lesson but one that will keep me from ever making the mistake again. Now if not blaming Liberty for all of my woes is something that makes you think I am a company plant or that I was in the grassy knoll at the Kennedys assasination I am not sure what to tell you.
Honestly:
If I understand your post right you wouldn't invest in Liberty if you had the oppurtunity to do it over again but since you did, your willing to share the blame?
My goal on here is to discourage people from buying a Liberty Tax Franchise. The reasons are clearly stated in many of the above post.
From my personal experience I don't believe Liberty is a well run company.
Why have someone budget and staff for 600 returns if you know the average 1st year store does around 200 to 250 returns?
E-smart software purchased it for over 2,000,000 and then had to write-it off as a bad investment!
Unwillingness to have a national ad campaign. Ask AFLAC if advertising works?
John Hewitt, while he did start Jackson Hewitt he was eventually given the gate. I believe he's narcistic personality has a negative affect on the organization.
There is very little effective training of franchisees and Area developers. The tax code is complex and without proper training you have inconsistent and inaccurate tax preparation.
The landscape for the tax industry is changing. RALs are all but over. New regulations on paid preparers. The business model that Liberty currently uses is based on the early filer and the use of the bank products. It will be interesting to see what changes Liberty makes.
The company is financially strong but a majority of their receivables are based on the underlying performance of their franchisees. While they do have allowance for doubtful accounts. I personally have not know of any franchisee who has been able to resell their franchisee for what they paid for it. So I guestion the valuation Liberty uses for it's territories.
Did everyone read the disclosure document that Liberty provides to you prior to signing on as a franchise. The numbers are all right there for averages 1st year, 2nd year, 3rd year, and 4th year offices......