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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

3,817 Responses to “LIBERTY TAX SERVICE Franchise Complaints”

  1. bill says:

    Trisha: The reason that Ed and John Barilla stay in is because their into deep to get out. Maybe they are a couple of the lucky ones in that each season they are profitable but based on the franchise agreement, their yearly profit is all their entitled to. Liberty owns the business, has right of approval and even if they agree with who you sell to they take a $5,000.00 transfer fee.

    As you stated many of this current franchises have been encouraged/coerced into buying new territories with varies methods with a lot financed by the company. This past tax season how many of them had to open a Wal-Mart location despite the cost and lack of profit? After all it was the company who signed the contract with Wal-Mart not the franchisees so why are the franchisees paying for it?

    On the financial statements ended 4/30/14 Liberty reported interest income of $14.231.000. Based on the 1959 franchisees in the system this averages out to $7,264.00. If you look at operating loans issued for that fiscal year they totaled $76,013,000 or $38,801.84. These numbers support Trisha’s position of how Liberty operates.

  2. Greg says:

    Actually, look at unhappy franchisee for H&R block
    Compare post counts
    Do a bit of looking for liberty tax offices for sale and compare to.numbers of block offices for sale

    Now, take block total returns and divide by number of stores and see how that compares to number of returns per store with liberty
    Now when you apply that to royalty rates see which one is signiffacantly more profitable

    It’s easy to say yuck 30% royalty
    But if you have twice the profit after you pay the 30% which is the better deal?
    I’ve been trying to buy a block office in my area for years
    The franchisees don’t sell and most have been franchisees for 10-20-30 years

  3. Greg says:

    Also,
    What’s the current franchisee fee for Block?
    It’s my understanding it is a $2500 deposit you get back when you get out.
    No franchise fee
    That’s a big difference
    $40,000 savings before the first return is done

  4. Greg says:

    Also, does that extra 10% cover national tv advertising?
    How but the money block allocates back to the franchisee for advertising?
    Probably more than covers the extra 10% in royalties

  5. dr zhivago says:

    Why did Christopher Carroll leave Liberty Tax? He was VP of Sales and Mktg, hired in October of last year at a salary of $250K/yr, but left on June 30th. Noticed it in their filing for the annual stockholders mtg.

    http://ir.libertytax.com/phoenix.zhtml?c=233197&p=irol-SECText&TEXT=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTk3NTk0NzMmRFNFUT0wJlNFUT0wJlNRREVTQz1TRUNUSU9OX0VOVElSRSZzdWJzaWQ9NTc%3d

  6. SanFranDan says:

    Now that this forum about Liberty Tax is four years old, it’s time to figure out how to take action against this rotten company. I’m all ears for suggestions. ADMIN? Any suggestions?

    I’d really LOVE to be a fly on the wall during the DOJ investigation. I’d also LOVE to find a way to have the news programs do some investigative reporting and digging……and broadcasting.

    ^^^Dr. Zhivago: NOTHING surprises me anymore. Over the years I’ve seen and heard about several high level executives leaving. Without a doubt they all have signed some sort of non-disclosure form so they can’t talk about their experiences. If Liberty has their way, the executives leaving would be bound and gagged to ensure “nothing” is told.

    This experience as a franchisee with Liberty Tax has knocked the wind out of me…….for years. I know I picked the wrong franchise to join. NO QUESTION. There could be other, normal franchises out there……..this is definitely not one.

    Yes, saraEA: I would love revenge. I know it’s not healthy, but they’ve turned my world upside down, for years & years. And I KNOW I’m not the only one. Revenge can be oh so sweet. Yes, I want the CEO to be arrested and handcuffed. I want him paraded around in handcuffs for the whole world to see. I want him to be forced to give back the millions he stole from unsuspecting franchisees all across this country (and Canada) for YEARS.

    I may just start keeping a journal. Maybe it’ll turn into a book. Maybe I just need to get it out on paper. I need some sort of closure. This guy is the Bernie Madoff of the Tax industry. What he has been able to get away with is outright disgusting.

    Arresting him would be ideal. Closing down the whole company would be a dream. He turned it into a stock company so the company would be saved. Lots & lots of questions need to be answered. This company needs to be scrutinized.

    I CAN’T WAIT for the DOJ to do their thing. Maybe finally then the knots in my shoulders and back will disspate just a bit and I’ll be able to move on to some sort of normalcy again.

  7. Ed says:

    This is in response to a question Bill asked a while back. Sorry I have not been on the site in a few weeks.

    two of my stores I have were purchased from former zees 1 just under 100k and the other one well below the virgin territory price of 40k.

    The store purchased dirt cheap is currently my second best store and has been the best investment I have ever made. I don’t mind telling you about my stores but that would tell who I was. Some of my stores are in cities where I have the only location so it will not be hard to determine that. Even though I usually defend Liberty (they do alot of things wrong though so I don’t always defend them haha) I’m sure they would rather I not post on external sites like this.

    I have stated the demographics of my stores numerous times and don’t really see the need to name a specific city anyway. Where I am at, Liberty is very well known with little to no available territories to purchase aroudn me (this may or may not be the case where you are) People DEFINITELY come in my office becasue I am a Liberty Tax as opposed to a joe’s tax shop. I feel at least 1 out of 5 come in because of this I also feel I can charge more since I am a Liberty. While I do not like paying royalties, this justifies it for me. Could I make it on my own? probably but I do feel I make more $$$ because of Liberty.

    Again all my offices are in low to middle income areas and I think this is key. Most are in high traffic shopping centers etc.

  8. guest says:

    Yes, thats why there is more profit, and you have no Liberty competition near your other store. It’s been said on this site before to buy existing and learn your way before you go it alone. This is a different year for legitimate tax offices. Lots of business from tax offices with problems, franchised or independant. We’ve been working all year with no advertising except referrals. Absentee is a problem. If you don’t have time this is not the business.

  9. Bill says:

    Ed: The reason I asked about the city and state of your stores was to help qualify your assertions about there profitability. Anyone could come on here and make bold claims about the profitability of their stores. By giving your city and state at least allows us to quantify what your saying.

    I appreciate your honesty and certainly understand your concern about having Liberty find out your posting on this site. They might consider your comments to be negative about the company and look to take it out on you. When I was involved with Liberty I posted a comment on Zeenet that was honest and accurate. They responded by threatening to take away an operating loan to help carry me over until the next season.

    If liberty is responsible for giving you 1 in 5 customers you are responsible for bringing in 4 of 5. Based on those figures you should only be paying royalties on one out of every five returns.

    Buyer beware!!!

  10. Franchizee says:

    Dang, maybe I need to work for LTS for these large sums of money and “retire”! Top heavy management and an over priced building all for the franchisee to pay for on behalf of their hard work.

  11. Sad but true says:

    Sooner or later the franchisee investor pool will run dry. Those still with debt to Liberty and those continually paying their 19%, will be the income needed to keep the company going. Throw in the bank income and some stock sales and that is most of the income. This site is having an effect – Liberty cannot fool the public too much longer. They really could change and do much better but time is running out for that.

    If the lack of new territory sales dwindles and current franchisees get out, Liberty may sell. It is too bad that the current hard working franchisees of Liberty would be hurt if they sell or go under. I can see them selling to H & R Block or Jackson Hewitt – what happens to those Liberty stores that are located near either a Block or JH? Will Liberty take care of their current franchisees at that time and buy them out? H & R Block is in the process of buying retiring CPA tax practices. They also want to provide additional accounting services.

    The Liberty maybe faltering is pure speculation – the H & R Block expansion is real. Liberty has no chance to catch Block, not 2020, or ever. Reality is hard to swallow. If you have a successful Liberty franchisee – sell (if you can) and get out now!! If you are a struggling franchisee – you have no hope!! If you are thinking about buying a territory – start at page 1 of this site and read to page 77, if you are still thinking about buying, you are not paying attention to the warnings.

  12. texastee says:

    Buying a Liberty Franchise was the biggest mistake of my life. We all want to believe what we are told, and John Hewitt likes to subscribe to that flaw in human nature. What would ideally happen would be for Liberty to go out of business and thus stopping its fraud on the consumer, franchisee and the government. This has not happened yet because Hewitt is still squeezing every dollar from every sucker he can. That is sad, despite the warnings here.

    Yes, reality in the market is not quite here yet as it relates to this franchise. They will continue to take advantage of franchisees, investors, consumers and the government until the money train derails. Hewitt will then probably move to an island or something with all his ill gotten gains. Too bad it has been on the backs of his franchisees and business partners. It looks to me that with all the executives leaving that I am reminded of rats fleeing a sinking ship.

  13. finalygone says:

    The Cfo and the mastermind who did what was necessary to get Liberty Public is leaving. From what I have heard that Liberty has been trying very hard to rewrite history and making things right and not pulling every stunt they can to make there numbers look better. I figure that everything has not stopped but the outright dishonest items have went away or away enough where no new press can be created. So many have been stolen from, mislead, and downright mugged for Liberty to get public I cannot believe that some things will come out eventually exposing what Liberty really is. Good luck to all current franchisees I wish you the very best. To any new prospective Zs I can tell you run and do not look back it is not a good business model and unless you like to wake up at night feeling slimy it will quickly change who you are and make you the business person you never intended to be. Spend your money on getting your Enrolled Agent Certification learn the real tax business not just EIC and build a client

  14. finalygone says:

    Base. You do not need a franchise name to build a practice. Any model that interests you can be researched and implemented without franchise fees. Buying a Franchise will force you to double your prices just to pay the franchisor and you will not get anywhere near the value back for the money wasted. I’m glad I am away and feel so much better about myself and about my professional status. Anyone with an update on Liberty cleaning house and making things seem very upfront and honest let us know.

  15. finalygone says:

    If anyone here forgets or if they do not know Trisha was a Top Gun Franchisee at least I thought she was and produced some great numbers when Liberty was desperate for them. She also bought into there system and executed it for her first couple seasons and continued to do everything she could to execute what they asked.. She will tell you that what she did the first couple seasons helped only Liberty and started her down a long dark path. In reality everything a franchisee does is to benefit Liberty and if there’s any crumbs and you behaved they may or may not allow you to eat the crumbs. It is sad how much dishonesty was used to get this company where it is and no matter what they do from this point on they will be criminals always. Too many peoples lives were played with used then discarded. There are so many and you only hear from a few on here. Why don’t more speak out? Fear of litigation or fear of getting governmental agencies after you.

  16. SanFranDan says:

    ^^^finalygone:

    What fabulous posts. Great to hear from a new poster to confirm what so many of us already knew & unfortunately experienced.

    Btw: “finally is spelled with two l’s, lol”

    MANY of us have been set down a ‘long dark path’ by being associated with this terrorist organization. Doesn’t matter if they got their ‘act’ together now since they have been around for years. This company began in Canada in 1997 and then brought to the US shortly thereafter. Just think of how many people have been fleeced of their life savings, their dignity, their professions and their precious sanity after dealing with them for 5+ years. The turmoil has been the worst thing that I have ever experienced and then some. If they cleaned up their act recently, that’s only because all eyes are upon them. If I were the DOJ, I would dig, dig, and then dig some more into the last 17 years this company has been in existence and put them all behind bars-permanently. They were ruthless! That’s actually an understatement. I hope they all get what’s coming to them, and soon.

    Prospective franchisees: save your money and stay away!! This company reeks of scam artists everywhere.

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