LIBERTY TAX SERVICE Franchise Complaints

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• So as long as this site stays completely negative and suits your special interest, you are agreeable, Mike. You certainly do not appear open to discussion, which I thought this site might be. Mike, Liberty sucks and anyone who invests are being foolish with their funds. There is no way to make it and it's truly a waste of time. Thanks for the advice. Have a great life! I'm opening Newbee Tax Service next week with a BEE costume in a strip mall next to WalMart and across from HRB. Thanks for the great advice....Mike. This site rocks!

• Some people are hopeless, I would HOPE that before any of you bought into this business that you did some analysis using Excel to get an idea of what volume is needed to break even and eventually turn a profit.

  Here is some figures so you can wrap your head around how to make money in the tax business:

  Stan Malizewski
  2010-08-11T02:10:12Z
  2010-08-11T02:32:20Z
  The Briad Group
  11.5606

  YEAR 2
  Paid Returns 330
  Avg Fee 245

  INCOME $80,850.00
  Guerilla Marketing $650.00

  Expenses

  Preparer Wage + Tax $17,143.70
  95 days of 18 hours coverage @ 10 & 9 per hour + Payroll Tax
  TP Bonus + Tax $2,710.50
  3% + Payroll Tax

  Waver + PR Tax
  $6,794.40
  95 days of waving @ 8/hr 8 hours a day

  Utiltities $2,400.00
  More during the season way less in off season

  Phone & Internet
  $1,320.00

  Comcast Phone & Internet @ $110/mo

  Office Supplies $445.00
  Customer Envelopes, Customer Folders, Paper, Toner

  Postage $88.00
  200 stamps used

  Insurance $350.00
  State Farm

  LTS Royalty $11,319.00
  14% Royalty

  LTS Advertising $4,042.50
  5% Advertising

  Local Advertising $650.00
  Misc flyers, coupons, candy, soda, water

  Marketing Supplies $650.00

  Direct Mailing $1,400.00
  8.5x5.5 Early Season Postcard mailing 5000 @ .28 each

  Rent $18,000.00
  1500 a month Rent

  TOTAL EXPENSES $67,313.10

  NET INCOME $14,186.90

  % Profit 17.55%

  YEAR 1

  Paid Returns 301
  Avg Fee 200

  INCOME $60,200.00

  Guerilla Marketing $650.00

  Expenses

  Preparer Wag + Tax $15,221.85
  95 days of 16 hours coverage @ 10 & 9 per hour + Payroll Tax

  TP Bonus + Tax $2,018.21
  3% + Payroll Tax
  Waver + PR Tax $6,794.40
  95 days of waving @ 8/hr 8 hours a day

  Utiltities $2,400.00
  More during the season
  way less in off season

  Phone & Internet $1,320.00
  Comcast Phone & Internet @ $110/mo

  Office Supplies $445.00
  Customer Envelopes, Customer Folders, Paper, Toner

  Postage $88.00
  200 stamps used

  Insurance $350.00
  State Farm

  LTS Royalty $8,428.00
  14% Royalty

  LTS Advertising $3,010.00
  5% Advertising

  Local Advertising $650.00
  Misc flyers, coupons, candy, soda, water

  Marketing Supplies $650.00
  Direct Mailing $1,400.00
  8.5x5.5 Early Season Postcard mailing 5000 @ .28 each

  Rent $18,000.00
  1500 a month Rent

  TOTAL EXPENSES $60,775.46
  NET INCOME $74.54

  % Profit 0.12%

• You know everybody says they want discussions which means they are allowed to spew statements with no facts to back them up. I sold one of my offices to a fellow that paid the full price for the office and he was financed 100 percent over 4 years at Libertys current interest rate, paid all the royalties, paid all the advertising fees, was completely current on his debt, royalties, and Advertising fee, plus prepayed rent all the way through Feb on his store at the end of the season and put approx 40k in his pocket. Now if all the items that everyone tries to lay the blame on was factual then their was not way for him to do that. For some of the failed Zs or even better struggling Zs lets take a look at the last Profit and Loss or the past couple years and see where the real problem is. Thats not being nasty, thats not putting anyone down. If the true existence for a discussion board like this is to spread truth so people can make an educated choice when purchasing then I think the truth should be analyzed and then all the insults and nasty comments can end and we will only deal with facts.

  And I am 100 percent serious about it not being about pointing fingers or making anyone look bad , thats not what I am about, I just want a factual look to answer why some make it and others fail. If it is impossible to succeed then simply analyzing Profit and Loss statements will clearly show your point. Unless facts are going to be intelligently discussed without the hatred and damaged egos this board will be nothing but "Jerry Springer". I know for a fact that several of you are not like that but having discussions based on opinions or on limited amount of facts is useless. I also understand anyones reluctance to risk having flaws exposed and I really do not like that word but could not think of another. Unfortunately doing this in a venue like this is not feasible but I would love to see what the results would be.

  Yes you can be profitable and obtain positive cash flow owning Liberty Offices. Does it take super human powers, does it take that special person that only 1 in a million would fit, and the answer to all of those questions is no. It can be done by anyone and has been done by quite a few and the talent level between all of the successful ones is quite different.

• Rob:

  I think Stan's numbers give a great basis for discussion, but Stan did not follow the Liberty plan, plus he has not factored in anything for his time or investment. He would have been just as well off working for McDonalds than owning a Liberty Tax franchise, worked less hours, and with half of the headaches.

• Sorry for the spew of numbers it looks prettier in Excel. I think the comment about my time and working for McDonalds is a bit far fetched. Each year my numbers and profit grow, I made sure of it before I expanded and invested any more time and money after year one.

  I suppose you're right in that I didn't follow the system 100% in the beginnning, each season I make adjustments and try to execute better. I do know for a fact that my first store I opened I did terrible in year 1, 30k in net fees, didn't wave, terrible b2b marketing, no parking (downtown location). Year 2, No waving, no marketing, did 36k in fees Woohoo. Finally in year 3 got my head out of my ass and moved the store to a small strip center 1 mile away on a secondary highway (7-14k cars daily) and made the committment to have wavers every day and do couponing and did 76k net fees.

  Obviosuly doing 76k in net is not going to make me a milionaire but at $900/mo rent and 4 months of a season it does just fine.

  I don't want to give my whole LTS life story today but I will also add:

  I took over 2 existing franchisee's offices throught my 4 season history and these are the results from me owning it controlling costs, spending on valuable marketing, waving consistently etc..

  Store 1:
  I took over for the 3rd tax season, previous owner did 88k fees. Very busy highway location. I took over December before the season, $135k net fees about a 40% jump. It was simple really the previous owner couldn't get out of his own way, slashing prices, playing lets make a deal, etc.

  Store 2:
  5th Year store I took over from the 2nd owner who was getting destroyed, I'm surprised he's not on here telling the world how much money he was losing. It's pretty bad when you only do 23k in fees and your rent for the year is over 24k.
  But I digress, took it over did the marketing and got the fees to 52k for the year then pulled the store out of the current horrible location and I am relocating to the main highway about 1 mile away and will end up paying less rent for more exposure.

  Being sucessful and making money with Liberty is just about handing out doughnuts or throwing a party in your parking lot. Yes follow the system/plan I agree but there are managerial and bigger decisions that get made over the course of the years that will ultimately affect if someone makes it or loses it. I takes calculated risks in buying new territories or buying out existing franchisees, I make models in Excel to make sure I can make the numbers work before any money is invested.

  Any of the naysayers are welcome to come by NJ and take a tour of the operation and see for yourself how you run multiple offices at a profit.

  • "Sorry for the spew of numbers it looks prettier in Excel."
    You should've seen it before I cleaned it up. :)

    If you paste it first into a text editor like Notepad or WordPad you can format better before you paste it in.

    Thanks for the numbers.

• The comment about Stan would of been better off just working at McDonalds shows that this isn't about the truth or reality and makes me question why some ever attempted running their own business or what their real motives on this board are. It appears that it needs to be called the "Smear" Board" in alot of cases because the objective is not about truth. Most of Stans stores are fairly new and he is in the early stages of growing his business. Stan is doing what every succesful business owner does and that is learning from his challenges and mistakes each year and making adjustments and improving every season.

  It is real easy to make things sound bad if (you) mess things up the first year or two and quit but most do not quit and most learn from their mistakes and improve each year. My numbers today look totaly different than they did year one or year two. But it is that way with any business, it is always tough at the beginning and very seldom are their over night successes. Not sure what some people think when they buy territories. I have seen people cry and moan about not making money yet when you look at their labor, they work in the office 24/7 and take no pay yet still run 40percent to 55percent labor numbers, and you can't make money doing business that way.

• Another thing for anyone looking for the truth, is Stans profit margin jumped 17 percentage points from year 1 to year 2. Because Stan understands his budget and understands what needs to be controlled and improving every year on where he spends his money he will be able to easily reach 30 percent profit margin as the return count grows.

  Stan was paying $1500 a month in Rent and able to break even with 300 paid returns!!! I am sorry that is talent any way you look at it. I want to thank Stan for standing up and going through the effort to put his numbers out there for all to see. I am not going to do it, at least on a budget form, but if you calculate Stans profit based upon his numbers today and he grows to 800 returns he will show a profit of around 60k plus and could be higher. As the office continues to grow and reaches 1400 returns, Stans profit will well exceed 100k per year.

  Stan had a choice he could of quit the first year and used his numbers as an excuse to smear someone else and financialy damage himself or he could do what so many other succesfull business owners do and work through things and improve. I think all of this is so simple to see.

• That was years ago (2006), I have since found very favorable lease terms for all my offices and run 25-40% profit margin depending on the office (labor can kill you). With that being said I add 1-2 new offices on each year either through acquisition or opening a new territory.

  My goal early on was to minimize damage from opening a new store and it didn't take long to realize that each year you build on top of last year's numbers. I always tell people do the best you can in year 1 because year 2 is always soooo much better if you execute.

• Also McDonalds wouldn't hire me :(

• Okay peoples..... Time for some truths.
  Anyone with access to Zeenet can see for themselves that what you are about to read is correct. I am not saying I downloaded these figures and manipulated them, they may have arrived in my inbox from a friend but you work out the viability of being a franchisee.

  FYI:
  fran·chisee [fran-chahyzee]
  Definition: A franchisee is an individual who purchases the rights to use a company’s trademarked name and business model to do business. The franchisee purchases a franchise from the franchisor. The franchisee must follow certain rules and guidelines already established by the franchisor, and in most cases the franchisee must pay an ongoing franchise royalty fee to the franchisor.

  I guess we agree on that. Emphasis on
  "rights to use a company’s trademarked name and business model to do business"

  Clearly the "business model" is what the focus should be on because we'd all agree, without that, we wouldn't have signed the frikkin' franchse agreement or thought the tax business was as cool as it could be.

  Report ZPR07 details the top 350 Entities (franchisees with at least one territory.
  Report ZPR03 lists the top 100 office in the country.
  Office 1 = 3,573 returns
  Office 100 = 1,160 returns
  Corss referencing both reports you can notice 41 Entities in the top 350 report prepared less than 1,160 tax returns or less than what the 100th best performing office prepared.
  It's believable that some or many of those Entities which appear in the top 350 report that prepared less than 1,160 tax returns actually had more than one office. Which suggests that each of their offices prepared on average 580 tax returns.
  To appear on any report is a target for any zee but more importantly it is the $$$ which matters most and the 350 report is very detailed in that area listing also the prior year results.

  Office number 346 had net fees of $218,200 with 1461 tax returns prepared.
  This office location and return count does NOT appear in the top 100 offices.
  So it is obvious this franchisee owns two offices.

  $218,000 - gross income

  $41,0000 - Royalties
  $43,000 - Rents (2 offices) $1800 per month (I know of no zee with 20 miles paying less than $1800 a month in rent. Several pay nearly $3,000)
  $50,000 - Payroll + taxes for preparers (2 preparers for every hour to up to 4 + receptionist during both peaks
  $28,000 - Marketing/wavers (one waver for every hour open x 2 stores + additional during both peaks+everything from IIP etc..)
  $7000 - Utilities = (~$300 per month per store for internet, gas/electric, phone etc..)
  $5000 - Office supplies - stamps/folders/envelopes/business cards/tax school books/Coffee/Cups/Popcorn/toys/coloring books for two stores
  _________
  $174,000 - Expenses
  =========

  $44,000 - Net Income from two stores

  Perhaps this franchisee had cheaper office rent, spent less on his marketing and understaffed. THEN he would NOT be following the Liberty MODEL especially on the marketing.

  Possibly his net income before taxes was $60,000 but the work and stress from two offices for only this much is only benefiting the franchisor.

  You only have to look at the royalties to see that the franchise fees are almost as much as the net fees.

  Sure you can make money.

  Sure. $10 profit is making money.

  The point is.. is the franchise model going to make you $100,000 a year. And dont accept the BS about the PART TIME crap. Not too many of us can get 3 months off work to run a tax season and have our jobs back on April 16th! And if it's so darn good then why are SO MANY zees responding to the ads in the zeenet marketplace about making money during the off-season. Why stay open for 40 extra hours a week to earn $40,000 in insurance etc.. when it's just (based on Entity 346 at $200 per return) just another 200 tax returns to stay closed 32 hours a week! Isn't the whole point to have a different lifestyle? Didn't we buy a business NOT a job!

  In advance of Mike or Rob's responses..... This information was not available to me BEFORE I opened the first office. In fact most franchisees are so focused on their own success, extraploating figures from the reports menu and realizing that most Entities work DAMn HARD just to get a reasonable income. Only RICH guys here are in the top 100 Entities.

  Last point. I made money every year from year two. Best year made more than $250,000 from two offices but netted only $60,000. Not what was alluded to.
  Which brings me back to the line from marketing/sales who said IF you don't reach 1000 returns by the fourth year Liberty may opt to take the territory back which was only stated to imply you must be a moron if you can't reach 1,000 tax returns!

  My office average was 925 returns (paid and free). After several years.