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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

3,970 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.

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