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
Totaly agreed-Frustrated. Just last season the AD said "it's about bringing people in and then consolidate" which means get a bunch of new people in the system, use and abuse and then take over. This area developer is Gene H. and it he aint no comet! He said that is Liberty's goal.
Hello... I'm the Liberty Tax sign holder from Kearny Mesa,CA. I just wanted the forum to know I finally received my last paycheck I was waiting a month for. My company owner here didn't flee the country like I originally suspected. Ha !! Ha !! On a serious note may all of your luck change for the better with control over your franchises. As we begin to do more for each other some day money will be a thing of the past, but as long as it's here for now we might as well band together and support each store and increase efficiency not only for payroll matters but for ease of business---lets get $50 coupon books in the offices,start to process returns in high volume, offering a nominal fee just above what someone would pay online for e-file, in office food, soda and treats, maybe an American flag or two and we will be well on our way to controlling our finances on the way to not needing tax services or money in the future. May God bless all good people , Thank You.
I was also bamboozled I followed the system johns top 10 gave free pizzas out the ass and doughnuts within a 2 mile radius of the store. Maybe got 5 returns out of that and spent thousands on free food.
Needless to say I had to full time wavers and a marketing person. I had coupon holders in all the gas stations and taliban stores. Did radio ads and also did a block part as they recommended for visibility. I also participated in the christmas parade and gave away bam bams candy ballons and coupons. I started my marketing in december I figured the early bird gets worm. Well I got no worm. I ended up with 62 returns and 13 were free after sinking an additional 37000 in operating expenses for the 4 months.
I kept calling my ad for assistance and he would suggest different ideas which I did but only put me further into debt. At the end all I did was SPEND MY MONEY TO FURTHER LTS AND PROMOTE THEE NAME. If I would have known this I would have just had 1 preparer in the office and that would have been it. Would have lost a hell of a lot less money.
All I can remember from EOT was that they made everyone believe they could do as many returns as they wanted. Well that was a lie. The only way to recoup ur money is to sell out to block by showing them the LTS system. You know the free doughnuts and costumes. I did have a noncustomer make a comment once and it did make sence " why would you have someone that uses costumes prepare your taxes". Looking back kinda makes sense
In the meet and greet with John and the request for consideration which occurs prior to that a question is asked on the paperwork similar to this:
"Do you a job?" This question is posed so that LTS may consider your ability to survive the off season.
It is already understood that Liberty agrees that your first year projections should be 600 returns.
Well if that were correct and assuming 100 free then 500 net returns multiplied by at least $150 per return would realize $75000. Less $15,000 for franchisee fees, $25,000 for rent/utilities and $25,000 for payroll and $5000 for marketing.
This would leave a first year profit of approx. $10,000. That wouldn't bee too bad for a first year office. I was a top twenty 1st yr office and I had a net loss of over $40,000!
Of the 300 or so new offices, the
20th office prepared 501.
50th office - 391
75th office - 336
Take off the freebies and you see a whole different story!
What does that say about the other 225 new offices?
How can anyone hope to make money... any before Barilla rears his ugly head... look at the 2nd year offices:
20th - 700
50th - 576
75th - 515
Wow.... So the 75th second year office of 400+ new offices according to entrepreneur.com - less 100 free prepared only 415 paid returns.
And the third year office in 75th place prepared only 580 returns!
Good times....
I am one that believes that there is great opportunity in the tax preperation business but will warn anyone that believes that you can build a tax practice on buying and delivering food products and with costume wavers outside alone without any business savy not to buy or go into any business. This business is tough and takes understanding what makes your potential clients respond and more importantly have the ability to execute a plan to make it happen. Yes you can use Johns Top 10 to be very succesfull but if you cannot do the many other things it takes to build a business and have a natural understanding of business and being able to judge when things you are doing is working or when you or wasting your time to stay away!
Liberty has allowed so many to open offices when they had no business in being a business owner let alone a Liberty Franchisee. In business it takes skill, some luck, and the ability to not quit despite the doom and gloom that will more than likely hit you the first couple of years. Its hard work and takes a ton of humility and the ability to not only blame someone like Liberty but to take responsiblity for your own mistakes and mis steps and the ability to look at all of these and formulate a plan to learn from these mistakes and to move on to success.
Good luck to everyone.
We need to start a revolt, i bought a new territory and this was my first year. they lead me to beleive that i could do as many returns as i wanted. that was a lie. I did between 200-250 returns and many of those free. i have lost so much money and the wife is threatening to leave me. I dont know what to do. i followed the system but the system sucks. the guy down the street an independent did close to 1000 returns and had to pay no franchisee fee or royalties. He had wavers dresssed as uncle sam and did b to b and coupons but under his own name. LTS Sucks
Antonio
Liberty Tax Service uses the same business model as Jackson Hewitt.
If we look at JH financials they provide an average number of tax returns per office by number of years in the network.
fiscal 2009 fiscal 2010
1st 205 166
2nd 235 234
3rd 274 253
4th 305 277
5th 348 297
6th 405 334
7+ 558 482
Yet Liberty starts a first year store off with a bogus 600 return which they use for every store regardless of location, demographics or franchisee ability. Then using this number they give you a projected staffing chart which if you follow just cost you money. John Hewitt just willfullly present misleading facts to sell their franchises. Unfortunately franchise law is written to protect the franchisor and not provide any real protection for the franchisee.
The 4/30/10 financial stmts for Liberty Tax Service shows they issued $32,488,000 in operating loans to it's franchisees so the franchisee can stay in business. This averages out to $10,000 a store. Which supports your position that there is not enough cash generated during the tax season to make these stores profitable.
I think the post from first year Z in NC proves my point. Liberty has its issues yes, but because a guy or female believes that they can just do any amount of returns they want by following any system and then becoming irate just flat out amuses me.
I am not sure what you were told NC but I am guessing you have limited business experience if any at all and would of struggled with any type of business. As far as the guy down the road that is fine but there are just as many independents out there not paying royalties that are going broke.
I think whats the most important thing is for everyone to realize what the truth is and what is personal opinion.
NC Z I want to appoligize for the "amuse me" comment. I do understand where you are coming from and would like to offer some advice.
1. You must limit your expenses to only the items necessary.
2. Find a Z who understands how to operate a Liberty Office, they are out there and they can be found. They can help you seperate fact from myth.
3. I think you may be better off than you think. As far as your spouse well thats one of those things that needs to be addressed going into any business. It is very hard to succeed when your spouse gives you no room to make mistakes and expects only success from the very beginning.
I am not going to defend Liberty in what you were told because I have no clue. I can tell you that you can quit now and accept the losses, or you can do some real investigating and find out if you can pull it out next year at least to the point where you can sell the office or recoup some of your losses.
I hate to interrupt the pity party, but does it occur to any of you that you bought a franchise OPPORTUNITY? Note the word is "opportunity" as opposed to "guarantee." You decided to launch a business VENTURE. If you want a promised ROI put your money in an FDIC insured account and reap the big reward. Don't start a seasonal small business in a highly competitive market.
You all signed a big fat franchise agreement that said you didn't rely on any sales numbers or projections that weren't in that agreement when you purchased your LTS franchise. Now you all claim you were "bamboozled." Take some responsibility for once.
The comment by "new francise zeew" on May 13th, 2011 1:40 am is classic.
"I was also bamboozled I followed the system johns top 10 gave free pizzas out the ass and doughnuts... I had to full time wavers and a marketing person. I had coupon holders in all the gas stations and taliban stores... I ended up with 62 returns and 13 were free after sinking an additional 37000 in operating expenses for the 4 months."
"I kept calling my ad for assistance and he would suggest different ideas which I did but only put me further into debt. ... All I can remember from EOT was that they made everyone believe they could do as many returns as they wanted. Well that was a lie."
Guess what? All the adults in a 2 mile radius of his shop had someone do their returns - just not the crude bigot who gives pizza "out the ass" and refers to his prospective customers as terrorists.
Anyone who claims he believed "they could do as many returns as they wanted" would have lost his money to the next magic bean seller anyway. Many of you should admit that you want the return of owning a business without the risk or the responsibility.
Look on the bright side... at least you've got someone else to blame for your decisions. That's something.