LIBERTY TAX SERVICE Franchise Complaints
UnhappyFranchisee.com asked: Are LIBERTY TAX SERVICE Franchise Owners Happy? If you’re familiar
with the Liberty Tax franchise, please share a comment below.
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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The large amount of cash flow increase is strange. Don’t forget the statements are unaudited. Still the increase is nice. ACA will not mean huge increases year to year, only very hard work from the franchisees will mean increases year to year. I do expect to make some more money next year because I’ve graduated from the school of hard knocks.
Financials show the year to year increase in loans to stores. Don’t forget your math classes and you’ll count it hard to make money with 12% financing costs.
John: As to cash flow the figure is now around 23M after purchasing 800,000 shares back from Datatax business Services for $20,000,000.00.
Also when you take a look at the balance sheet there was $7,491,000 of additional paid in capital coming from exercising options. This helped improve the company’s cash position and allowed them to buy back those shares.
A big surprise is Liberty increase it’s advertising expenses by 63% to $4,074,000.
The final caveat is these numbers are unaudited.
There are a couple of noteworthy comments from the call: 1. Screwitt mentioned that fees were up because block (although he did not mention them by name) did not pursue the free 1040 ez program last year, so liberty was able to charge more…..I picked up 10 new clients from liberty last season because their pricing was outrages the season prior. 2. One caller asked John how will it be possible to become the largest tax company by 2020 based on these YOY increases (paraphrazing here)? John said Liberty needs consistent 30% increases in returns to take the number one position John said “we have our work cut out for us.” That’s alot of new offices needed to get a 30% YOY increase, NOT GOING TO HAPPEN…hahahahahahaha….3. The ACA is only going to bring in low income filers and by they way to sign someone up takes alot of time and they will likely go to a free place to get the tax return done…….I hope they get a lot of them….
John Hewitt is the most unethical snake oil salesman there is on this planet. He will sell a-n-y-t-h-i-n-g to anyone with a wallet. Oh yeah, franchisees are making lots of money lying, cheating and stealing. I wouldn’t touch that franchise again if they paid me a million dollars. He sucks, the AD’s suck, the corporate office sucks, the lawyers suck and as far as I’m concerned, they can all go to hell and stay there. He has perfected the art of ripping people off in his illustrious 42+ year “tax” (haha) career.
He can twist the numbers around all he wants. But the truth is: HE sucks and the company sucks. There have been many ‘moments’ at conventions…..verbal conversations not traceable by paper……bragging, claims and challenges set up to the detriment of the franchisee. Those conventions SUCK royally.
It is TIME that frachisees become PROTECTED under federal law. Only the franchisors seem to be protected right now. That’s a serious problem in this country.
When will it stop? HE seems to be continually dodging the legal system. It’s a freakin’ joke. How long will it take before he’s behind bars and facing criminal charges??? The way our system operates, looks like years, instead of months. They let these crooks walk around our streets and lock up the innocent. All about the $$$$$. As I said before, hopefully we’ll come to the point where $$$$$ can no longer buy his freedom. But it’s taking so long, I’m having doubts if it’ll ever happen.
Trish??? If you’re out there please sign in and let us know what’s happening legally. JA: please do your job and wrap it up already!
It’s a mistake to ignore ACA because the credit and or penalty will be on the 2014 tax return. Also, read HR Block’s report and find they increased their prices this year. If you get ready for the season its going to be a good one. If you don’t know what you’re talking about customers will walk cause they will already be confused. Nobody’s talking about free returns cause don’t have time.
Bill: Good points on the cash flow. FYI: Liberty’s advertising increase was only up 63% in the last 3 months of the fiscal year. For the full FY, advertising expense was down 1% even though advertising royalties were up 7%.
Dr zhivaog thanks for pointing that out. This company has never spent money on advertising and I certainly don’t want to mislead potential franchisee.
Liberty loves to say they have a low 14% royalty fee but as you point out there is no correlation between the amount of advertising fees collected and what is spent by the company on advertising. Just another way to collect money from the franchisees.
Liberty has a HUGE HISTORY of misleading the public, especially potential franchisees, media news releases, stockholders, etc.,etc.,etc. They skirt the issue and tell you what they want you to hear. They are snake oil salesmen who have perfected the art of selling territories that are worth squat and perfected the art of telling you only what you need to hear, but certainly not the full picture.
Buyer beware. Read that contract inside and out a hundred times. Then put the pen down and walk away. You will save your money and your sanity.
After 5 years, you have nothing. You are roped in to their contract and if you leave, they make sure you leave all the clients behind that you spent 5 years cultivating. And that’s just the beginning. They will sue the pants off of you if you even think of starting up with them or challenging them in any way. They control all the marbles. Your business?? Bullshit. The only way it’ll ever be your business is by putting out your own shingle and earning the respect of clients on your own, one at a time.
SanFranDan,
I think anyone that knows how to read a franchise agreement knows that you are signing a 5 year agreement. Obviously if after 5 years you don’t renew that means you have quit and have nothing. I think you discovered America in a bucket of water.
It’s like saying i signed a 5 year lease with option to renew but i decided to not renew because I don’t like the landlord, he is mean to me or whatever your personal problem was with Hewitt. Now he won’t let me stay in the space and is suing me if I try to stay at that location.
As usual you make no sense.
I am also glad this year more of the loser franchisees were terminated or quit. Got rid of more SanFranDans, Mikes, Frustated. Got rid of the dead weight so now average revenue per office was up 15%. 5 years of this type of growth will mean next time we renew the average office will be doing $200k in revenues.
Anyone with half a brain that reads comments from you guys realizes that it is personal anger you have. I know when i bought first territory this website was there in 2009 and it had no effect on me.
John Guerilla Gorilla: (or whatever name you are using today)
Of course you are the first to respond to my post, natch!
I have info. about that company that would knock your socks off. You, sir, have NO IDEA what really goes on there behind closed doors. Is this a personal anger I have? Absolutely. Do you know my individual case? Not at all. So if I were you, I’d crawl back into the hole from which you came and stop spouting such trivial remarks that you have no idea about. I don’t need to make sense TO YOU.
I am here to tell potential franchisees that this company isn’t at all what they present themselves like to the general public. They are deceiving, coniving, and very slick at what they do. Who the hell puts spyware in their software?
If you have a tax background, then you do not need this franchise. In the long run you will own your own clients, not borrow them from Liberty. There is nothing to that franchise that someone with a tax background would learn from them. Start your own and sleep well at night.
Again: this forum is called UNHAPPY FRANCHISEE and I am unhappy. The one happy guy has nothing better to do with his time then harass the UNHAPPY POSTERS.
John Barilla: thank you for your analogy that the franchise agreement is like a lease. When you buy any franchise you are only buying the rights to operate under that name for a given period of time. In the case of Liberty, you will pay them $40,000.00 for the right to operate under their name for 5 years. In addition to the $40,000 you will be obligated to pay the greater of a 14% royalty on your net fees or the minimum royalties of $8,000 the first year and $11,000 a year for the next 4 years. As John points out if for what ever reason you decide not to renew you essential have nothing.
This is just another factor that you need to consider in deciding if it’s worth purchasing a franchise.
Based on this year’s financials the average US store front did 453 returns at 191.00 for an average revenue of $86,523*. From this figure Liberty will take $16,439 in royalty and advertising fee leaving $70.084 for operating expenses and income for the owner.
*This figure does not include income from financial products because I don’t have enough detail concerning how much the franchisee keeps and how much goes to Liberty Tax Service.
SanFranDan, you and all the other people who are sharing their experiences are doing a phenomenal job. I was seriously considering to franchise a tax business. But your comments prompted me to do some serious research and to be more observant.
I have seen too many franchised businesses close shop. Also, it is a competitive business. The margins are slim. I have access to university research databases. The profit margin in a rural area is about 11 cents on the dollar. The profit margin in a big city is around 13 cents on the dollar. (Those figures are without franchise fees.)
Here is the point, your information prompted me to do more research. And I am going to open my business on my own.
If anyone is willing to share any information on pricing, processes, sales techniques, or anything related to running the business, then it will be greatly appreciated.
Thank you
Admin: you can give Uphillbattle my e-mail address and I will be glad to offer some advice.
Thanks Bill for setting John Guerrilla straight. There are You Tube videos where John Hewitt is flat out lying that this business is YOURS. What a crock of Cr@pol@! You don’t own nothing but debt.
Everything that John Hewitt states is a flat out lie! You are not CEO of your business, you are the CEO of MAJOR & MASSIVE DEBT!
I am not sure what Bill’s and Franchizee’s point is. If you don’t renew your agreement after 5 years you have obviously quit. Are you saying because Liberty won’t let you continue using their name or operate and not pay them royalties you don’t own your own busines? That is like saying a restaurant owner that does not own its building does not own his business because once his lease expires and he does not renew he cannot stay at the same space without paying rent. Gosh, i really don’t know why i bother with you guys…. I really really blame corporate for selling you guys franchises. You guys have no common sense, and definitely no business sense.
^^^”Gosh, i really don’t know why i bother with you guys”……..
NEITHER DO WE!!! GO AWAY AND HAVE FUN MAKING ALL THAT MONEY AND HANDING IT OVER TO JOHN HEWITT.
Uphillbattle: I am thrilled you have decided to go out on your own based on the postings of this forum. You will be SOOOOOO much better off in the long run. GOOD FOR YOU!!! I’m so happy you learned BEFORE you plunked down a lot of money for nothing. Anytime I can turn someone away from this franchise, and by now it’s gotta be close to a hundred……then it’s a fantastic day. Yippeee!! :)
SanFran,
YOu think you only affected hundreds? It has gotta be thousands or millions…. whatever…
I love how Barfrilla(AKA Hewitt) has a handle on incorrect facts. The simple truth of this company is to milk franchisees of all their money and then resell the territory again to the next victim. Apparently, there are a lot victims out there since the corporate revenues appear to be going up. This sure is hell looks like a ponzi scheme to me in that the last investor and franchisee will be left holding the debt and liability that Hewitt has so graciously bestowed upon them, When I started with the franchisee, the minimum royalty was 5K in the first year with no additional kicker to get 14% of sales if by some miracle you go over. Evidently some people did and the minimums were increased to insure Liberty maximizing their take.
Remember, Liberty is not in the tax business. They are in the franchise sales business. To this they are successful in that they are able to prey upon people that want to believe their system and lack the sophistication sometimes to understand what they are getting into.
Liberty continues to encourage lack of skills and training for their franchisees. They are able to train the franchisees to maximize fees so that they can collect 19% of them. That is the skills Liberty teaches which, I believe, are at the least immoral if not illegal.
There will be a day of reckoning when the canary dies in the mine. Keep away from these thieves. You have been warned!!!!!!
Since John Guerrilla is confused. What happens if I leave a lease? My business goes with me, not so with LTS. I let the franchise lapse, then according to LTS they own the business I built and poured my hard earned money into. They own everything but the DEBT.
Not a hard concept, if you are not on drugs. LTS sold to many under false pretense, and they courted us, not the other way around and they freely took the money we sent to them.
I’ve been observing the discussions on this site for some time. I am a former LTS franchise and I can agree with those of you who describe LTS as a colony of “crooks”. When I was with them, all they wanted was money. They gave me and my manager no support. Never returned a phone call and my only responses I received from them were “notice to cure” . I was so upset with them that I had to withhold my royalty money several times. They still never got the message. Under LTS’s system, if you can call it a system, I trained morons and idiots for 2 weeks in tax preparation and nothing was ever done right. I followed the book in marketing and spent a great deal of money to get costumed clowns to perform street antics to attract unintelligent clientele. I spent money on giveaway crowns, doorhangers and other stuff. Everything was done by the book and at great expense, yet I only attracted 42 tax returns in the first year plus 5 free ones. The second year I spent nearly $10,000 on marketing plus royalties and only got 74 tax returns of which 22 were free. Sure, the percentage increase was in double digits as LTS claims, but I was still under 100 tax returns in year 2. At year 3, I spent about $8100 in marketing since I was really running out of money at this time and I followed the system exactly and attended all the phone conferences except for 1. In my last year I did 76 returns of which 25 were free and I got rid of all my employees because of the expense. I had what LTS called a prime location even though the rent was high and not as visible as I would have liked. Throughout this time, I did things ‘by the book’ and got no support from Virginia Corporate offices. The only communications I got from them was that I owed them royalties in which I was not going to pay. They sued me of course like so many on this site for the money and abandoning the franchise contract. Didn’t win the case, of course since hiring a lawyer was far more than what I supposedly owed them. I will continue to monitor this site, but I can agree with all those that have had bad experiences. That is what I have to say-This is a company that is dishonest and not worthy of your time or money.
Thank you for your story taxoldtimer. Your numbers are helpful.
Thank you everyone. Keep up the great work.
Taxoldtimer, sorry to hear your story, but you are not alone. So many people fail and never come forward. It can be embarrassing, not to mention causing financial ruin.
And to any prospective franchisees, take heed to the majority of the advice and stories on here, except for John Barilla. He was called out for posting under numerous user names on this site, and that is a fact. He has zero credibility, just like Liberty Tax.
John Barilla, why did you post using multiple user names on this site, all of them bashing the Unhappy Franchisees? Why did you do that?
See ADMIN’s post from May 24th, 2014 at 6:28PM to see what Don’t Be Fooled is talking about, that is Barilla’s multiple identities trying to post here.
taxoldtimer thank you for posting. I encourage new ex-franchisees or those still struggling to post their experiences. Provide us with updated information on thing happening in the company. I would like to here more about last year when JTH bought out some area developers and franchisees. Providing current information helps this site stay relevant.
I encourage potential franchisees to ask questions!
taxoldtimer hit the spot! When Hewitt and co have to resort to name bashing and insults, it just goes to show how insecure they really are.
It just seems that they are due for their fall since you can’t fool all of the people all of the time!
I just started reviewing the financials and there is some good information in there for potential franchisees. After the 2013 tax season a total of 418 offices closed or 11.25% of all offices. Of the offices listed by age 21% of first year stores closed before their second year, 15% of 2nd year stores closed before their 3rd season and 16% of 3rd year stores closed before the fourth season. If these statistics hold true then the attrition rate for a 1st year store opening in 2013 will have less than a 50% chance of surviving to a 4th tax season. in 2014 158 of stores 6 years or older closed or 7.7%.
Kiosk are basically worthless of the 311 opened in 2013 202 closed or 65%, By year it was 64% before their second year, 66% before their 3rd year and 72% before their 4th year. Of course that didn’t stop Liberty from encouraging/coercing their franchisees to open 297 in 2014 while they went from a total of 157 to 56.
But the best part of the report that I found so far is this comment:
“Our Company-owned offices, including Walmart kiosks, tend to be less successful than franchised offices. For this reason, we continue to seek to minimize the number of Company-owned offices we operate each tax season. To the extent we succeed in this effort, we would expect tax preparation fees to decrease, but royalties and advertising fees to be favorably affected”
This of course is most franchisees can’t afford to pay themselves a wage.
Buyer Beware!!!
One other note: I did an analysis of returns prepared by age of store using a weighted average (number of stores/kiosk and age). A 1st year store on average did a little over 100 returns with a 6 year store averaging around 625 in returns. The breakeven point for most stores is 400 paid returns and that is average of a 4th year store.
If you already have the tax knowledge and are looking to go out on your own it will take you 4 seasons with Liberty to break-even. For the $40,000 in a franchise fee that money would be extra cash flow for you to use to build your business plus there would be no minimum royalty fees.
Thank you Bill. It looks like you have some training in numbers. If you you factor a 12% of the stores closing during or after the fourth year, you are pretty much on the money. That means that you break even at four years and you are probably going to close anyway. Four hundred returns are way too many to just break even. But, following the argument to its logical conclusion, the longer that you are open, the more likely that you are going to close the business.
Your numbers are helpful. So, in short, figure 100 returns for every year that you are open. And you are still trying to recoup the $40,000 franchise fee.
Would a business like this be profitable without the franchise?
My territory won’t show up until this time next year. They intentionally kept it on the for several months longer than it was in business. So there should be even more stores not on next year’s list. Plus my territory (which it was not) is not even up for sale. They will probably just not even put it in their numbers. Talking about numbers, when they would send them out, mine never hit the list and neither did other stores who did not do well, so who knows even if the numbers they tout are even true. They conveniently kept off my territories all together and others in their number every week.
Also, JTH Tax, Inc is being changed to Liberty Tax according the John Hewitt plus as Bill stated getting rid of the company stores. It must be too much of a money drain to keep them going huh John.
If you are looking at this franchise, just realize, John can’t make his company own stores turn a profit. Hey John are you following your crappy system??? It doesn’t work, now does it?
Franchizee,
You are funny. You are proud that you ran your territory down the drain and that your store was so bad you could not even make the rankings. Congrats!
Hey John – Thanks for the compliment! It would of helped that the Dumb Arsed AD and John (who signed and approved the non-territory) and LIED about the numbers that this territory would produced, of course anyone with the CORRECT information would not of purchased a “virgin” territory.
However, both that were purchased were suppose to be “not marketed” to, but both were destroyed and people were already going to other offices and had relationships with those offices.
Also people watch for having too many Zees in a 50 mile radius and barely having the minimum number of “people” not household’s. LTS goes with 29,000 people not 29,000 households. When a company breaks it down to “people” instead of households, how many of those people are children??? In my area, there a lot of children. My other territory did not have any people but workers who lived elsewhere, but they skewed the numbers with military bases, which don’t PAY for tax returns. Too bad they LIED.
Just watch John Guerilla – He is just like a typical AD with this company – A Bully and blames others not the Company, so he must be a company man!
I tend to agree that 400 returns is about the breakeven point. You also have to amortize the 40K cost of the territory as well. if you borrowed to buy the territory, you have to pay back the loan with all interest and principle costs associated with it usually over 5 years. Taking into consideration the minimum royalty of 11K each year and the so called marketing royalties, you would be hard pressed to make any money.
Just so John Barfrilla can review the figures, here is how it looks at 400 returns paid at $200 each:
Gross Income $80,000
Less:
Minimum Royalty $11,200 Based on 14% which is higher than 11K Min
Advertising Royalty $4000
This leaves you $ 64,800 to pay bills.
Rent is easily 2K a month = $24000 (Still with me Barfrilla?)
Salaries for 3 months = $25,000 (includes bonuses)
utilities such as heat, Phone , Water about 1K a Month = $12,000
That leaves us with $3800
Now, you haven’t paid for your own marketing which is usually around $5000, you are in a high crime area, so you have to deal with vandalism, broken windows and etc. I reserve about $2000 a year which is usually correct. Don’t forget various taxes and fees to your city and the end of the season party. Conservatively, this number is about $2000 a year.
So that leaves me with a whopping loss of $5200. That’s based on 400 returns that are paid! Notice I did not include amortization of purchase price nor office supplies or any one of a number of sundry things that come up.
Do the math, you can’t win with this franchise. These are the numbers that came from my experience. There are off season costs as well such as working with the clients that your preparers goofed up and ended up in audit or assessment.
The only one making money is the crook John Hewitt. Stay away.
The argument for buying a franchise is that you get a proven business model, financial support, brand recognition, corporate buying power and training.
With Liberty what you actual get; an outdated business model, financial support at 12% interest rate, no brand recognition (2% market share), Corporate use the buying power to line their pockets with rebates from suppliers, and self-taught web training.
According to the financials Liberty Tax service eliminated a franchisee rebate on refund transfer products. Would like to here from current franchisees who can explain how that impacts them?
Franchizee,
You are like a bad student that gets all bad grades and blames the school system and the teachers. Meanwhile other students have gotten good grades.
Losers always makes excuses (too many children in their territories, military bases) neighbor franchisees. Just curious, do you take any blame for being a failure?
First of all the average office does more like $95k in revenues. I said average. Anything below $95k is below average. If you are a below average person pleeeease don’t buy a territory, and i would hope corporate does not sell you a territory. I admit a big problem is the company will sell a territory to anyone even Franchizee/Bill/Frustrated and SanFranDan ( i wonder where she is at these days, probably more shock therapy).
Payroll should not be more that 20% of your gross or you are overstaffing so that is $19k. I don’t know how your utilities can be $1000 a month when you are open 4 months a year. More like $350 a month plus telephone of $500. Royaltes $19k and rent $24k. You should easily make about $20k in profit. That is average for running a slow store that only does $95k per year in revenues.
Now many stores are doing $200k in revenues so run those same numbers and you easily get to $75k profit per year working 4 months per year. Have 4 stores and you are looking at $300k profit per year for 4 months of work a year.
Face it folks, you can make statistics say anything you want them to. Like when 21% of first year stores closed and 15% of second year, does that 15% include or exclude the total number that closed prior? In other words, did 36% of stores close within two years, or did only 15% of those who made it to a second year (a number that starts 21% lower than the preceding year stats) close after that? One number makes the prospects look better than the other. Bill used weighted averages to determine the return count, which makes more sense, but you could weight the averages differently and draw a completely different conclusion.
The raw number that should make any potential franchisee think twice is taxoldtimer’s return count of only 42 the first year and not much more than 50 paid ones after that. Way back when I was at Block, part time no less, I did more than that myself a week. Later in the season I’d average less, but they were complex returns that took time and the fees were higher. There were other preparers doing the same, so the office count was exponentially higher that oldtimer’s experience.
Can you imagine sinking all that money into a franchise, marketing all over the place, having high hopes that you will succeed, and have 42 people show up? It’s like preparing for 60 kids to come to your door on Halloween and only 6 ring the bell, or throwing a party for 50 people and 5 come. Most days s/he probably just sat there, and sat there, praying for the door to open or the phone to ring. I give him/her credit for not getting discouraged right off the bat but continuing to try another year, and another. (Before you say it John B, this person followed the system to the letter.)
In this area, Liberty first appeared in low-income areas where Block had its busiest stores, often opening offices next door or directly across the street. Now that RALs are gone the Block offices aren’t so busy but still do a respectable business. Since the lines aren’t so long anymore, why on earth would someone cross the street to have their taxes done at a place they never heard of, especially when the Block store has been helping them for years? If Liberty would only use some of those marketing dollars to get the brand name out there, they’d have a chance of luring some of those clients. Marketing is nonexistent though, despite the fact that zees pay so much for it. Waving clowns don’t count–people see them as a gimmick and not as a sign of a serious place to get your taxes done.
Forty two returns? Think of how that feels when you started out with such high hopes.
Guerrilla – I have not failed and I did not fail at LTS, it failed me and my company. I was oversold and that does happen in business.
Easy to spout how you are such a great business man, but not every territory turns a profit nor breaks even. I have seen top dogs fail in different states and different areas of the same town, so it is possible.
Also, payroll takes into consideration (payroll taxes) and other expenses which Guerilla seems to over look. Do you even do your own books or are you the big ceo who struts around looking like the big wig?
John Hewitt even wants to unload the corporate office because they are a huge drain on profits. I don’t blame him, I dumped mine too on his doorstep.
Also every state has different costs such as base payroll, utilities, insurance cost and cost of doing business. Your numbers come from a much lower place than where I live, so your number are never going to match my experience with LTS.
People have to realize that LTS one size fits all does not work at all. John Hewitt takes a model that works in the low income area with high EIC and bank products and tries to make every territory fix that model. Well in some areas there is an area in a city or a couple in other states, but not every territory manufactured by his company does not exist.
When starting with LTS the person helping us told us, the biggest secret is all the failed offices and Hewitt tries to hide them and not let them out so he can sell more territories. Well this site is bringing them out. He should of been more honest and tried to not over sell his crappy franchise, which it is not a franchise business.
Mr. Barilla,
You can make up any number you want and change the outcome. We could have used a $400 dollar average, not $237.
You spout that Liberty has such a great system, why are you not following all of John’s reccomendations? In one of your posts on the H&RB section of this site, you stated that you do not do atleast 100 free returns per store, because it is not enforced. You also have stated that you do not keep the reccomended store hours.
Aditionally, donot keep spouting that you only work 4 months per year. Being a business owner is a 12 month a year job. You have client problems to fix in the off season, training, getting the tax classes running. The only way you can just work 4 months per year is to be an absentee owner. That means you have an Operations Manager. This manager starts at 26K per year plus bonus. That would blow up your numbers that you have stated.
42 returns? What are you talking about Sara? I did 42 Returns on April 13th this year in one of my Liberty tax offices that was 2 years old.
John: your a salesman and nothing more. What I’m referring to is an average for all offices from 1 to 6+ years. Basically I’m saying and your agreeing with is after you reach 400+returns you will be walking away with 20,000.00 of profit per year on an investment of $40,000 and countless hours of work. If we simple break it down to a profit of $20,000.00. I could work out of my house and make 20,000 in profit by my fifth year by building a client base to 150 returns and charging a net fee of $150.00.
The only abuse I would here is from my spouse!
To anyone looking at this franchise, keep in mind that my only purpose in posting here is to help you avoid the mistake I made. I work hard to present only facts and all the information about average income and net fees are based on the information taken from the 10K filings submitted by the SEC. If JTH Inc. provided more information about the results of stores by year or kiosk I would report it as such. Unfortunately a franchisor can pick and choice the information they want to share with potential franchisees. That’s why it’s important to look at the company’s SEC filing because they require much more disclosure.
Buyer Beware!!!
Bill, it is a good idea to add the losses of the unprofitable years to the investment of $40,000, the cost of the franchise license. (But this only strengthens your argument.) There is a time value of money component that factors into the analysis. Borrowing $40,000 for a few years is going to cost money. I have done research. The customer is getting more sophisticated. It is not as easy to charge a high fee as it used to be. The DIY software (although it is not cheap anymore) is a strong competitor. Also, related to competition, H & R Block has a huge share of the market. Some franchises barely show up on the radar. Also, as far as the free returns, H & R Block abandoned the concept because it was costing too much money.
But thank you everyone for your information. I am looking for a storefront and I am not going to franchise.
I’m laughing at how assinine John Barf villa sounds. I was away in ‘shock therapy’, John. Thanks for missing me, not.
ADMIN: Any way to block this asshole John Barf villa from posting? If not, too bad we have to read his crap.
The bottom line is………….and always will be for me……………I will NEVER join a company like this one again that is so unscrupulous, so unethical, so money hungry that they treat their franchisees like the scum of the earth.
I don’t give a rat’s ass if you make $20,000 or $30,000 or more……….they bend over backwards to make your life miserable and there is absolutely NO support whatsoever.
I’ve stated a million times and I’ll state it again: I was ‘successful’ in having multiple offices. There were SO many issues that were ALL negative that this kind of franchise just isn’t worth it at all. Employees stealing, Liberty charging an arm & a leg for marketing materials, notices to cure for EVERYthing, the ridiculous royalty payments, NO SUPPORT in any way shape or form, spyware in their software, and that’s just the beginning.
I would encourage anyone reading this forum to back away from any Liberty Tax contract. If you really want to open a tax business, do it part time while you are currently working elsewhere. Start seeing clients in the evenings or weekends. Rent a very inexpensive small office in an office park somewhere. Rents are usually under $500 a month. Or go to the clients homes. Or have them come to your home. DO NOT sign up to join Liberty Tax franchise. There are many horror stories coming out of this franchise. Just don’t do it.
You don’t want to be associated with a company that just wants to sell territories only. You want & need the support. That’s why you are paying $40,000 and all the royalty payments. I have a tax background and needed support. Mainly the computer’s would break down (because it was loaded with spyware) and I was on the phone with their help desk literally for days. If you don’t have a tax background, forget this franchise. They will eat you up alive. Trust us on this. There are enough red flags to read here. Oh yeah, there is one happy guy. What a joke. Yucch.
Liberty wants franchisees to open up a satellite office in Walmart. The new agreement they negotiated with Walmart charges a franchisee over $7000 this year to have a space in Walmart. The fee last year was $3000. Not sure who gets a piece if this fee, which the franchisee must bear in addition to their main office rent. There does not appear to be a lot of good revenue data this is good for the franchisee. It is a good deal for Liberty’s corporate office, which is strongly encouraging franchisees to do go into Walmart.
John, read more carefully. 42 returns is what taxoldtimer says s/he did the first year., and that after following the heralded system to the letter. You must have a choice territory, but not everyone gets one of those.
The fact that taxoldtimer did 42 returns his first year says a lot about taxoldtimer. doesn’t it? I think i you opened for two weeks during tax season any decent tax prepaper can do 42 returns.
John: You never come with any facts. Liberty knows what an average 1st year store does but won’t provide that information. Since Liberty won’t but does provide the total number of returns prepared, number of offices and the age of offices, I have calculated an average using a weighted average based on number of stores and office age. Using this method will get you an average of 100 returns per 1st year stores. I know this figure includes kiosk but Liberty does not provide separate data for them. As a reference I reviewed Jackson Hewitt’s 2010 annual report which showed an average 1st year store did 166 returns. Since both companies have Kiosk the difference in my numbers and Jackson Hewitt can be contributed to the fact that Jackson Hewitt has 3% market share vs. 2% for Liberty or 33% more volume. ‘
Bill,
You are a making stuff up. Before you buy a territory you are disclosed with a PDF that is 300 pages. If you chose to not read it and wrote a check for $40k without doing your home work thats on you. The average store does about 250 returns its first year and you know that. Your calculations are silly. What does Jackson Hewitt’s market share have anything to do with your numbers on this subject. They have been around since 1982 and are not opening new offices except in territories that no one has chosen to go to in 32 years.
John your rebuttal sounds like something I would hear in a grade school playground! Your a salesman and you wouldn’t be able to sell these franchises for $40,000.00 and a 5 year commitment to pay minimum royalties of 8,000 the first year and 11,000 for the next 4 years if you gave honest information. All the information I presented is based on information obtained from the company’s annual report. The information about Jackson Hewitt comes right from their 2010 financial statements. All the information I submitted can easily be substantiated.