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
I will really appreciate someone's help.
We have completed two seasons with losses and do not want to open for 3rd season ans so forth.
What are my cost?
Can I default on future minimum Royalties ?
Can they go after me?
Is there a program to give the territory back to LTS?
If there is another Zee interested in buying my Territory for $30k, can LTS stop that or create any issues?
How much debt do you owe Liberty? If it's not too much I would be willing to take the territorty and the debt over for you since you don't want to operate anymore.
Also where is it located?
Guest,
I believe you can "sell" your territory back to Liberty for a reduced rate. What about your lease, are you out of it? LTS has the ability to stop your sale to another party, they are the ones to approve the person. Just do what you can to minimize any future losses and get out. Also, don't sign you MUTUAL TERMINATION AGREEMENT!
Guest
Thanks for asking some questions that I needed to know. I am in exactly the same position that you are. Two years and no profits and yes I followed their system to the t.
Mike ,
What is the deal with the Mutual Termination Agreement what is the problem with signing it?
Bill,
I'm in the New Orleans area if your interested in my 2 franchises. My AD had 9 stores they are all owned by corporate now after his 2 years of trying to make a profit,
Was any of you able to leave Liberty without claiming bankrupcy?
I would like to know what steps you had to take and what the final outcome was.
Unfortunately, very few leave without filing bk.
The Mutual Term, basically means that you leave on good terms and can't sue, or talk detrimentally about Liberty. It is also important that every zee knows about this website.
I cannot believe there are so many whiners out there with nothing to do but rag on Liberty for their lack of success. I own 3 stores and they are all making a profit. Is everything perfect - hardly but if it was easy everyone would be doing it. It is easy ro blame everyone but yourself for your failure
Guest,
its really just Mike/Frustrated/Antonio, which is the same loser that keeps reposting. File bankruptcy and give it up you failure!
It is quite sad that so many feel it necessary to come on and bash everything about Liberty blaming them for all of there failure when anyone who knows anything about business knows it cannot be all true.
If I was going to start a Tax Preperation Practice today and had all the knowledge I have now would I pay 40k for a territory and pay the royalties which are 14 percent and advertising fee of 5 percent. Probably not. But if I had not purchased Liberty my knowledge would not even come close to where it is today. So if I was new to the business, not having any experience in the industry yes I would still strongly consider paying the 40k and other fees before setting out on my own.
There is no arguing with the irate ones on here determined that by being consistently negative about everything they have some sort of hope of damaging Liberty. Liberty is still a solid business model and the tax industry is a great business to be in today! Does Liberty have some issues? Of course, every franchise model does. But if I sat down and judged Liberty Tax Franchise on the facts and on the numbers the opportunity is not only valid it is great. Just because many have failed does not prove the opportunity is missing. I know for a fact and without any doubt this business when compared to many others is nothing short of amazing. And just like with almost any other franchisor, Liberty places there sucess over everything else including its franchisees. But since I know this and I know what to expect or not to expect I can live with it and move on and make some great money.
There is plenty to complain about if you are a Liberty Franchisee but allowing that to controll you and blind you from the fact that this business is a great one and the opportunity to make great money is there for anyone willing to figure it out is a tad bit foolish.
If you are considering buying any franchise and think you are getting more than just a basic track to run and a name I would caution you. Every franchisor will attempt to make you believe that there franchise is as easy as following basic instructions and riches await you! But in reality thats never true. Some will provide you more than others but in the end it will be your ability to learn business in general and then learn your industry better than anyone else that will determine your level of success or make you a failure. Do your homework and get some very solid expectations based in fact not on sales materials. Then decide do you have the patience and the business IQ to be a sucess on your own or will the track the franchisor is selling you enable you to be a sucess much quicker than doing it on your own.