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
While I think there are grounds for a lawsuit, getting to JTH is going to be tough. You have to show that he knowingly set out to mis-represent the opportunity which in a business environment is tough. There are some specific areas that should be explored which I will state to a lawyer, not on this forum. My suggestion is to find a good law firm that is well versed in franchise laws, and willing to create a link so that people can get in touch and supply supporting evidence. I know there are plenty who can supply the necessary documentation to get this started.
Mike and Frustrated:
I certainly would support a class action suit I just don't know where to begin?
AM HERE CAUSE I DONT KNOW WHERE ELSE TO GO AM A WAVER WITH LIBERTY TAX AND I LOVED MY JOB AM IN TEXAS UNTILL WE FOUND OUT WHO THE OFFICE MANGER WAS HE DID WHAT HE COULD TO MAKE MY LIFE HELL LIKE I HAD TO BRING MY OWN DRINKS AND COULD ONLY GO IN TO USE THE BATHROOM NOT TO WARM UP OR ANYTHING HE TOOK MONEY FROM ME OUT OF MY JACKET WHEN I WAS OUT DOING MY JOB HE GRAB ME AND THOW ME ON A WALL AND TOLD ME I WAS GONNA DO IT HIS WAY OR LOSE MY JOB AND THEN WHEN WE WERE ALONE AGAIN HE TOLD ME IF I WOULD GO IN THE BATHROOM WITH HIM MY TROUBLES WOULD GO AWAY THEN I HAD TO TAKE OFF WORK FOR MY DAD WENT TO TRY YO WORK AND WAS SENT HOME THE NEXT DAY MY DAY DIED AND NOW I DONT KNOW IF THE GUY WHO HAIRED ME WELL BELEAVE ME OR NOT I NEVER SAID ANYTHING CAUSE I NEEDED MY JOB A WAVER IN NEED CAN YOU HELP
Mike:
I will get you started. Ask around and find out who is a good lawyer, is familiar with business and franchise laws who would be willing to at least spend the time and find out whether there is provable grounds for a lawsuit. When you talk to him, the basis of your discussion needs to be that JTH is knowingly selling a system that only works in select areas, and is committing fraud in telling people that they will make executive income if they purchase the franchise. In a ton of cases, not only have you not made executive income, people have lost thousands of $$ trying. His real system is to have you and tons of other people lose money to build his empire. At some point he will have critical mass, but done with yours, mine and many others hard work and lost money.
I just bought an existing LTS franchise last year. This is my first tax season. I did not quit my real job. Today is March 7, 2011 and I completely paid off my investment of the business today. I owe nothing. Basically the money I took out of my bank to buy the business, down payments for this, toner cartridges for that, every penny is back in my bank as of today. I still need $25K to pay the rent for the year and I haven't t paid myself but I have to admit, I'm very happy with this years numbers. Next year if everything stays the same I will be at $25K profit and I did not quit my "real" job.
I looked over this site before buying. Wife even said after she read the above she wanted to do a "post nuptial" if I buy this business LOL Thankfully she didn't go through with it. I had a very long conversation with a few successful owners. I did a lot of homework and I took the plunge. Knock on wood. Everything is going as planed. I feel sorry for the above posts. I'm by no means consider my self "profitable" at the moment but my path is very clear and I'm confident the franchise I bought will be profitable in a year.
How?
Luck lol. # 1 I got the business cheap. The last owner had a crap location and did not use wavers????? I moved the location, turns out, a very good location. I got 4 months free rent + $6K in improvements. I put three wavers on the corner. Cash in a flash works! Use it for early season, period. Now I'm stuck with what the hell to do in March???? I did two returns today, crap. I just bought three 50% off signs and I'm going to couple that with March Madness or something??? I gota get March rolling. April will take care of itself.
Anyway I just wanted to give some feed back. Lots of good information here, but continue your research after reading here. Also I'm no expert, I have only 3 months experience LOL. I will occasionally post updates and I would be happy to post some numbers as long as there's no legal issues with posting here. My wife is a lawyer so I'm sure I can get the skinny on P&L's and so on. Cheers all :)
I'm glad your doing good. Would you mind telling us what state your store is located in the demographics of your area? Most of the ones that I know who have had some success, which isn't many in South Jersey are in lower income urban areas with a large population.
Thanks
My store is in Phoenix AZ area ,high populated low income. The location is ideal, of course. Why buy in a crap location???? Not all of this is luck. You have to do your research. It's important to find out what works as well as what doesn't work.
The reason I was on this site was to research the franchise over all (LTS). I was curious about the support they provided, tech support, marketing and so on. IMO: Over all the franchise works and I get what I pay for 19%. Would I be happier if they cost less? Yes, of course. However, that’s the price they charge and I agreed to pay for it, done.
My personal experience: The longest I waited for tech support on my computer issues was 2 hours. I had a computer fail and had a new one the next day. Of course I paid for the expedite fee but time is money also. Info I got from other franchisees was the same. Over all happy with the support provided but wish it was less than 19% LOL, go figure right.
Disclaimer: I’ve been doing this for 3 months, LOL, maybe my opinion will change, but doubtful. LTS makes money when I make money. LTS makes more money when I make more money. If they (LTS) was doing something illegal the courts would stop it, doesn’t matter how many lawyers they have or how much they spend on their lawyer fees. My wife is a lawyer and specializes in contract law, if there was something shifty going on with this franchise or any other franchise she would jump all over it free of charge. Of course she would collect a percentage of the punitive damages that could be in the millions
Basically as a franchisee I’m risking my time and money to make a profit. If that risk is acceptable I will do it. If not, I will keep my money in the bank at 2.5% LOL Nowhere in the contract did they promise me a profit. No one held a gun to my head to sign papers. If this fails it’s primarily on me. The economy is crap, I’m getting older, rent is going up, fuel cost are high, but I knew this going in. Good luck to everyone on here but don’t stop here and jump in a franchise with both feet, do your homework.
The basics are the same in every business. Where does the money come from? (the customer) and how much does it cost to get that money? (rent, franchise fees, labor and so on).
Someone tell me what to do about March???? LOL you can see I have a lot of time on my hands.......
John:
If you are happy, good for you. You need to remember two things. It sounds like you purchased the franchise for substantially less than the current $40K investment, and you probably got not only equipment, but a customer list etc. That goes a long way toward the success you are enjoying, not having to pay those up front costs. Someone obviously lost a bunch of money to allow your success to happen. Many franchisees you see on this forum did not have that advantage. In the next couple of years you are going to wonder why you are giving LT and JTH that 19%. They supply software which can be purchased on the open market for less than $1500 per year. You will realize that the customers are coming in doing so because of your efforts, not due to anything LT does. I can attribute less than 1% of my customers come in due to ever being on the website, and since H&R and Hewitt have better known brands, you are actually fighting an uphill battle to find customers. The 4% you are paying for Danny (the clown) Hewitt and his Marketing would just as well be flushed down the toilet. You are also paying for that A/D who has no clue about your area or customers, and does no more than collect some of your very hard earned money.
Certainly hope you have a good experience. We will be watching as your attitude changes.
LIBERTY TAX Scam Exposed by Franchise Owner
https://unhappyfranchisee.mystagingwebsite.com/liberty-tax-scam-franchise-owner/
Yes, I bought the franchise at a substantially lower cost than the $40K going rate and it came with everything. Basically a turn key operation. Yes, the guy I bought it from most likely lost a bunch of money and was disgruntled. I believe he was making an emotional decision and I jumped all over it. He actually told me he would of gave me everything for free if I was whishy washy and delayed until December, just so he wouldn't go through another tax season! Yes, I believe this added greatly to the success so far and I strongly recommend keeping the initial investment as low as possible!
You make a very good point about the A/D :) I agree! After the second month of paying my fees I realized I want that job! I'm irritated with myself it took me two months to see the light! I WANT that job :) I will spend this off season researching.......