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
Since there hasn't been any activity on this site since Hewitt was forced to resign, I guess that must mean there are no more "unhappy franchisees"! They must all be happy now! ;)
Another unhappy 10 years franchisee who wants to leave. Unresponsive response from corp and the crazy 19% fee are the main issues I want out. 5% market fee never helped my location whatsoever. Recently received another 5 years to sign but now you can't sue liberty in Califirnia. The only franchisee who got away from the lawsuit is Benjamin lee in San Francisco. I'm pretty much fucked if I signe another 5 years contract with them. I'm also fucked if I don't sign. They will sue me for still being there to oprate a tax business . Any suggestion, anyone?
Is your store making a profit? Will you lose customers if your sign changed? Did you lose alot of customers last year? Have you tried to sell.
Don't re-sign. Just quit Liberty and have a friend or family member open a tax prep business if you are worried about being sued. I am so glad I got out when I did, you will be glad, too. Time to quit answering to the 'man,' and do your own thing.
Move your office 25 miles away. Talk to a franchise lawyer.
No Name you would be foolish to sign up for another 5 years. Although I'm glad they got rid of John Hewitt that is not going to change the projection of this company. You will still be paying 19% out to a company who does not have your best interest at heart.
When I turned the franchise over I didn't solicit any clients to come with me. I went to a local firm in
the same area and those Liberty clients followed me. My store was small but another franchisee in my area had a store doing over 400 returns when he walked away. He continued doing taxes but from his home and people just followed him. He told me he made more money doing it this way then when he had the store. No overhead, royalties or advertising fees. Liberty never bother him.
Best of luck!
Thank you everyone for saving my future. Independent is the way to go.
What is you opinion on these tax packages?
1. TaxWise
2. Drake
3. ProSeries
Thank you,
Anyone have any thoughts about offering cash in a flash?
I left LTS in 2013. I had an unapproved store front. I just started doing taxes at the unapproved location and had another number in place a couple of years in advance with advertising. It did not materialize until I did actual print advertising. I just would check my old phone number and return calls. LTS did not bother me because I never made more than $75K per location in one tax season, so they can't go against anyone that does not make more than that number. So, I laid low for the first part of the tax season and the next year I hit is harder. I just started making money in the last two tax season. I planned many years in advance to leave. I could see it was not going to materialize as John stated it would with a ton of competition from other LTS store fronts.
^^They will absolutely come after you if you do not re-sign and stay in the same location. If they don't you're incredibly lucky. They have a long memory and whatever you do, they will act accordingly and come down twice as hard. They were complete jerks to me. They were incredibly obnoxious, and that's the understatement of the year. Best advice: move the 25 miles and cater to new clientele and the old that travel to see you. Hewitt figured out a long time ago that the Liberty name means NOTHING at all. It's the relationship you form with your tax preparer. If you do well by them, they should follow you. With everything being electronic these days, it's so much easier to continue working with the same clients, even at 25 miles away, which is really nothing. You can do taxes for people anywhere...........across country, doesn't matter.
I used Tax wise, Main Street and H&R Block softwares..............depending on what I needed them for. Each customer dictated what software I used.