LIBERTY TAX SERVICE Franchise Complaints
UnhappyFranchisee.com asked: Are LIBERTY TAX SERVICE Franchise Owners Happy? If you’re familiar
with the Liberty Tax franchise, please share a comment below.
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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No wonder we ain’t go no real advertising and marketing. Ain’t got no money left. Adding those royalties to my bank account since money is given away.
Today, Block’s stock dove over $5 a share. They are closing 400 stores and anticipate lower future revenue due to the new tax law. They also had great 1st quarter results.
I can only imagine how bad Liberty’ reports will be, if they ever issue them. This outfit is a joke.
Don’t buy a territory and get out if you’re with them.
Liberty’s stock is getting hammered, poor Screwhitt! What is the new CEO to do???
Liberty Tax (TAX) to Request Hearing After Receiving Nasdaq Letter; Names Michael Piper as New CFO
https://www.streetinsider.com/Corporate+News/Liberty+Tax+%28TAX%29+to+Request+Hearing+After+Receiving+Nasdaq+Letter%3B+Names+Michael+Piper+as+New+CFO/14317795.html
How about those compensation packages for Dodson, York and Ossenfort. Damn.
I guess Liberty finally decided to pay the “Piper” for CFO :)
If you’re a Liberty exec, be sure to get the “let go before 12 months” payout.
Guest2,
Liberty never did any advertising. They took our marketing $$ then told us how to buy donuts and spend even more money on gimmicks.
What a hoax.
I honestly can’t believe it has taken this long for this lousy company to go belly up. Even if you make a little money, the money you pay the man is outrageous.
Den of Thieves.
No explanation for the auditors leaving. Who has two sets of auditors quit? Delisting not so important to franchisees. Explain why auditors quit?
The first auditor to resign was one of the big four. “KPMG cited concerns around internal controls over financial reporting as it relates to the integrity and tone at the top set by Hewitt.” The replacement auditor just quit too, with no reason given. Maybe they took one look at the books and headed for the doors, or else they too felt negative vibes from “the integrity and tone at the top.” Something is going on here that investors and franchisees should be concerned about. The company is now very delinquent in filing its financial reports and doesn’t have anyone to complete them. Most firms that do audits jump at the chance for new business. It appears that no one is jumping here. Makes you wonder why.
Definitely!
Any legitimate CPA firm would not bless the financials after a giant like KPMG quits the engagement. There is way too much risk in rendering an opinion on the financial condition of Liberty Tax. If there is no assurance of the integrity of the financial statements, you literally have nothing. You are certain to open yourself up to lawsuits by investors the minute this company goes belly up. Yes, it is a big deal to be delisted by an exchange since it indicates a whole lot of trouble for your financial stability. I’m sure the SEC is getting interested in the financial shenanigans Of Liberty and might investigate at some point. Because this is such a small cap company, it has probably been cruising under the SEC radar. Time will tell, see you on the Pink Sheets!
I have a legitimate question. If Liberty ends up failing, as many on this forum seem to be hoping for, couldn’t that potentially be a GOOD thing for the franchisees? Wouldn’t that free them up to continue running their tax business under their own flag, and keep their client lists? After all, if Liberty corporate is no more, what would they (corporate) need with the client lists? I guess without corporate the franchisees would lose out on software and “support”, but I would think they could gain that from other avenues (I’m sure there are other reliable tax software packages that can be purchased). Plus, the franchisees would no longer have to pay the sky-high royalties to corporate. Am I missing something here?
^^Actually, I could think of NOT ONE THING that Liberty added to the pot, except negativity and headaches. We were essentially paying for nothing. Their software sucked. There was NO support. We paid royalties up the kazoo. Yes, it would be an excellent thing for current franchisees if the company failed, but knowing them (LTS) they way I do, they will somehow manage to enforce the non-compete and put people out of business than to go out silently. As you can see, the employee lists are gathered by the franchisees, not Liberty. In fact, whoever has been reading this forum, it is very clear no one needs Liberty Tax service to run a Tax business, especially if you have a Tax or Accounting or Business background already. They certainly don’t tell you that as they are taking all your $$$.
John Hewitt: Hope your time up almost up. I’m hoping and praying the company goes even more downhill. The stock is worth bubkis and if I were a stockholder, I’d be furious. Hope his girlfriend gets all his money with tons of lawsuits. I could see the writing on the wall years ago when RAL’s and ERC’s became a thing of the past.
Guest49 – you’re missing nothing. Franchisees could drop now is my guess. It’s hard to see what would be in their way except in cities with many stores.
Guest 49 not much in way. Nothing really stops franchisees now.
I believe Liberty will sell their franchisee contracts to Jackson Hewitt or Block. Whomever buys them, may just take the clients lists and might buy out the franchisees. Since many Liberty stores are close by their competitors, it won’t be realistic to have 2 stores in the same general vicinity.
John won’t let these clients go for nothing.
Not delisted yet https://globenewswire.com/news-release/2018/07/05/1533957/0/en/Liberty-Tax-Service-Announces-Nasdaq-Stay-Request-Granted-Approval-of-Quarterly-Cash-Dividend.html
I actually saw a Liberty Tax storefront recently. They have disappeared for the most part in one of the largest cities in the South. I hope that this bum loses his company like I lost my franchise. Then I want one of the largest class action suits against this company that can be put together. His entire franchise marketing was a scam, and anyone at this point who buys into this would be a fool. I have recovered financially, but want this clown to forever be in jail. It is disgusting what he has done to people. No other words can describe it.
^^^Boy are you not kidding, F & D. Actually quite an understatement. You are too kind! That was the worst cesspool of a franchise ever imaginable. NO ONE should be signing up for this franchise any longer. One new person signing for next season is one too many. Many of us have not yet recovered financially, but it’s in the near future (for me anyway). Jail? ABSOLUTELY!!! For too many reasons to list. This is not a reputable franchise, this is a ‘take your money and laugh’ franchise. Class Action suit? You bet. Can’t wait. I agree that he is a clown and needs to be in jail permanently. Just when you think it couldn’t get any worse, it did. NO ONE should be subjected to this level of unprofessional crap. Hope people keep bailing out so that he sits in a conference room with just himself and no one else is left to run this hellhole of a company. People be careful: you NEVER think it will happen to you and then BAM, it hits you when you least expect it. I am forever changed because of this rotten experience. HE needs to land permanently in jail or hell, whichever is worse.
They did get a new cfo but the real news is the return of Mark Baumgartner, as a strategic advisor, who they say is widely respected in the industry. Mark B is one of the main reason for Liberty’s financial success and many of the franchisees and Ads financial issues. Mark is a very intelligent but ruthless businessman. Mark is one who with John created Liberty’s financing programs and also was key in creation and implementation the Area Developer Contract and financing for them. This shows me that you won’t see any kind of positive changes and it’s my opinion that Mark being back as a strategic advisor is to either keep things afloat till John returns or to prepare for the sale of the franchise. I can’t see John wanting to sell Liberty. Either way current franchisees won’t be getting any positive changes and any new prospects should run as fast as they can. If Liberty is going to attempt a sale, the franchisees will be the least of Liberty’s concerns and if John is planning a return it will be the same nightmare and probably even worse. John returning will mean he will rule with an iron fist, because he will be determined to never be put in the position of being dismissed ever again and he will be multiple times more paranoid about everyone in the system than he had been in the past.
Wow……looks like you guys got half of what you wanted…..the other half being John behind bars lol
Liberty Tax released a press release today saying that John Hewitt is selling his stake in Liberty Tax to pursue his new dreams.
His new dreams are screwing another group of investors. Did he have to sign a non-compete like the rest of us?
His new dreams need to include an 6 x 6 padded cell. :(
IRS and DOJ: Get this man, please, and give him what he deserves. Jail time and re-payment of thousands of $$$ to each & every franchisee he screwed……..basically ALL of them. He needs be charged with racketeering, fraud and that’s the minor stuff.
I think when John John got thrown out of LTS it was done prematurely for his time line, so he had to get people back in so he could get his paid shares out of the company he founded. Good news for LTS, but no justice for the rest of us. :( Plus with the new tax law, if a LTS is not doing a lot of “legal” schedules, C, E, F, B, etc, their business will somewhat decline over the years. Or they need to get into payroll, to balance their books. If I was John John, I would head to the supposed “island” he owns and get out of dodge. Hopefully someone would be at the port of exit to catch him.
Major shakeup at Liberty Tax
https://www.streetinsider.com/Corporate+News/Liberty+Tax+%28TAX%29+Reports+John+Hewitts+Sale+of+Stake+in+Liberty+Tax%3B+Receipt+of+Anticipated+Nasdaq+Delinquency+Letter/14425243.html
Liberty Tax (TAX) Reports John Hewitt’s Sale of Stake in Liberty Tax; Receipt of Anticipated Nasdaq Delinquency Letter
And here’s the reason Hewitt sold… “An amendment made to the company’s credit and term loan agreement with lenders and SunTrust Bank on July 18 said Hewitt must resign and give up the securities that allow him to appoint or elect a majority of the company’s board members upon the transaction of his shares.”
Only the bankers could make him leave…
https://pilotonline.com/business/article_f2f6fa06-8f4b-11e8-a89b-5f8b3a5ebd9a.html
To bad, he is going to walk away with $oatloads! I was hoping he would go down with the shipt!
I think he’ll get $16 to $17 million before taxes from the stock sale…he’s selling just under 2M shares around $9 per share. May he be haunted by lawsuits.
Major shakeup will be coming to Liberty’s headquarters employees especially at the management level. Once a new chairman of the board and new board appointees have selected and are in place. They will most likely put in a new management team that will share their vision not the vision of past chairman and former CEO’ vision.
https://www.bloomberg.com/news/articles/2018-07-26/it-s-incredibly-hard-to-fire-a-founder-even-if-he-deserves-it
business
It’s Incredibly Hard to Fire a Founder Even If He Deserves It
By
Jef Feeley
Jeff Green
Anders Melin
July 26, 2018 11:12 AM
Delisting Starts tomorrow! Nice that John was able to sell out everyone right before the stock tanks! Pink sheets here we go! Actually, for the first time in years I’m hopeful there will be meaningful changes! New changes from top down are certain with the next board meeting with an absent John at the table determining everything! If I was the CEO, COO and Chief Strategy officer I’d be dusting off my resume. The board will want to get rid of everyone who has been affiliated with John Hewitt and his cronies.
Concerned Zee, delisting is not only the bad news for Liberty Tax for August 2nd. Liberty’s line of credit will be slashed by 120 million dollars.
8K Filing to the SEC on July 24th, the Sixth Amendment reduces the Aggregate Revolving Commitment Amount (as defined in the Credit Agreement) from $193,750,000 to $170,000,000. The Sixth Amendment also amends Section 2.2 and Section 2.13(e) of the Credit Agreement to provide that if there shall have occurred any delisting of the Company’s common stock from the NASDAQ Global Market® Exchange, the aggregate principal amount of all Revolving Loans (as defined in the Credit Agreement) would not be permitted to exceed $50,000,000 until such time as the Company has satisfied all requirements set forth in the Credit Agreement with respect to the Company’s fiscal year ended April 30, 2018.
Now that Liberty is delisted, no one has anything to say anymore? Thanks, NCHillbilly, for your fabulous updates and media reports. I gave up trying to find news articles. I really don’t care what happens to the company anymore. My focus has always been on the jerk himself.
It really says a lot of negative about our justice system when we really cannot get anyone to look at him seriously enough to arrest him and put him in jail. The fraud he has perpetrated for so long, and now onto yet another company to begin ripping people off again?!?!? With his son, together?!?!? Double trouble.
They figure, why not? They’ve gotten away with fraud for years & years & years. Might as well keep trying in yet another company. :(:( I really won’t be happy until he’s sent away. At this rate, it may never happen. :(:(
Crickets – with John gone it seams most have lost interest. Please post any relevant info as I believe there will be allot less info floating around. Still interested to see the final chapters its already gone on allot longer than I expect but the trend has been steady.
It would be informative to hear from current franchisees. When the new board settles in, they will have to come up with a new game plan. They will certainly want to keep franchisees from jumping ship, but what will they offer? Can franchisees jump ship now that the company has been delisted, or is the contract still firm? Please share what you’re hearing.
Fact is that John was able to steal so many blind and destroy so many lives and in the end walk away with millions to start a new organization that will be even worse than Liberty I imagine. Existing liberty zs will have a nightmare on there hands unless they are financially stable enough to survive.
John more than anything, I believe, saw the writing on the wall and that is that the tax business he built is not going to be viable in the future. Technology along with education has all but killed tax preparers trying to make it while paying Huge rents. Add to that the money liberty steals from them in royalties and advetising there is no way the vast majority of Zs ever have a hope of enjoying any kind of real profit.
Any current Zs that can afford to walk away and that can restart without liberty should but that is not that many I imagine.
My guess is that soon, not exactly sure when but soon Danny Hewitt will come on the scene at Liberty if that is not already the plan right now. I can see Danny being given a shot to restore the family legacy and the family reputation. It won’t work but I’m betting we see it soon. Danny will excitement and energy he just will not be able to deliver the results overall because it’s a flawed model.
In the end in doesn’t matter and Liberty and John were allowed to get away with stealing millions from hard working folks. Many of who never got the opportunity to start over like John is. Because they were financially destitute and many sick.
Out, there is no way the new owners will hire Danny and I really doubt that the current management team will be there much longer. The new board of directors will hire professionals to run the company and will remove all those that have been associated with John. Don’t feel bad for them, their employment contracts give them a nice parting gift.
Liberty Tax finally releases its financials: Returns down 10%, offices down 13%. Overall revenue flat but that’s because they got $11M from an electronic filing fee. Can someone explain what that fee is? I thought these fees had been banished long ago. Without that fee, revenues would have declined 6%.
http://ir.libertytax.com/news-releases/news-release-details/liberty-tax-service-announces-fiscal-year-2018-results
ADMIN: Could you please return your landing page to its previous format? It is very hard to find this forum. When I select “Liberty Tax Service” on the homepage searching by companies, this main forum for Liberty does not show up. I get a bunch of other Liberty Tax forums, but this main one does not show up. Thanks
Dr. Zhivago:
I have republished this post using today’s date so that it will show up first when you choose “Liberty Tax” from the company directory. Hope this helps.
ADMIN
Agree….I liked the old format better…this new home page is nowhere near as easy to find the newest posts on the companies most recently discussed. Please change back to the old format.
It was an optional fee (included in corporate revenue) and then 80% sent back to franchisee (included in expense).
Following are the details as copy and pasted from ZeeNet:
Optional Electronic Filing (E-File) Fee Program
Program Details:
Fee is optional and participation in the Program is at the ERO’s discretion.
EROs can opt in/out of the Program throughout the tax season.
By default, all EROs are opted out of the Program and the e-file fee is set to $0.
If opted in, the ERO can select an e-file fee amount up to $50 in $10 increments. E-file
fee is not available in NY.
Fee is charged to the taxpayer by JTH Tax, Inc.
Fee will be charged once per taxpayer for the federal e-filed return, with or without a
financial product.
Fee will not be charged on state only e-filed returns.
Fee will not be charged on free returns.
Fee is subject to sales tax where applicable.
Fee payments are not subject to royalties.
80% of the fee will be rebated back to the ERO.
I never owned or did business with Liberty Tax Services, but any company who considers a Statue-Of-Liberty-dressed sign twirler on the side of the street at clever advertising didn’t gain a ny respect from me. Looked stupid/ridiculous.
Hi guys where are you? No new postings.
The reason for no new posts may be the new layout of the site. I don’t like it. I preferred the newest posts being listing top to bottom on the right side of the page.
This “new way” of posting makes it harder for everyone to post and to see new posts. Maybe this website became so popular that this is the only way to assure that new posts from many other franchisees are listed (?) Not sure, but I’m sure ADMIN would change it if he could……..maybe it’s just better this way from a growth standpoint…..
Since I don’t follow “HIM” any longer: what’s HE up to and when will he actually go to jail? Any lawsuits against HIM personally that we can follow??? Man, it’s amazing what he has been able to get away with. Money certainly talks :( The stories I could tell. :(
https://pilotonline.com/business/real-estate/article_d3a270a2-c65c-11e8-885e-6bebafe184a1.html
A friend of mine told me to go to HIS FB page, to see any recent updates. I found this^^^ and his quote: “You’ve got to kill me to stop me”. Really, HIS quote. So??? Well??? Someone??? Anyone??? Yucch. That guy is nuts and sick. He has now started yet another company called “Loyalty Brands”. He is preying on people’s money and trust. He’s psycho. HE belongs in jail!!! No where else.
The Liberty Tax model and system is a sham! Their system is to find a franchisee who is putting up big numbers and then parade them in front of all franchisees as their poster child…And I might add that LTS doesn’t care how the big performers got to the top or what actions they took(legal or illegal) and if they do know that there is illegal activity then they look the other way and pretend that they don’t know even though their predictive analytic software flags illegal activity. If you are a franchisee who is a big thinker, then Liberty will entice you with financing until you are up to your eyeballs in debt. They will push you out on a limb and then saw that limb off! Another note…Their corporate culture is one that is immoral and down right disturbing. John Hewitt wasn’t the only one at the corporate level conducting acts of sexual misconduct and assault…I have proof and witnesses to back this up. #gropingwomen #gropingmom #gropinggrandma
Liberty Tax finally fired Martha O’Gorman on Friday. Maybe now franchisees will have a chance to get a real marketing person in there to help turn the brand around. If we can just get rid of the newest “executive team” and get experienced leaders (like the ones that were lost in February) franchisees might actually start to make money.