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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View Comments
I agree some NJ Zees are absolutely brutal running a Liberty Tax. I did find it funny when the Vineland Zee opened for all of 4 weeks and disappeared.
5 Year Office - AGI $80,000
5 Year Office (Acquired Jan 2010) - AGI $41,936
4 Year Office - AGI $73,000
1 Year Office - AGI $55,394
1 Year Office - AGI $28,130
I have a good mix of demographics, I attract lower - middle income taxpayers in the first peak and I then turn my attention to bringing in higher income earners for March and build up for a strong April.
I will say that because I like full control, I explore towns and evaluate sites based on criteria that I believe is a winner. I read and digest all the information from Liberty Corporate, Zeenet, Discussion Boards and my own business acumen to make decision on expansion, staffing, advertising, etc...
I never expected nor wanted Corporate or my local AD to hold my hand or get in my way, but I know they are there if I needed tax support, tech support or procedural help.
As I've stated before I take very calculated risks before I open a new office. I budget so my break even is at the lowest possible level without sacraficing the core marketing techniques that bring in business.
And by being apart of another large franchise system, I think it's funny how much hating goes on against Liberty for support, royalties, advertising, etc. Liberty Tax is there to provide the framework and system to run a Tax Preparation business, it's not their job to run it for you or spend their money on advertising. All big franchise systems have franchisees pour advertising dollars into a fund, with no help from the franchisor.
People need to take some responsibility for picking a terrible location and/or territory, negotiating a bad lease, over spending on payroll, furniture, computers.
NJ Zee Out.
MIke
Congratulations on your success but I'm a professional skeptic. Could you please give us a little more information like the state and maybe the City you where located in? Could you tell me how many returns you did in your first year and what was your net fee in year one and year two. I know that these may be invasive questions but everyone on here who is a former franchisee is willing to be upfront about their experience and is only limited in what they can say based on the stipulations that Liberty imposes on them. Many of the individuals who speak about their success with Liberty do so in general terms. My purpose here is to provide fair and honest insight into owning a Liberty Tax Franchise.
To NJ Zee
Thank you for breaking down the number of offices you have and there respective ages. Since you own 8.5% of the NJ stores and I know who the main store owners are in SJ area then you must be located in the North Jersey area. Would you mind telling us the number of returns each store did? Also, how did you arrive at AGI (adjusted gross income)?
AGI can be found by looking at the IRS efile statistics for a city/town. I have a spreadsheet with all my offices and all the potential towns I might want to expand to.
I am in the Central - North Jersey area.
Bill considering you seem to know my area so well can you share your experiences and level of volume you were able to achieve?
Mike is from Massachusetts and the statistics he states are true and not exaggerated in any way.
I am going to decline to post my office returns counts and net fees on this message board because frankly it doesn't benefit me to share my numbers at this time.
To NJ Zee:
I think this is where you and I differ. I expected when I purchased my franchise to get a least a little help understanding the business in my area, what locations would work out better, what marketing techniques have worked in the past for the demographics I had in my territory, and for the most part, what numbers to really expect based on others in the area. I ASKED FOR THIS TYPE OF INFORMATION AND NEVER HEARD A WORD. I GOT NO ANSWERS. If you think it was just me, it wasn't. There was another franchsiee who bought and started at the same time who spent over $30K on marketing the first year and did less than 300 returns. We are both struggling because we now know what we didn't know then. The season is so short, and the window so narrow, you have to have a good year or you will go broke unlike other year-round business opportunities. Do I expect Liberty to run my business for me or hold my hand like a child. No, I expected to be able to talk to someone who knew the business and understood based on demographics what may work best. Also, if you have new franchisees, what does it hurt to help with doing some local advertising so that they have a better chance of success. This is the kind of help I expected, needless to say I didn't get it.
I'm sorry to hear you did not get the support you needed. You are right this is where our perceptions differ about Liberty.
Curiously how did your 2nd year turn out?
Frustrated and Disgusted,
If you want to talk outside of this forum I would be happy to talk to you. We disagree on here but I think by us speaking one on one and finding the common ground that we do agree on I may be able to share some things that will change your business. I have always been willing to put my money where my mouth is and I would be happy to speak to you confidentialy and would be happy to help increase your business no strings attached.
I have never said Liberty was perfect but no company is and I am willing to bet my first year was as challenging if not more challenging than anyone out there. There is no Franchise out there thats perfect or that does not make mistakes. The difference is I refused to quit and I refused to be average even though my first year was a disaster. It is up to you but I am willing to talk one on one and my only intention is to see if I can help, our conversation will never go any farther than you and I. I can tell just from the posts you have natural talent and your name Frustrated and Disgusted describes more of how your feeling than your talent level.
NJ Zee
My experience was after I bought my original territory in November., none of the sites I had chosen were considered acceptable locations by the AD/Corp office. Because the tax season would be starting soon and because we couldn't agreee on my site locations I was (foolishly on my part) persuaded to swap my territory for one with the right type of location i.e. urban/poor AGI 28,000. Didn't get approval for the Certificate of occupancy until Feb. 3 so my first tax season was a bust. Never got over 100 returns. The following season I moved to a different store location and after 3 seasons finally had to call it quits. In talking with other franchisees my situation is not unique. My only motive for posting on this website is to offer insight to potential franchisees and maybe help them avoid the type of mistake that I made.
The tax prepartion business is more complex then Liberty makes it out to be. The system that they developed works best in urban/poor areas where you can get low rents and maintain a high net fee through bank products. However, this area of the tax business is starting to change as fewer banks are offering this product, The IRS is doing a way with the debt indicater and is working on a new program to speed up the refund process. Also due to the economic downturn there are less people filing and the biggest group hit by unemployement are the poor. No wages no EIC.
Liberty Tax does not do any national advertising... You can talk all you want about guerilla marketing but it does not build brand recognition as quickly as a national marketing campaign. Just look at "AFLAC" for an example of how well national advertising works. The reason Liberty doesn't have a national TV campaign is because it's too expenses and JH doesn't want to spend the money. Is it any wonder why the online tax service e-smart failed. Who would know it's available if the company doesn't advertise it.
I could go on but I'll wait for the usual comments from you about how I didn't follow the system.
If this is the way the Liberty zees talk TO each other... have fun with yourselves. I'm outta here.
Bill:
Over the last couple of weeks, I have made several phone calls and done some significant research. Situations like yours are not unique by a long shot. I have also found out through the same research that a significant number of stores and owners are in deep financial trouble. Much of what you discuss is the issue. Strip mall store fronts in many areas are very expensive, add to that the significant cost of marketing, and you have an unworkable business plan. For Liberty to survive, they need to bring down the costs to a sustainable level. Some of that needs to be national advertising, some needs to be additional support for services that will bring in revenue off season, and to your point, realize this is a much more complex business because the revenues from EIC and RAL's are quickly going away. It is unfortunate that they have their heads in the sand thinking that this will all go away and be good again when the economy improves. I have serious doubts.