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?
.
Recent developments have left franchisees worried and uncertain about their futures. To advocate for greater…
The Building Kidz Worldwide franchise is an opportunity to own a preschool & childcare center…
PAINT NAIL BAR has undergone some significant changes since franchisees contacted us with their complaints,…
U.S. Veterans magazine has removed JDog Brands as its #1 "Best Franchises for Veterans" list.…
More than 400 Veterans & military families who invested in JDog Brands franchises have failed,…
Genevieve McDaniel is a former franchisee turned franchise researcher, franchisee advocate, advisor and fiercely honest…
View Comments
I ALSO HAD CTC WITH LTS. THE 1ST ONE STARTED IN 2001 ENDED IN DEC 2006. WE WERE USING TW SOFTWARE FOR THE FIRST 4 YEARS. TW SOFTWARE DOES EVERYTHING. WE WEREREQUIRED TO TEST LTS SOFTWARE IN 2006. LTS WAS THE WORST. IT WAS NOT AS GOOD AS OR BETTER THAN TW. LTS WAS SO BAQD I ADDED 3 PAGES TO THE NEXT CTC. CALLED LTS RESPONSIBILTIES AND ACCOUNTABILITY. IT MADE LTS RESPONSIBLE FOR PROVIDING GOOD TESTED SOFTWARE. IF THE Z DID NOT FEEL THEY GOT A GOOD SYSTEM/SUPPORT THE Z COULD TERMINATE LTS WITHOUT POST TERMINATION REQUIREMENTS.
LTS DID NOT LIKE MY 3 PAGES...SAT ON THE 2ND CTC FROM DEC 06 UNTIL JUNE 5 2007, THEN REMOVED MY PAGES, SIGNED THE 2ND CTC AND PUT IT ASIDE. WE THOT LTS HAD AGGREED TO MY CHANGES ..UNTIL WE DECIDED THE SUPPORT AND SOFTWARE WAS NO GOOD. CHANGED OUR NAME, WENT WITH TW ... NOW IT LOOKS LIKE WE ARE GOING TO SUE LTS FOR NOT AHEARING TO THE CTC.
WILL KEEP YOU ALL ADVISED. IF YOU HAVE ANOTHER CTC COMING UP YOU SHOULD ADD MY CHANGES...
JOHN
Liberty can draw some lines on a map and sell you that location for 40k. Guess what, you cannot operate outside of those lines and when you fail, you cannot run a tax business 25 miles in all directions from those lines. Failing is almost guaranteed. Do yourself a favor and save your 40k and you have no boundaries at all.
Another Top Liberty Office in South Carolina busted by the FEDS!
Greenwood and Clinton, S.C.: The U.S. has filed to bar a preparer Julie E. Hueble from preparing federal returns for others.
The civil complaint alleges that Hueble owned and operated three Liberty Tax Service franchise locations in South Carolina and that she and the employees of her prep stores prepared federal income tax returns that improperly understated clients’ tax liabilities or increased claims for refundable tax credits.
The complaint alleges that Hueble and her employees prepared returns for clients that, among other things, falsely reported on Schedule Cs
non-existent businesses or inflated income or deductions. The suit further alleges that Hueble and her employees fabricated other deductions,
claimed improper filing statuses and falsely claimed dependents, all of which resulted in fraudulently inflating refunds or refundable credits or both.
In one example in the complaint, Hueble fabricated a child-care business for one client even though the client did not own such a business and gave
Hueble no documentation showing that she did. The fabrication enabled the client to receive an inflated EITC.
The complaint states that Hueble’s stores prepared 2,165 federal income tax returns between 2012 and 2014, and that she prepared 904 returns
during this period. Analysis of returns filed in that time revealed that the harm to the U.S. Treasury caused by Hueble’s conduct might
exceed $1 million, according to the suit.
Here is the article that came out in Accounting Today that NC Hillbilly is stating.
http://www.accountingtoday.com/news/tax-practice/tax-fraud-blotter-a-year-and-a-day-74830-1.html
How long can corporate keep skating out of responsibility for this type of fraud.
The real story here isn't the fraud.
She did about 2200 returns in her three stores over three years. That is less than 250 per store per year.
Let's assume she paid the 45k for each store. Add on royalties, rent, payroll etc etc...
She realized she had been taken for a ride. She really had no choice to recoup her money than to do fraudulent returns for big tax prep fees just to break even. She had to facilitate $1,000,000 plus of theft from the treasury just to pay john Hewitt.
She was robbed by liberty and one good turn deserves another.
The story is that liberty is a bad investment.
Greg: I echo your thoughts and hope anyone who is thinking of buying this franchise heeds your advice.
As to the issue of fraud and responsibility, with more of these franchisees being shut down by the IRS lends evidence to a culture within the organization that these kind of actions are acceptable.
Greg,
The same thoughts went through my mind: 3 stores, 3 years, 2200 returns. No way to make a living, let alone a profit on that. I think some people are driven to fraud due to the enourmous amount of investment loss and likley debt incurred along the way. I know Liberty offered me loans to open more stores, etc. Thankfully I didn't need thier loans and didn't bite. But how many people invested thier 401K money, thier savings, etc.
Bottom line for any potential buyer: Liberty will take your hard earned money and sell you a territory with little to no chance of success. I've said this before and I will continue to state: if the system worked so darn well. .why are there franchises owned by "top gun" franchisees that are simply not profitable? Because the good territories are long gone and the business model is outdated and going from bad to worse.
Drop in a big bucket. Tax fraud is an epidemic the IRS can control with elimination of the earned income tax credit. The credit is being reviewed. Ms. Missy from SC just decided to get more money. Greed is the bigger problem. Funny how the customers just throw you under the bus when the IRS interviews them. 85 returns $500 fine is $42,500 owed to the IRS. Fines can be for multiple years and don't include the money paid in refunds. This stuff is scary. More scary than Liberty.
Yes, I agree
She was greedy to get that money back she spent on the territories and royalties
Greed did play a part. John was greedy with the franchise fees and royalties and she in turn was greedy to make enough money to pay them.
There is money to be made in tax preperation. A smart person would never consider purchasing a franchise if they just sat down and ran the numbers without listening to the hype being sold. The royalties and Advertising fees that is charged compared to what you actually get for paying that giant amount is shocking. And we are not even taking into consideration any interest on loans you may owe either because of financing a store or an inability to pay all your royalties and ad fees. You get 2k To 3k of real value for all that money given away, and a lot of times that means giving away 100k plus each year. There is no reason to pay the franchise fee then pay all the fees for the system when anyone with any sense can implement a like system for next to nothing. We live in a age where all these systems can be copied for nothing, it's not like it was 30 years ago. Franchising is corrupt and that is sad but it is true. After learning the most expensive lesson in my life I would never be associated with franchising of any sort ever again. The saying "In business for yourself but not by yourself", is not a positive thing because the not by yourself means they have the right to force you to do what is in there best interest even when it's not in your best interest at all.