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
Frustrated complains that there should be national advertising to increase brand recognition. He criticizes Lt for spending $7500 for a speaker on retention and says that should have been spent on increasing brand recognition. Adding 1000 new locations will increase brand recognition more than any as campaign but he doesn't have the guts - or honesty - to praise that.
Face it frustrated nothing LT could do will meet with your approval. I'm sure you could run the convention better. No expensive speakers no growth goals just one big whinefest no one would ever return to.
You are one of those complainers that never offer a solution. What would you do if you were in charge?
Anon,
Love your response!!!
Frustrated would fail and will continue to fail at everything he does because he does not look at himself in the mirror and admit that he made mistakes too. Frustrated, since you have owned your franchise was there anything you think you should have done differently that would have helped you be more successful? Let me guess your answer is i should not have joined Liberty and paid 19% royalties... Enough of your whining that just makes you look silly!!!
Anon and Barilla:
Rather than resorting to personal attacks, why not tell us why buying a Liberty Tax franchise for $40K and paying 19% royalty is a much better option than starting your own tax business with commercially available software and doing your own advertising.
Just to give you a quick background, my personal net worth is over $3M in real estate and investments. Liberty was something I decided to do as a semi-retirement activity. I worked for Fortune 100 companies most of my adult career. Would I have liked Liberty to be the investment I was told it would be, of course. Do I think Liberty is a poorly managed organization, quite definitely. Once you get down to the numbers and get rid of the hype, it is a very poor investment.
Frustrated & Others think LT is a poor investment.
It's not worth $40K + 19% royalty.
We get it. Point made. Ad Nauseum.
Question remains: If you were in JTH's position, what would you do to fix it?
What changes should current franchisees be demanding?
Is there any way to improve the system, or are you advising all Liberty Tax franchisees just to throw up their hands in despair and give up?
There are nearly 500 comments on this thread, many of them complaints with no constructive ideas for improvement.
I'm sure Liberty Tax corporate and maybe even JTH is reading this thread.
By not offering any positive ideas, demands or changes, you just reinforce that franchisees are simply whiners who will complain no matter what LT does.
Is that true, or are there improvements that you want? Anyone?
For starters, they could apologize to everyone that has filed bk since purchasing a Liberty franchise. Second, they could tell the truth and give real expectations. Third, they should have AD' s that have owned and run offices for more than 3 years and have been truly successful, not one hit wonders.
Anon,
Good question....
1. Stop forcing franchisees to pay additional royalties on 2nd and 3rd year territories they cannot afford to open because of less than stellar results from their first season... forcing them... to file for bankruptcy after the second year does not succeed.
3. Allow franchisees to sell their territories for whatever they want without the limitation based on "reducing the value of a Liberty franchise" by selling at least for a price the zee can walk away on. Eg. Fellow zee wanted to sell his business (net revenue of $160,000 - net profit of $45,000) for $60,000 to a buyer. Liberty says business is worth $160,000 (based on standard Liberty calculations) and he cannot sell it for less than $100,000. Zee cannot find a buyer for that amount and zee is forced to walk away or continue in a business her cannot afford to run. Why? Because his costs are $60,000 to support his family he cannot keep trying to find another seasonal job/or his employer won't keep letting him have four months off a year to work his tax business.
3. Reduce the franchise territory value to $30,000 by removing the AD's (re-aquiring the 7% fees that go to them), have regional area directors like they had 7 years ago. All the fees will go to the franchisor. And stop selling AD cities/states for $200-1 million.
4. Use an inhouse marketing team with marketing experience. These pathetic flyers can be produced by my 12 year old. Why use IIP etc.. when all they do is find similar products online and mark up. Card board cut outs, decals etc... Can be mass purchased by the franchisor and resold for less than an individual franchisee can find himself online for less.
5. Have a national campaign where each state gives away a new house to one lucky tax client. Who does that?!! $250,000 house will produce more than 5% growth and cost less than $5 per return per office. Simple sales campaign and in this economy.... better odds of 50,000 - 1 than buying a lottery ticket at 4million to 1.
6. Ensure ALL offices are visited one a tax season. Apart from DMA meetings...I say my AD/Regional director once in 5 years! Actually saw my RD three times in one yearand my AD once in 5 years.
7. Instead of returning a portion of the 5% ad money, use it on national advertising! Majority of people who apss our stores are drivers who listen to the radio. Spen franchisor money not zees spending their life savings.
8. Montior zees spending - payroll marketing etc... This will at least help to project end of season success. Zees spend when business is slow. Money needed for off season rents etc.. LTS should see the writing on the wall for a zee as early as mid February. Throwing money that late will not change anything unless its a late season territory which is not a territory LTS should approve anyway.
9. Offer other progams apart from tax.. teach a bookkeeping course, notary training etc.. To encourage off season income.
10. Have office stay open 6 days until end May. I have done dozens of taxes since April 18th worth ~$4000. Rent for three months.
8.
7.
Antonio:
You are right on target. I have a couple comments.
1) Both the franchisee and LT need to be realistic about the first year of business. It has been really easy to blame the franchisee for not following the system and having a bad year. I suggest that the reason many have a bad year is because they did follow the system. Throwing money in every direction with the hope of having a good year is the quickest way to bankruptcy there is. My first year, the site selection person recommended I get an A location for $2500 per month and sign a 5 year lease. I was smart enough not to do that. I took one in the strip mall right next to it as they were willing to give me a 5 month rental. Thank god I did as the area turned out to be a bust. Again, the A/D was unable to give me any direction on how to market, what would work best and what didn't work as they were new and had never even set foot anywhere close.
2) Liberty needs much better site selection system. Not everyone has a store front that is 30' from the road on a highway that sees 50,000 cars. Many urban centers these days are hidden from the street, with little to no visibility from the street. You would need at least 3-4 wavers just to cover the entrances which is cost prohibitive. That is why there needs to be at least some regional or national advertising.
3) Liberty needs to get rid of their A/D's and go direct with Regional Directors who are directly responsible for the health of the franchisees. The A/D's are a cancer on this organization, as way too many are coupon clippers. I have seen mine once in three years at a 1 hour DMA meeting. If JTH keeps the A/D system, he needs to make them accountable for the health of the franchisees. If a franchisee goes out or declares bankruptcy, the A/D loses that territory, and any royalties they may have earned from it.
4) The franchisee, A/D and corporate must agree on a yearly plan for each territory. If the plan shows a loss, corporate needs to examine what can be done to fix the problem, and come up with a solution. Two years of unexpected losses in a territory, and the A/D loses the territory and royalties from it.
1-800-Mr-Refund.com is a much better option.
You can do REFUND$ online and in person.
It is a REFUND business.
Liberty does not speak the end result of REFUND$ for 90% of e-filers.
MR REFUND is the best brand name ever for those that are getting REFUND$ as in 107 million for $317 Billion.
That is simple inovation, online with a teledotcom.
Look people, it is too easy to go online and get a $5000 bogus filled refund in a week without providing a social security card of the kids on the 1040.
You need millions of 1040s to win this game.
quote:
Author: Mike Kolar CPAComment:Look people, it is too easy to go online and get a $5000 bogus filled refund in a week without providing a social security card of the kids on the 1040. You need millions of 1040s to win this game.
And you can file your bogus 1040 at MrRefund.com
Come on folks.. just get a few bogus SSN's and Mr.Refund's your uncle!