Franchisee “Joey Black” claims that the unhappy franchisees (and ex-franchisees) of Liberty Tax who vent here are “over the top” and in need of a reality check. What do you think? Excerpts highlighting his main points follow the full text of his comment, below.
Here is Joey Black’s comment, posted on LIBERTY TAX SERVICE Franchise Complaints:
The comments here from people who did not make it as Liberty franchisees are frankly over the top. I spent $70k on each of the offices I’ve started, and that was it. Why someone would expect to spend three times that is beyond me. People complaining about the royalty are particularly suspect. Jackson Hewitt charges more, and H&R Block charges its frachisees a whole lot more. Same for the ad fees. And this year, Liberty gave back half of the ad fees to the franchisees to spend on marketing materials. They paid for my yellow pages ad. They produce all the ad copy, graphics, etc.
But none of this was hidden when I signed the contract. It was all right there. And what franchise business doesn’t charge royalties and advertising fees? And interest on notes you’ve signed? Didn’t you read what you were signing? Again, it’s all there in the contracts you sign. Good grief, at least complain about legitimate things. Otherwise you end up looking worse than you’re trying to make Liberty look. You didn’t know what the interest structure was on your note, but you wanted to do peoples’ taxes?
Now, most people who fail as franchisees are people who are not suited to own their own business. And they could be identified up front, but Liberty will accept your money and sell you a territory if you can fog a mirror. They pretend theirs is an exclusive club and you’re lucky to be let in, but that’s a lot of hype. They have a large tax department to support franchisees, software development, technical support, operational support, marketing, etc. to the idea that most of the company is the legal department is ludicrous. I know their VP of legal and corporate counsel. It is not a big department, but yes, they are very willing and eager to litigate. You need to know that going in. That’s why it is important to talk to real franchisees, both current and former, successful and unsuccessful. I make good money as a Liberty franchisee, but I have had to learn what is real and what is BS. They leave me alone for the most part, which is all I want now that I understand the business.
Yes, the franchised business is harder to sell than Liberty would lead you to believe. Yes, buy one and run it for a year before buying multiple units. Yes, 12% is a very high price to pay for money. If you have to use Liberty’s 12% money you probably should not be going into business. Most financially sound people don’t have to pay 12% to borrow money. Yes, many of their Area Developers are useless and you just want them to stay out of your way but they are your only conduit to the corporate office for support sometimes. You have to deal with that. And yes, if you are profitable at all, just a little bit, in your 2nd tax season you’ve done very well. If you have to have profit to sustain yourself in tax season #2 this is not a business for you. These things are true. But there’s a lot in this thread that is not true for most Liberty franchisees. A lot of it is failure looking for something to blame.”
Joey Black’s Reality Check: Main Points
Startup costs: “I spent $70k on each of the offices I’ve started, and that was it. Why someone would expect to spend three times that is beyond me.”
Royalties & Fees: “Jackson Hewitt charges more, and H&R Block charges its frachisees a whole lot more. Same for the ad fees.”
Advertising: “…this year, Liberty gave back half of the ad fees to the franchisees to spend on marketing materials. They paid for my yellow pages ad. They produce all the ad copy, graphics, etc. “
Due diligence: “…none of this was hidden when I signed the contract. It was all right there.”
Franchisee failure: “…most people who fail as franchisees are people who are not suited to own their own business.
Sales hype: “Liberty will accept your money and sell you a territory if you can fog a mirror. They pretend theirs is an exclusive club and you’re lucky to be let in, but that’s a lot of hype.”
Franchise support: “They have a large tax department to support franchisees, software development, technical support, operational support, marketing, etc. to the idea that most of the company is the legal department is ludicrous.”
Litigation: “…they [the franchisor] are very willing and eager to litigate [franchisees]. You need to know that going in.
Profitability: “I make good money as a Liberty franchisee, but I have had to learn what is real and what is BS.” “if you are profitable at all, just a little bit, in your 2nd tax season you’ve done very well. If you have to have profit to sustain yourself in tax season #2 this is not a business for you.”
Financing: “12% is a very high price to pay for money. If you have to use Liberty’s 12% money you probably should not be going into business. Most financially sound people don’t have to pay 12% to borrow money.”
Area Developers: “…many of their Area Developers are useless and you just want them to stay out of your way but they are your only conduit to the corporate office for support sometimes.”
Blaming others: “…there’s a lot in this thread that is not true for most Liberty franchisees. A lot of it is failure looking for something to blame.”
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View Comments
"You are about to invest $40,000 or more on a franchise that doesn’t have a national advertising campaign and has marginal name recognition. "
Bill, your comments are baffling to me. If you are truly investigating Liberty as an opportunity then you've attended a presentation by John Hewitt where he explains exactly what you've said. He tells you exactly why there is no national media advertising campaign. Now, if what he says doesn't make sense to you then that's fine. But it is not as if it is a secret. Mr. Hewitt shares his marketing views precisely with prospective franchisees and then it is up to each to decide if they believe he is right or he is wrong. If you think he's wrong, of course you shouldn't invest any amount of money. If he's right, well, that certainly has value.
Your comment about marginal name recognition is ridiculous, by the way. There is no town of any size in America today where folks haven't come to recognize the Liberty wavers at tax time. Everyone knows what they are, and what business they represent.
And how would your "friend" have confidential insider information about Liberty if he's not an insider at Liberty? Your comments sound contrived by a disgruntled person to try to sound like an objective opinion, but they're too transparent. Talk about legitimate things, and I'm happy to have a conversaion. Yes, I think $40,000 is too steep. I think somewhere around $32,000 is the right price, but hey, they're not my territories. And yes, some franchisees fail. No doubt about that, and too many for my taste. But many of us have very profitable businesses with quite a lot of equity.
Joey:
I see these comments like "you should have realized that before you purchased". Let me suggest that Liberty would be much better off at their meet and greets to be honest and straght forward about what someone is purchasing. There are many, many facts that I found out the hard way, that were never talked about at the meet and greets, nor the training. I also asked many questions, and rather than getting straight answers, I received what I now realize were answers based on what JTH wanted you to think, not reality. To me the worst was when I asked how many returns I should expect to do the first year. I was referred to Mr. Top Gun who said he did over 900 the first year. Reality is, the average is less than 300 for each store. Also, I was led to believe Liberty had a much greater appeal in middle income neighborhoods. I was told that I should expect more late season business. That is all BS. Liberty's appeal is EIC and low income. Without a fair amount of those returns you might as well close your doors. The chances of living on middle income business is slim and none. How should I have known those factsbefore I purchased ? I guess by osmosis because you will not get straight answers at Liberty.
Joe Black:
My whole purpose on here is to make potential franchisee's aware of the possible pitfalls of purchasing a Liberty Tax Franchise. Without even talking about the bad experiences that many franchisee's have, The fact that the JTH does not have or believe in a national advertising campaign should make people think twice before investing with this company.
Over the years JTH has made a small fortune selling franchises. However in the last couple of years there appears to be a slowdown in the number of franchises it has sold. This may be due to a slow down in the economy or just a normal stage in a franchisor's life. When I check the franchises available I do see that the company has adopted John's philosphy of now developing certain areas of a State where Liberty has a presence vs selling franchises to anyone and everyone.
(wonder how the area developers feel about this).
Overall the company is financial very strong but not strong enough to over take H&R Block despite Blocks own mistakes and Jackson Hewitt's problems. If there as many failing or struggling franchisees as this site suggest and franchises sales are slowing cash flow may start to become an issue. On top of that the company still needs to develope an online tax presents.
By the way Joe, where are your stores located?
I agree with Bill:
Not only are Liberty's franchisees struggling because there is no national advertising campaign, they are struggling because they pay 4% and getting nothing from Liberty, and on top of it, having to spend massive $$ to get people in the door. I wouldn't put Danny Hewitt in charge of cleaning my dog cage. He knows absolutely nothing about advertising or marketing except what he read in his guerilla marketing book. He is clueless. If Liberty wants to grow, they need to get rid of their current Marketing department, and hire someone who has done extensive successful Marketing for a major retailer who understands how to connect with customers. The current marketing plan is so out of touch with the real world it is scary.
I have been researching this franchise for months. I've talked to the company and read the negative stuff on the net. I've also dug and contacted franchisees to talk to them about real world experiences. All of them gave good reviews and said they learned what worked and what didn't in their particular area. Most had also purchased additional stores. My situation is I'm combining a relocation to another state with the potential purchase of a franchise. I'm an accountant by trade and really like the LTS methodology. The main (and probably most important) question I need to find answers to is, what is the profitability (averages) of a first year store. I'm willing to do whatever it takes re: "the system" (which if i'm honest, sounds like the movie "The Firm"..lol). I've also talked to a marketing company who works with some Liberty Tax stores, not part of Liberty, just a company that works with some local offices. She indicated, if she was living in a different area, she would absolutely buy a store. She sees the actual numbers of the stores she works with. She did say a person won't become rich with one store, but she said the clients she has who run the stores properly and professionally are doing incredible. I'm not convinced one way or the other, but I am simply trying to find out as much as I can before making the decision.....any constructive opinions or real world experience one way or the other would be greatly appreciated....
Mike
Mike:
I will give you my stores. All you need to do is take over the liabilities. They are nothing but a money pit. And by the way, I am serious.
Why would anyone take advice from someone called Frustrated and Disgusted.
Its like you meet this girl and you want ask advice from her former boyfriend who is a loser and is still stalking her..hahahahahahaa.... Change your name to "Loser and Disgusted"
TestaipiraL
if you spend any time looking at my posts, I have presented facts and stayed away from personal attacks. I suggest you do the same. It's always interesting to me that people who have no real facts to back them up use personal attacks instead. Like anyone would even spend the time to read them is beyond me.
Mike;
Liberty Tax knows the average profitability of each store, so when you ask them what do they say? Per the 2010 Jackson Hewitt Financials their 1st year store averaged 166 returns which is down from the 205 returns they averaged in 2009. Liberty Tax Services is modeled after Jackson Hewitt so I believe this average would be comparable to what a 1st year store with Liberty could average. I say could be cause Liberty does not have the brand name recognition or a national television advertising campaign. If we use the 205 return figure and an average net fee of $180.00, your first year gross income would be $36,900.
Are you a tax accountant? If you are I would strongly suggest going out on your own and not enlisting a franchise. There are several good books out there one being "How to build an accounting practice".
Thanks Bill....Yeah, those numbers are anemic. I am a tax accountant (an Enrolled Agent) but there was something compelling about being part of the "group" that seemed to take the risk out of it or @ least decrease it. When analyzing the numbers, it appears they make the risk even worse. I do have a niche I'm going to pursue and I'm not the traditional accountant, and it's this "look" that I'll promote. I've been in touch with some marketing extraordinaires who think my idea is something that could really make me stand out and draw clientele. I've really been wondering why I'd sink $40k plus marketing dollars into someone else's mousetrap when I could spend a fraction of it and blast my area with a systematic promotion of "me".....I appreciate everyone's input, good and bad....Oh, and with respect to what Liberty says when I asked about numbers, profit potential, etc, they indicated it would be "illegal" for them to provide it....thankfully, in the last week or so, I've interviewed another 12 or so franchisees and they've given similarly paltry numbers for their first year....