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?
.
Recent developments have left franchisees worried and uncertain about their futures. To advocate for greater…
The Building Kidz Worldwide franchise is an opportunity to own a preschool & childcare center…
PAINT NAIL BAR has undergone some significant changes since franchisees contacted us with their complaints,…
U.S. Veterans magazine has removed JDog Brands as its #1 "Best Franchises for Veterans" list.…
More than 400 Veterans & military families who invested in JDog Brands franchises have failed,…
Genevieve McDaniel is a former franchisee turned franchise researcher, franchisee advocate, advisor and fiercely honest…
View Comments
So who is regulating this mess? Good for Maryland that they caught this. We the taxpayer keep funding these EIC refunds or we have to borrow money to do so. I believe the whole of our country is doomed for financial failure because the money is flowing freely thru various government departments to these fraudsters. It is difficult for the government agencies to keep up with all of this.
Shame on us for just letting it happen. SHAME! SHAME! SHAME!
Liberty is turning a blind eye to this! How can you promote someone that does so many fraudulent returns? I know they audit franchisees for high numbers of returns with certain types of tax credits. Did they think it normal there were so many Schedule C business people filing so early in the tax season, for one Zee? No, that is why she was considered - "special" and an example for all. Promoting fraud? Are you doing so Liberty?
They just want there 19% and we the taxpayer are giving it to them, indirectly through the bogus returns.
IRS/FEDS/STATES - SHUT THEM DOWN AND INVESTIGAGE!
Maybe my last word - Investigage was a Freudian slip. We need to look into this company and be engaged and outraged as taxpayers to these types of fraud.
All of the majors have some of these. Block, Jackson Hewitt, etc. It's gotta be more than Schedule C returns for Maryland to stop the bank products. Don;t forget most of these are done by those using online software. It can only be stopped by ending or cutting back the EIC.
The reality is circular 230 only addresses the preparer and or the owners of the firm or tax prep company who prepares the returns. The way the laws are written a franchisees are considered independent business operators that pay a franchisor a fee to operate under their name and business model. Despite the amount of control franchisors exercise over their franchisees, the franchisor is not considered the owner of the business and is not held accountable for any misdeeds of the franchise.
So, Liberty is free from any culpability because a few renegade Zee's go off the reservation. My point is; what kind of internal controls are in place by the Franchisor to stop this?
For Concerned Zee; would it not be a great exit strategy if Liberty was shutdown and you keep your clients and go it alone? I know this is unrealistic, but one could dream.
The pressure of making a profit for yourself, after you give back 19% of your hard earned money, is a great pressure on the Zee.
Again, Liberty bears none of the burden, even when fraud is committed. They will just resell these territories and probably advertise what a success they are, oh so many clients they have (ha! ha!)
Remember, they promoted this gal. Also, all returns flow thru them to the IRS.
If they are so called tax experts, how do they not spot a trend? SanFranDan may be correct, they (Liberty) may turn them (the fraudulent Zee) in when the Zee goes bonkers with fraudulent returns. Liberty looks like the good guy and they get back a territory to resell. What a great deal!
I really feel for the current Zees. Successful or not, giving them 19% of your revenue is just so tough to stomach.
If any potential investors are still thinking about buying into this mess, think again! Do not do it!
Sad but true: Liberty monitors everything that the franchisee does. So it can see these trends. However, the franchise laws don't hold the franchisor accountable for the actions of the franchisee so Liberty can just ignore the trends. Based on past post we know the IRS tried and may still be trying to link Liberty through its training and marketing methods with encouraging these fraudulent behavior.
Guest....you are absolutely right in that all of the majors have franchisees that break the rules. The problem is that only one of the national chains; liberty, makes the fraudster the national franchisee of the year after 2 years in business and gets them to preach the tactics to all of the other franchisees.
That's the problem. Encouraging and rewarding the behavior.
If Hewitt encourages and rewards this type of behavior to gain market share what does it say about other business practices? What does it say about how he might treat franchisees if the rules don't really matter? In his own backyard, an hour or so from va beach he let a new franchisee do this stuff? Then kicked her to the curb when she was caught?
Run, run far and fast!
Greg, your assumption is that the majority of the returns prepared in a successful store are fraudulent. I'd bet thats not the case. There are millions of filers who lawfully qualify for the EIC and they need the money to support both their families and Walmart.
Trouble starts with greed sets in. Trouble also starts when owners lose control over their stores because they become too big.
guest; I think you misread Greg's posting. He can explain, if he wants to.
Thanks bill, love your insights.
Facts are facts; Liberty does not care for the franchisee, the customer, or the public at large. All about making money for the owners. Stay away!