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
For those curious I have decided not to go with LTS for next year. I have rented out a small office room inside a financial place for this season. I have been open a week and already done 20 returns.
I am well on my way to breaking my last years sales and could not be happier. Time will tell but I think I am making the correct decision.
I may revisit a tax franchise at some point, but it won't be next season. I want to see how far I can go with this on my own.
Thanks again for all your help and advice. You have no idea how much I appreciate it.
Horation: Your making the right decision. After tax season you should take the time to look at franchising overall. What you will discover is a model that was once constructed to benefit the interest of both parties has changed. Now a concept is marketed as a viable business, paying the franchisee fee funds them and thanks to how the contracts are structured, the new franchisee becomes a crash dummy.
If you review this site and the internet there are many franchises that target a start up cost of $50,000.00. Most if not all of these franchises are legal scams and are targeted at the middle class. The middle class is a perfect market, enough equity in their home or values in their retirement funds to buy a franchise but most don't have enough money to legally pursue the franchisor. More importantly there are no federal laws to protect their interest. The FCC is a joke and the required franchise agreement does not require data based on the overall performance of all franchisees. It allows the franchisor to selectively pick what performance information is disclosed.
do you think with John's new book and all of its awesome sales he will finally be able to afford braces to help his bucked teeth?
Horatio,
Rest assured you made the right move.
You are doing as many, if not more, business than if you had bought a LT franchise.
There is no way you would have done 600 returns with a new office - lucky if you do 200. You would be spending money on wavers, donuts, marketers, etc. and when the customers still don't walk in the Area Developer (what a joke!) would tell you to spend MORE! That its all your fault, you are doing something wrong.
I, as well as the 4 franchisees in my area, have all gotten out. That is 5 for 5.
The corporate goonies on this site want you to believe that we are "loosers." Really? All 5 of us had/have successful other businesses, the backbone and the means to buy and run a franchise. We are not loosers - the good territories are gone, the system doesn't work for all territories and, IMHO, the model is loosing favor with the public in general. These people are croo ks.
I am one of the lucky ones - while I lost money - I didn't have to borrow any either. I am too busy with a successful business (and my life) to frequent this site often but believe me, there are PLENTY of people who have been taken and feel the same contempt for this franchise.
Good Luck in the future.
ZeeOut: Unless it would compromise who you are would you mind giving us
the State your store was located in.
South Jersey is a dying area for franchise sales. There are a couple of main stays, Glassbore, Clementon, Mt Holly and Camden. Every other territory is less then 5 years old and most likely will be closed by the end of their 5th year.
There was a store in Atlantic City up till tax season started but that's been removed from the board. I do see there are now two in Vineland, one at 703 E. Landis Avenue and one at 705 E. Landis Avenue. One office most have the Liberty Tax Sign and the other the Siempre Tax sign. Just out of curiosity I called and one office answered the other went to someone's voice mail. I wonder how many
bogus stores are listed on their website.
Could someone recommend what software I can buy to work as an independent tax preparer? I currently work at a Liberty Tax and I was thinking of openingmy own office (in a different state) but I don't want to get a franchise. (or what software you would recommend)
Thank you
You should try Drake. It is a good system, with good support. If you have done a corporate return for Liberty, you have used Drake. The one thing Drake does not do is store returns in a corporate area. You will need to set up an external back-up, with a good automatic back-up schedule.
During the season, my back-up is daily.
I like the program and I use it for my clients. It does have some quirks, but all programs have them.
I hope this helps.
I use Drake and I believe it is the best and especially has the best support. Phil Drake and his family are very centered on our happiness and being available and helpful as possible. They offer bank products and make sure everything you need to start a business is available along with CE.
Out and Glad, which external system do you recommend for back up daily?
I use a Western Digital 1 TeraByte external drive. You can use any type you like. I have seen 4 TB drives for under $125.00
I do agree about Drake. I will not use any other software.
Thanks for the information!
What's the cost for using Drake? is it a one time fee or is there a monthly subscription?
Thanks!