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?
.
Recent developments have left franchisees worried and uncertain about their futures. To advocate for greater…
The Building Kidz Worldwide franchise is an opportunity to own a preschool & childcare center…
PAINT NAIL BAR has undergone some significant changes since franchisees contacted us with their complaints,…
U.S. Veterans magazine has removed JDog Brands as its #1 "Best Franchises for Veterans" list.…
More than 400 Veterans & military families who invested in JDog Brands franchises have failed,…
Genevieve McDaniel is a former franchisee turned franchise researcher, franchisee advocate, advisor and fiercely honest…
View Comments
Mike,
You have proven that you are just a little cry baby that angry that he lost his money for being a poor business man.
Mr. Allen,
I was located outside of Atlantic City. No store has been successful in Atlantic or Cape May Counties. [contact info withheld] I will gladly answer any of your questions and can provide you with some information on what you need to start a tax prep. service similar to Liberty.
Admin - I think it's a great idea to ad a classified section to the website.
It could help the franchisee trying to sell and it could help someone
looking to purchase get the best price.
Separate from the bickering, this website provides good information
for those of us trying to run a small business
Liberty Tax is a poor investment, the tax industry has changed significantly over the last several years, buy into a different industry, tax prep is dead. Don't waste your time and money with these used car sales people!
Mike,
HR block is a Fortune 500 company and does $4bill in revenues... The tax industry is dead? Seriously dude, get lost.....
Do your taxes or free at any VITA or IRS if you have an AGI less than $58,000 the tax industry has more "free" locations every year, the PAID market is DECLINING!!! Liberty "makes" you prepare 200 free tax returns your first year and if you don't hit that "free" return count you are frowned upon, don't buy into this deception!
Liberty is no H & R Block....funny.
Also, Buffet bailed out of Block because the tax industry is dying!
I again ask anyone who supports this organization in any way to justify the $40K investment and 19% royalty. To date, absolutely no one has come forward and said, Wow, what a bargain. I, like Mike suggest Liberty Tax isn't even in the same league as H&R or Jackson Hewitt and is doing nothing but collecting franchise fees, and providing no support to their franchisees. You can do a lot better on your own.
Mr. Allen
they removed my post because I included my e-mail address. My store was located outside of Atlantic City. There have been 5 territories opened in Atlantic/Cape May County. 4 have failed with one of the 4, the Mays Landing territory being run by corp. Corp. took over the store because it did 475 returns. The Mays Landing store was later sold to another franchisee. The newest territory opened last year in Egg Harbor Twp. and they are struggling sowe will see if they open for the upcoming tax season.
As I have stated in the past there are two major tax prep. services; H&R Block and Jackson Hewitt. Liberty is a distant 3rd. Outside of people in the tax prep. industry, Liberty has very little name brand recognition.
Liberty has no national or regional tv advertising plans to help change this position. They expect to build a client base on the backs of the franchisees while they collect a 5% marketing fee from them.
The reason Liberty is able to sell the franchises is based in part on John Hewitts success with Jackson Hewitt, The other parts are the initial price is low in terms of other franchises and that people by their nature like the idea that they can make a living only working 4 months a year. It's the last part that we want to believe so badly that we ignore the facts. The same reason intelligent investors didn't question Madoff about how they could be earning such a high return on their investment.