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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JH and HRB have loans this coming tax season but can't find any info on offerings for LTS anyone have any information? If they don't should be the final nail in the coffin.
Jackson Hewitt and HRB both will have to change there business models soon or they will also be history within next 6 years. The days of making your profit taking advantage of people’s ignormace and irresponsibility is quickly going to come to an end when it comes to tax preparation. We are about to see a shift in professional tax preparation and the shift will not be in retail stores. It will be a shift to people dealing with tax preparers who they have a relationship with but everything will be done by phone, email, and the cloud.
HRB will outlast all others just because they are the ones who instead of betting everything on the scam they built a true tax practice in many if there locations. I think they still will loose market share but they may be the only big box tax stores that have enough intelligence to change.
LTS will be offering loans this year, very similar to the amounts that JH and Block are offering, though I understand a slightly higher amount. This product will be highly misleading to clients, rumors are flying that there will be a very low approval rate for individuals applying for the maximum amount.
The loan fees that LTS will be charging the offices are extremely high and this will be passed on to the clients via extremely higher tax preparation fees. LTS is encouraging owners to add to the tax preparation fee an E-file fee of $49.95 which LTS will get 50% of. Individuals applying for these loans will see fees over $600 or more for simple tax returns
You do not have to worry about JH and Block destroying LTS, that is happening within. LTS new CEO is clueless and his objective is making money for corporate not the franchisees or area developers.
So, the objective is the same as always; fleece the franchisees and clients. For the franchisees it’s not only their money but their time and dignity. Dignity because they let LTS take advantage of them.
Don’t be duped potential and current franchisees. Don’t get in and get out when you can.
Out - you are definately on point. All three face the same challenges. The market is changing and tax offices will have a major shrink over the next 2 years. Survivors will be the ones with a staff of experienced professionals. Early season stores know its coming unless head buried in sand.
Because everybody, including the banks, is after money - mom and pops in a basement can offer advances up to $2,500. My email is full of offers from tax software companies.
Loans are no major advantage.
Soon the race begins and we shall see the outcome by March 1st.
https://pilotonline.com/business/stocks/liberty-tax-delays-earnings-announcement-because-of-recent-management-changes/article_84f57d2a-e261-5586-99a0-c8032ff545b1.html
Liberty Tax delays earnings announcement because of "recent management changes"
By Kimberly Pierceall
The Virginian-Pilot
After canceling its first quarter earnings call with analysts and investors following the ouster of its CEO and founder John Hewitt, Liberty Tax postponed its second quarter announcement and call, too.
The Virginia Beach-based company announced the postponement Wednesday evening, the night before the scheduled 8:30 a.m. call to discuss its financial condition in the three months ending Oct. 31.
The company's board of directors voted to fire Hewitt from his position of CEO in early September after hiring an outside law firm which found credible evidence Hewitt had relationships with staff and franchisees whom he treated with preference, had sex in his office and arranged off-site meetings and trips around the Yankees baseball team schedule.
Hewitt, though, has remained chairman of the board and chooses a majority of its nine-members because of his controlling stock ownership. He removed two board members after his firing, replacing them with longtime Liberty Tax franchisees. Another two independent board members announced their departure and the chief financial officer announced she would resign at a future date.
Liberty Tax said the delay was because the company was still finalizing "their quarterly assessment of internal controls as related to recent management changes."
After thinking and studying this for a while Ai don’t believe there is a chance in hell that Liberty will ever find agreeable terms with John. The only agreeable terms is for him to return and be the face of the company and allow him to have a say in the direction of the company. Other than that short of the feds coming down on him I don’t see any way they are able to fix this without him returning. I’m betting he returns shortly after this season and it may even be much much sooner than that. Liberty cannot Force John to sell his shares or give his control he has over the board. So the only thing Liberty can do now is try to limit any damage he may cause. That will be impossible and he will quickly be back in control once they let him in the door.
Sanfrandan. You and I need to talk. I think you and I speaking may result in something very very positive for everyone. If your interested let me know and I can arrange it. I think you will enjoy the conversation and be very excited after we speak .
^^^I'm wary, but interested. Let's figure out how to talk. Thanks.
Liberty Taxes problems are continuing to grow:
http://markets.businessinsider.com/news/stocks/Liberty-Tax-Discloses-Resignation-of-Independent-Accounting-Firm-1010936572
Liberty Tax Discloses Resignation of Independent Accounting Firm
PRESS RELEASE GlobeNewswire
Dec. 11, 2017, 07:30 AM
VIRGINIA BEACH, Va., Dec. 11, 2017 (GLOBE NEWSWIRE) -- Liberty Tax, Inc. (NASDAQ:TAX) (the "Company") today disclosed in its Current Report on Form 8-K that KPMG LLP ("KPMG") has resigned as the Company's independent accounting firm and that the Company will delay the filing of its Quarterly Report on Form 10-Q for the quarter ended October 31, 2017. As detailed in the Form 8-K, there are no disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. Additional information regarding KPMG's resignation can be found in the Form 8-K. The Company has begun the process of selecting a new independent accounting firm.
As disclosed in the Company’s Form 8-K, KPMG’s resignation is due to concerns around internal controls over financial reporting as it relates to the integrity and tone at the top set by Liberty’s founder, current Chairman and former Chief Executive Officer, John Hewitt.
Ross Longfield, Chairman of the Company’s Audit Committee stated, "We are disappointed that KPMG has resigned, however, we appreciate the long term relationship we have had with them. The Company will work as quickly as possible to engage a new accounting firm and to complete their review of our second quarter results.”
Hewitt was terminated on September 5, 2017. The Audit Committee has high confidence in the existing management team and is confident that the management team will help to lead the Company through the resolution of the accounting concerns.
The resignation of KPMG does not impact the normal course of operations of the Company. Liberty management, employees and franchisees are focused on preparations for the upcoming tax season.