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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To anyone looking at purchasing a Liberty Tax franchise, please keep this in mind. Liberty Tax, has no incentive whatsoever to help you as a franchisee, nor does your A/D. They will collect 19% plus of your hard earned dollars, and at the end of the day, you will have nothing to show for it. Not one person will come in to your store because you have a Liberty Tax sign vs Joe's Tax Service, not one person will come in because you use LT software, not one person will come in because JTH thinks he is gods gift to the tax industry, all of which you are paying for with your 19%. They will come in because they saw your advertising, have gotten to know you and your preparers, and feel comfortable that you are interested in their business. There is nothing that Liberty Tax will do that will help you be successful vs. your own hard work and effort. I have done a lot of research since I purchased my territory and found that except for one or two die hards who are getting kickbacks by LT, the rest realize they were taken big time by an organization that offers nothing more than a lot of hype and empty promises. I have heard them all, and now laugh when someone calls me to find out how I like LT. They get the same response at each store they call, don't do it.
Buyer beware!!!! Now that tax season is over JTH can go back to selling franchisees. That's of course unless he's too busy helping the people of Japan & Haiti, Feeding the Needy, Cell phones for Solders.
Don't buy it!! Most stores 90% do less than 1000 returns regardless of age, if after your 4th season you are not doing 1000 returns you are in violation of your UFOC and Liberty has every legal right to your store even if you are at 999 returns!! Liberty wants you to work hard, invest your life savings then in a few years the store is theirs!! Check your contract, and ask how many stores do more than 1000 returns! They are selling a nearly impossible task! If you follow their model be in a low income high RAL area, one small problem, RAL's are almost over with and probably will be next year unless JH finds some way to fund them I think he is doing a test with JTH Financial in Detroit area, keep your eyes open for this new venture because without RALs and with the dramatic increase in "free" return sites, most Liberty offices will be toast next year, unfortunately most zees don't see what is on the horizon!! and John certainly at the Greet and Meets won't be told how the industry is changing!
"Liberty Tax kicked sand in the faces of tax franchise competitors Jackson Hewitt and H&R Block by boasting strong systemwide sales growth for the just-completed tax season."
LIBERTY TAX Boasts Growth in Tax Returns & Revenue
Comments invited.
Not sure how anyone looks at 11% growth a win when you added 10% more offices. Still doesn't make it a good investment.
Frustrated,
Nobody expected you to say anything good anyways.... If growth had been 70% what would you have said then?
Frustrated,
Weren't you the one saying that there is no way they added 10% more stores since they have been closing a bunch.... Seems like you want to have it both ways....
John Barilla
I actually had a decent year, but it does not hide the fact that anyone who buys a franchise will get nothing for their $40K plus 19% royalty. I never even heard from my A/D during the season, the advertising that was supposed to happen never did, and the few times I tried to contact Tech Support, they gave me answers that were clearly wrong. That tells me the growth that happened was because the franchises themselves were more effective, not Liberty.
Rather than criticizing me, how about telling us what you get for your 19% and how it is worth that much.
Isn't it clear that LT wants us to do free returns only because it gets the number of returns up for the purpose of saying Liberty did more returns than H&R or JH. It is clear though that the 50% return rate that they said we would get is non existant. As for the advertising fees they charge where is the money being used? I see no advertising to promote the preperation side of the business. If you ask me the fees are being used to promote Franchise sales only. What they refuse to believe is that their way to attract business on the local levels do not work in all territories. Yes the Liberty wavers might work in small towns and the B to B also but I have franchises in the New Orleans area and people wear costumes everyday, nobody even takes notice of them. All I'm trying to say is if you buy in be prepared to be on your own as far as advertising goes. I've been with Liberty for two years and this may be my last tax season. I wish I would have read this blog before going to Virginia and hearing all the BS that was feed to me.
Free returns produce repeat customers primarily wanting free returns.
My second year office produced 700 returns. No RALS. Just ERC's and cash loans up to $100.
We prepared more than the nearby Liberty office opened at least seven years.
Yes we had a waver.
For all intents and purposes, any "Busy Bee Tax Service" would have been as successful as ANY new Liberty office.
RALS are going as we all know. Look at HRB's share price. Started the season at $12.49. Today it's $17.51. And HRB did not offer RALS.
What does that say about Liberty as the only RAL provider. Not much really.
Commercial software costs $1200.
ERC's are available from any of the major companies.
Leave Liberty... wait a couple of years and start your own brand.
BTW. My old Liberty friends (with the exception of ONE) all made less money than last year.