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
Just curious if John Barilla is still out there?
This is about the point in the tax season where you begin to realize you just aren't going to make it and that you have made a huge mistake, despite 'following the system'. Good luck to you all, I'm afraid you're going to need it.
Man the doom and gloom here is out of this world!!! This is part of the season I get exited. The early season is over and now clients that my preparers have spent much time building solid relationships start coming in. These clients pay by check cash or credit card, set appts, and truely appreciate the service we provide.
Last year we did well over 30 percent of our business in March!!! Thats paid business. And this year that will be even more and thats on top of having a great early season.
This business is not all doom and gloom. I know many do not beleive that but the opportunity to be succesfull is tremendous in this industry!!! No its not a walk in the park and yes it takes total commitment but there is not another industry or business I would want to be involved with at present.
I know the attacks will come but thats normal here. Everything nots doom and gloom. Late season clients who frequent paid preparers do so because of the value they place on the relationships with they have with the preparer. Build relationships with these clients and charge a fair price and late season will work.
Bob and Frustrated,
First of all I am sure you guys are the person. I just think it looks pathetic that you guys keep posting on here over and over. If you spent more of your time trying to run your business the right way you would be way more successful. Not preaching, just a thought
by the way sorry i didn't mean Bob and Frustrated are the same person. Don't Be Fooled and Frustrated are definitely the same person or life partners.
RUN FAR FROM THIS MONEY-PITT.I LOST HALF OF MY LIFE SAVINGS,AND
THSES PEOPLE LIED AND DID NOT DO AS THEY SAID THEY WOULD.
THIS PIECE OF TRASH IN VA MAKES HIS MONEY BY SELLING THESE MONEY
PITTS,THEN LEAVING YOU HIGH AND DRY.
Another testimonial of how inept this organization is to run anything larger than a small tax preparation office in Virginia Beach. Again let me repeat RUN FROM THIS ORGANIZATION LIKE YOUR LIFE DEPENDED ON IT, BECAUSE IT DOES.
Frustrated,
How many times are you going to post with different alias? You have lost all credibility that you might have had. Face it, at some point look at yourself in the mirror and blame yourself, not the rest of the world!!!
John:
I have one alias, Frustrated and Disgusted. I have never posted under any other name. Like your B2B person, my point is to hit the same point over and over. I again spent some time in a major city in the southeast over the weekend. Had a chance to stop in and talk to several franchisees. Same story over and over. If your store is in a low income area with a high visibility storefront, you are coming out OK. Higher income areas, the store turns into a money pit with no way out but bankruptcy. My point is that Liberty is out selling territories in areas that they either know and don't care, or are so inept they don't know will fail. I suspect it is a combination of the two. I see people investing hard earned money, follow the system, and are in debt up to their behinds with nothing to show for it. Liberty has an obligation to understand what markets and territories are viable and which ones aren't. And don't tell me they are all viable just because the territory exists. Unfortunately people are not aware of the pitfalls of this business, and the ineptness of this organization. JTH will sell any territory regardless of it's viability. When it fails, he blames you for not following the system and resells it to someone else who again loses their money. Sorry, but this is a dishonest way to do business.
John
Most franchisees are not successful. If they where they wouldn’t need operating loans from JTH. According to the 2010 financials JTH Tax had to loan $32,488,000 in operating loans to its franchisees. Based on the 3,280 stores listed on this web site that breaks down to $9,904.88 per store. This shows the stores don’t generate enough cash flow to stay open. With the exception of certain stores the only winner in this is JTH Tax
Just curious, we all know that JTH is an SOB. How can we stop them from destroying more lives? Someone posted a thread to a lawsuit link above but it is not there anymore. We need a Class Action lawsuit against them ASAP, any suggestions?