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LIBERTY TAX SERVICE Franchise Complaints

August 11, 2009

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.

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?

Comments

3,736 Responses to “LIBERTY TAX SERVICE Franchise Complaints”

  1. Up Hill Battle says:

    Thank you Bill.

    Keep up the great work.

  2. qctibs says:

    For those considering investing in Liberty Tax, you need to know that to be successful requires hard work and the willingness to follow the system to the best of your abilities. You don’t have to be perfect to be successful, but you also can’t just sit in your office hoping customers walk in.

    Please take the time to read this board. Understand you are reading posts from the bottom 5% of franchisees – so this is worst case stuff – those that failed – but look for kernals of truth – some are being honest and fair in their negativity, many are just name-calling, some are being compensated for continuing to stoke the flames – after all, this board is a business, a very successful one. And then ask the questions raised that matter to you to see what type of response you get. Realize when you meet franchisees during the purchase process you are talking to the top 20% – so balance the bottom 5% and the top 20% – how do you fit in?

    For those on here who will certainly dismiss this post as nonsense, be comforted that I will most likely not post here again – I was originally attracted to this board by some authentic postings about a possible DOJ investigation that concerned me – but that has apparently been shelved for lack of evidence of wrongdoing. Since then one poster here has remained balanced in his negativity and I enjoy reading his posts, but there is too much to wade through to get to it – I’ve lost interest.

    For those who obviously and sincerely feel they’ve been wronged – I wish you peace.

  3. ADMIN says:

    qctibs:

    Thank you for your contributions to the discussion.

    However, I must call you out on your statement: “…some are being compensated for continuing to stoke the flames – after all, this board is a business, a very successful one.”

    If you have evidence of anyone being compensated to post here, please present it. I can assure you that no one is being paid by this website to “stoke the flames.” It appears that Liberty Tax has provided enough motivation for its franchisees to do so free of charge.

    ADMIN

  4. SanFranDan says:

    saraEA:

    It is posts like the one from qctibs above that keeps me posting. His post is assinine. How would he know if the people posting here have been in the bottom 5% of franchisees? What a stupid, stupid comment.

    I guess it’s hard for people like that wack-o to believe that EVEN if someone is ‘successful’ as a franchisee by Liberty’s definition, and still want to leave that hell hole, then they must be in the bottom 5%. Why else would they want to leave??? After all, Liberty makes is sooo enticing to want to stay, NOT!

    By-the-way, the DOJ investigation is still ongoing. Looks like they want to be thorough with their investigation before moving forward. Can’t wait.

    Bill: I can tell you a few general things about my ‘time’ as an LTS franchisee. I was very early, within the first 5 years of the beginning of his company, counting his start in Canada. There was NO brand name then and there certainly isn’t now either. I had many tax clients that I brought into the fold, that Liberty proceeded to ‘steal’. I built up the business from one territory to several, but 5 or less. The site selector that was assigned to me was from several thousand miles away, so he knew just the right location, huh??? WRONG. My location was not approved by them, yet it was a perfect spot. After a while of dealing with very elementary decisions, I could see Liberty was ‘overhwlemed’. Each decision they made for me, I did the opposite. In EVERY SINGLE instance, my insticts were spot on. Clients came to me because I was honest, fair and competetive in pricing, and I knew my stuff. They sent in and referred friends, family, and at that time I did the send-a-friend….whatever marketing Liberty told me to do I tried. The after losing a sum of money, I tried my own marketing that brought in the higher level returns and more people. It was VERY apparent that you DO NOT NEED this franchise to have a tax practice.

    Employees ripped me off left and right since it was hard to be in more than one palce at a time.

    I will not say anything else because whatever I say will be criticized by our resident three stooges: Barf villa, qctibs, Ed and whoever else wants to be associated with the three stooges. I DO know, however, that after I left, the franchisee agreement got harder and more stringent. There’s plenty else, but I wish not to share since Barf villa, qctibs and Ed will continue to shoot down anything said. Even on UNHAPPY FRANCHISEE, you still cannot speak freely because one of these asshole stooges will say something rotten. I ‘will be comforted to know that he most likely will not post here again’, YAY. See ya. :)

  5. Uphillbattle says:

    Thank you everyone. I attended a reputable graduate business school. I learned that you have to decide who your customers are going to be (demographics, income range, and so on).

    Based on the information from the responses on this website, it appears that it is wise to segment the market and focus on people who are willing to pay a reasonable fee for a great service. (This is especially true since the refund loans are pretty much gone, for now.)

    Moreover, as saraEA has mentioned, if you deliver a competent service, then you will get referrals.

    Consequently, it appears that a location in a blue collar area (maybe higher) might be wise. (This might help in thwarting off the shysters.)

    What do you guys think or suggest? I appreciate any criticism, information, or suggestions.

    Keep up the great work. You guys and gals are getting your points across very well.

  6. Bill says:

    qctibs: Like all of liberty’s numbers yours are fussy. In 2013 you had 2073 franchisees and in 2014 you had 1,959 a decline of 5.5%, In 2013 you had 4262
    offices in 2014 715 of those offices closed for a decline of 16.8%. All of this information can be obtained from reviewing the company’s annual reports.

    Uphillbattle: I don’t know your situation, meaning can you afford to strike out on your own? What I can tell you is that it takes time to build a tax practice. A fair breakeven point would be 3/4 years out. As for neighborhood I have client’s from all walks of life and as SanFranDan stated it’s about honesty, fair and competitive in pricing. If you demonstrate those attributes people will stay with you.

    What I found is by franchising not only do you have the usual cost of running a business but now you’ve added another layer of cost. In franchising you essentially give up your rights on how to run the business and are required to follow the contract terms which means doing business as Liberty says. In Liberty’s case this meant staffing your office based on a budget of 600 returns ( average office in 2014 did 453 returns), have a marketing budget of $6,000 for the season (which included buying from their suppliers who gave Liberty a rebate), giving away 100 returns (Would you trust someone who said I will do it for free just give me all your personal information), during the off season you where required to hold a tax class and buy a minimum of 30 books for class etc. If you don’t the franchisor can threating you with a notice to cure. On top of that there was the 14%royalties and 5% marketing fees.

    In my first year I gave Liberty 28,000 in a franchise fee and 5,000 in royalites that’s 32,000 or 16,000 a year that would have been better invested in me if only I had the balls. Unfortunately Uphillbattle your looking for a sure thing and you would be better off just staying where you are.

    Buyer’s Beware!!!

  7. Uphillbattle says:

    Thank you Bill. I agree with you; the service has to be made available to everyone who is willing to pay a fair price. Also, your estimate of a 3-4 year break-even point is helpful.

    Keep up the great work everyone.

  8. Sad but true says:

    How to start a tax business at home that could lead to maybe your own storefront business. This advice will save you the franchise fees that any of the big three charge.

    http://www.ehow.com/how_4796962_own-tax-preparation-business-home.html

    Instructions
    1
    Take a tax preparation course with one of the well-known tax preparation firms. Jackson Hewitt has a great tax preparation school that teaches you the basics and the more difficult points of doing taxes for individuals and businesses. The classes are usually free, and you are only required to purchase books and software.
    2
    When you finish your tax preparation course and get your certification, buy tax preparation software that’s made for professionals, such as TaxAct or Intuit, and install it on your computer.
    3
    Think of a professional business name for your new tax preparation business; feel free to use your own name as your business name as well. Your state may require that you receive a license in order to operate a tax business in your state.
    4
    Get a Preparer Tax ID Number (PTIN) from the IRS. This is the ID that you will use on forms when filing taxes for your customers.
    5
    Get a 800 number to help you handle calls from potential customers and to make you look like a professional tax business.
    6
    Start off your advertising efforts by tapping your friends and family. Tell them that you have passed a course to do tax preparation and charge them a deeply discounted rate. Tax preparation is a business that heavily relies on word of mouth and referrals; if you do a good job on your family and friends’ taxes, they will help spread the word about your tax preparation business.
    7
    Solicit customers for your tax services by posting an ad for your services on Craigslist, AngiesList and in your local newspaper. Design and post flyers about your tax preparation business at your local shopping centers and supermarkets. Place radio advertisements during tax season to publicize your tax preparation services.

    This is just one of many sites that give advice on how to start a tax business.

    May I add that you need to get an EFIN to efile taxes professionally.

    Be your own boss and limit your investment initially by working from home. If you find you are good at this business, open an office in an existing office complex or storefront.

    Note – this is not proprietary information like some would make you believe. It is out there on the internet for anyone to find.

    Yes, as Bill often states, Buyer Beware when it comes to investing your money in a franchise tax business.

  9. Uphillbattle says:

    Thank you “Sad but true.”

  10. SaraEA says:

    I agree with all Sad but True’s advice except part of #6. Don’t start off charging “deeply discounted rates.” You’ll have a heck of a time raising them in the future. Go back on this board and read the comments about Liberty’s mandatory number of free returns. Most people say that the clients will expect free the next year, and if they don’t get it they walk. Even Block did away with its brief pilot of free EZ returns, either because it didn’t turn the recipients into clients the next year or so many people didn’t qualify under the fine print they got ticked off and will never be clients. Either way, Block realized that was no way to build a business.

    I’ve read complaints on many blogs that someone had a “simple Sch C” or whatever and the preparer had the nerve to charge the rip-off price of $125 or something so low I had to laugh. You don’t want clients like that. Charge what you’re worth.

    Family is different of course. You’ll be doing their returns for free forevermore, so consider them good practice. Do limit “family” to immediate family, no cousins or in-laws’ neighbors. My child has a Sch C with FIVE pages of depreciable assets, with some retired and more added every year, and almost every line on the schedule has an entry. This return would easily be over $2000 in any practice. So accept that you’ll be stuck with you kids’ and parents’ and maybe siblings’ returns, depending on where you drawn the line, but resolve that you will not do freebies for your cousin’s kids. Just ask any Liberty franchisee who is asked to do them for perfect strangers, which you cousin’s kids likely are to you.

    And yes, SanFranDan, EA stands for Enrolled Agent. It means that I’ve learned so much about taxes that I now realize how very much I don’t know.

  11. Sad but true says:

    I have to believe that many people looking to invest in a tax franchise or start a tax business, will find this chat site. The goal of many of us is to educate these people to consider many things before they buy into a tax franchise or start their own business.

    PRICING – One big plus for you if you go it alone is that you will probably have the ability to charge your customers a fee below the big three’s fees. SaraEA gave good advice on pricing. One thing you can do with your new business is ask your potentially new customers what they paid for their return the prior year. You will almost always be able to charge them less if the big three did their returns and still make a decent prep fee for yourself. Do a great job for them, give them good customer service, and let them know you will be there for them next year (unlike preparers that come and go at the franchise operations).

    One type of return that is almost always charged a high fee by the big three are the earned income credit returns. These customers are sometimes scammers but many are not. SaraEA – please share your approach to how you handle these types of returns when one or two W-2′s are involved and that is all the clients have. What is a fair price, in your opinion.

    My approach on this site will be to help others be successful and avoid many of the mistakes others have mentioned. You do not need to spend your money on a tax franchise to get into this business!!

  12. guest says:

    I don’t think this is the right board to explain how to get into the tax business. It’s misleading to make it sound simple. Tax preparation is not getting easier. For the coming tax season the opposite is true. Even experienced tax preparers are going to have trouble because of the ACA. Anybody not getting ready early will have trouble.
    If you want to get in, I’d say find someone to work for first. Even the EIC returns won’t be as easy this coming season. Not the time to be a rookie, unless you really have money to lose. If you do the returns wrong, it’s going to delay the refunds. If you are a new preparer on your own, really bumpy ride.

  13. Sad but true says:

    No one said it was simple – actually, I copied and pasted my seven points of instructions (see July 13 posting) from a website – the website is highlighted.

    Again, my main point is to save your money by NOT investing in a tax franchise operation. I was subtle before in my posts about this, but there, now I said it. I would assume that if someone is thinking about starting a tax business, that they have some accounting/business/tax background. If so, go for it. If the ACA is going to send more people to paid tax preparers, then now is a good time to get in the business – demand may be higher.

    As for preparing taxes, yes, be sure you know what you are doing. Not all returns are difficult and the harder ones need more time and make sure you get it right. You will make mistakes but “nothing ventured nothing gained”. THIS IS AMERICA STILL – BE POSITIVE – WORK HARD – DO THINGS CORRECTLY – AND LOVE WHAT YOU ARE DOING!!

    Sadly, many have started their tax businesses as franchisees and that is why this site exists – don’t you think people are looking for all sorts of information related to the tax business here. I am taking the high road and saying you can do it yourself if your skill sets are in this profession.

  14. SaraEA says:

    Where I work now our approach to EITC returns is pretty simple: We don’t do them. Well, most of our clients have been with us a long time and occasionally some will have a bad year (like those who owned construction businesses a few years ago) and qualify for EITC. But we know that their kids really are theirs, really do live with them, they have real businesses they didn’t just invent, and they aren’t making most of their money under the table. Or they just got divorced and the spouse who has custody is in the job market for the first time, not yet making much.

    New clients who come in with EITC returns are sent to the chains. Their preparers have way more training in due diligence and required documentation. In fact, when the due diligence standards and penalties were increased, we looked over our maybe 2 or 3 dozen EITC returns and fired half of those clients, the ones we weren’t really sure were being totally honest. That said, we charge $25 more for a return that has EITC than we would without it, to cover the time to prepare Form 8867 and the extra risk. So someone with one W2 would pay our standard $100 (our minimum fee) plus $25. No extra for HOH filing status or child tax credit or refundable CTC, because the software does most of that work, and filing status is part of any return.

    One thing to add to Sad but True’s list is E&O insurance. If you don’t think you can afford it, don’t go into the business because you sure can’t afford the calamity that will happen if you don’t have it.

    And before you start think about what type of returns you want to do. EITC returns are complex and most taxpayers in this situation need professional help. But with the lure of RALs gone, many are trying it themselves with IRS free file or going to VITA sites. That is a shrinking market you don’t want to target.

  15. Sad but true says:

    Thank you SaraEA

  16. Up Hill Battle says:

    Thank you SaraEA. It looks like you have segmented the market and have a strategy. (There are some customers that you will not take; this is part of a strategy.)

    Is this working out? Are you profitable?

    Thank you,

  17. SaraEA says:

    We have more clients than we can handle and intend to fire more this year just because we can’t serve everyone as well as we would like. We rarely take new clients–just referrals from attorneys or really good current clients. This year anyone who came in the last week of March onward was put on extension. We’re still working on those.

    You can’t start a business with these restrictions because you don’t want to turn away revenue. But charge what you’re worth and do a really good job. Would you rather do 50 $100 returns or l0 $500 returns? Tax law is so complex that I think the future lies in specializing–owners of construction companies, truck drivers, estates and trusts, restaurants, whatever area of tax interests you. Do a couple of gas stations or resident aliens and others will follow. If you want to concentrate on individual returns, there are tons of middle-class taxpayers who are fed up with the chains and not brave enough to try doing their own. Do a lot of networking to connect with these folks.

    And where does that leave the chains? Established Liberty and JH franchisees in good locations probably already serve clients with more complex tax returns. Those located in low-income areas or who relied on RAL clients will not survive because that business model is dead. Block has always demanded that its preparers take upper-level courses so they are better able to serve clients with businesses, rentals, partnerships, etc. If you can grab an HRB franchise I’d do that because I think they have the only model of the three chains that will survive. Or ease into your own practice.

  18. Uphillbattle says:

    Thank you SaraEA. Whatever more information that you are willing to share will be greatly appreciated.

    Believe it or not, I was thinking about focusing on the clients who are fed up with the chains (as you suggested).

    I plan on targeting the people who are willing to pay a fair price and not play games.

    Thank you,

  19. bill says:

    SaraEa & Uphillbattle: Neither of you are or want to be Liberty Tax Franchisees so I’m not sure why either of you feel a need to post here. There are other sites more appropriate for your questions/comments. Specifically for DYI tax business start-ups.

    The purpose of this site is to provide honest information to those thinking of buying a Liberty Tax Franchise. What I’m trying to do is show the pro and mostly the cons of being involved with this company. Part of the discussion does revolve around going out on your own but only to emphasis the benefits associated with being independent over being a franchisee.

  20. Uphillbattle says:

    Bill, this site provided me with invaluable information. It even steered me away from Liberty. Before I ran into this website, Liberty seemed like the way to go, a “no brainer.” Thanks to people like you (with experience and breaking down the numbers), I understand the franchise concept better.

  21. Guest says:

    The truth is most business clients don’t change tax preparers unless they have to. A new business will need to bring in work by marketing. Franchise can work if you don’t start a new territory. Find a selling franchisee and work out a good deal. Some franchisees run great stores but want to retire.

  22. Uphillbattle says:

    Bill, more to the point, this is a great site. I direct Everyone that says that they are considering getting a franchise of any kind to this website.

  23. bill says:

    Uphillbattle: this is certainly a worth while site and that’s my point about asking you to focus on the mission at hand. Sidebar conversations are not relevant and do not help the people who are looking for a franchise. More importantly they make the site seem irrelevant and I would like to see admin do more monitoring to keep people on topic.

    For those unhappy franchisees/AD’s who have left the system or those who remain and are struggling. I encourage you to anonymously tell your story.

    Buyer beware!!!

  24. BILL says:

    I write on this site to provide factual information to those individuals looking to purchase a franchise. This is truly a free service and you can ask question and use the information to help you make the best decision. However, there are other sites on the internet that offer you a free consultations that helps you find a franchise that meets your needs. Here is a bio from a consultant for one such site:

    Chris Cynkar – Franchise Consultant
    Chris Cynkar knows the challenges of finding the perfect business opportunity. For the past 15 years, Chris has walked in the shoes of a business owner. With business ownership experience in multiple industries, Chris possesses the skills necessary to help candidates find the perfect franchise opportunity to achieve their specific goals. After beginning his career with a Big 6 accounting firm and earning his CPA license, Chris spent 3 years working in financial management with 2 rapidly growing companies in the healthcare and manufacturing industries. In 1999, Chris made a career shift from employee to owner. Since he chose business ownership, Chris has owned and operated businesses in a variety of industries including commercial printing, medical equipment, professional services, real estate and healthcare staffing services. In all of these businesses, Chris served as both the lead investor and, more importantly, the leading executive of the company.

    Since 2006, Chris has been an Adjunct Professor of Entrepreneurship at Carnegie Mellon University. He has worked with hundreds of students to evaluate, plan and start businesses in countless industry segments. In 2011, Chris joined a leading retail franchise as a master franchisee.

    Chris has joined xxxxxx in order to help candidates benefit from his deep and diverse business ownership experience. Because of the variety of industries in which Chris has direct experience, he is able to assist candidates in evaluating multiple business opportunities with an experienced guide on their side. Chris’ goal is to help every candidate find the franchise opportunity that will help them reach all of their personal and professional goals.

    Chris lives in Pittsburgh, PA with his wife, Jacquelyn and their three children. Chris can be reached by calling 800-536-5201 or via email at CCynkar@XXXXXX

    Mr. Cynkar is an area developer for Liberty Tax Service in the Pittsburg area but no where in his bio does he disclose this information. Just another example of
    how things are not what they seem to be.

    Buyer Beware!!!

  25. SanFranDan says:

    Keep up the good work, Bill.

    Anyone interested in joining Liberty Tax Service as a franchisee should know the full facts before making an important decision to part with that much money. You will NEVER see that money again or any return on your ‘investment’.

    When I joined, I was ‘wet behind the ears’. Very good in taxes, but not good in recognizing skunks or sharks. I definitely trusted too much and could not believe my eyes and ears at how much theft, unethical behavior and deceiving took place within this company.

    It starts at the top and the CEO behind this company is a worm, skunk, shark, rip off artist and that’s just the nice stuff. My ‘ignorance is bliss’ outlook on life quickly changed as soon as I signed on to be a franchisee in this god awful company.

    This company is an example of all the evil in this world. They put up a good ‘front’ and are very unsuspecting, until, of course, you sign a contract with them. That’s when the real shit hits the fan. Yikes.

    They need to be investigated FULLY. Now of course, they know they are being watched, so are on their ‘best behavior’. They stink and prospective franchisees need to keep their distance and back away. You will be forever grateful. Don’t make the mistake of joining. You will loose your shirt, your sanity, your freedom and your career and a bucketful of money.

    Bill: Wonder how we find out how many franchisees have left and lost their whole investment and then some? How many have filed bankruptcy? How many have gotten divorced? How many have sued them or have been sued? I betcha anything it’s waaay more than we can even imagine.

    Can’t wait for them to go to jail. And they will. The sooner, the better for everyone.

  26. Bill says:

    Potential franchisees: Facts that the company won’t give you:

    1) In 2014 715 locations closed
    2) The average 1st year store does 105 returns.
    3) Company only has 2% market share
    4) Company does not do any national, regional or
    local TV or radio advertising.
    5) Proprietary software is a CCH tax product modified for the company.
    i.e. you could buy comparable software from a 3rd party for less money.
    6) Company does not find it profitable to “operate it’s own stores”.

    Also keep in mind that the company charges minimum royalties of $5,000 the first year and $8,000.00 the second year. If they believed in their business model then they should be willing to accept a straight 14% royalty on your net fees. However, most stores are not profitable and that is confirmed by the company saying it can make a profit operating it’s own stores.

    “All of this information is taken from the company’s financials. Just go to Liberty Tax investor relations, financial information and read their annual reports.”

    Buyer Beware!!!

    Remember if it sounds to good to good to be true it probably

  27. Uphillbattle says:

    Bill, keep up the great work. Please keep sharing information like your latest post.

    I really enjoy reading your information and I am a big fan of this blog.

  28. Sad but true says:

    Fortunately, for potential Liberty franchisees, there is too much history and information about Liberty’s franchisee success rate (or should I say failure). This site is a warning to them about what may happen to them if they invest in a franchise. Since the best low income territories (best for the Liberty model) are probably owned by now, a new franchisee has to make it in middle income areas. Forget high income locations – will not work there. In the middle income areas there are mom and pops, and other franchise operations. This competition will limit your market share. Also, more people are finding out that on-line tax software is satisfactory for simple returns.

    So, if you think about the $40K franchise fee, 19 cents of every dollar you make going to Liberty, and your operating costs, think twice about how you are going to turn a profit. As Bill noted; in 2014 – 715 locations closed. Most probably closed because it was not profitable to stay in business.

    Fortunately for Liberty Corporate, they already made their money by selling territories and are continually receiving their 19% from existing franchisees.

    Maybe Liberty will change the way they do business and address the pitfalls of their operation. They really have nothing to lose because once they get the $40K, it is enough for them to cover their costs of wooing you and training you to get up and running. They are smart business people and are profitable because the franchisee bears all of the costs. Give credit where credit is due but do not give them your money. This site has considerably more posts then the other “complaint” sites because so many have been burned. Stay away from the fire!!

  29. Greg says:

    Another thing to consider when thinking of this franchise is reputation per the clients
    In just a little bit of searching here is one figure from ripoff report, a business complaint message board
    Searching liberty tax and liberty tax service you will find 96 and 44 complaints respectively for a total of 140 complaints.
    Liberty tax brand served a total of 2.4 million clients
    That works out to one complaint per 17,143 clients on ripoff report
    Compare this to H&R block
    There are a total of 216 complaints when you search H&R block but the total clients served by the H&R block brand is 24.2 million
    This is one complaint per 112,037 clients

    This ratio is roughly the same for all of the complaint sites. I only put pen to paper on ripoff report but the other sites are bear out the same ratio.

    Important for understanding and comprehension
    Both companies have way more complaints than this…it is a small sample. It the ratio remains the same and for every person that took the time to write a complaint, there are 100 more who didn’t take the time, they just won’t come back.

    Now my question would be…. Why does liberty generate complaints at a level 6.5 times the rate of H&R block clients.

    And for further research, jackson Hewitt had exactly 140 complaints as well and I’m pretty certain they are still larger than liberty tax.

  30. bill says:

    How to value a franchise: In most ventures where someone is buying an existing business you have tangible things that can be measured. Owner’s income/AR, you can review the owners tax returns for support. From that you can build in some intangibles like goodwill. As a rule of thumb if you valued a tax practice business at $40,000 the business would have to be doing at least $40,000 in gross sales.

    So why is it that you are going to pay $40,000 for a new franchise territory. Think about it. A tax business with zero sales would have no value and now just because you add a franchise name it magically is now worth $40,000.00. The same can be said for an existing franchise. The rule of thumb valuation should be a % of gross sales/net fees (franchise language) but unlike buying an existing business where you have a 100% of the profit you would need to apply a discount to the valuation for the royalties you are going to pay. You also have to take in the brand and how it is perceived in the market place. See Greg’s earlier post.

    If anyone is looking at a franchise I will gladly talk to you. .

    Buyer Beware!!!

  31. Guest says:

    Beware of unbiased advise. I would not buy a new territory but might but an existing store. Jackson Hewitt and hr block etc. all have upfront costs.

  32. Guest says:

    Just saying make sure the advise is free.

  33. Out and Glad says:

    When you are looking to buy the franchise, they will tell you that you can sell the franchise at 125% of gross fees. However if you try to sell it to an existing franchisee, they will only pay 85% gross fees. Then the seller will have to pay $5000.00 per territory as a transfer fee. This difference of 45% and $5,000.00 is a big hit on the business that you built.

  34. SanFranDan says:

    ^^^Out and Glad:

    BINGO
    You’re very last sentence is of utmost importance: “……..on the business that you built” could not be more true. Liberty Tax is totally not needed. Period. This is a business that you pay to do your own marketing, cultivate your own clients, pay for rent, lights, electricity, hire employees…………this is NOT a true franchise in the sense that there is no support, the materials they make you buy are at 10,000% markup and your clients that you’ve worked so hard to cultivate in a one on one relationship are NEVER yours! It’s not like a McDonalds where the customers come in and out without ever knowing their name. And Liberty knows this and preys on this too.

    This business is built on the hard work of the franchisee. So why do they need the franchise to begin with? Because they get suckered into their marketing prowess. It’s all a huge gimick. Gimme,gimme,gimme. Absoutely HORRIBLE.

    Besides all that, you have dishonest managers, AD’s, CEO, lawyers, site selectors, on and on and on and on. They create an ennvironment where all they do is take your money. It’s beyond comprehension. This gimick should be outlawed. When will the US government wake up and see how many people across this country have been fleeced. It’s an outrage.

  35. guest says:

    That 85% is pretty good. Its the $5,000 tranfer fee which shouldnt happen. Really the buyer should be concerned about the 85% of fees since paying a percent of fees doesnt consider that you might have been losing money.

    If I pay a percent of fees without looking at if you make a profit – I will need to flip that store within 4 years to make a profit and get back my investment.

    What I should’nt do is pay 125% of fees. Its WAY to much. Definately – if I pay with borrowed money.

    You did very well with 85%.

  36. texastee says:

    Any valuation has a certain degree of subjectivity. Remember, as was previously stated, the franchisee develops the customers, not the franchise. The customers are there to see the franchisee, not the franchise for this type of business. In a McDonalds situation, you have brand loyalty, not franchisee loyalty by your customers. Mc Donalds spends a lot of money making sure that customers stay loyal and get consistent products no matter where they go. Liberty, on the other hand, is a service product that is dependent on individual franchisees to deliver end product. Liberty is not concerned with end product or consistency, but with territory sales-that is where they make their money. Liberty has a guaranteed minimum royalty fee that they get no matter if the franchisee is good or bad. That is why Liberty is not in the tax business, but, rather, in the franchise business. End product make no difference to Liberty and that is why they do not do any real advertising (plus its very expensive). HR Block has at least been able to cultivate customer loyalty by keeping out front its name. All this being said, the valuation of a Liberty tax is based on several discounting factors: 1) the minimum royalty fees; 2) the % royalty fee on gross once minimum has been exceeded; 3) the personal loyalty of the clients to the current owner; 4) The overall fixed costs of operation such as rent, phone, employees and etc.; 5) The hassles of having to deal with corporate people and AD’s or any others that have their hands in your pockets; and 6) the overall reputation of the franchise or business in the marketplace.

    These are relatively easy bits of information to glean from various sources out there. Liberty lends itself to be on the much lower valuation scale since it has questions in all of these discounting factors. It always boils down to doing your research and smelling a rat when its smelled.

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