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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https://pilotonline.com/business/consumer/article_4accf2f9-b76a-5ce0-9404-2138eca89d5d.html
The latest article over Libertys “Race to the Bottom” meaning Liberty Business Model is to capture the poorest and the most desperate in our society, by offering them the largest Free Loans goes to show Liberty will never change. And it shows that what many of us have been saying for years is the hard cold facts.
We have an economy now that is booming compared to the last 9 or 10 years. Unemployment is at its lowest level in years and things are for the most part pretty good. But Libertys primary marketing plan is to capture the group of clients in our society that are struggling the worse by offering them a pretty appealing advance on there refund. Since the amount of people out there that are struggling and desperate has been decreasing while employment and overall people’s financial situation has gotten Dramaticly better why would Liberty put so much effort into going after the poorest most desperate clientele out there?
The answer is pretty easy if you understand there business model. First of all Bank Product revenue, which is the revenue they have complete control over, is the most vital and key for Libertys Business Model to succeed. Bank Priduct revenue is key to every part of the scheme they created and have operated for years. It gives them the leverage to loan money to franchisees for operating expense and for expansion. And by loaning the money it gives them absolute power and control over these franchisees business. Because without these loans many if not the majority if franchisees would never be able to survive.
Bank Product revenue also has been key in Libertys AD or DMA system where they sell 50 percent of an areas revenue to an individual with the agreement that the AD gives support to franchisees in that area and sells new territories where the AD receives 50percemt if the franchise fee.
The reason it has been and always will be key to Libertys success is because it is the one tool they have that ensures absolute control over the franchisees and Area Developers. Under this system the vast majority of capital that a Franchisee produces is deposited with Liberty then according to Libertys agreements with the Franchisee is disbursed to the Franchisee minus any Royalty’s , Advertising fees, and any outstanding loan balances . Many many times the bulk of the money never reaches the Franchisee bank account because of the fees and the loans due. All of Libertys loans or 99 percent of them is short term loans. Most of the loaned money is loaned for a very short term meaning a year or less at very high interest rates.
Liberty has been in business long enough that the revenue from bank products and the revenue from cash, checks, or credit cards should not be as lopsided as it actually is. A Franchisee deposits all cash, check and credit card deposits. But at Liberty the amount of revenue from bank products far exceeds overall as a whole compared to other payments. The excuse for this is that Framchisees are not following the system but that is garbage.
The truth is Liberty has little to no desire to put much time and effort into growing what people in the industry calls the late season. The culture at Liberty is very clear about who the bread and butter client is. That is a customer who is desperate and needy desperate for cash or the client who just fails to understand why bank products are not wise.
What’s sad is the public doesn’t understand all this finance stuff and majority of times the Franchisee as usual takes the blame and the heat for practices that Liberty Corp themselves are responsible for and forces on the Franchisee. When marketing these advances the Franchisee has to spend money for staff for marketing and to prepare the paperwork for these advances and then spend money on Labor to try to get as many of these advance clients back in the door to complete the actual return since if no tax return is done they will never get paid. If you don’t have these costs built into your pricing you will not do very well at all and sink further into a hole. But the public and the media doesn’t understand this and because Liberty is so good at blaming all negatives on bad franchisees or in reality any Franchisee, Liberty gets away it while the Franchisee suffers.
Liberty is also still always the winner and its franchisees are almost always the looser.
I wouldn't be surprised if Preparers start coming forward and speaking truth to power in the wake of what went down in Wisconsin. Tax Preparers coming forward will help the IRS and DOJ connect the dots.
When I came forward to the IRS and DOJ, they were not really interested!
Some fool yourself about doj or.irs investigation of Corp. Unless Liberty Corp is just breaking every law possible like Instant tax done they are not interested in going after him or Liberty.
Now as stated before they will use information received.to go after Z's or preparers because they know they will win and it will.ne easy. But going after Liberty is a pipe dream not reality .
I believe "Out" is correct. If there is a case against LTS, it will come in the shape of the Franchisee's because they are the small potatoes. I helped on the case back in 2013 and not much has happened and possibly the person who was working on it is most likely retired from the IRS by now. But in doing so, it did bring awareness to the corruption, but not enough to bring John John down. But what will bring John down is people not renewing their franchise agreements and not buying into the franchise system. The LTS people in my area are struggling, but only to the extent, they are not bringing in as much money as they used to 10 years ago or so. Also, the stockholders have more to say to John than even the franchisee's. Time will tell, but people are not keeping their franchise's. The person who took over my locations failed after the 2nd year. But according to LTS I was their worst franchise ever in my state. Yup, but I'm still in business and they aren't.
If you don't live in the Los Angeles market, you are unlikely to be aware of what's going down with the IRS and DOJ against Liberty. Hence all the air of dismissiveness taking place here. The IRS moves slow and keeps things on the down low. They are going to Taxpayers showing them faces of individuals and asking them if that is the individual who did their tax return, it's obvious someone who worked as a Tax Preparer for Liberty outed the scam of Franchisees without PTINs acting as Ghost Preparers, which corporate is admittedly aware takes place in CA, and has also admittedly done nothing to stop it. Anyone who attended the DMA in Orange Cty last November would have seen that admission take place.
^^I agree with you both. The DOJ and IRS interviewed me extensively. Haven't heard from them since. JTH made my life miserable because it was either me or him. I'm small potatoes, so it was me, naturally :( He made my life so miserable that it took years to recover. I'm still struggling. I'm sure there are decent franchises out there and decent CEO's. I just happen to sign up with the worst of the worst. Way back in the beginning, before there ever was an unhappyfranchisee.dotcom website.
They always go after the easy targets, the little guy. Whereas it's the big guy in 100% of the cases that need to be brought down. Always. Still waiting for vindication.......and waiting......I know it WILL happen, just don't know when. But again, if they keep going after the little guy, HE will never be brought down.
There isn't any doubt what-so-ever that the DOJ and IRS are fully aware of how corrupt HE is. But he's obviously bringing them money and we all know money is everything! Not corruption, not scams, not blatant dishonesty and distrust.......MONEY. Sucks.
In the defense of the DOJ and other govt agencies they did go after some of the biggest fraud shops at the top of LTS. These were some of the biggest and best operations doing millions top of the Elite 18. Now at least they can start investigating our new CEOs operation and our COO and Chief Strategy officer I'm sure they are squeaky clean. Unlikely since one of them bought Doleskys AD and stores, we all know that StevyDs stores were ripe with Fraud and abuse.
Concerned Zee...You must have been psychic...Doletzky busted.
https://www.justice.gov/opa/pr/justice-department-files-lawsuit-shut-down-tax-preparation-businesses-st-petersburg-area
NICE!!! The funny thing is how these zees were so awesome!! I would imagine that there are likely more zees out there that have done the same thing! I hope the government keeps searching!