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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None of this really explains what the board members object to. Opinion: lots of franchisees will just quit after tax season. Just change the sign and move on. They are breaking the franchise agreement. Too much instability. Time for him to retire.
NASDAQ just sent Liberty Tax notice to cure for not submitting reports in a timely fashion. Likely this is the Last Season for Liberty because the money was already borrowed by John prior to his quasi departure. Liberty will owe mountains of debt after this season. With many Zees pulling out they will have a hard time going to the banks to for borrow hundreds of millions of dollars to finance next seasons expenses. All this combined with these scandals, firings, resignations, pending lawsuits, bad press and lack of communication to the Liberty network, and I almost forgot the lack of an Accounting Firm to review their books! Will it ever end??? Where is the Liberty Leadership?? They are in hiding. Tax Season will be a disaster as an AD assured me with John coming back after Bruno resigns in Mid February (after 1st peak) or he is fired by the Board. The John appointed Board members will re-elect John as long as he's not it prison for Gambling on the company credit card. Last I checked that's embezzlement. He will let his EGO be in front of Thousands of employees and Zees he doesn't get it and will never step aside to the benefit of a host of Franchisees, Board members, Corporate Counsel, Banks, Investors, Friends, Girlfriends, concubines, ex-lovers, ex-wives, Family and yes you Danny! Please urge him to step aside! Urge him to sell his Class B Shares that is our only hope now for Liberty to exist. John, give us a XMAS present and resign your board seat and sell your shares and let go. Or in the words of a Child after watching Frozen: Let it go! Let it Go! Merry Christmas everyone!
Concerned Zee, although I feel your pain, Screwitt is not going anywhere. He will get his company back. He doesn't care about what franchisees are going to think or do, he can always get more of them. Liberty is the only thing that he is living for, he is too old to start something new and his reputation is too destroyed to work somewhere else, he will scratch and claw to get back control. I personally hope he gets it back for that is the only way Liberty will be destroyed!!!!!
Anyone have an idea of what happens when you still have a pnote with liberty and would like to get out? Or any path i can take to get rid of the debt? Bankruptcy?
Any idea of what happens when a pnote is in effect with liberty and i want to get out?
Bankruptcy? I want to be freed from the pnote
Concerned:
Bk is an option depending on what you owe them, are you still a current zee? If you don't want to file bk maybe talk to them now that Screwem is out, if he was in likely your only option would be bk, but with things in disarray maybe there are options, they likely want to get back on track I would try talking to them first.
Any updates
How does Liberty handle tax pro training? The new tax reform is massive and will change almost everything. Tax pros are going to have to learn a ton of new rules (and unlearn most of what they already know). Few of the tax reform changes will affect 2017 returns, but clients will be anxious to know how they will fare under the law, if they are having enough withheld once the new tables go into effect, etc., so preparers will have to learn enough of the new protocol now to advise people. Will Liberty's tax projection software be up to the task? Will its training? Next year will be a disaster for any tax prep firm that hasn't invested in training.
As a tax pro who does superb work I make it a personal habit to have my due diligence, ability to discuss tax law changes (I've already began analysing the new tax law) be my key marketing driver as to why clients of all income levels want to work with me.
I graduated law school and treat my job as if I'm the neighborhood personal banker that everyone knows me by name. I don't engage in ghetto as guerrilla marketing, instead I hand out my personally made business cards with my IRS and State Tax Pro credentials. None of my clients come away feeling they got served by some illiterate GED holding pion that is is dishonest about fees let alone their own individual competency like most of the Liberties in my area hire to attempt to do the job I do.
Most of the complications under the new tax law will be for those of higher earnings, not Liberty's target market. With the increase in the standard deduction, returns might become a little less complicated in general which would lead to more on line business than someone going to a storefront. This could very well be the last year that Liberty exists in the form we have known. I'll be at that funeral!
More NASDAQ news another notice to cure because the Board is NOT independent as required. There are only 3 Board members that have been there for over 90 days Hewitt, His Sister, and his long time best friend. Liberty may be delisted before the first refunds hit. Not even disclosed on Liberty website but it is an 8-k on Nasdaq. Complete Hush Hush by Corporate.