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
What was written and what was promised were two different things, They keep telling me those figures applied to the losers and i was a winner. I was suckered, my fault, but still i was suckered by a deceptive company. IF THEY WERE TO TELL EVERY PROSPECTIVE FRANCHISEE THE TRUTH, THAT YOU WONT MAKE ANY MONEY, NOBODY WOULD BUY THERE SHIT.
New Zee, WAY TO GO!! TELL EVERYONE EVERYWHERE!
New Zee wrote: "IF THEY WERE TO TELL EVERY PROSPECTIVE FRANCHISEE THE TRUTH, THAT YOU WONT MAKE ANY MONEY, NOBODY WOULD BUY THERE SHIT."
It looks to me like Liberty Tax told you exactly what you would make and you bought it anyway.
New Zee stated that he did 220 returns @ $200 each, which is $44,000.
In the earnings claim provided by Liberty Tax above they stated the average 1st yr store did 284 minus 17.63% which equals 234 paid returns @ $164.20 for a total of $38,422.80.
They gave you actual sales figures and you did about $5577.20 above the average that they gave you. I don't see how you can claim they were deceptive. Please don't say that they made verbal representations that contradicted the legal document because you swore in the Franchise Agreement that you didn't rely on any other representations and that would make you a liar and I'm sure that's not the case!
You forgot the FREE returns... ~200
According to the figures put up by admin it shows that 89% of 1st and 2nd year offices are loosing money and the 11% on top are barely getting by after expenses. Wish I would have been giving these figures at the LT meet and greet instead of the hype that was spread around. Without any national ads Lt has no name recognition unless you look up the number of law suits pending. Their marketing strategy just does not work in most areas today. Of the 12 stores that opened in my area 9 has been giving back to Liberty and my 2 are next. The one store that made profit, very little at that, was a z that owned his own building and had another business operating in the same office. As far as the z's that are failing i"ve heard from guest that we must be stupid of don't know how to run a business. Well I have run businesses for three individuals and my own for 10 years befor retiring and all were successful because we had a good marketing strategy and advertised locally in the media. What is LT doing with the advertising dollars that are paid to them? I personally believe that the money is used to sell franchises and not used to benifit the franchisee. The majority of us that have bought franchises were smart enough to save for their retirement so I don't believe anyone of us is stupid, we just fell for a good con. I take full responsibility for my actions and will suffer the consequences but I just don't want anyone else who worked their whole life loose their money to this scam artist. I will work to stop this as hard as I have worked over the last 65 years.
He said he did 220 paid returns.
Isn't it obvious that guest is a AD or a LT plant? What city is your office located in? How many returns did you prepare?
guest
People believe what they want to believe. Look at Bernie Madoff and the people who got taken there.
My only point for being on here is to inform potential franchisees that there are better ways to use their money then to invest in a "Liberty Tax Franchise".
The question every potential franchisee should ask themselves before they invest in any franchise is what can franchising provide me that I can't do myself?. Am I getting a brand that is well recognized? Does the company provide national or regional television advertising campaign? What are current and former franchisees saying about the company? Do they have a strong business model? What about training? It was my experience that Liberty was lacking in all of these areas.
Yes they were.
Richard B, I am with you. I will forever each and every day, tell as many people as I can about Liberty Tax! I also post as often as possible on Block's Yahoo board, Liberty's F ac e Book , Tw it ter etc. I will continue to spend 2 hours per day sharing my experience with John and his POS company!