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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

3,986 Responses to “LIBERTY TAX SERVICE Franchise Complaints”

  1. bill says:

    John Barilla: “Personally, I have chose to never open in the ones in my territory. Every year I consider it but II feel like i should focus on my brick and mortar stores and not lose concentration worrying about those other locations. I am sure it does not hurt to open in them as it would at a minimum help the brand name in your own territory. I am sure you can make a small profit too but again I have chosen not too as I rather use my resources on my stores.”

    Thank you for your above comments. As much as you want to disagree with what I posted you can’t look yourself in the mirror and honestly believe that the locations in Wal-Mart are viable or that current franchisees should sign up to operated them. This decision was between the company and Wal-Mart and the obligations is the company’s alone. What I’m advocating is that franchisees not operate any of them. Let the company do it or let them try to sell the locations. Either way it’s a win for the franchisee because what ever marketing is done will
    help build the brand without costing the franchisees anything.

  2. Franchizee says:

    Good points – Sad but true – People need to know that everything good about LTS is gone and all you are doing for the company is pay them to abuse you. There is only a couple of top guns and people that used to be top guns are no longer top guns.

  3. SanFranDan says:

    I miss the posts from uphill battle. Hope she/he comes back. The posts were spot on and interesting.

    ^^Franchizee: I am trying to remember ANYthing good coming out of LTS. What an incredibly negative, tedious, horribly degrading experience that was.

    Prospective franchisees: If you must sign their contract, which in my opinion is a hughly serious mistake, then for goodness sake, be smart enough to have a real Franchise Lawyer look it over & scrutinize it line by line. Then walk away without signing it. You will have dodged a bullet. You’re welcome! :)

  4. texastee says:

    Seeing that the tax business is trending away from the storefront preparation option to an online option, it seems obvious that Liberty has a far outmoded business plan. Their main claim to fame was that they were able to capitalize on the one day loan market due to government inefficiencies in processing refunds. This model, while theoretically good, is outmoded. The government is able to process refunds quite rapidly now and there is a plethora of free tax software available to the target market of Liberty. This being said, the Liberty business model is dead. They still only have a small percentage of market share, which should be proof enough that their business is not in the growth cycle.

    This leaves Liberty with the only way to make money is to sell territories and require minimum royalties. They are not in the tax business anymore. They are in the franchise sales business. They are selling an intangible that they define and thus control. This is not fair and should be a warning to a potential franchisee.

    Stay away from them!

  5. SanFranDan says:

    Bill, Admin & everyone else who is on the side of taking down LTS:

    I have asked once before but received no response. Do you let the DOJ and IRS do their thing alone or do you contact some investigative news media?

    Does anyone know the update of how far they’e gotten in their research and when they may be ready to proceed ahead? Thanks.

  6. John Barilla says:

    Yes SanFran, we all did see your email but thought it was on a day you missed your shock therapy. There si no DOJ or IRS investigation. If you think there is please send us your source or link, and not Trisha or some other moron that posts on this website.

  7. SanFranDan says:

    ^^^Non-person. Anyone else?

    Not only do I KNOW for a fact that there is an investigation, bozo, I was one that was interviewed.

    Enough said, moron.

  8. John Barilla says:

    Again, what is your source or proof? I guess you have none.

  9. SanFranDan says:

    I will NOT address you at all. You are here to agitate unhappy current & ex franchisees. As far as I’m concerned, you are a non-person.

    Do you really think I would tell information that I have to a person who comes on here and suggests that everyone else are losers EXCEPT himself because he is the one happy franchisee? Not on your life.

    I know the date, the time, the place & the people I spoke with for several hours. After that, it’s none of your damn business. Can’t wait for your day to come. And it will. I cannot wait for the day I can tell my story. Barfvilla will just be in the middle of that hot mess thinking that maybe this company was a mistake after all. All of us willl be laughing at you from the sidelines.

  10. John Barilla says:

    I think your post speaks for itself.

  11. SanFranDan says:

    Time to grow up, little boy.

    Amazingly, you just know everything the way you think you do.

    Moving on………

  12. SanFranDan says:

    Amazingly, you just DON’T know everything the way you think you do.
    Imagine that!

  13. Franchizee says:

    Remember Nov 1st all existing offices are to be open with LTS and new offices start Nov 15th.

    Keep in mind, when looking at this business, John toots that this is a “part time” business, when in reality, you are expected more and more time every year to serve the shareholders expectation to have a better return on their money, which in turn, you as the franchisee, make it all possible with your royalties. John does not have to lift a finger to make the shareholder’s happy, he just puts the screws to the people who make this business.

    So with that in mind, why would anyone PAY to be harassed and extorted out of their hard earned money to fund someone else’s dream and business?

    Go on your own, get educated and advertise. Be an honest business person and people will come to your office and charge a reasonable price and give exceptional customer service. You will make more money in the long run than ever in a LTS franchise. With LTS you make money, but it drops in your bank account, just to bounce back out with high expenses, from rent, payroll, payroll taxes and royalties to LTS, to fund John’s and shareholders lifestyle.

    Just think about it. I am sure the “happy franchisees” will try and dispute the above, but it is true. It is common sense.

  14. Bill says:

    Liberty Tax Business Model: Locate your store as close as possible to HR Block in a high EIC area. Office space should be 800 Sq feet. You will need a processing area which consist of a computer, printer, supplies and 4 bank boxes. One box for ready to process, one for waiting for checks, one for corrections and one for returns to be picked up. You will need software, the first year I was with Liberty Tax we used Taxwise and it worked very well and they had good support. Do business to business marketing, door hangers on residences and get yourself a Liberty Tax Costume.

    That will be $40,000.00!

    Thank You.

  15. Franchizee says:

    @Bill – Cha Ching… Bada bing. You win the best paragraph this week!

  16. Guest says:

    No requirement to open in November. That’s optional. The tax prep business is diversifying for all involved. You can decide if you want to be a franchise or on your own. Have a great tax season!

  17. Franchizee says:

    Is it possible a requirement for people who have a FAC with LTS? I will watch the one office near my home to see if they are open. According to Top Gun’s they are required to be open, but they also tap the FAC.

  18. guest says:

    Not a requirement. You might find the listing for an HRBlock store in Los Angeles of value. I did. This listing is asking for $155,000 for a store with $140,000 in gross revenue. Net cash flow $35,000 on 790 returns.

    Tax prep is a saturated market but still good business. Just have to be careful with your money. Lead yourself and use google wisely.

  19. bill says:

    Guest: Please elaborate on how the tax prep. business is diversifying?

    Since you are still involved with the company why not provide us with what exactly franchisee’s are required to do vs. what the company is suggesting they do?

    It’s apparent from the franchisee agreements exhibited on the company financial statements that the company has the right to sell a Wal-Mart location or a Siempre tax location in a territory currently owned by a franchisee. I am sure the company will use this leverage to coerce franchisees’ into opening a kiosk in Wal-Mart or even purchasing a Siempre Tax Location. While it’s perfectly legal it’s ethically wrong.

  20. Franchizee says:

    When we were LTS last year, if a Walmart became available in your territory, you would have to the store, or another franchisee could come in and take it from you. Unless it has changed, that was what the deal was with our territory. That came from the home office and from the AD. Jackson Hewitt had the store, so no problem with our territory.

    I believe the other people of the dates of opening. Back on 10/06/2014, NCHillBilly stated it was a requirement. It will be hard to sell a LTS as a part time business when the state date is moved to more payroll expense for a zee with very little income at that time of the year.

  21. John Barilla says:

    Forbes Ranks Liberty Tax Service No. 27 on Its List of 100 Best Small Companies in America
    Marketwired
    October 30, 2014: 12:50 PM ET

    Liberty Tax, Inc. (NASDAQ: TAX), the parent company of Liberty Tax Service, has been named one of America’s 100 Best Small Companies by Forbes magazine. Forbes’ annual list, which recognizes small businesses based on sales, earnings growth and return on equity, ranked Liberty at No. 27.
    “We are extremely pleased to be recognized by Forbes as one of America’s 100 Best Small Companies,” said Liberty CEO and Founder John T. Hewitt. “We have built a brand that is focused on excellent customer service and continuous improvement. We have a proven system, but we are also flexible. We quickly adapt to change and seize opportunities.”
    To be placed on the Forbes’ America’s 100 Best Small Companies list is not an easy task. Forbes takes many factors into consideration when building this list. “The rankings are based on earnings growth, sales growth, and return on equity in the past 12 months and over five years,” according to Forbes.com. “We also factored in stock performance versus each company’s peer group during the last year as of Oct. 1.”
    About Liberty Tax, Inc. Founded in 1997 by CEO John T. Hewitt, Liberty Tax, Inc. (NASDAQ: TAX) is the parent company of Liberty Tax Service. Liberty Tax is one of the fastest-growing tax preparation franchises and has prepared almost 18 million individual income tax returns in more than 4,400 offices and online. Liberty Tax’s online services are available through eSmart Tax, Liberty Online and DIY Tax, and are all backed by the tax professionals at Liberty Tax locations and its nationwide network of approximately 35,000 seasonal tax preparers. Liberty Tax also supports local communities with fundraising endeavors and contributes as a national sponsor for many charitable causes. For a more in-depth look, visit Liberty Tax Service and interact with Liberty Tax on Twitter and Facebook.

  22. Franchizee says:

    This is about the franchisee not the franchisor. Of course Liberty does well with Forbes because of the hardworking franchisees sacrificing THEIR profits and lifestyle extorted by this company.

    You spew garbage. This about the reality of what happens to people when you plunk $40k to this company and how negative it is on a person, family and the your credit and pocket book. Also this company has a common thread of sueing the past franchisees which is a huge negative especially people who were in favor with the company!

  23. SanFranDan says:

    Hahahaha, Barf villa is at it again. He sounds just like a company shill to me.

    Of course Forbes names them……..how much money did Hewitt give? On each & every ‘prize’, it has been manipulated and paid for by JTH himself. That’s right, Barf villa, now you go & dispute that too. The point is, you really DON’T know if any of these awards or prizes have been paid for, now do you?

    Franchizee: not only does LTS DEFINITELY sue past franchisees, but what happens next is for the playbooks. They don’t just stop at suing past franchisees. Let’s just say is all a set up with LTS controlling ex franchisees like little puppets. IT gets waaaay worse than that. So far you have avoided it, so I’m thrilled for you.

    Apparently Forbes didn’t do their due diligence and speak to some of the IRS and DOJ agents as I and so many other have. Yes, Barf villa, it’s really true.

    This company is so far from squeaky clean, it’s filthy. Their numbers are manipulated manually just for these purposes and for the shareholders.

    It WILL catch up to them. Can’t wait. By then Barf villa will really have something to Barf about. Hahahhahahahahaha!

  24. Out and Glad says:

    How can anyone be happy with 27th in a small company list. I could understand if it was the top 10 list. 27th means that you are in the middle of the pack. We need to remember that LTS has been in business for 17 years. However they are not in the top 10 or top 20. If you remember that several years ago they were letting everybody know that only Subway and McDonald’s were listed as better franchises.

    How the mighty have fallen! They will not be the #1 tax business by 2020 (they probably will still be third). I might take them until 3020 to become the #1 tax business.

  25. Tina Harvey says:

    Hello, all! This message is for TM, Federal Direct is a solid company with years of experience and a reputation to prove it. I work for this company and I can say that I work my butt off for my offices. I know most of them on a first name basis. We call our arrangement a partnership because we don’t want to be confused with the requirements and limitations of the term “Franchise”. We also have an A+ rating on the better business bureau. We are staffed by enrolled agents who are seasoned and always happy to help. If by some chance you see this, call us and mention this, and I’ll make sure that you get 50% off. My name is Tina. If you aren’t happy with us, then we’ll wish you the best of luck with your future, but we stand behind our claim of the best service in the industry. The number is 866-357-2052, my personal extension is 264! :) Also, I’ll happy apply the discount to any unhappy franchise owner who wishes to come on board!

  26. bill says:

    Out and Glad: I have been reading the posting on this site for over 5 years from former franchisees, some successful and some not successful, and all say the same thing their glad their out.

    For anyone considering this franchise understand that you are signing a contract that obligates you for five years to pay minimum franchisee fees. 5,000 the 1st year, 8,000 the 2nd year and $11,000 for years 3 – 5. There is no walking away until 5 years pass.

    Buyer Beware!!!

  27. SanFranDan says:

    Good point, Bill.

    I might add the $40k franchise fee, or whatever that rip off price is these days in addition to what you wrote. Definitely the minimum franchise fees (which are HIGH, since you’re not getting anything for that fee except stress & headaches) AND if you walk in with pre-existing clients, LTS wants to snatch all of them up at the end of the 5 years too. And don’t look for any advertising on their part. Just hand over the money & fend for yourself. Do some ‘guerilla marketing’ for FREE, and just keep handing your money over to them. Have someone dress up in a costume :(:(

    How about that at the end of the 5 years, ALL the clients that you worked hard to obtain and cultivate are no longer yours after 5 years. Unless, of course, they are willing to drive over 25 miles, and you better be sure it’s 25 miles and not 24.

    We knew within months of the very first year we had made a fatal mistake by joining this dumb ass company and we had to stick it out for 5 grueling years and then be tortured by the company during and after the 5 year contract.

    Am I glad to be out? You BET!!!! I would recommend to ANYONE looking to buy into this hellhole franchise to STAY AWAY. You will be wrapped up with them for YEARS & YEARS. Every time we tried to back away, they would swoop back in for more. Not everyone has the same experiences we did, thank goodness, but I can tell you they were incredibly unprofessional and sharks to deal with.

    To be free of Liberty is so liberating! :) Hope they all go to jail soon. That’s where they belong.

  28. Out and Glad says:

    You also need to remember that if you have to borrow operating expenses, you will pay 12% interest.

  29. bill says:

    Franchising has become a great Ponzi scheme it’s just not Liberty it’s the entire industry. Whether it’s Edible Arrangements. Subway or any of the other countless franchises that are out there. Unlike blue sky laws that protect individuals from fraud there is no requirement that franchisors provide any factual information at all. What is required is if you as a franchisor decide to disclose information about potential income or sales the law requires that they have a reasonable basis for their claims and that they make the substantiation for their claim”. What this means is Liberty can present in section 19 of the financial disclosure document anything it wants as long as it can substantiate it’s claim. i.e. Last year 100 franchisees made over $100,000.00.

    Between the Lawyers and Wall street who support franchising the deck is stacked against the average guy. For people that are already involved with franchise there is very little they can do. The only way to change what’s happening is to make some noise with your politicians and try to invoke some change while encouraging (self sacrifice) individuals not to buy a franchise.

  30. Trisha Grabert says:

    @SanFranDan,

    Yes, The IRS is working in conjunction with the Department of Investigation on matters with John Hewitt and Liberty Tax. They have and are taking hundreds of witness testimonies from previous and current franchisees on several matters. This is a long process and much time and resources have been invested. They have been in my home and they drive State to State and door to door. The issues they are working on is private and no reason to disclose to the accused. They work alone. No media is needed. A private lawyer is recommended for any civil arguments to each of you that has not already been settled.
    @John Barilla, I have told YOU John Barilla, AKA John Hewitt, keep my name from your ignorant conversation that has contributed nothing but false information and immaturity. Go back on the podium and complain about how “Unhappy Franchisee.com” needs to be shut down for a high blood pressure rant again as you did in Las Vegas. Good Luck with that. If the Company would not steal franchises or teach illegal practices, this site would not have Liberty on the hot list.
    There is no reason to hide the truth of important matters at hand. We will continue to share information and I have confirmed the Company has been and still is under investigation, period. If you are smart enough to go work for them, please apply. Otherwise, call them and request them to come to your door like the rest of us. There is NOTHING preventing me or anyone from disclosing documentation to shut that argument or others down, do not tempt me. I do not have the desire to humiliate the people involved of which the Company is accountable for. The Annie Fuller flip-flop testimony at the South Carolina case was not enough?
    And SanFranDan, calm down, yes people are still and always will be angry.

    The facts and stats given in simple math and trending evidence are justifiable cause for any sane person not to invest in a Liberty Franchise. If they do, they can explain their bankruptcy, divorce and reasons their kids cannot go to college to their own family in 5 years or less at their painful awakening.

    Stay away from the brutal franchise. They do not care about you. If you have talent, these are not the scouts to parade you for a show. Do not be their donkey for a couple pep rallies and pats on the back. If you are broke, have a dream and full of ambition….DO NOT BECOME THEIR TARGET.

    Trisha :-)

  31. Trisha Grabert says:

    Anyone who would like to be a part of the investigation, contact Jerry Arrington at the IRS. He will fill you in and take your testimony on record on any matter of concern with Liberty Tax. Please do contribute your complaints.

    Thanks!

  32. Trisha Grabert says:

    I can verify Danny smokes pot. I was with him and other guests on top John Hewitt’s roof of his beach house in 2007 with his now ex-wife. He has a little ADHD and perhaps self-medicates. But that is none of my business. Yes, I saw it, I watched it and I smelled it and it was pretty expensive stuff for a common poor son and then he kicked my butt at a boardgame. Good times XD

    I think they should have written a book about Danny a long time ago as well as his sisters and all they have had to endure with the stories they told me about their father. Should I publish those texts and emails? Anyone? JohnBarilla/John Hewitt may see some names of the MANY women that would be humiliating to the investors of all the sexual activity, love-child lawsuits and such with Corporate employees.

    Let me run and ask their permission, LOL. There are some idiots on this site.

    Shall we get back on topic with useful information other than their tarnished family dysfunction, because the Corporate dysfunction is more useful to prospects. If you are looking for a Godly man as CEO, this is not the Company for you and your family.

    -Trisha

    :-)

  33. John Barilla says:

    Trisha,
    I think you have proven who the idiots are on this website… Wow, Danny Hewitt smokes pot? Lol…. I would have thought less of him if he never had. You are a joke. Maybe he should give some to SanFranDan, to calm her down…..

  34. bill says:

    Trisha and San Fran Dan: You add many positive and factual points to why someone should not invest in this company. Don’t let John Barilla or any other person on this site bait you into saying something that takes away from the facts. Emotional/personal comments, which may be true, don’t come off as objective to someone who is reading this site to see if they should invest in this company.

    While it may seem tedious we need to continue to hammer home the following facts:

    It’s a $40,000 for a new franchise despite after 17 years the company has only 2% market share.

    The company charges a royalty of 14% but because they know their system doesn’t work they have a minimum royalty of $5,000 the 1st year, $8,000 the 2nd year and $11,000 for the remaining three years. (Why should you believe in their system more then they do).

    The company charges an advertising fee of 5% on net fees per return. Despite they do no national or regional advertising.

    If your looking for confirmation of your efforts look at the fact that now Liberty is going to offer a new franchise called Seimper Tax + designed to the Latino community. He knows this site has become an impediment to selling franchises to the English speaking community so now he has set his sites on the Latino community.

  35. Franchizee says:

    Can anyone speak Spanish?? Lol. Head to that website or make one. Can they just translate in to Spanish?

    Any who, Bill is right, make sure you want to be in business in losing a large amount of money? Want to carry a net operating loss for many years? Well this is the place to throw hard earned money to support Hewitt’s lifestyle. He is the only one that is benefiting from this franchise, and people in the homeoffice.

  36. Sad but true says:

    This comment is for those of you thinking about buying a Liberty Tax franchise –

    Please save your hard earned money and think about spending it elsewhere. I refrain from using the word investment, because with an investment you have the hope or promise of a return on it. If you do buy a Liberty Franchise, you will be spending your money for; grief, loss of more of your money, and anger. Anger because you did not listen to the many commenters who warned you not to buy.

    We keep hammering home this point about the problems with this franchise because we are responsible people. We earned and had money to once buy a franchise – that means we are not idiots. We were duped by the empty promises of the Liberty Corporate shills. Also, the tax preparation business changed with the constant upgrading of on-line, do it yourself, software. We hoped Liberty would take the extra money from their growth to start advertising nationally. That never happened. They just take, take, and take some more. They could care less if you are successful because they get your $40k purchase price plus minimum royalties for five years.

    So, learn from others who are giving you factual information about this company. If you really want a tax business, you hopefully know how to do taxes and if so, go it alone. Liberty will not offer you any business skills that you cannot learn on your own. There is nothing proprietary about anything they have – even wavers are not. You should listen to our warnings, or if you don’t, good luck, you will need a boatload of it.

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