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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I passed by a Liberty store today. I saw a male statue of liberty clown smoking whatever and looking like he lives on the street. Some things never change ! What a brilliant marketing ploy: have the homeless bring in the homeless. I wish I thought of that!
And my literacy gets destroyed by the iPhone.
Dirty Ducker - Most of left LTS because of the lack of professionalism. They brought in many dregs of society or someone who does not want a personal relationship while doing their taxes. I'm starting my 5th season with out LTS and I'm making the same with two LTS offices, with very little overhead.
Someone took over one of my offices, because home office said I was the worse franchise they ever had. My office ended up serving the unemployed and homeless people. I still made "money" but had the lowest numbers of my state and region. Well I kicked that location to curb and someone stole it, because I had it up for sale for 8 months or so. They failed for the last 4 tax season. Pawned to someone else, they pretty much are bankrupted. I still did double the tax returns than those other people.
Both my locations have not been successful, because you have to be a skilled salesman in order to make them work. They don't work on their own if they are difficult areas.
So, is there any word on how bad 4th qtr earnings really were? I understand LTS has given up looking for a major accounting firm to 'bless' their books and is looking for a small regional firm or a boutique firm. Anyone else heard anything?
My other big complaint is that I as a tax professional, know more about accounting, taxes, law, and business than 3 of the franchisees I worked for. If you're just a business person you shouldn't be allowed to own a franchise.
Less than 2 weeks and Liberty will be delisted from the Nasdaq. Major technical problems this year despite the slow season. Fee intercept is the one thing unaffected by all the technical problems. Another 400 offices didn't open this year. Next year look for even more closures. Liberty is hanging by a thread. I'm hoping for an LTS B.K. it will save every Zee tens of thousands in Bank Fees and Royalties
I just checked out Liberty's stock price and it's 9.95. It's amazing how this company
was initial viewed by investors as a great investment. Most of these investors are institutional investors and they helped propel the price of this stock upwards despite it's overall cash flow issues
and complaints by its franchisees. Now their filing a lawsuit and its based on the following:
The lawsuit focuses on whether the Company and its executives violated federal securities laws by making false and/or misleading statements and/or failing to disclose that: (1) Liberty’s former Chief Executive Officer, John T. Hewitt, created an inappropriate tone at the top; (2) the inappropriate tone at the top led to ineffective entity level controls over the organization; and (3) as a result, the Company’s statements regarding its business, operations and prospects were materially false and misleading and/or lacked a reasonable basis.
What irks me about this is they the investors understand the franchise model and how it exploits
the franchisees. They know the franchisee is locked into a one sided contract that provides a steady stream of royalties. As long as the company can continue to sell franchises the investors could careless about the ethics of the company. The laws are written in this country to protect the wealth and big business. No wonder people think the system is rigged against the small guy.
Buyers Beware of All Franchises!!!
Agree. Liberty Tax has taught me all about how one-sided the relationship is.
They can't go up in smoke quick enough for me - better for the Franchisees! They are being picked clean.
3 Days to delisting! I've received 3 emails and Zero calls from my AD this season same thing for all Zees? They will still collect 19% I could have bought software for about 1k and not be affiliated with this Ponzi scheme. When renewal comes I'm out. Hopefully B.K. will wipe out our Franchise agreement sooner than that. Liberty=Leech Fees, Bank Fees,Check Fees, Processing Fees, $178.50 ESF fees, CIF fees, 12% Interest Fees, Advance Fees, minimum royalties, back office fees, phone appt fees, transfer fees, 10% commission fees, 1k other business fees, 40k Franchise Fees, 14% Royalties 5% Marketing Fees, Training Fees, and I'm sure I left off lots of other fees. Amazing thing is corporate still wonders why no one wants to renew... Ha! Ha! Joke is on the 1500 + Zees and their clients. Liberty is toast!
hr block charges 25% of sales as royalties, why dont you guys complain about them. 25 higher than 19%, both are crazy high, but its all about profits. i was with liberty up in Canada, same junk there. no one makes any money. recycle zee's or anyone who wants to work for free. eventually we all walk away. one way or another. I was happy that no AD ever visited me, then one year they did, didnt like what they saw and i was gone, I learned a lot, how to deal with people, low end sure, but thats the market. We are not some high end CPA firm you know. I moved on, doing my own office, same work, more money, and no politics, but honestly , i never did have any politics with LTS, i think i was too small for them to care. but eventually, everyone gets recycled. The other Zee's and regional only called when there was a problem, LTS was always a bucketshop even our clients knew they were not even on par with HRB. and thats saying a lot. Fold up, churn up, and the new LTS is done.
To my knowledge H&R Block bought out most of its franchisees years ago and only has a few of the really large ones left (wanted all the profits for themselves). For a while they tried to sell their unprofitable Walmart locations but finally just exited the contract. A big difference from Liberty is that franchisees actually get something of value for the 25%--a good name, for one, and access to great training, backroom support, advertising, etc. Early in the season I actually heard some Liberty ads on the radio, not local ads franchisees paid for themselves but what seemed to be national ads. Maybe this year they actually spent some of those advertising fees on, of all things, advertising. Haven't heard one lately though, even though it's the height of filing season. Haven't seen one on TV, but we record everything so we can zap through the ads.