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
@ZeeOut - You're correct. Everyone associated with this company are bullies. They are there worst enemies!
Well guys, we found out from Admin that there is no such subpoena. What may have bothered Jim was that there has been fraud, that he could not deny, by two Top Guns. This, of course, is not good and the Liberty's name is tarnished. Sure, others have done the same thing but this comment site relates to Liberty so keep them as the subject matter here.
I asked this before and would like a pro-Liberty commenter to let us know if Liberty is paying back the U.S. Treasury the 19% royalties and ad fees they received from fraudulent return prep fees? You can say that Liberty is innocent but profiting from fraud is not right. I am surprised that the IRS does not try to recoup some of their losses from Liberty Corp. I understand that the prep fee is not supposed to be related to the customers refunds but we know that higher refunds justifies (in some minds) a higher prep fee. Also, are the taxpayers so ignorant to not understand their returns were incorrect? What about ghost taxpayers that do not exist? Were there any of those? You would think that both the franchisee and Liberty would need to explain all of this to the IRS. I am not a fraudster so I don't know how all of this works.
I believe Liberty should concentrate on putting controls in place to identify fraud. Less focus on suing former franchisees and more focus on repairing the Liberty image. Companies can turn things around, but they have to want to do it.
Was very interested in buying a franchise until I saw the operations of a local office on Curryford rd in Orlando. I would like to speak to the founder and express some concerns we have.
It looks like the stock is taking a beating today. Perhaps the market woke up to the shenanigans of John Hewitt?
Fastest growing? Not anymore
Biggest by 2020? In your dreams
How's that stock doing?
I guess Hewitt has nobody to blame but himself for his failure
2 maybe 3 years I predict Hewitt retires and the company goes belly up
The major individual holders have been selling the stock like crazy
No purchases only sales
It's about over IMO
The chickens are coming home to roost! It must be that all the franchisees didn't follow the system........or maybe the system sucks! Hahaha!
Ralph, read the most current posts before you decide to invest in Liberty.
http://www.nasdaq.com/press-release/liberty-tax-service-reports-us-tax-results-through-april-17th-20150430-01572
Preliminary Tax Season 2015 Results
U.S. Tax Returns
2015 2014 Change
Offices 1,830,000 1,818,000 0.6 %
Online 45,000 173,000 -16.2 %
Total U.S. Returns 1,975,000 1,991,000 -0.8 %
Not good, the overall is a negative.
More than likely, Liberty will be losing hundreds of franchisees. They lost Syed, I wonder what these numbers look like, minus those returns.
Bad investment, very, very bad investment. If anyone buys into a losing entity, shame on you!
Maybe JH's $50 Wal-Mart Gift Card for All or their small but more available RAL took a bite out of Liberty's results???
Yes, IRS and public at large; Liberty Tax's return count most likely includes those fraudulent returns from Maryland, Detroit, and Chicago. If so, will there be an investigation into Syed (Detroit and Chicago) and Liberty or just Syed?
The taxpayers are the losers here. When John Doe Tax, Inc. does fraudulent returns, he is totally responsible, as he should. be. When a franchisee of Liberty prepares fraudulent returns, the franchisee is the only one responsible? What gives here? All tax returns from franchisees flow through Liberty to the IRS. They of course cannot know which returns have fraud and which don't. But, they should be paying some fines for not adequately monitoring this. They knew the IRS was interested in certain franchisees and what did they do? Maybe they helped the IRS. Anyway, this lead one to believe that you are best to go it alone as an honest tax preparer and business.
The most important thing to note is John Hewtitts credibility is GONE, BAM, OUT THE DOOR, ADIOS...all of us with a brain knew the ACA was going to be a BUST!! I guess his inner forecasting and brilliance should be a warning to all of the current and future zees...your AD will likely want you to spend more money on wavers etc......which will not help you.....get out now while you can!!! LIBERTY/JOHN WILL ALWAYS BE NUMBER 3 BECAUSE THEY PUSH A LOT OF NUMBER 2!