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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I have been passing by several Liberty Stores and have found them to be deserted. I know that this is a slow time of the season, but I usually pass by them around noon time as well as on my way home. This has been consistent throughout the year. I see the lights on, but no one in there. Maybe 1 preparer working. That's it. I have seen the same lack of activity in the Jackson Hewitt's as well. Even HR Block seemed quieter, even though they seem to have a few people within their stores. Has anyone noticed that this tax season has been slower for the street level preparation firms? Have the past deceptive practices by Liberty finally caught up to them? Are there more people using on line tax software?
Thanks!
It must depend on what state you're in, but retail stores are down everywhere I think. If you don't have experienced preparers and high retention rates, it's trouble.
I'm seeing returns from moms and pops with crazy deductions and credits, so I think its crazy out there.
Also talked to folks (older customers) who I didn't expect to use turbo tax and they tried it this year.
It's a new game and only the strong ones will survive with a new approach to get clients. The old ways no longer work. It's change or quit.
We are not down from last year but we know what we're talking about and treat customers like they're important, so they return.
Texastee: I am seeing the same thing LTS ghost town JH about the same HRB has people but still slow but the IRS is still down allot. We will see how it pans out allot of things causing this in my opinion look at the IRS numbers. HRB has a 2nd half the other two do not we will see how it turns out.
https://www.irs.gov/uac/2017-and-prior-year-filing-season-statistics
http://comptroller.marylandtaxes.com/Media_Services/2017/03/17/owner-of-liberty-tax-franchises-pleads-guilty-to-conspiracy-to-steal-from-the-state/
Tuesday | March 21
TAX PRACTICE
Liberty Tax Earnings Down 48%. Founder Hewitt Wants Out.
Hewitt
Liberty Tax Inc. reports results for the third quarter ended Jan. 31
By CPA Trendlines Research
Liberty Tax, the chain of almost 4,000 tax prep offices, is suffering from a variety of problems, both internal and external, according to Founder and CEO John Hewitt.
“The 2017 tax season marks another period of change for the industry as filing patterns continue to shift later into the season,” says Hewitt in a statement. “The whole industry has been slow, but we are clearly not satisfied with how we have performed in comparison to the market. There is still a lot of season in front of us and we are focused on delivering a strong second half and on implementing the appropriate changes to be successful in an evolving landscape.”
Through Feb. 28, the company said it had prepared 915,000 U.S. tax returns, as compared to 1,094,000 U.S. tax returns prepared in the comparable prior year period, representing a decline of 16.4%. The company operated 3,823 offices in the U.S. in fiscal 2017, down from 4,225 offices in 2016. The decrease represents a decline of 250 permanent office locations, as well as a reduction of 152 seasonal and processing center locations, some stemming from compliance problems.
Hewitt surprised listeners on the company's quarterly earnings conference call by saying he's looking to turn over the reins. “It’s time I have a backup in the company,” he said.
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To add to the great information I am subscribe to the Latino Tax Professionals Association.
http://www.theprogressiveaccountant.com/Tax/liberty-returns-drop-16-4-percent?inf_contact_key=d207977e25fd33fa378c84fe74509bc7485b3a277ffb3fcb3568501330098379
One thing for sure, Hewtwit will spin it anyway he can. Hewitt termed the results an "aberrant year" and that the company "has put the worst behind us." That would seem to imply that they will have better second half season results. My guess is that they likely complete about 40% of their returns in March and April. These latter season filers are generally more educated than the first half season and meaning they likely read the news. The negative publicity with all the fraud that has been going around will punish this POS company further! This company is absolutely going out of business, the death spiral has started and will accelerate as negative results compound with negative territory sales. Hahahahahahahahahahahahah!
"It's time I have backup in the company", means he's fleeing the country with all the money. Getting out while he can. DOJ & IRS: You had better prosecute him with all the info. you've been collecting on him for years. Please do not let him just walk away. If I had a chart of his face, I'd throw darts at it. He makes me physically ill.
NCHillbilly: YOU ARE THE BEST!!! You always have the greatest of information!!! I LOVE reading your posts!!
I KNOW for a fact that all these "fraudsters" were taught by no one other than the man himself. You definitely see an overwhelming amount of people "caught" from LTS locations. As soon as he leaves, the fraudsters will be no longer! They absolutely need to regulate this with proper licensing.
I though John was not going to quit until Liberty was the #1 tax service in the universe? I would imagine Barvilla is shuttering his stores by now, too. If you are an owner, get out while you can, you will only lose more money.
Don't flatter yourself believing customers are reading the news and leaving because of the company issues.
Customers leave because of fees and turbo tax fighting hrblock which is decreasing fees across the board. The turbotax - hrblock fight is also hurting hrblocks. What would you do if they adv. free schedule a and you've been paying $400 - $500 to file?
JH is empty because their season is over. Mostly EIC. They got a pick up due to paystub start. They will see an improvement.
Market is declining and will continue to drop. People filing online or filing late.
Sorry guest my office is up 18% and growing. We have customers from Libturdy and Block even a small few from the free places.