LIBERTY TAX SERVICE Franchise Complaints

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• I'm in NC, We have around 130 stores state wide I think maybe more

  Avg household income in my area is somewhere around 50k (not the poorest areas but sure not the richest)

  I can definitely say that the name Liberty and the system definitely generates 1 out of 5 customers and is only getting stronger. I feel like it is more like 1 out of 3 customers use me just because I'm Liberty. As long as it stays more than 1 out of 5 I don't mind paying the royalty, but see your point if you feel like Liberty generates little to no customers for you. I still believe in the end, Liberty will continue to grow and the brand will eventually be recognized virtually nation wide. So if you can stick it out it may pay off in the end.

  I am not trying to argue for or against Liberty, that is for each person to decide. My entire reason for posting was in response to the person who stated he was losing handfuls of money doing 800+ returns. IF an office is ran even halfway efficiently that is virtually impossible. IF you can get an office to 500+ returns it should be profitable. I have heard rent in NY can be as high as 5000+ per month, if this is truely the case I may need to rethink that number, but at least where I am at, 500+ should generate some income for you.

• One more quick point.

  IF you are looking to get into the tax business you need to be cutthroat. For one, you make all your money in a few months. You only get 1 shot at the customer, if you don't get them you must wait an entire year to even have a chance at them again (you can't afford to get it wrong) Also, staffing is very hard. Expect someone to work for sometimes only a few weeks in the year and then send them packing.

  But, if you still want to try it, you only really have 2 options independent or Liberty.
  Jackson Hewitt will not even exist in a few years and are under bankruptcy right now. Block has no virgin territories left and to get a decent corp store you are looking at 500k+ with 35% royalty I believe.

  Liberty offers realitively cheap entry and gives you a chance to make your original investment back in a year or so. Are they perfect, No no one is, but was obvious choice for me as I knew little about how the business operates.

• Ed:

  Jackson Hewitt will survive bankruptcy and be on better footing then it was on the last couple of years.

  As for HR Block there are not many franchises to purchase and as you pointed out a decent corp. store would cost $500,000. royalty's if paid on time is 40% on first 5,000 of fees and 30% on any fees after that.

  As you point out you have two options go with Liberty or independent. After being with Liberty my view is to go independent. the 40,000 to purchase a franchise with minimal name recognition along with the royalties/advertising fees that start at 5000 the 1st year and go to 11000 in third year will cost you 64,000 in 3 years. That would be money better spent in building your own business. New small business start-ups have about a 37% success rate. Liberty adds nothing to your chances of exceeding that success rate.

  As for breaking even on 200 returns show me how you can still be in compliance with your franchise agreement and breakeven.

  As I pointed out in an earlier post Jackson Hewitt does publish it's average net fee and breaks down by age of store the number of returns prepared. A first year store on average did 166 returns and as company it's average fee was 208.00. Since Liberty and Jackson Hewitt are cut from the same cloth there is no reason to think that Liberty's results wouldn't be similar.

  My purpose on this site is to help potential franchisee see what the reality of this business is vs. the pie in the sky sales pitch that Liberty presents.

  Ed how long have you been a franchisee? Do you own more then one territory? Are you an area developer or affiliated with one?

• Ed,

  I think what you will find with people doing a decent amount of returns and stating they are loosing money is they are having severe cash flow issues not actualy taking a loss.

  Because Liberty does all of its financing short term it is very easy to get yourself into a cash flow nightmare and be close to bankruptcy while still posting a decent profit margin. It is a double edge sword when it comes to Liberty and financing. It is great and pulls many new Zs out of the hole when they do not do what they anticipated the first year or 2. But Liberty financing can kill your business quick if you do not have a handle on your finances. So many have no clue on the financial side of Liberty so they get caught up in the cheerleading and Ra Ra of expansions only to find out they cannot operate any further unless Liberty loans them money.

• As far as Jackson Hewitt being around after lets say 3-4 years or so, I predict they will have less than 1000 active offices and declining very quickly. I have been wrong before though.

  If you know alot about running a tax business and do not feel the Liberty brand has a decent presence in your area independent may be the way to go, not disputing that.

  I own 3 territories and am not an employee of Liberty, Ad etc.

  Liberty gives return counts per year 1st yr 2nd yr store and so on in FDD. It is published FACT the avg Liberty store outperforms JH stores by around 33% per year. so add 33% minimum. The difference is more now than that now with the new batch of JH numbers I suspect because they have walmart kiosks which typically do 50 returns distorting their picture, but please use legally binding FDD from Liberty to obtain actual results.

  NO ONE is 100% compliant John himself will tell you that. You better do what it takes to survive PERIOD

  As far as cash flow issues, I'm sure you are correct. I would never borrow more money than I could reasonably pay off after tax season. Borrowing money at 12% long term is suicide unless you really know what you are doing.

  Borrowing money to float a couple of months at 12% will not hurt to bad if absolutly necessary.

• honestly,

  I don't understand your though process regarding cash flow. Cash flow problems are directly related to how much or how little profit you mak. Liberty offices are on the cash basis and the bulk of your income comes from January to April 15. This means at the end of April, if your profitable you should have enough cash on hand to pay for all of your expenses for the year, plus the profit which will be used to pay the owner and meet any business loan obligations.

  Ed,

  Survive is a good word for most "Liberty Franchisees" Since you own three territories you certainly have a personal incentive to state postive things about Liberty as a franchise. Do you have stores in the other territories?

  The Fedreral Trade Commission provides very llittle legal protection for franchisees. There is no requirement that franchisors complete item 19 of the Franchise disclosure document. If a franchisor choices to report it can use historial or forcast of potential performance. It is not requred to use all of it's franchises in preparing historical data. It can pick a group or subgroup, it can pick any reasonable time period, it must disclose the number of franchisees in the group or subgroup measured ie. urban areas etc. I don't no what Liberty represents on item 19 but I do believe it is based on a select group of franchisees based on top performing stores by age of store. But since you have the information please share it with us?

  So can you breakeven or not at 200 returns if you are 100% compliant with Liberty. Sounds to me your saying no. It also sounds to me if you had to do it all over again you would have gone independent.

• Where do I start??? FIrst, a person is not buying a territory, you are leasing, that means that JTH can take back the territory anytime they deem necessary. In the third year if you do not make a profit they will send you a "notice to cure" on or around April 15th. I received mine April 20th.

  I am a veteran of the United States Army with over 16 years of service returning from Afghanistan in 2008 to invest my money in a LTS franchise. I opened a store in January 2009 that was a company owned store. I met the area developer at the store really excited to be in business. I quote "This is an odd location to place a store," he states. Hmmm, I thought, how odd for a person who has many years of experience in this business to say such a thing as this. SO, I go on. After 2 months of moving in my anchor store went out of business. The lease, according to LTS, shoudl have a "kick out clause." Nothing in the lease says so. This was in the end of February. February 2009, I get a call from the property manager asking me if it is ok for an accounting business to move into the part of the complex that is owned by them. I said absolutely not!!!! The received a letter, that they hid from me from LTS Corporate stating not allowing them to move in. March 1, 2009 people are building next door. The property manager allowed the acounting business to move in. Here is the caviot. The ones moving in next to me had a Liberty store across the street prior to the corporation moving the company owned store to this location, from the center of the territory. The people next door, lets say their names are Jack and Jill. SO, Jack and Jill leave LTS and open a store called "LTS." They told me how Liberty was but I ignored them, because I tried to do this business the way LTS wanted me to.
  LTS suggests to put in the lease an exclusivity clause to do taxes. The lease had an exclusivity clause, but it was for insurance. When I brought it up to corporate, they said it was a mis print. I said it will not stand up in court and I get no response from them.

  Around May 2009 I sent correspondance to JTH requesting them to move my store because they failed to disclose these problems before I showed up on the scene.

  The place where the store was placed was limited to marketing, The street to the east was all exclusive and the street to the south was inclusive. I find out that half the businesses in the complex face the east border are technically not in my territory. The border on the south has a huge apartment complex that has the east street address which makes it excusive to my territory. I tried to get corporate to understand this and they told me to market the other part of my territory which is over 2 miles away. LTS says that 85 - 90% of your customers come within 2 miles of the store location. I even hires one of their coaches to come to my store and show me how to market. I did it and did it work??? well, I do not think so, what a waste of $500.

  JTH lawyers wrote a letter to the landlord about the Accounting business moving in next door but all that came of that was they wanted me to take them to court. JTH did not support me in moving my store. When it comes down to it, they WILL NOT put any money on the table to support you as a potential franchisee.

  I want to speak about Mutual Termination Agreements (MTA). IF you, as a franchisee enter into one of these agreements, it is nothing but mutual. Once I received it I mentioned that I was taking it to a lawyer and they could not beleive I would do such a thing. I brought the franchise agreement, the lease and the MTA into the lawyer and they told me that I did not stand a chance from the moment I signed. I sure wished that all the hype they do at EOT, I still would have taken the franchise agreement to a lawyer. The lawyer suggested about 6 to 7 things to change in the MTA, they would not change one thing. You are supposed to sign it and send it back, no monkey business.

  Here I am having to file bankruptcy because JTH is all about business. I took the store from 238 returns to a little over 400. JTH does not care about the worth of your work just about finding some other sucker to buy into their scheme to leave you desolate in the end.

  JTH is not in the tax business, they are in the business of selling a franchise system that they claim works. If you get in, you will notice that a very small percentage of franchisees actually are in the top sellers of returns. Looking at the list out of 3500 stores most do not do over 400 returns per location. Only the ones who do over 1000 returns are going to be talked about.

  This is sickning that they will wipe you of retirement, savings, investment, and equities from your houses to buy into a boldface lie. When will the government step in and stop JTH from doing this.

  I also found out that the interest rates for Accounts receivables is 18% compounded. If you do not do at least 600 or more returns, your debts will not get paid off during your 5 year franchise agreement. After the 3rd year you will receive a "notice to cure" three times and then a termination of your agreement because you failed to pay off the accounts receivables.

  So if you are thinking about buying into this scam good luck, I will see your post on here in about three years and I can say I told you so.

• To: bankrupt July 2011

  First of all, thank you for your service.

  Anyone supporting Liberty Tax on this site after what you have told us needs to look at themselves in the mirror and realize they have sold their souls to the devil.

  Your story makes me want to go after these bastards anyway I can.

• Sounds like my Smart Tax franchise story below:
  STAY AWAY. Don't let their sales smiles fool you. Yes they will deny this but I wouldn't take the time to write this if it wasn't true.

  They say it's cheap to start a Smart Tax but don't tell you about all the crazy over priced products they force you to buy. Besides every new store lately has been an outright failure loosing thousands and thousand with owners going bankrupt when they find they are money pits.

  Their support sucks, when you call in the middle of tax season with a client in front of you and an important question, their "support" staff is actually doing returns for the main branch's customers at the same time. Very often you her them say things like "sorry I'm with a client I'll call you back" and they don't even call back half the time.

  It's too new of a company and lacks the proper support especially since they spend their time and funds on selling more franchises and not helping the poor franchisees. Heck why should they care they get minimum fees from your office whether it gets a single customer or not. Plus they make you buy all kinds of Smart Tax crap at a premium like umbrellas, pens, envelopes, $1,000 plus murals, posters, mats, etc, etc, etc.

  Very unprofessional and they control all the funds, always threatening not to pay or let you operate from your office unless you put up with their unethical ways.

  When company decisions are made it's not in the best interest of the clients and franchisees but the owner of the franchise and his main men.

  STAY AWAY don't let the small start up costs fool you, they will take you to the cleaners. If you doubt this you should call individual franchisees. Beware though the franchisees are cautious of the Smart Tax spies calling them. You should still be able to sense when you call, aside from his main men Joe and Jorge every one is miserable.

• I have looked at Smart Tax after they called me and agree with the previous post mostly. They have a lower Franchise Fee but they make it up with very very high royalties!

  Plus if you study there site it claims you work a short season and vacation the rest of the year but they offier (according to the website) year round products which is appealing, if you ever ran a tax office, I just wonder how many of there Zs actualy run year round offices.

  I am not sure how they treat there franchisees but it is becoming common place for franchisors to cut back room deals where they get to profit off of there franchisees purchases of inventory which is at best unethical.

  The call I got stated they could sell me a territory where I would be able to do 2500 returns which I laughed at. Sure I could do 2500 returns but the reality of reaching that numbers for most is laughable. I will get to that number is a couple years in a few of my offices but it has taken a ton of work to do.