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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People effected by a bully franchisor shoul call mark & Klein llp in red bank nj.
I went in for a basic return. They told me it would cost me half my returns, So I told them I would just go to the IRS and have it done. They tried taking off 50.00 here and 100.00 there but I still didn't agree so they told me they could do it for free.As long as I promised to get some of my friends to do there taxes there. WHAT UP !!!!
Don't fall for it. Another Liberty Tax scam. Bring in other people that they can rip off, and you will get yours free. Best way to lose friends there is. They are in the business of over charging everyone who walks in the door. Get on the IRS website, or get it for free at any of a number of free sites that there are out there. Otherwise find a good independent accountant tax preparer. It should never cost you more than $100 to do any individual tax return unless you have a separate business which then should be around $200. Good luck.
At the tender age of 33, John Hewitt made an important decision that changed his and thousands of other lives forever. He took the leap and left his position as a Regional Director at H&R Block to explore the world of entrepreneurism. And now, Danny Hewitt at the age of 33, is doing the same thing. Based upon the last fifteen years of rallying the troops at Liberty, Danny is starting his own business to focus full time on what he does best, marketing, creating excitement and motivating people to win! As we say goodbye to Danny as a Liberty employee we wish him the best of luck in his new venture in othe words THE RATS ARE JUMPING SHIP
At the tender age of 33, John Hewitt made an important decision that changed his and thousands of other lives forever. He took the leap and left his position as a Regional Director at H&R Block to explore the world of entrepreneurism. And now, Danny Hewitt at the age of 33, is doing the same thing. Based upon the last fifteen years of rallying the troops at Liberty, Danny is starting his own business to focus full time on what he does best, marketing, creating excitement and motivating people to win! As we say goodbye to Danny as a Liberty employee we wish him the best of luck in his new venture in othe words THE RATS ARE JUMPING SHIP
At the tender age of 33, John Hewitt made an important decision that changed his and thousands of other lives forever. He took the leap and left his position as a Regional Director at H&R Block to explore the world of entrepreneurism. And now, Danny Hewitt at the age of 33, is doing the same thing. Based upon the last fifteen years of rallying the troops at Liberty, Danny is starting his own business to focus full time on what he does best, marketing, creating excitement and motivating people to win! As we say goodbye to Danny as a Liberty employee we wish him the best of luck in his new venture
At the tender age of 33, John Hewitt made an important decision that changed his and thousands of other lives forever. He took the leap and left his position as a Regional Director at H&R Block to explore the world of entrepreneurism. And now, Danny Hewitt at the age of 33, is doing the same thing. Based upon the last fifteen years of rallying the troops at Liberty, Danny is starting his own business to focus full time on what he does best, marketing, creating excitement and motivating people to win! As we say goodbye to Danny as a Liberty employee we wish him the best of luck in his new venture in other words the rats are abandoning ship
2nd year Zee
I too was once in your position. I'll tell you what I should've done my second year. Lower all your costs, change how you market - have one waver (if you have a store with poor visibility in a hard to find you way otherwise you don't need one). Get yourself one tax preparer maybe two if you personally don't prepare them.
Don't do the BBQ's, don't do the bounce houses, don't do all the other stuff they tell you all of it is a waste of money.
Go to events in your area such as running events, art shows, etc. and pass out coupons but don't waste your time or money on going B2B and giving away donuts or cookies or candies or whatever they have you doing now. You aren't selling telephone service or widgets your are offering tax preparation; I wouldn't go to a tax preparer cuz you gave me donuts and a coupon. Would you?
Once tax season is over, RUN and don't look back! Get as far away from these people as you can. Liberty is good at telling what to do and how to do it and when you follow their stupid plan as they tell you then they will tell you and everyone how you didn't follow the system.
It took me 4 years to come to my senses and to the decision to shut down my stores (I had 3). The day I shut down my stores was the happiest day of my life. I liberated myself of Liberty :D and I am now enjoying my life again.
I am guessing that JTH is getting ready to bail and leave a bunch of shareholders with a worthless piece of crap, just like he is doing with his franchisees. It was a few years ago that JTH was touting Danny as the second coming, and that he would be there to take over when JTH moved on. Well, as an earlier poster stated, he wouldn't hire Danny to clean his dog cage. I wouldn't either, nor would I hire him to promote my company. People want to see a professional image when they are dealing with an organization. You are not selling used cars, you are selling professional services. It's interesting now as I drive up and down the street and see the wavers, I know that they have so little effect anymore as there are so many people out on the streets with signs, that people just ignore them.
Go out, create a professional image, do good work, treat customers fairly, and they will return. Screw them with over inflated prices, look like a chinese nail salon and hire incompetent people, you are guaranteed to fail.
BANKRUPTED BY LIBERTY:
WELL SAID. THE BUSINESS IS BUILT ON YOUR CUSTOMER SERVICE AND YOUR KNOWLEDGE. IF YOU HAVE THOSE TWO ABILITIES YOU CAN BUILD A TAX PRACTICE BUT IT WON'T BE EASY. ADD IN A LIBERTY FRANCHISE AND IT JUST ERODES YOUR CASH FLOW.
FRUSTRATED AND DISGUSTED:
WE CAN ONLY HOPE THE IPO IS A FLOP. BASED ON THEIR FINANCIALS I JUST DON'T SEE IT BEING SUCCESSFUL. MOST OF THE ASSETS ARE RECEIVABLES AND THERE ONLY AS AS GOOD AS THE UNDERLYING FRANCHISEES ABILITY TO PAY. THEN LOOK AT THE FACT THAT LAST YEAR THE COMPANY HAD TO EXTEND $56 M IN OPERATING LOANS TELLS YOU THESE FRANCHISEES ARE FAILING.