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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

4,165 Responses to “LIBERTY TAX SERVICE Franchise Complaints”

  1. Dan says:

    Dan,
    It is entertaining to read all the comments on this board — most of them are emotions venting as you probably already assumed. I too am a multi-unit owner in my 2nd decade with Liberty. I have my own feelings about Liberty and JH but try to keep them to myself since I am here to make money — not make a friend. With that said — JH is a legend in his own mind and he does surround himself with those who drink the Kool-Aid.

    I make a good living. I have never had to borrow from Liberty and never would but I do understand why some folks do. You have to be in a LOW income territory to truly be successful. Middle class areas can succeed but it will take you much longer.

    You need to test what works for you. Door hangers stink for me so I don’t do them. Roadside parties were horrible. Cash in a Flash — some areas work some areas — its an insult. Appreciation week — why would anyone do a free return for someone making $100k? An most importantly — its illegal where I am to give gifts to public servants. Just because something is in the ops manual doesn’t mean it’s appropriate for you. Don’t just accept — ask why and experiment.

    This is not a 4 month job — it is much more. It will require your time and effort. The payoff comes in future years so have another income or source of income for the first couple and you will see that the investment was worth it.

  2. NCHILLBILLY says:

    Horatio and Dan

    Stay far away from Liberty Tax.

    You will be promised the moon, but the moment after you signed that contract you will quickly get to see the other side of Liberty Corporate. Read this contract carefully, and you will notice quite a few items that will get you in the end. You will also notice that this is a living contract and it is tied to Liberty’s operation manual which you cannot see until you sign. The operations manual is constantly in flux.

    Let’s begin with the Area Developer – you can not hold this individual responsible for any advice or anything that you do that they instructed you do. The contract gives them an automatic get out of jail card. The AD’s interest is getting their share of royalty income, not your personal welfare. They are investors that have invested a huge fortune.

    Taking legal action against Liberty Corporate you must take the case to the federal court systems in located Norfolk Virginia. This is a huge advantage for Liberty Corporate as their in house legal team is very well known, within the Norfolk federal court house, must of these judges are Liberty Corporate friendly. Liberty understands that you will not be able to truly afford a legal battle, especially if you live outside of Virginia. This stacks the odds highly in their favor hoping you will either quickly disapear or give in. You may have an attorney that tries to convince you otherwise, just Google JTH Tax and you will see lots of cases and JTH Tax is almost always the winner.

    Freedom of Speech, you will notice that when you leave Liberty on good or bad terms that you cannot talk or discuss anything about Liberty for the rest of your life. If it has been discovered that you are talking about Liberty, they will quickly take you to court for damages. You have just given away a good part of your life during your time with Liberty. The contract makes sure that you forfeit your freedom of speech, which you agreed to when you signed the contract. You probably have noticed that all of the individuals posting on this site use alias names.

    Support, you are going to be promised all kind of support, but you will quickly discover that it does not truly exist. Technical and marketing support is very limited and extremely poor. Do expect to go days without an answer. Tax support is average, most of this support is provided by fellow zees and other Liberty Corporate individuals. Area developer support is practically non existence. Usually the only time you hear from the AD is during tax season. They do not exist to help you build or grow or business.

    Liberty’s growth, you will be truly misinformed. In 2014 it was not in the brick and mortar offices that had a growth, it was in the online market. To verify this check Liberty’s 2014 financial report, take the number of Liberty offices and divide it by the number of new returns that were completed, each office only grew by 14 tax returns. So if an office grew by more than 14 returns, it meant another return count went down. This does not sound very good for someone opening a new office.

    600 returns for a 1st year store, don’t get caught up that you new office will do a minimum of 600 returns that is not even close to being true. Liberty will not disclose to you the actual average return count of a new office for the previous year, but it is right around 163 returns. They will only tell you about the exceptional office. There are less than 125 Liberty offices nationwide that do greater than 1000 returns.

    Liberty brand name – You are going to be sold that Liberty Tax is a household name and that is far from the truth. Liberty has no national advertising plan on either TV or radio. You have do all of the marketing and advertising. Liberty’s advertising plan is geared towards low income markets, which turns off clients in middle to upper middle income areas. Too many Liberty offices have taken a national symbol and turned it into a clown. People will not flock to your office because of the name, this is not McDonalds. You also find out that there are not standard prices amongst Liberty offices, offices do no work together instead they compete against each other, and there is no standard advertising between offices.

    Liberty Corporate owns your clients, and everything in your office. The contract gives them the right to make compliance inspections at anytime. They will come in and review your client files, computers, advertising, employee files and anything else.

    Selling your territory, it is very difficult to sell your territory especially for what you paid for it. The resale value is pennies on a dollar not your investment.

    Liberty Corporate conference calls – you will be sold about the important wisdom that John Hewitt shares for individuals listening to the corporate conference call, but you will quickly discover that is far from the truth. Actually John says very little.

    Finally, you will be sold on the idea that you are the CEO of your business, and that is far from the truth. You are actually a puppet and slave to the Liberty system. You have no rights and no voice. If you challenge Liberty’s system or lack of, you will be cast aside, stomped on, compliance checks and anything else that Liberty Corporate can think of they will do. Spend the resources and have an attorney go over each line and each paragraph before signing your rights and your life away.

  3. Franchizee says:

    @Dan – Great info. Thanks. What the most successful LTS people have done is diversify off their money with LTS into totally different business streams. I have seen it done time and again.

    They started in the LOW income areas to make the money, so they can spring board off. However, people that were piled onto each other in a small area, only the largest one won out and would give free returns to the $100,000 people, which cut out the little zees.

    Having AD’s owning territories and directly competing against the people he sold territories too. That is always fun. He takes the extra royalties and markets his territories against the people paying him. Good times to be had by all!

    The one size fits all does not work in 100% of the situations. That is the point of this board.

  4. Sad but true says:

    I am beginning to believe that Horatio, Dan I, and Dan II are bogus commenters. First, John Barilla we know is full of it. So, they have to create more myths and whom better to do it than people thinking about buying now? Second, Horatio and Dan I appear out of no where to give the impression that they are thinking about buying territories just before first peak starts? Next, Dan II is another successful franchisee who states that “the payoff comes in future years”. Nice try on mixing in truth about the drawbacks of owning a franchise territory with positives.

    Anyway, if John B and Dan II are so successful, shouldn’t they be busy right now managing their little tax kingdoms?

    Oh, lest I not forget that the rest of us are losers. So John B., please save you keystrokes with that description of us, we get it.

  5. SanFranDan says:

    ^^Sad but true:

    You have a good point there! How many corporate dweebs can post as potential franchisees? After all, they have no skin in the game so they can post & say anything to make anyone feel better about emptying their pockets out and handing it all away to them anyway.

    NCHillbilly:

    You are brilliant. An EXCELLENT post. Needs to be said quite often because of course 4,000+ unhappy posts are NOT enough! :( It’s almost like they are arguing that it can’t be that bad! Yes, it is! Don’t believe us? Go ahead, hand them over your wallet. It’s not like anyone didn’t warn them! Boy how I wish this site was here when I signed. I definitely would have thought longer & harder & asked a ton more questions. And saved myself soooo many years of stress & grief. And money.

    If you are familiar with Tax Laws, do it yourself!! As uphillbattle has stated as many others have: Better to do it yourself than be trapped in the misery of having to deal with all their rules and fee intercepts. Then the money goes into YOUR own pocket at the end of Tax season, not theirs. There is NO magic formula they have!!! They like you to think there is!! Everything’s a big secret–NOT :( That’s how they sell “territories” which is so bogus to begin with.

    I really feel for the unsuspecting people that have signed and began this year. They don’t know what’s about to hit them and until JTH is stopped once & for all, it will continue. How sad.

  6. Dan says:

    I cannot speak for anyone else, but I (dan 1 i think) know that I am only posting using the name dam. im not impersonating or claiming to be anyone else. I dont know how to prove it, and if you dont believe me, that is ok. I was coming here hoping to get some good advice, and that i did. A lot of what was told seems in direct conflict with what LTS has said, so it has been a little bit hard to stomach,

    Right now i feel as if my world was just turned upside down in the last few days and i dont know what to do, I am sure you all can relate.

    For what its worth I think that i am going to take the suggestion of not rushing into anything and not going in anywhere this year.

    unsure of where i am going to go from here…

  7. Franchizee says:

    Dan – Since you know taxes, order from a tax preparer system and open a small office and do some advertising and shoot for the later season people. If you have a place pretty inexpensive or can afford the one LTS had chosen for you, just do it on your own. With LTS that is all your doing anyway.

    Starting my 2nd season as a independent and certified with IRS, I am slow, but starting to get my appointment’s in the door. I am so happy not to listen to the crapola phone calls, and listening to Heather (nothing against her personally) having a new theme every week or a tax season. I did like her music in the beginning. If I hear the word “AWESOME” from her one more time, I was going to send her a dictionary!! John stays on for about 2-3 minutes and says like – Stay the course, this season is not normal or a number of buzz sentences.

    I don’t have to worry about someone stopping by and handing me a notice of cure or talking to my landlord and taking over my location for their pleasure.

    I have an additional 20% and time of no stress. With 20% I can invest in advertising, better equipment or just have money in general.

    Stepping away and taking a breather is the best. Good Luck!

  8. SanFranDan says:

    Dan:

    You are incredibly LUCKY that you have decided to step back & re-evaluate. Smart thinking!! There is nothing like the pressure you get from Liberty to sign on the dotted line. Read NC Hillbilly’s post very carefully. It is 100% the truth.

    THEY have perfected the art of marketing and ripping people off. At this date you should not be signing on to be a brand new franchisee for this season. The fact that they are allowing it is disgraceful.

    Push back & step back. Better to be sick to your stomach now BEFORE parting with your hard earned money. Really great decision on your part. A decision you will not regret. Unfortunately it will still be there next year if you decide to sign with them then. Hope you don’t. :(

  9. Out and Glad says:

    Dan,
    Try using Drake. I is a great tax software and you can do any tax return on it. The full version is $1,500.00 dollars and the support is great. The only problem is that you have to make your own back up of information. They will not keep client return information. You can get a bank product through them, and it costs less.
    Another possible advantage is that Liberty uses Drake to do corporate returns. They do not want to sink resources in a sector that is only 1% of the income.

    I presently use drake and love it.

  10. bill says:

    Dan: Your making a good decision. Remember “Slow and Steady Wins The Race”. This is very true in the tax industry. If you build solid relationships with your clients they literally will be with you for a life time.

    You received great advice from this site and saved yourself a lot of money remember to pay it forward.

    Best of Luck!!!

  11. Annette Johnson says:

    I went to get my taxes prepare on 1/24/15 at liberty Tax service at 11151 Avalon los Angeles California 90059 the lady who help me name is Gregorian L, after she finished type everything in her computer I asked her how much will this cost and she told me to wait so AFTER I sign everything I asked again how much im getting back she told me $1850.00 and I asked why she said because she’s charging me $628.00 for preparing my taxes I didn’t agree to the price and she stated I submitted already and was very rude about it . I think this was ILLEGAL what she is doing!! What COST$628.00 for 30 minutes of her Time im going to the Better Business Bureau because this dont make since to be ROBBING SINGLE MOM’S

  12. Mike says:

    Annette, if you want, you can to go to irs.gov in the search box (upper right hand corner type in “abusive preparer” and then follow the instructions. Call Liberty Tax at 800-790-3863 and DEMAND to talk to John Hewitt, he is in charge of customer service. Tell him you want your money back. They will tell you he is not available etc. etc. but be persistent! They have a satisfaction guarantee…..were you satisfied??

  13. Out and Glad says:

    Dan and Horatio,
    If you read Ms. Johnson’s post above, that the problems you will have. The bill is not itemized, and the client will not see it until they pick up their copy of the forms. You are told to not discuss price, and to get the customer to sign all of the forms. At that point you make a big deal of the $50 or $100 dollars to get them excited and leave happy. Normally it is not until they pick up their check and the copy of the return that they discover they have been ripped off.

    Good luck if you plan on continuing on with the process.

  14. Uphillbattle says:

    Ms. Johnson, California has laws for tax preparers.

    Pay the State’s Attorney General’s office a visit and state your complaints.

    Also, check to see if there are city regulations for tax preparers.

    The above mentioned actions carry more weight than complaining to the Better Business Bureau.

    Good luck to you.

  15. bill says:

    John Barilla posted this on Jackson Hewitt’s website: “You guys have 2800 Walmart location with crazy rents that were increased and the reason HR block got out and Liberty is mostly out as it makes no sense.”

    This time last year John B was saying how great an idea it was to open in Wal-Mart.

    What really happened is the company lost all creditability with its franchisees. The franchisees know there is no way Liberty will operate a Wal-Mart location inside of an existing territory because of the cost of operating the Kiosk would have to be paid by Corp. and they can’t afford those losses.

    It will be interesting to see if Wal-Mart goes after them for breach of contract.

    To offset the decline in franchisees and Wal-Mart Locations, Liberty came up with Siempre Tax. Another way of coercing franchisees to open another location to help booster the number of offices open this year. This lame attempt is going no where as a search for these tax offices found only a couple of individual offices with the rest being part of a Liberty Tax office.

    The King has no clothes and this tax season people will start to notice.

    Buyer Beware!!!

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