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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Guest, sell your store and cut your losses-tell everyone you know that Liberty is a bad investment! John thinks he will be the number one in 2020, is he smoking crack? They can't give away the territories anymore, and just wait until there aren't anymore RAL's, Liberty will go the way of Jackson-Hewitt.
testaipira
You really need a reality check. Just because your stores work in your area, doesn't mean they are going to work in every area in the country, or even most. I can show you 10 stores, two of them making money, 8 of them for sale because they are not, and can also show you how they all do the same marketing. The two making money, low rent, high EIC, the rest are in mid-level neighborhoods. Go out and look for yourself sometime.
Re: testaipira
After thinking about your comments, I suggest you consider this. Most very successful franchises spend thousands of $$ and do market research the best locations for their stores. Your comment is that you can put a Liberty Tax anywhere with no research whatsoever and be successful. So McDonalds etc. spent all that money for nothing because they could have located their stores anywhere and made money. Again, it appears you don't really understand business principles, or you have listened to JTH and as usual he is wrong about 90% of the time. Which is it ?
Do you know someone interested in controlling their own business and destiny? Do your friends and family members seek opportunities to be their own boss, work seasonally and change their future? If so, now is the time to refer them to Liberty! We're seeking the most ambitious and dedicated people to add to our quickly growing list of franchisees.
When you refer someone, you have the potential to earn $3,000 for each person who buys a franchise and successfully completes training in time for the 2012 tax season. The process is simple:
Alert sales@libtax.com with your referral's contact information and your name, address and phone number
Liberty's sales staff will contact your referral
When your referral buys a franchise and completes training, a reward of $3,000 will be sent to you.
There is no limit to your potential referral money so feel free to send in as many names as you'd like!
Send a referal to Librty and get a reward of $3000, and then sit back and watch your referal lose their life savings and file for bankruptcy, it's a fantastic deal!
Don't referral fees like that need to be disclosed in the FDD? Doesn't that make franchisees salespeople who need to be listed as such in the disclosure documents?
Does anyone know the law on this?
If a franchisee finds out later that the franchisee who talked him into buying a franchise was getting a $3000 kickback that no one disclosed, can they sue that referring franchisee?
The FTC requires salespeople and brokers to disclose their relationship in the sales process. Wouldn't franchisees be required to disclose that their endorsement has been bought with a $3K incentive?
That can't be legal, can it?
I have also heard from Area Developers that Aread Developers are paid a handsome salary for attending the Meet and Greets as well, these paid Franchisees are doing the same thing as you mentioned. I heard that this is also a violation of the law that should be looked into, anyone from Liberty care to discus?
Mike,
Get a life buddy! Have you filed bankruptcy yet? Do us all a favor and hurry up an do that. You come across as not too bright with your comments, which explains your failures.
Area developers are disclosed as franchise salespeople. I don't think that would be illegal, Mike.
If you are considering buying a Liberty franchise, call as many current zees as you can to see if they are happy! There are many unhappyfranchisees here that can attest to the poor leadership in this company, if you have questions post them before you purchase!