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
http://finance.yahoo.com/news/liberty-tax-partners-irs-fraud-152407055.html
Omg, this is so laughable. THEY are the ones that created the fraud, not the franchisees. IRS: Wake up & smell the roses.
Admin: I'll write "in my opinion"........
In my opinion, who better to show the IRS the fraud than Liberty themselves?
This is definitely NOT a matter of greed on the part of the franchisee, guest2. Believe me, I've had an education in corporate greed, fraud and governmental greed to last me several lifetimes. Things do not always appear as they seem.
Funny how the IRS and Liberty Tax Service have formed a PARTNERSHIP on going after fraud where we know they are certainly the experts in that field! Makes me nauseous.
If you are honest and have integrity, this is absolutely NOT the franchise for you!
SanFranDan,
Liberty is trying to work with the IRS not in preventing fraud by a tax office (bogus Schedule "C"'s), but in Identity Theft.
Liberty can then spin this into saying that they are vigilant in combating tax fraud.
If you click on your link, then go halfway down the announcement and click on the embedded IRS link, you will see it only deals with Identity Theft.
This is just Liberty's way to spin things to get more territories sold.
^^Out & glad:
Thanks for pointing that out. In my mind, it doesn't change a thing. It just makes my skin crawl knowing that Liberty Tax is teaming up with the IRS on ANYTHING. Especially anything to do with FRAUD. Liberty wrote the book!
I wouldn't say anything about this on a public forum unless I have experienced this first hand. Fraud with a capital "F". Starting at the top on down.
It's all a game and a way for the government to make money. Otherwise stricter regulations would have been in place. I can almost guarantee that the franchisee from SC, Julie, was doing something to make Liberty mad. That's how they re-pay their franchisees for their hard work. Anyone that doubts my posts, I can prove it. Don't mess with Liberty, the next thing you know the IRS is breaking down your doors. And guess who taught that fraud????? Hmmm, I wonder.
I'm not sure what this means regarding JH's position in the company but on Friday
they announced that he has taken a salary reduction. His base salary will be $1.00
this year.
"For the fiscal year of the Company ending April 30, 2016, the Company shall pay Executive a base salary of $1.00. The Board shall review Executive’s base salary annually during the Employment Period (beginning after the fiscal year ending April 30, 2016) and may alter that base salary from time-to-time, based on its periodic review of Executive’s performance in accordance with the Company’s regular policies and procedures....
I think John is trying to say to his franchisees--"I too will work for free" NOT! Money must be getting tight, though..just my hopes.
Just another Liberty gimmick.
Mike and Sad but True: I agree 100 Percent with your assessment. First, you have turnover of CFO's, then the CEO allegedly reduces his salary. Signs of a sinking ship.
Mike,
I agree it is a gimmick. Do you really think that the board would not give him a bigger bonus? Also, JH has all of the tier 1 stocks. They set up the two tier stock system so no one could vote him out like they did in Jackson Hewitt back in the 90's.
The key reason for John H's salary reduction is to calm his investors. Liberty's dismal growth will be reflected on June 18th when the 4th quarter results are posted. Liberty will not be posting the growth in both sales and number of returns that John was touting a year ago. Investors will only accept excuses for a short period of time. In addition to using to John's salary reduction, Liberty will use HR Blocks decline this year as an example and that will also help calm the investors.
John will be compensated by additional stock options if the company performs and that will make up for any lost salary. -
Liberty results are reported and while Liberty Corp. made money, you have to wonder how many and how much the individual franchisee's made this past tax year.
Overall storefront tax returns increased 17,000 or about 4 (FOUR) returns per office. Average number of returns per office were 469 (1,907,000/4069 stores). Average net fee was $217. This means, on average, each store made $101,773. Royalties and advertising fees on $101,773 = $19,337, leaving the average franchisee with $82,436 for; rent, payroll, payroll taxes, utilities, marketing, supplies, etc.
The mantra that if you want to make more money, say $80k per store, so buy more territories, is not true. You are fortunate to take home $20k after expenses.
Liberty storefronts dropped from 4175 total in 2014 to 4069 in 2015. So, less stores did more returns (17,000) but this is little consolation since 4 more returns per store is not making the franchisees any better off.
Sadly, some of these total returns may include fraudulent ones and Liberty still makes money on those too.
A drop of 106 storefronts means 2.5% of your offices from 2014 were closed in 2015. Individuals looking to buy into a tax franchise business are wising up to the fact that a Liberty franchise is not a good idea. Now, the numbers prove it. Why, because not all stores averaged 469 returns. The stores way below that 469 average number will soon close and the drop in stores will continue. John Hewitt will retire someday and I have to think that the #3 tax franchise will be absorbed by #1 or #2.
Buying into a business where the franchisor makes most of the money is not the way to go. You do all the work and they reap your hard earned cash.