LIBERTY TAX SERVICE Franchise Complaints

5,730 thoughts on “LIBERTY TAX SERVICE Franchise Complaints”

• Trisha: The reason that Ed and John Barilla stay in is because their into deep to get out. Maybe they are a couple of the lucky ones in that each season they are profitable but based on the franchise agreement, their yearly profit is all their entitled to. Liberty owns the business, has right of approval and even if they agree with who you sell to they take a $5,000.00 transfer fee.

  As you stated many of this current franchises have been encouraged/coerced into buying new territories with varies methods with a lot financed by the company. This past tax season how many of them had to open a Wal-Mart location despite the cost and lack of profit? After all it was the company who signed the contract with Wal-Mart not the franchisees so why are the franchisees paying for it?

  On the financial statements ended 4/30/14 Liberty reported interest income of $14.231.000. Based on the 1959 franchisees in the system this averages out to $7,264.00. If you look at operating loans issued for that fiscal year they totaled $76,013,000 or $38,801.84. These numbers support Trisha’s position of how Liberty operates.

• Actually, look at unhappy franchisee for H&R block
  Compare post counts
  Do a bit of looking for liberty tax offices for sale and compare to.numbers of block offices for sale

  Now, take block total returns and divide by number of stores and see how that compares to number of returns per store with liberty
  Now when you apply that to royalty rates see which one is signiffacantly more profitable

  It’s easy to say yuck 30% royalty
  But if you have twice the profit after you pay the 30% which is the better deal?
  I’ve been trying to buy a block office in my area for years
  The franchisees don’t sell and most have been franchisees for 10-20-30 years

• Also,
  What’s the current franchisee fee for Block?
  It’s my understanding it is a $2500 deposit you get back when you get out.
  No franchise fee
  That’s a big difference
  $40,000 savings before the first return is done

• Also, does that extra 10% cover national tv advertising?
  How but the money block allocates back to the franchisee for advertising?
  Probably more than covers the extra 10% in royalties

• Why did Christopher Carroll leave Liberty Tax? He was VP of Sales and Mktg, hired in October of last year at a salary of $250K/yr, but left on June 30th. Noticed it in their filing for the annual stockholders mtg.

  http://ir.libertytax.com/phoenix.zhtml?c=233197&p=irol-SECText&TEXT=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTk3NTk0NzMmRFNFUT0wJlNFUT0wJlNRREVTQz1TRUNUSU9OX0VOVElSRSZzdWJzaWQ9NTc%3d

• Now that this forum about Liberty Tax is four years old, it’s time to figure out how to take action against this rotten company. I’m all ears for suggestions. ADMIN? Any suggestions?

  I’d really LOVE to be a fly on the wall during the DOJ investigation. I’d also LOVE to find a way to have the news programs do some investigative reporting and digging……and broadcasting.

  ^^^Dr. Zhivago: NOTHING surprises me anymore. Over the years I’ve seen and heard about several high level executives leaving. Without a doubt they all have signed some sort of non-disclosure form so they can’t talk about their experiences. If Liberty has their way, the executives leaving would be bound and gagged to ensure “nothing” is told.

  This experience as a franchisee with Liberty Tax has knocked the wind out of me…….for years. I know I picked the wrong franchise to join. NO QUESTION. There could be other, normal franchises out there……..this is definitely not one.

  Yes, saraEA: I would love revenge. I know it’s not healthy, but they’ve turned my world upside down, for years & years. And I KNOW I’m not the only one. Revenge can be oh so sweet. Yes, I want the CEO to be arrested and handcuffed. I want him paraded around in handcuffs for the whole world to see. I want him to be forced to give back the millions he stole from unsuspecting franchisees all across this country (and Canada) for YEARS.

  I may just start keeping a journal. Maybe it’ll turn into a book. Maybe I just need to get it out on paper. I need some sort of closure. This guy is the Bernie Madoff of the Tax industry. What he has been able to get away with is outright disgusting.

  Arresting him would be ideal. Closing down the whole company would be a dream. He turned it into a stock company so the company would be saved. Lots & lots of questions need to be answered. This company needs to be scrutinized.

  I CAN’T WAIT for the DOJ to do their thing. Maybe finally then the knots in my shoulders and back will disspate just a bit and I’ll be able to move on to some sort of normalcy again.

• This is in response to a question Bill asked a while back. Sorry I have not been on the site in a few weeks.

  two of my stores I have were purchased from former zees 1 just under 100k and the other one well below the virgin territory price of 40k.

  The store purchased dirt cheap is currently my second best store and has been the best investment I have ever made. I don’t mind telling you about my stores but that would tell who I was. Some of my stores are in cities where I have the only location so it will not be hard to determine that. Even though I usually defend Liberty (they do alot of things wrong though so I don’t always defend them haha) I’m sure they would rather I not post on external sites like this.

  I have stated the demographics of my stores numerous times and don’t really see the need to name a specific city anyway. Where I am at, Liberty is very well known with little to no available territories to purchase aroudn me (this may or may not be the case where you are) People DEFINITELY come in my office becasue I am a Liberty Tax as opposed to a joe’s tax shop. I feel at least 1 out of 5 come in because of this I also feel I can charge more since I am a Liberty. While I do not like paying royalties, this justifies it for me. Could I make it on my own? probably but I do feel I make more $$$ because of Liberty.

  Again all my offices are in low to middle income areas and I think this is key. Most are in high traffic shopping centers etc.

• Yes, thats why there is more profit, and you have no Liberty competition near your other store. It’s been said on this site before to buy existing and learn your way before you go it alone. This is a different year for legitimate tax offices. Lots of business from tax offices with problems, franchised or independant. We’ve been working all year with no advertising except referrals. Absentee is a problem. If you don’t have time this is not the business.

• Ed: The reason I asked about the city and state of your stores was to help qualify your assertions about there profitability. Anyone could come on here and make bold claims about the profitability of their stores. By giving your city and state at least allows us to quantify what your saying.

  I appreciate your honesty and certainly understand your concern about having Liberty find out your posting on this site. They might consider your comments to be negative about the company and look to take it out on you. When I was involved with Liberty I posted a comment on Zeenet that was honest and accurate. They responded by threatening to take away an operating loan to help carry me over until the next season.

  If liberty is responsible for giving you 1 in 5 customers you are responsible for bringing in 4 of 5. Based on those figures you should only be paying royalties on one out of every five returns.

  Buyer beware!!!

• And Mark Baumgartner, former CFO, just resigned as well.

  http://ir.libertytax.com/phoenix.zhtml?c=233197&p=irol-SECText&TEXT=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTk3NjMyNTcmRFNFUT0wJlNFUT0wJlNRREVTQz1TRUNUSU9OX0VOVElSRSZzdWJzaWQ9NTc%3d

• Dang, maybe I need to work for LTS for these large sums of money and “retire”! Top heavy management and an over priced building all for the franchisee to pay for on behalf of their hard work.

• Sooner or later the franchisee investor pool will run dry. Those still with debt to Liberty and those continually paying their 19%, will be the income needed to keep the company going. Throw in the bank income and some stock sales and that is most of the income. This site is having an effect – Liberty cannot fool the public too much longer. They really could change and do much better but time is running out for that.

  If the lack of new territory sales dwindles and current franchisees get out, Liberty may sell. It is too bad that the current hard working franchisees of Liberty would be hurt if they sell or go under. I can see them selling to H & R Block or Jackson Hewitt – what happens to those Liberty stores that are located near either a Block or JH? Will Liberty take care of their current franchisees at that time and buy them out? H & R Block is in the process of buying retiring CPA tax practices. They also want to provide additional accounting services.

  The Liberty maybe faltering is pure speculation – the H & R Block expansion is real. Liberty has no chance to catch Block, not 2020, or ever. Reality is hard to swallow. If you have a successful Liberty franchisee – sell (if you can) and get out now!! If you are a struggling franchisee – you have no hope!! If you are thinking about buying a territory – start at page 1 of this site and read to page 77, if you are still thinking about buying, you are not paying attention to the warnings.

• Buying a Liberty Franchise was the biggest mistake of my life. We all want to believe what we are told, and John Hewitt likes to subscribe to that flaw in human nature. What would ideally happen would be for Liberty to go out of business and thus stopping its fraud on the consumer, franchisee and the government. This has not happened yet because Hewitt is still squeezing every dollar from every sucker he can. That is sad, despite the warnings here.

  Yes, reality in the market is not quite here yet as it relates to this franchise. They will continue to take advantage of franchisees, investors, consumers and the government until the money train derails. Hewitt will then probably move to an island or something with all his ill gotten gains. Too bad it has been on the backs of his franchisees and business partners. It looks to me that with all the executives leaving that I am reminded of rats fleeing a sinking ship.

• The Cfo and the mastermind who did what was necessary to get Liberty Public is leaving. From what I have heard that Liberty has been trying very hard to rewrite history and making things right and not pulling every stunt they can to make there numbers look better. I figure that everything has not stopped but the outright dishonest items have went away or away enough where no new press can be created. So many have been stolen from, mislead, and downright mugged for Liberty to get public I cannot believe that some things will come out eventually exposing what Liberty really is. Good luck to all current franchisees I wish you the very best. To any new prospective Zs I can tell you run and do not look back it is not a good business model and unless you like to wake up at night feeling slimy it will quickly change who you are and make you the business person you never intended to be. Spend your money on getting your Enrolled Agent Certification learn the real tax business not just EIC and build a client

• Base. You do not need a franchise name to build a practice. Any model that interests you can be researched and implemented without franchise fees. Buying a Franchise will force you to double your prices just to pay the franchisor and you will not get anywhere near the value back for the money wasted. I’m glad I am away and feel so much better about myself and about my professional status. Anyone with an update on Liberty cleaning house and making things seem very upfront and honest let us know.

• If anyone here forgets or if they do not know Trisha was a Top Gun Franchisee at least I thought she was and produced some great numbers when Liberty was desperate for them. She also bought into there system and executed it for her first couple seasons and continued to do everything she could to execute what they asked.. She will tell you that what she did the first couple seasons helped only Liberty and started her down a long dark path. In reality everything a franchisee does is to benefit Liberty and if there’s any crumbs and you behaved they may or may not allow you to eat the crumbs. It is sad how much dishonesty was used to get this company where it is and no matter what they do from this point on they will be criminals always. Too many peoples lives were played with used then discarded. There are so many and you only hear from a few on here. Why don’t more speak out? Fear of litigation or fear of getting governmental agencies after you.

• ^^^finalygone:

  What fabulous posts. Great to hear from a new poster to confirm what so many of us already knew & unfortunately experienced.

  Btw: “finally is spelled with two l’s, lol”

  MANY of us have been set down a ‘long dark path’ by being associated with this terrorist organization. Doesn’t matter if they got their ‘act’ together now since they have been around for years. This company began in Canada in 1997 and then brought to the US shortly thereafter. Just think of how many people have been fleeced of their life savings, their dignity, their professions and their precious sanity after dealing with them for 5+ years. The turmoil has been the worst thing that I have ever experienced and then some. If they cleaned up their act recently, that’s only because all eyes are upon them. If I were the DOJ, I would dig, dig, and then dig some more into the last 17 years this company has been in existence and put them all behind bars-permanently. They were ruthless! That’s actually an understatement. I hope they all get what’s coming to them, and soon.

  Prospective franchisees: save your money and stay away!! This company reeks of scam artists everywhere.

• Looking for current franchisees or recently former franchisees(Yea!) who can shed some light on how the Wal-Mart experiment went?

  Recently I saw in the notes that in 2013 they changed the rebate program on financial products to franchisees and was wonder exactly what they did and how it effected the franchisees?

  SanFranDan: I’m open to any ideas that would deter anyone from buying a franchise from this company.

• Along with the Wal-Mart kiosk experiences that Bill requests. I am also interested in how the “rent to own” or “try before you buy” expansion experience went for others. How was their contract terms and were they set up in States that actually protected the franchisee against contracts like Liberty without consideration from Corporate? PLEASE share. It is important to give out as much information as possible.

  Yes, I do believe many are still in trying as hard as we did to not be one of us. It is inevitable that they will be and that does not make any of you a failure. It is a very one sided contract and system and make no mistake if you name yourself out like I have, you will have to be prepared to fight and they do not fight clean about giving out your experiences. They will threaten and do worse to you at your most financial, emotional and physically vulnerable times like a predator waiting in the grass. KEEP YOUR IDENTITIES ANONYMOUS on this site and others until they figure out they cannot bully or shut anyone up anymore. That is why many are reading and not posting.

  As far as the head people leaving, forced out or retiring. I suspect risk management. As Danny Hewitt warned me, “dad knows how and when to bury the bodies”.

  For the person who said that Liberty and a Student Loan forgiveness plan called him (Chris?). In all honesty I have never heard of such a thing. It is known that during summer months, franchisee starve even more and this could have been something a rogue franchisee had set up for extra income to make it to the next season or just to survive from another business plan. So many franchisees did everything from sell insurance to selling financial planning or teaming with other companies like a sublease partnership. I was not one to ever use my offices for non-Liberty purposes, but I knew of many that felt they had to to avoid starving. That does not make it right and I never agreed with those actions and reported them. That was not recommended by Corporate, yet when reported by surrounding franchisees for the purpose of other brand signs in their windows (such as Progressive Insurance). Corporate turned a blind eye to my complaints of the activity of others so our branding was not protected by Area Developers or any Corporate staff. There are many struggles and it sounds like a franchisee went on their own with that one unless I have not known of a new promotion. Some of the top franchisees are buying other businesses, but it is not right to use a Liberty office even on off-season to tarnish the brand. By no means do I mean to compliment Liberty, but in fairness it is not their policy and in fairness they do nothing about it as they promise after we worked so hard to brand the areas and make the locations easy to find for new customers.

  I agree BUYER and current franchisee, BEWARE. I see new testimonial ads such as my franchise story. Many new faces as the old ones are here posting or going through their own battle with Liberty now. Hold as much credit in what they are selling as you do for Adam Levine in a Proactive Acne Commercial. Things are not as they appear. Allow 1000 franchisees without a pretty story to tell their experience and let the public judge how many were justifiably named failures at the business itself.

  -Trisha

• Yes Corporate monitors and lawyers or bounty hunters, I have proof that Danny wrote this to me and called me on the way to boarding the plane to testify against John Hewitt in the South Carolina case if you need me to prove that along with all other statements that I made such as the facebook private message John Hewitt’s wife sent me that she hopes he burns for all he has done to people and every single conversation with his daughter, so don’t bother with wasting ink on that one. It is not hearsay, it is factual of all I have shared told to me by the family after they heard what was done to me. If you would like to debate it, try doing so here….in public.

  -Trisha

• ^^Bill & Trisha:

  I also would welcome ANY ideas or suggestions to deter prospective franchisees from buying into this hellhole of a company. My idea is to somehow contact news agencies that do investigative reporting. This is a rogue franchise with a rogue CEO and a rogue corporate headquarters whose lawyers follow their CEO’s instructions to the letter.

  I can’t even fathom how other human beings act this way. They go to sleep each night knowing that they’ve ruined people’s lives. And they’re okay with that!?!

  It is YOU, John Barf villa that needs to watch his back. After calling us all “losers” for months and months, maybe you’ll crawl back from under that rock in which you came and realize what we’re saying is the TRUTH.

  Trisha: THANK YOU SO MUCH for validating what so many of us have been saying here about this franchise. It stinks to high heaven. Back away from the contract. Do not sign. Your life will never be the same again. It’s just so not worth it.

  ADMIN: I know there are things going on behind the scenes to take this man down. Any way to contact investigative news agencies to go out and have a field day with this one?? How the hell this man has flown under the radar for 42+ years is beyond me. Thank goodness we have the internet and sites like this one. So thank you to ADMIN for starting it! He is a lunatic and needs to pay. Like I said earlier, he is the Bernie Madoff of the tax industry and must be stopped. ASAP.

• The funniest thing about “my franchise story” is….
  Click on the “why liberty” tab
  You’ll see the top video is from the Tomesselos. The wife’s name is Heather.
  The top video claims 4 locations in 7 years
  Scroll down and you’ll see the second video. Again it’s Heather Tomesello

  Only this time it’s 7 locations in 5 years.
  Only a few possibilities here
  1- liberty in all their professionalism screwed up pretty bad in their public presentation to sell franchises
  2- the tomesello’s closed 3 of these crazy succesful stores in the span of 2 years
  3- it’s outright dishonest BS

  Any of the possibilities is ugly
  Take it for what it’s worth
  Bad any way you slice it

• Greg: Thank you for posting. It’s important that we post more recent and relevant information.

  The videos are just another example of how this company is poorly run.

  If you look at the press release for the upcoming August 28 2014 conference call you will see further down in the script that a replay of the call will be available shortly after the call and continuing until Wednesday, June 25, 2014. Both Kathy Donavan and Martha O’Gorman’s name is listed below that.

• Potential franchisees:

  Wikipedia defines franchising as “Franchising is the practice of leasing for a prescribed period of time the right to use a firm’s successful business model and brand”.

  Invetopedia defines franchising as “A type of license that a party (franchisee) acquires to allow them to have access to a business’s (the franchisor) proprietary knowledge, processes and trademarks in order to allow the party to sell a product or provide a service under the business’s name. In exchange for gaining the franchise, the franchisee usually pays the franchisor initial start-up and annual licensing fees.

  As potential franchisees you are more inclined to accept Wikipedia’s definition of a franchise but the reality the correct definition is the one presented by Investopedia and for this franchise it is born out in the financials by the following statement:

  “Our Company-owned offices other than the Walmart kiosks tend to be less successful than our typical franchisee-owned offices because they often represent offices transitioned from a less successful franchisee. For this reason, we are not able to obtain the continuity of staffing in Company-owned offices that we expect to experience in our franchisee-owned offices.”

  This company is telling you they can’t make a profit using there own business model but they want you to pay a franchise fee and ongoing revenues because you can do a better job of running the business.

  Buyer Beware!!!

• If anyone wants to see if franchising or in this case a tax office is the right move for you I suggest you do this. First compare buying a franchise to opening your own store using the same amount of funds. Take the Franchise Fee you were planning on paying and set it aside to open your own business so for example sake lets say 40000. Take 10k or so to pay yourself while you educate yourself about the business and build yourself a real business model. It may not take the 10k but for example purposes it is just a number but take the time needed to educate yourself the right way. This may take 3 months or even a year but learn the business.

  Then go ahead after your education period and start the process of opening your business. The cost your going to spend to open your own branded tax office in reality is not going to cost you any more than you were going to spend opening a Franchise Store and since you were seriously considering it you should have the capital to do this without touching the remaining 30k you put aside by not purchasing a Franchise.

  Now your ready to open and go through your first season. I know some of you are asking what about software and support? It may amaze some of you but you can purchase top of the line software with excellent support in many cases for nothing just because if you are going to offer bank products and are going to be doing a decent amount of returns the software company will waive the fee because the amount they will be paid via the bank for your production. Even if you decide your not offering bank products software with support is not that expensive at all.

  Now were off and open. Take 10k to 15k of the money you were going to pay just for the franchise fee and use it to promote your business and your services. If you did your homework during the time you took to educate yourself this will be easy. You could spend more but that’s up to you. I would split it between my first and second year. You should by now have a good idea what works and what doesn’t if you did your homework.

  Now here is where the numbers really start making sense. If you are a Franchisee your only getting 75 percent of every dollar your making. Why?because your paying royalties and advertising fees and those get paid no matter if you received anything from them or not. If you do 100k in fees under your own brad your 25k better off.

  It is not that hard to realize that taking your money and getting yourself educated and prepared is by far the right way to go but you need to do budgets for both and look at what your really paying when you sign a franchise agreement.

  I hope this gives you at least a starting point to make an informed and logical choice. Because the difference between these 2 options can change your life. In Franchising they tell you your in business for yourself but not by yourself and that is so appealing. They do not tell you what that means. It means when you try to do something to help your business succeed they can and will tell you what is acceptable and it matters none that what they tell you may harm you or stunt your business growth. It means that anytime they wish to interfere and change things they can and you paid them allot of money to give them this right!

• finally gone, you are so right. People think that buying a franchise also buys them a proven system that will increase sales faster than would have happened otherwise. I have over 20 years of corporate marketing background. There is no such thing as a proven system. What creates demand in one area, does not always work in another. Giving away $50 Cash in a Flash in one area may flop in 10 others. I tried CIAF and it fizzled big time. Wavers can bring in some customers, fail in another. Local marketing to businesses had minimal return. What always works is true word of mouth by giving good service and having satisfied customers. Every business owner will attest to that. That can easily be done with or without franchise help. Hence, build your own brand, your own business by creating satisfied customers.

• My wavers always brought in more FRAUD business than you could shake a stick at. I always told my wavers, stop bringing in the fraud business, bring in decent business, so you will have a pay check. Of course, they aren’t bringing in fraud directly, but indirectly, because this business looks like we are not serious and we are goofing off. You look like you are silly business, you will attract fraud’s in more numbers than if you are your own brand.

  LTS did not bring much business overall, but it did bring in the following on a regular basis:

  1. More fraudulent returns to sift through, wasting time and money.

  2. More worthless phone calls and people in general coming in and wasting your time.

  3. Callers wanting free advise on how to process their tax return. John always offers our time and money for free to the public.

  4. Wasting time giving free estimate’s for a tax return, just to have them leave right before they sign for the bank product. What the Hell is that all about??? Keep probing that they are valid and they walk after all the work and wasting of ink and paper….

  5. Having people call constantly about their refund and having to look them up all the time, wasting time!

  That is what you $40K will get you, tons of wasted time and energy, not counting on the other franchises spying on your office and sending in people to waste your time and money, which probably goes back to some of those numbers above, why with a franchise business it is so prevalent.

• Liberty has a proven system of FRAUD. Let there be no mistakes about that. Recently, they have been very careful to cover their tracks since they have known they are under investigation. I know I was taught how to inflate tax returns by adding businesses that weren’t there or by lowering income by business losses. That, I was taught, is how you are able to increase fees charged. Liberty is based on defrauding and encouraging EIC tax returns. I agree that the Liberty in a clown suit in front of a store only encourages customers of a criminal intent to walk through the door. A lot of customers are encouraged to find nieces and nephews that they should claim that they are not entitled to. By the way, if the IRS looks into your business and discovers this type of fraud, you are responsible, not Liberty. In fact, they will deny that you are even with the franchise system and are “ROGUE”. Sound familiar?

  The Liberty system does not work. It is an antiquated model that aims at people that can ill afford the high cost of these services. Signing up for Liberty schemes will only cause you to lose tons of money, your integrity and gain increased agitation for yourself. If, after reading all these warnings, you still sign up, then you deserve what fate awaits you.

• Recent comments by finally gone and Frustrated and Disgusted have been posted here to invite a discussion on whether those wanting to open a tax business should buy a franchise or go it alone as an independent:

  Tax Franchise Owners Say Don’t Buy a Franchise!

  Your comments invited.

• No disrespect to Admin: but there are very few HR Block franchisees for sale, Jackson Hewitt is selling franchisees but not to successfully so the only franchiser of the big three that is the most active sellers of franchisees is Liberty Tax Service. This particular site with the exception of some sidebars has been trying to address the question of should you buy a franchise or go it alone. The magnitude of responses on this site now exceeds “Curves” an that number of responses helps support our position that Liberty Tax franchise is NOT A GOOD INVESTMENT and you would be better off going on your own.

  For the above reason I will only post to this site and ask all others to continue to only post here. To Divide is to Conquer.

• Congratulations to everyone’s hard work. According to the “unaudited” financials Liberty 43 new franchisees purchased territories from Liberty. This is up from last year when the company sold 30 in the first quarter. However, the franchisee fees paid in the 1st quarter of this year was $704,000 vs. $1,039,000 last year. A decrease of $335,000.00. For the current quarter 26 franchisees bought 28 new territories and 17 bought existing franchisees.

  Liberty is holding a lot of paper on these sales. If a new franchise sells for $40,000.00 the total amount of the sale comes to $1,720,000.00 but they only received payments of $704,000.00 leaving at the minimum $1,006,000.00 financed by the company.

  John Hewitt is pumping up sales through financing hoping that he can cash in on the next stock offering.

  PT Barnum said “There is a sucker born everyday” don’t you be that sucker!

• Quick math lesson:

  40,000 * 28 = $1,120,000 NOT the 1.7 mil you came up with.

  The other 17, Liberty may or may not make a 5k transfer fee depending on how the deal was structured (If you transfer to an immediate family member, they can waive the 5k or in certain instances upon death etc.) I’m unsure if this was the case for any of the 17 existing ones. Either way, the 5k is probably accounted for somewhere else other than “New territory sales” Maybe in Misc revenue not sure.

  I listened to the conference call yesterday and was very positive and the opportunity has never been brighter to purchase a Liberty franchise. The next few years should show huge increases. I would encourage anyone interested in purchasing a Liberty to listen to the call replay on their website http://www.libertytax.com under investors.I’m already excited about next tax season and normally I dread it lol.

  Have a good Labor Day weekend all!!!

• Big Value Opportunity In Liberty Tax
  Aug. 29, 2014 9:56 AM ET | About: Liberty Tax, Inc (TAX), Includes: HRB, INTU, WMT
  Summary

  Liberty Tax has comparable margins and return on invested capital to its larger competitors.
  Despite its comparable profitability, Liberty Tax trades at a significant discount to its peers.
  Increasing complexity in the tax code due to the Affordable Care Act and rapid growth in its online service are significant catalysts for profit growth.
  Liberty Tax (NASDAQ:TAX) has carved out a successful niche as the discount option for tax return preparation. Despite its significantly smaller scale and brand awareness compared to competitors such as H&R Block (NYSE:HRB) and Intuit (NASDAQ:INTU), TAX still earns a comparable return on invested capital (ROIC). The beauty here is that the market values TAX at a considerable discount to HRB and INTU.

  This article was sent to 147 people who get email alerts on TAX.
  Get email alerts on TAX »
  Low-Cost Option

  At a glance, it appears as though TAX should struggle to compete in the tax preparation business. Its largest brick and mortar competitor, H&R Block, has a massive scale advantage, as its offices prepared 24.2 million tax returns last year compared to TAX’s 2.2 million. Intuit does not disclose the number of tax returns it prepared, but its Consumer Tax segment earned $1.5 billion in revenues last year, ten times what TAX earned.

  How does TAX compete against companies with such large brand awareness and scale advantages? It successfully markets itself as the low-cost option and keeps its margins low. A 2013 survey estimated that the average cost per return at TAX was $180, 9% cheaper than the $198 average at HRB.

  Similarly, both TAX’s mid-tier and premium online services are 40% cheaper than the corresponding TurboTax services.

  TAX has targeted the discount market by opening kiosks in Wal-Mart (NYSE:WMT) stores each year. Prior to 2012, only HRB and privately held Jackson Hewitt operated in Wal-Mart stores, but TAX moved in after HRB’s contract expired.

  TAX’s low-cost strategy is working, and it has been taking market share. Last year, TAX grew revenue by 8% and the number of returns prepared in its U.S. offices by 6%, while the IRS reported that tax receipts grew by only ~1.5%. HRB saw a 4% decline in the number of returns it prepared last year.

  TAX is growing its online business rapidly, increasing its number of returns prepared by 29% compounded annually for the past three years.

  Franchise Model Boosts Profitability

  Understandably, TAX’s low-cost strategy means its margins suffer compared to its competitors. TAX earned a 14% after-tax (NOPAT) margin last year, while HRB’s NOPAT margin was 18%. INTU earned a NOPAT margin of 21%, which understates the profitability of its tax segment, the company’s highest margin business.

  Despite its lower margins, TAX actually earned a superior return on invested capital of 20% versus 18% for HRB last year. Higher capital efficiency offsets TAX’s lower margins and drives the superior ROIC. Higher capital efficiency comes from franchising almost all of its 4,400 offices while HRB owns over half of its 12,000 offices worldwide. By not owning its offices, TAX keeps its invested capital low and earns significantly more revenue per dollar of capital invested than HRB and INTU. Figure 1 compares TAX, HRB, and INTU on the basis of ROIC, NOPAT margin, invested capital turns (revenue per invested capital), and revenue growth.

  Figure 1: TAX vs. The Competition

  Sources: New Constructs, LLC and company filings.

  As Figure 1 shows, TAX earns 40% more revenue per dollar of capital employed than does HRB, which helps offset TAX’s narrower margins.

  Where Do We Go From Here?

  TAX has successfully carved out a profitable and growing niche for itself against larger, better-known competitors, and now it has significant growth opportunities ahead of it.

  I do not worry about HRB or INTU, or other competitors trying to squeeze TAX out of its low-cost niche. Both HRB and INTU would have to incur pretty serious margin cuts to compete with TAX on price, and I do not think they can afford the hit to EPS those cuts would cause.

  As a result, I think TAX can look forward to continued steady growth from its physical locations as the improving labor market steadily increases the number of filers each season. The increasing complexity of the Affordable Care Act might also push more tax filers to turn to a paid preparer.

  The real growth opportunity, however, comes from TAX’s online product, which is already growing at ~30% a year as mentioned above. TAX invested over $20 million last year in its new NextGen tax software, which should improve its online offering and allow for greater integration between the company’s online and in-office products.

  Encouragingly, TAX has plenty of cash it can use to invest in its business, either by furthering investing in software or supporting the opening of more new franchises. TAX has $38 million in excess cash, or about 35% of its current invested capital. If TAX can deploy new capital as efficiently as it has in the past, significant growth is possible.

  Significantly Undervalued

  Despite its comparable profitability to HRB and INTU and solid growth opportunities, TAX trades at a significant discount to its larger peer. At its current valuation of ~$34/share, TAX has a price to economic book value ratio (PEBV) of just 1.15, which implies that the company will grow NOPAT by no more than 15% for the remainder of its corporate life.

  By comparison, HRB trades at a PEBV of 1.65 and INTU at 1.93. If TAX commanded a similar valuation to HRB, it would trade at ~$50/share, a 45% premium to its current valuation. A $50/share valuation implies 6.5% NOPAT growth compounded annually for 10 years, which seems entirely plausible based on TAX’s profit growth opportunities. We don’t have long-term data on TAX’s past NOPAT growth, but INTU’s consumer tax segment has grown revenue by 14% compounded annually for the past decade, and HRB has grown NOPAT by 24% compounded annually in the past two years.

  If TAX can manage 9% NOPAT growth for 15 years, the stock is worth $80/share. That projection is probably on the optimistic side, but it reveals the upside-100+%-that is within the realm of possibility for this stock.

  I don’t see a great deal of downside risk for TAX at this price either. As Benjamin Franklin once said, “Nothing can be said to be certain, except death and taxes.” TAX operates in a business with extremely reliable demand. Even if profits never grow again, TAX would only be overvalued by 15%. TAX offers investors potentially high rewards with fairly low risk.

• Of course the conference call would be positive. Do you actually think the spin doctors at Liberty would tell the truth about their outdated business model? Hewitt is the master of the big lie (remember Josef Goebbels of nazi germany?). The fact is still that no matter what the financials say or don’t say, this is a system that is designed to fleece franchisees and eventually, investors.

• Ed: It’s a difference in assumptions. I made the assumption that all the franchises sold where sold by the company. 28 new franchise territories and 17 existing company stores. My assumption is based on the company’s comments that company stores are “Less successful” than franchisee run stores and therefore we look to minimize the number of company run stores.

  Since your still with the company I will accept your assumption as being right. But it doesn’t change the fact that the company received $335,000 less in franchise fees in 1st qtr. of 2015 then in the 1st qtr. of 2014 despite the fact that 43 where sold this year vs. 30 last year.

• Bill,

  We both may be wrong. They touched on this discrepancy in the conference call in relation to one of the questions asked at then end I believe.

  The finance officer said they reclassified the way some revenue was recorded and you had to add together this and the notes receivable to get a comparable amount (it was kinda confusing to me)

  Either way, I am not an employee or inside guy with Liberty, but I have heard from someone fairly reliable this current quarters franchise sales are looking very good. I know they have recently made more EOT training sessions and have more scheduled than normal. I would assume this is to accomodate the new prospective buyers.

  You guys need to work harder, if franchise sales are up, people must not be getting your message or not caring one of the two. Or perhaps for every one of you that doesn’t make it, 2 or 3 others are successful?

  Imagine that, maybe Liberty is not such a bad investment?

• Don’t overlook the fact that the summary refers to the CORPORATION’s financials, not that of the franchisees. I question the statement that Liberty “has carved out a successful niche as the discount option for tax return preparation.” They give some stats showing that their fees are lower than those of their competitors, but do they show you what goes into those stats? If they divided total fees by total number of returns, of course the average fee looks low because franchiseees have to give away quite a number of free returns. I’d put more faith in that statement if the number was derived by dividing total fees by total number of PAID returns. Liberty does not have a reputation of being low-cost here in New England.

  Another problem with comparing fees between companies is what types of returns generated those fees. Clients with Schedule C, D, E, and F (self-employed, investors, landlords or partners, farmers) take longer and pay more than those with a few W-2s. So Block may be preparing more of these types of returns, which makes their average fee higher. (I’m not even counting estates, trusts, partnerships, S corps, which Block does do, which require specialized knowledge and generate high fees.) I’m not sure how much of this business Liberty does.)

  The more complex returns are the more sustainable model. I don’t think EITC returns will keep anyone in business for much longer. Preparers now have to ask a lot of nosy questions and demand a lot of documentation. The IRS just issued proposed Regs that will require the same degree of due diligence for the child tax credit, so people will need birth certificates, school records etc. Many of these clients are likely to choose to self-prepare rather than be grilled like criminals.

  Texastee is right that companies can spin statistics anyway they want to support the appearance of success. Before investing in a franchise or the stock, study the business model, the paid preparation landscape, talk to people in the business to discern what the future may hold as the IRS tightens the reins. I’ve sold my Liberty stock and looking at its recent financials have no inclination to jump back in.

• ED: I appreciate your honesty and I understand your enthusiasm. There is not one of us on this site who didn’t go into the next season believing that this will be the year!. Unfortunately what we witnessed was a lot of commitment, time and money on our part and nothing from the company.

  Each press release from Liberty states the following: “Liberty Tax is the fastest-growing tax preparation franchise” “In 2014 they prepared almost 18 million individual income tax returns in more than 4,400 offices and online.” They have been saying this for at least the past 9 years. During that time HR Block has lost some market share and Jackson Hewitt went through bankruptcy despite that Liberty is still only in third place among the large tax prep. retailers with a 2% market share.

  This company was built to have this large growth in offices and then have a big IPO where the owners could walk away with a lot of money. That didn’t work. We
  are seeing that now with all the exercising and selling of options. The proof is in Steve Ibbotson finally getting his payday of $20,000,000.00 despite the company’s poor cash flow position. You also see Mark Baumgartner leaving he was the company’s CEO,CFO and is credited with starting JTH Financial announcing his resignation and cashing out on his options. Sounds like some of the major players are jumping ship.

• minchia, your conclusions about PEBV make absolutely no sense to someone with a little knowledge about stocks.

  Also, related to stocks, in order to increase growth, a company has to build up value (not merely pursue a business model that can be easily copied).

  Moreover, in order to speculate about future growth, you need the “Net Present Value of Growth Opportunities.”

  Here is what your information did reveal, however. The PEBV of 1.15 tells investors that liquidating the company would result in 86.9565% recovery of the stock. Put another way, if the stock sell for $37.00, then liquidation would decrease the stock value to $32.17.

  Here is what you did reveal. The company is worth almost the same alive or death. This means that the firm has very little value in it. So, to suggest that the company will maintain a growth of 9% is an impossible argument to someone who is at least minimally versed in stocks and company growth.

• “minchia” has never posted on this forum before, that I can remember. First post is a news release. Hmmmmm. Can we say ‘John Barf villa’?!?!?

  Those ‘spin Doctors’ at LTS are hard at work! :(

• Minchia, most people (even uneducated people) know that there is a “time value of money component” when making financial decisions.

  That means that, even if the price of the stock grows to $80 in 15 years, an $80 instrument tendered 15 years from now is not worth $80 today.

  Again, in order for a firm to increase its value, it has to invest heavily in processes that return a good investment (beyond an easily imitated business model).

  One thing that is hard to manipulate is the “Price to Book Value” ratio (the free market sets the price, it is pretty accurate). So, the difference of .15 shows that the business has a little value in it but not very much.

• Here’s a news flash folks! LTS has money because the Franchisees do the following on their behalf:

  1. Send them money for a piece of paper and territory that may or may not pan out for any money for the zee.

  2. Sends LTS minimum royalties even if the zee does not make money.

  3. Pays all the bills for LTS and sets up stores to make LTS look like they are doing everything, except they ain’t, the Zee takes all the risk, bills and losses no matter what happens.

  I mean, think about it, who in their right mind could not have money???? Listening to a LTS call is a joke and as Bill has pointed out, we don’t know about the individual Zee who is sputtering and broke all for the great LTS god.

  If LTS fails it is only because John Hewitt did not have the money managed properly.

  The news release is a fallacy, it does not explain the individual franchisee, which is what this site is set up for, to warn people, even if they don’t take heed, that John is doing great, which mean someone is totally broke.

  This site is telling anyone looking at LTS to remember, no matter how great LTS does, it usually does not translate to the individual Zee as almost 3,000 post’s can attest. You have been warned, to take it slow and look past news release.

• ^^Good one, Franchizee.

  There is absolutely no redeeming reason why a potential franchisee should look to Liberty Tax in order to ‘make money’ in the tax business. The ‘spin Doctors’ (LOVE that phrase, texastee) make sure they have taken your money without giving you anything in return. Except headaches, stress, and empty pockets.

  Franchizee: There are almost 4,000 posts here, not 3,000. Lol.

  As Bill says, “Buyer Beware”. Back away and go elsewhere. Seriously. You will thank us over & over again. They are slick scam artists who have perfected the art over many years of ripping you away from your $$. Don’t do it. It’s easy to get caught up in their ‘marketing campaign’. They have ‘bought’ the judges in the Eastern District Court of Virginia and every single case that goes to them are found in favor of LTS (What a surprise! Not) It is a HUGE scam. Interesting how many cases are brought against franchisees by LTS. Save yourself lots of time, grief and money. Go elsewhere.

  NOTHING will be done until the US Gov’t wakes up and sees the thrashing of regular innocent people by these franchises. There needs to be tougher regulation. Until then, people just need to back away and NOT pay hard earned money for a piece of crap.

• Liberty as a stock investment? Really?
  Liberty trades like a penny stock.
  Very little volume.
  The only days that have big volume are when insiders are selling their holdings.
  Check it out. Match up the big volume days with the insider transactions.
  Know what else? Those insiders manage to sell at the top.
  Now think about this. What if liberty does do an ipo that is talked about….what happens to the share price when the market gets flooded with a ton of new shares?
  John said something about needing to raise the float. The float is 50something million shares. (I could be wrong about that, I’m going from memory)
  What’s the average volume? Now back out the scewed average due to the big guys selling their holdings on big volume days
  There are plenty of free trading shares.

  Here is how this thing works as a business for liberty
  I looked at buying 2 territories about 10 years or so ago.
  The sales pitch was too good to be true. Never a hint of risk mentioned and all “your gonna be rich and not even have to work much” so I didn’t bite.
  The 2 territories….
  1 of them went through 3 owners and is now closed
  The other? Has had two owners and the current owner works at a book store may-December to make ends meet.

  What did liberty get out of it?
  $40000 x 3 fir the first
  $40000 x2 for the second

  Minimum royalties for the years

  Liberty has made about $350,000 on those 2 territories
  4 franchisees are out
  1 is struggling with a retail job
  She is a smart lady who sold a successful existing business to purchase the territory

  4 total failures and 1 struggler

  5 for 5

  Glad I didn’t bite on the deal that was too good to be true

• ^^Hey Greg:

  Insider trading where the transactions sell at the top? Isn’t that ILLEGAL? Hmmmm. Isn’t that how Martha Stewart ended up in jail? For insider trading? Hmmmm, can’t imagine anyone at Liberty doing something so illegal (!) :(

  Greg: You were smarter than the rest of us that got duped. Consider yourself lucky!

• The problem with the stock market and with this stock in particular is that people are willing to believe what is fed to them. This is not a company in the tax business, but a company selling franchise territories for excessive amounts to unsuspecting people. Let’s face it, they don’t sell anything tangible, they sell a fictitious territory that they created in order to carve up the US and Canada into parcels that have no meaningful value. Stockholders will have to soon realize this since Liberty is now trying to believe their own BS. You see insiders cashing out and moving on. Seems to me this is the end of the line.

  Insider trading has and will always occur which has traditionally given those at the top a major advantage. The stock has shot up merely by the low volume manipulation of a few shareholders. This tells me its time to bail, if I were a shareholder. I’m not even sure if an IPO is even in the future. Has anyone seen a S-1 filing? I love how the Liberty stooges ar quite adept at posting their own press releases, believing these to be truthful. Press releases are NOT real reporting because they are printed verbatim by the media because they are merely too lazy to construct a story that requires insight and intelligence. Liberty is not the only company that capitalizes on media laziness, but they sure have known how to exploit it.

  minchia, which I will call mini-mind for short, has shown that if you say something often and loud enough, people will start to believe it even if it is utter nonsense. Most press releases are some sort of nonsense that is trying to put a positive spin on something that is not good. We have heard quotes like that before such as “The individual Income Tax is not designed to support the burden of government costs as is the corporation tax.” We all know that the opposite is true. We need to be a little smarter, through this great site, to impart the knowledge that we have acquired through being cheated by Liberty Tax.

• Whew!!
  To all of you, thank you very much!
  Friday Aug 29, 2014: I made a call to LTS to show my interest to buy a franchise.
  Saturday Aug. 30, 2014: I read their franchisee sales pitch and even viewed one available outlet. It was a hole in a wall type.
  Sunday Aug. 31, 2014: I read your believable complaints AND SUGGESTION.
  Lost my interest! Thank you all for the advice! This site was definitely helpful. Someone will not get a referral fee anymore!

• It is good to know that this site is saving people from making a bad investment in a Liberty Tax franchise purchase.

  The main reason people get on this site to defend Liberty, is because they too know it will be a bad investment for those looking to buy a territory now. If Liberty offices made money, the corporate office would be using stock sale money to open more and more stores. So, why is that not happening?

  If you are thinking about buying a territory, do not. Many former Liberty franchisees are truly looking out for you. We know this site will not change the fact that a few have gotten rich off the many former and current franchisees. It is our duty to tell our stories and give our advice so others can save their money and avoid unnecessary strife.

• ^^EdmontonAlberta:

  YES! Music to my ears! Way to go!

  Posts like yours are the reason it’s all worth the effort to post and to warn. We were absolutely crushed by this franchise. It is so not worth all the headaches, stress and money lost. It is a huge scam. A huge professional looking scam.

  Hope more people come on to tell us that they, too, backed away. This awesome news just made my day! Can’t wait for more of the same! YEA! :):)

• Very happy to see yet another person persuaded from making a bad investment in a Liberty franchise. Its refreshing to see some positive outcome from this website.

  I’m still seeing the propping up of Liberty stock by stock manipulation of insiders.Where else can you see a stock so influenced by such a small daily volume. It looks like a lot of the rats are jumping the ship by selling and exercising options. Maybe the stock is as high as it will go with all this insider trading.