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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Ok, I found the pricing, I see two options, what do you guys use or recommend?
Options: http://i.imgur.com/I9dbmWP.png
It depends on the number of returns you plan to do. If you are going to do less than 100 returns, the pay per return option is good. Look into it, if you purchase 100 returns they change it into the full option.
Look on http://www.drakesoftware.com. That is the official website. The pay per return price is $300 dollars for 15 returns. You would then have to purchase extra returns at $20.00 per return. Once you reach 85 returns it is converted to an Unlimited license. You can do an Unlimited license for $1495 dollars.
Horatio, Dan and now Richard:
You are ALL doing a wonderful thing by backing away from this franchise. There are not enough negative words to describe what they do each & every day to unsuspecting average people that get suckered into their sales pitch. It is such a blessing when I hear & read that people have backed away before signing. It's music to my ears. My life would be SOOOO much different today if I had this website to warn me about the pitfalls of this franchise. But life is about learning and growing. And life is also about extremely stressful situations that happen to unsuspecting innocent people. Being at the wrong place at the wrong time. Losing thousands. Literally thousands. For what? To line HIS pockets so he can buy more prostitutes. I grew up REAL fast after this stressful experience. Did I mention STRESSFUL?? It is SOOOO not worth it, especially if you already have Tax experience! Do it on your own. Build it up each year. Give good service with a smile. Reasonable prices. They will refer friends & family to you. You won't have to hand out $50 bills either. And you won't have to have this franchise breathing down your neck. YUCCH.
Take all this advice on this website from lots of us who have been miserable. The only place to go is far away from this company and never sign. I cannot stress how much of a bullet you're dodging. Congratulations on decisions well made!! :) Go forward with your plans independent of this franchise and don't look back. You will be saving yourself money & so much peace of mind.
Thanks San Fran Dan
I just hope I do not end up regretting it. Given more time to think, I dont I will.
The realty Dan is your a tax professional and not a salesman. If you listen to us and don't go with Liberty you will be ultimately responsible for the results. However, if you do go with Liberty you will still be responsible for the results but you will have paid a franchise fee and committed your self to a minimum franchise fee of 5.000.00 the first year.8.000 the second and 11.000 per year after. Understand your own strengths and weaknesses and than offset your own skillts by paying someone.
Thanks for all the information, Drake software looks pretty good.
Unlimited license for $1495 dollars will cover unlimited (online?) returns? no extra money for 1 year? Next year is the same fee?
Thanks
I have Drake and if you buy the unlimited package early, I think by June, the price is deeply discounted, I paid $1095 for the early purchase.
Unlimited covers all types of returns, 1040, 1065, 1120, etc and also gives you access to the Document Management System. Drake returns are NOT online, the software sits on your hard drive and like many have said, make sure it is backed up!
I can't turn on the TV without getting barraged by H&R Block ads with the guy dumping billions of dollars in refunds out of the cargo plane. It's annoying, but I bet it's effective. Has a great line about them making "tax season" into "refund season."
When I think of Liberty Tax I think of the crackhead-looking dude they arrested in our town a year or two ago. The cops had him handcuffed on a busy sidewalk in his ratty Lady Liberty costume. They had him mistaken for another guy they were seeking, but it turned out he had outstanding warrants so they jailed him.
Do Liberty franchisees actually pay an advertising fee for that mascot strategy and no advertising like Block has? I think those wavers do more damage to the brand than good.
I am surprised that the IRS is not looking at H and R Block returns. Also anyone who is an actual tax payer would darken their doorway after this refund season. It is very disturbing and we will see if it doesn't hurt them in the long run.