LIBERTY TAX SERVICE Franchise Complaints

UnhappyFranchisee.com asked: Are LIBERTY TAX SERVICE Franchise Owners Happy? If you’re familiarliberty_logo 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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5,669 thoughts on “LIBERTY TAX SERVICE Franchise Complaints

  • October 17, 2018 at 11:49 pm
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    Glad to see Martha is gone, but you still won’t make money with 20% of your income going to royalties and ad fees. Liberty is a dated “system” with a tarnished name. Get out now if you can.

  • October 29, 2018 at 11:45 pm
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    This new format is terrible. You can’t see what company people are referring to in the ‘most recent’ comments. Please go back to the old way.

    Proof this format is losing viewers is that no one has commented on Liberty Tax in well over a week.

  • October 30, 2018 at 3:29 pm
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    At LinkedIn, Martha O’Gorman is now listed as Chief Marketing Officer at Loyalty Brands, Hewitt’s new company, so probably mutually agreeable solution for all involved.

  • October 30, 2018 at 4:31 pm
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    I don’t understand how this guy can get away with opening a franchise (with his namesake), being asked to leave, opening second franchise, being asked to leave, open third company and get away with years of defrauding people of their money and defrauding the US government. And asking for 19% in Royalty. I will never join a franchise ever again and I am telling everyone I know to stay away from franchising. However I have seen some franchises charge literally 2 or 3% Royalty fees! With actual support, ongoing training, support from AD’s (what a joke) and not spying on you with their software. That chapter of my life lasted waaayyy longer than the 5 year contract period. My life is incredibly less stressful now. The mistake of a lifetime. What the hell is Loyalty Brands supposed to do except rip people off even more? And barter for services?!?! When will the appropriate people WAKE UP and stop covering for him? I’m waiting for the full circle moment.

  • October 31, 2018 at 4:01 pm
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    I appreciate the input about format.

    I operate this site on a shoestring and rely on your contributions (which are pretty nonexistent, with a few exceptions. You can contribute here: http://www.unhappyfranchisee.com/support-franchise-fairness/) .

    I’m thinking about running a GoFundMe campaign for both a site redesign, server change, tech support, and SEO assistance. Serious question: What do you think? Would anyone contribute?

    The last few weeks we’ve had a lot of downtime thanks to our web host being sold to a company that has eliminated support and allowed its software to pass “end-of-life” while billing me double.

    Some of the more tenacious and worst scammers (The NY Bagel Craigslist Scammers) I’ve exposed have decided to anonymously create an attack website against my family which includes pictures of my kids, my daughter’s wedding pictures, etc. with defamatory smears intended to damage their personal and professional lives. They think this will coerce me into removing the only warnings protecting people from their blatantly predatory scam.

    I’m not saying this to generate pity or donations (though no complaints on the latter) but just to say that I would love put the redesign and SEO on the front burner, and will as soon as I get some time and money. Those who have followed the site know that I’ve successfully fended off coercive lawsuits ranging from $30K to $35M to keep the site going and providing a trustworthy forum where ya’ll can share the truth about these franchise bullies and blowhards.

    So sorry for the inconvenience. I will get there eventually and do a proper redesign. In the meantime, if people simply bookmark this URL you should be able to find this main discussion right away:

    http://www.unhappyfranchisee.com/liberty-tax-services-franchise-complaints/

    Bookmark this URL for the archive of all Liberty Tax posts with the most recent first:

    http://www.unhappyfranchisee.com/category/franchisor/liberty-tax-service/

    Thanks,

    ADMIN

  • November 3, 2018 at 2:09 pm
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    John will Continue his run as Ceo of successful companies as long as the public is blinded to the facts of how business is truly operated these days.

    John is no fool, and I believe that John saw the writing on the wall and saw that monetizing poor people which is what, made him very rich, was coming to an end no matter if he fought on and remained at Liberty or if he decided to leave. Leaving allowed him to pocket a huge sum of capital and also allowed him to refocus his abilities and capital on a more stable market and a market that is going to last much longer than the Liberty Tax business model, which is a model that is dying very quickly!

    John over the years has been able to take other peoples great ideas in his organizations and once he is able to separate the idea from the person or persons that envisioned it, he is able to make the idea his own and capitalize on it! He does this over and over and over!

    He understands that small business is one of the only possible bright spots in the income tax prep industry and even the small business side is very limited overall. But he does know and understand the tax industry very well so including it at the start of this new adventure only makes good sense. So this new adventure with loyalty brands enables him to spread the risk out and be more flexible with the products and services he offers. It ensures that this next adventure has the flexibility needed to survive no matter what business environment we may be in at any particular time. Except for a total collapse of the American economy and at that point I’m sure he will find a way to capitalize and monetize that also.

    In the end the business model will be much the same. John will not make money on the services that Loyalty Brands provides. He will make his fortune convincing talented but cash strapped entrepreneurs or business owners that want to be a part of something special, to join him by offering them things that they don’t think they would be able to obtain on there own easily. With Liberty he used financing and a well written contract to lure many in and it worked great. For those people who bought into the Area Developer scam don’t feel bad. It was a genius business move on Libertys part to create such an amazing contract that even impressed some of the most talented lawyers out there and fooled so many! But the execution by John and Liberty of the Area Developers contract was anything but genius it was as corrupt as anything I have ever seen. Many good people went broke because of the way Liberty used the Area Developer Contract and financing. Not only the people who bought Into being Area Developers but also the franchisees. Liberty became what it is today because of the choice to become a high interest low risk loan shark plain and simple.

    Over the next several years many of the talented and loyal people who helped build liberty will be brought into Loyalty Brands to pump up the excitement and to create the needed culture for John and investors to sell this opportunity to the masses. Many of the people will be brought on to ensure control of the franchisees or the business owners who decide to get involved. Control is key to Johns. Success!

    I’ve not yet looked at Loyalty Brands Opportunity very in depth but I plan on it and I can almost guarantee you many will be able to see what the hook is and how this will play out. John sells the dream like very few out there are able to do. And people believe they are truly buying a dream and a partnership when in reality the majority are buying into nothing but a living nightmare. Yes a very few will go on to be successful with John. But the design is that the majority are used then discarded for the benefit of the very few who are chosen to share in the ultimate rewards. And if you ever have the opportunity to sit down with John and talk business he will tell you this! It won’t be so blunt or brutal as I have presented it but he will tell you what the end game is and if your listening you will catch on and keep you wallet in your pocket! If there’s one thing John loves to do it is talking about himself and his companies.

    What happens to Liberty is beyond me. The current model is a dying one so unless the new ownership is wiling to listen and include the talented franchisees and employees who remain I don’t hold much hope out.

  • November 3, 2018 at 2:20 pm
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    I also want to encourage anyone who has found this site to be helpful and think that spreading the truth of what is really going on in the franchise world today is of utmost importance to donate and support Sean with the financing of this site!

    Sean has been a lone warrior who has went out and battled many of these franchisor and there lawyers and has won! He has been threatened and told that they were going to destroy him and this site yet he still remains and still is fighting the fight!

    Sean never started out desiring to be the one who exposed the franchising industry he wanted to highlight the good franchisors out there and be a place for the masses to come when they were looking for a honest and good business opportunity.

    But quickly like so many of us found out that the franchising industry as a whole is corrupt and full of nightmare stories of intimidation and threats.

    If you have the resources please consider donating to this very worth cause.

  • November 3, 2018 at 11:30 pm
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    Sometimes the most difficult thing is understanding and accepting that your time has come and gone. Mr. Hewitt time has come and gone. The millennials won’t care or know of him and the rest of potential investors are seniors looking to keep their monies happily into retirement. No one has time to look at the past. We need all our time to cover the future. Franchisees have said goodbye and are moving on.

  • November 30, 2018 at 10:13 am
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    Hate to say it but I told you it would happen. Kills store equity but makes it open season to jump ship.

  • November 30, 2018 at 11:16 am
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    Who wants to bet that HE is involved with this somehow. He’s a creep & I wouldn’t put anything past him. :(
    PLEASE jump ship before the start of the next season. HE really has the kahunas to wreak havoc on your life for years. It is SO not worth it.

  • November 30, 2018 at 12:30 pm
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    Oh, I’d be willing to bet good money that John Hewitt is behind the private equity buyout attempt. It sounds kind of like the Papa John’s situation where their board forced Papa John out and he’s been attempting to get backing of private equity to buybuck his company and take it private again. I’d imagine John Hewitt is trying as well. As much of a con artist as John is, I can’t honestly say it would be any worse for the remaining franchisees as they are basically rudderless now. John was a jerk, but he was a steadying presence and at least gave the brand some legitamacy via his background in the industry. Either way, I’d recommend people start looking for an exit as these are the final gasps of a dying company. Maybe after this tax season, maybe two or three more, but it’s not turning around and will eventually collapse.

  • November 30, 2018 at 1:53 pm
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    ^^”The brand” had NO legitimacy! No one came to me to have their Taxes done because it was Liberty Tax! Hell, no one cared! Liberty Tax was and is a fictitious, made up name to hide behind. It could have been “Joe’s Tax Service”. They came to me because I was honest, fast, knowledgeable and fair. That’s it! And they referred many friends & family. His “industry background” meant nothing! How much do you want to bet he most certainly has never prepared a Tax return? I had people coming back to me every year for ME. If they wanted the “brand”, they could have asked for any preparer instead of waiting for me. Especially since I had multiple offices. It’s amazing what you can create out of thin air and coax people’s money from them from these “territories” that are all just imagined and drawn up. He has been in the business of ripping people off again and again and again no matter what company brand he was hiding behind. The fact that the DOJ still hasn’t arrested him, knowing full well how much info. they have on him, frankly is nauseating. Karma will happen eventually. Never thought I’d have to wait so long. He’s out of LTS but completely free to work, rip people off and continue his shenanigans over & over again. It’s marketing, sales, whatever you want to call his business, but it certainly has never been Taxes.

  • December 10, 2018 at 5:03 pm
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    A new nugget inserted into Liberty’s recently released 10-Q filing for their second quarter. I don’t recall seeing this before, so it may be a recent and ongoing investigation:
    “The IRS has been conducting an investigation of our policies, practices and procedures in connection with such tax return preparation activities. We are cooperating fully with the government in connection with these matters, including by providing documents and other information. The Company is unable to predict what action, if any, might be taken in the future as a result of these matters or the impact, if any, of the cost of responding to the government or any potential remedies as a result of these matters could have on the Company. It is possible, however, that any such remedies could have a material adverse impact on the Company’s consolidated results of operations, financial position, or cash flows.”

  • December 10, 2018 at 10:11 pm
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    I feel sorry for all of the newbies as they are gearing up for a new season, unaware of the money they are likely to lose. My advice to them is to get out now, no matter what. Start an exit plan immediately.

  • December 10, 2018 at 11:28 pm
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    Dr Zhivago, Best news news I’ve heard in a while better late than never.

  • December 14, 2018 at 1:34 pm
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    Awesome, glad I’m gone from this circus.

  • December 14, 2018 at 3:23 pm
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    IRS investigating Liberty Tax, company says
    By Kimberly Pierceall
    Staff writer

    Kimberly Pierceall
    Reporter
    kimberly.pierceall@pilotonline.com

    Dec 14, 2018

    https://pilotonline.com/business/stocks/article_04bc2236-ff11-11e8-b19f-4306c64355a6.html
    VIRGINIA BEACH
    The Internal Revenue Service and the Department of Justice have pursued multiple cases against Liberty Tax franchises in recent years, but the IRS has also been investigating the company itself, according to a Liberty Tax financial filing .
    The mention, deep into the Virginia Beach-based company’s quarterly earnings report filed Monday, appears to be the first public acknowledgment that there’s an investigation into corporate activities.

    Under “other matters” in the filing, the company says “the IRS has been conducting an investigation of our policies, practices and procedures in connection with such tax return preparation activities.” The phrasing inferred the investigation into the corporate headquarters’ activities could be related to other cases the agency is looking into involving the company’s franchisees.
    “We are cooperating fully with the government in connection with these matters, including by providing documents and other information,” the company notes.

    Multiple cases have been brought against individual franchisees who collectively operated hundreds of stores. In April, the Department of Justice sued to shut down a longtime Florida franchisee with corporate connections, accusing it of filing fraudulent tax returns. The case, which seeks $1 million in what the federal government described as ill-gotten gains, is pending in a Florida federal court. In 2016, at least 70 franchise locations were shut down and scrutinized by federal authorities.

    In the same financial filing, Liberty Tax said it had determined its internal controls and procedures for financial reporting had a “material weakness” and referenced issues it had with “tone at the top,” a concern cited by its original auditor, KPMG, when it resigned from its role with the company in late 2017.
    Liberty Tax founder John Hewitt had been ousted as the CEO that year after an internal investigation determined he could be fired for cause. He was ultimately fired without cause but remained in control of the board of directors because of the class of shares he owned, causing a management shakeup.
    Among the fixes the company said it had made: buying Hewitt out of his stock and forcing his resignation from the board, forcing the resignation of his appointed board members, hiring a new chief financial officer and retaining franchisee Nicole Ossenfort as the company’s CEO and president, electing new board members and hiring Ernst & Young to review its corporate governance practices.

    The company’s chief financial officer did not return a call and email seeking comment. The IRS declined to comment, citing the agency’s disclosure and privacy rules.

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