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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

4,022 Responses to “LIBERTY TAX SERVICE Franchise Complaints”

  1. Sad but true says:

    Question? Liberty contract states former Franchisees cannot state (hold out) they were former Franchisees. Is this for advertising or what does it mean and has anyone ever been sued for this? Very vague language in the contract.

  2. Out and Glad says:

    If you stated that you were a former franchisee, it would open up to questions on why you do not still own the franchise.
    With the number of former franchisee’s that have a bad taste in their mouth about them, Liberty could not halt the negative impact on others buying a franchise, or people going to them for tax prep.

    That is my two cents worth.

  3. bill says:

    Congratulations to everyone who provides input on this site, including John B. Your comments are having an impact on Liberty’s ability to sell franchises.

    Liberty came out with their 2nd qtr. results and stated: “during the first half of fiscal 2015, we sold approximately 105 new territories” The report goes on to further say “Our new brand, Siempre Tax +, will open approximately 60 locations during the 2015 tax season”. ” In cases where a new Liberty Tax Location and a Siempre Tax + locations are sold in the same new territory, this territory is only counted once in our new territory count”.

    As someone deduced on the Tax message board of Yahoo finance. This means the company only sold 45 new Liberty tax territories.

    Keep up the good work!

  4. Sad but true says:

    I feel bad for the 45 new Franchisees. They will learn how it feels to give back 0.19 on every dollar earned.

    How many Franchisees quit? It is probably more than 45.

  5. SanFranDan says:

    ^^Sad but true:

    I agree with you! :) Those 45 franchisees will be posting here very shortly, unfortunately.

    It’s still 45 too many. I feel very badly for them too. They don’t know what’s about to hit them.

    Thanks for the update, Bill. Now we have to find a way to make that number zero.

  6. Uphillbattle says:

    How many of the current franchisees were pressured into opening a Siempre Tax office?

    This business is getting harder and harder. There are many regulations on the horizon. Although the IRS has not been successful at instituting mandatory regulations, the IRS will probably succeed with the help of the Congress.

    In the meantime, the states are implementing tough regulations that hold the preparer and the owner of the business accountable.

    There is at least one city that has regulations for preparers with on the spot fines.

    Assisting people with immigration paperwork is priced control by some cities. This service does not seem profitable. Some of the paperwork has to be handled by lawyers.

    Here is the point, the tax business is not like it was in the 1990s. In a few years, only licensed professionals will be able to turn a profit because most of the restrictions will not apply to certain licensed professionals. (Keep in mind that the minimum wage is about to increase, more expenses.)

    Does anyone have any experience operation a tax business in a state with regulations? (Currently, there are four states with regulations.)

  7. Franchizee says:

    It seems the IRS is encouraging people to become EA’s or some other titles. Just like Sara ea seems to stay busy all year long.

    Did anyone read the article in Progressive agent about LTS? Hewitt admitted the no franchise fee and higher royalties did not pan out. That’s how they grew so fast a couple of years ago. Apparently those offices failed because his marketing machine is antiquated and over done. Also, he stated offices opened on November 15th to try and take the insurance market. I know the offices in my area are only open their same amount of time and are available for appointments only. Also they lost $11 million last quarter. Could not have happened to any better company.

    Taxes are getting more complicated and complexed. A nine week course is not going to cut it. Or one week course. Plus as stated above minimum wages are going up which requires more cost to the consumer. It seems becoming a professional will be the most likely answer.

  8. Franchizee says:

    It was Progressive Accountant.

  9. uphillbattle says:

    I just glanced at Liberty’s Income Statement on Yahoo. For the last quarter, the income tax expense was subtracted from the “income before taxes,” as opposed to added. This is not done on an Income Statement. (It is done in a “cash flow statement,” if the taxes are a depreciation expense.

    This means that the real loss for the quarter is $18,791 (over $18 million dollars). The (7,463) amount might be an unused credit that was applied on that quarter. But without any taxable, I do not see how an unused credit is used. (Even if this were the case, the income tax is calculated on the yearly income.)

    This appears to be some type of depreciation expense (reduce taxable income) that the company is planning to take at the end of the year. But this type of expense is usually not accounted for in the “Income Statement.”

    The real loss for the last quarter without the “Income Tax Expense” adjustment is over $18 million dollars.

    Simply put, people should ask about that adjustment when investing in the company. I am sure that there is a legitimate explanation.

  10. SanFranDan says:

    ^^Uphillbattle:

    Good to see you posting here again. Posts from everyone are helpful. Greg, NC Hillbilly, out and glad, sad but true, franchizee and Bill………….and everyone else too (except Barf villa) add real value to this forum.

    The franchise was in it’s infancy when I became a zee. Now, looking back, I don’t think I ever got a straight honest answer regarding their numbers, and how to handle certain levels of clients. The free return was such a joke. It added to THEIR numbers, not ours.

    Their method of franchising stinks. Many, many people have realized this and that’s why they’ve lost so much $$. They were NEVER forthright and honest. They manipulated everyone and everything to make their numbers appear greater.

    People have had serious life changing experiences by being involved with this so called tax franchise. PU-LEASE. The best advice I can give anyone that has already signed at this late date: you’re really stuck now for the next 5 years. Try to minimize your $$ lost (ha,ha,ha) and cut your losses as soon as you can and leave this heap of a mess behind you.

    To anyone reading this that is saving to join next year—–DON’T!!! Save your precious hard earned $$ and walk (RUN) in a different direction. Anything but this company. You will be forever grateful.

  11. Uphillbattle says:

    SanFranDan, you and the rest of the people who are contributing are making a difference. Many years ago, I was seriously considering a franchise. The comments on this and other websites should alert an investor to do some serious research.

    I have also learned a lot about the tax business on this website. Through some serious research, I have concluded that this is a tough business. Sure, you might make some money for two or three months out of the year. But you have to pay bills for the whole year (lease, insurance, utility bills, and so on).

    The business is about to get a lot tougher. In a few years, all tax preparers will have to be licensed by the state and the IRS. (New York already implemented the requirements.) New York has a statute that protects consumers from “unconscionable” tax preparation fees.

    There is at least one city that fines the business for not disclosing the fees upfront or not providing copies of the documents. (This means that in a few years a tax preparer will have to be in compliance with city, state, and federal regulations.)

  12. SanFranDan says:

    I personally think it’s good that tax preparers will be subject to higher scrutiny and need to be licensed. It’s about time, actually. This baloney about hiring people off the street to come and work in a Liberty Tax office as a preparer is for the birds. It should be and needs to be regulated.

    My beef is not with the tax business since I’ve been in it my whole professional life on the corporate end, my beef is with Liberty tax Service as a truly sorry excuse for a professional, honest company. Yucch.

    Although my problems with Liberty began in year one…..I was able to make a living of sorts through my own hard work and determination. It was what happened AFTER I left that the shit hit the fan and their true colors surfaced.

    If anyone has ANY doubts at all about anything said on this forum, you can be assured that posters are writing about their awful experiences to stop others from similar experiences. LTS makes sure to squash you mentally, physically and certainly monetarily. No matter how much money you bring them. I cannot emphasize enough how ridiculous and stressful it was for YEARS.

    This is a company that needs to be scrutinized and then shut down. At the very least. It has been able to get away with waaay to much for too long. IRS & DOJ:
    take notice please and go get ‘em!

  13. Frustrated and Disgusted says:

    To all;

    I received this link in the mail. Hopefully Sean will allow it to stay. It gives great insight into a struggling organization gasping for air. Opening up with Insurance Agents ? Hoping he can sell ACA insurance ? Fewer Walmart locations ? Got rid of the Zero Franchise program that was a waste, and lost $11.3 in the final quarter.

    ACA, Immigrants to Lift Liberty Tax

  14. guest says:

    HR Block, Jackson Hewitt, and Liberty are all getting into health insurance. Per Jackson Hewitt’s website they are revamping. They now have $50 gift card for coming in. Tax prep offices have to change, franchise or not.

  15. emma says:

    I was looking into buying a franchise b/c I took their tax class and the owner made it sound so attractive. I later became wary of this business b/c I was not hired…even though I scored high on the tests and did everything that was asked of me. I then went back the following year and did the same thing at a different liberty and did not get hired. Both years I had noticed that no one got hired from either class. May I ask here why they have so many classes and why give the classes if they have no intention to hire from them. Is this part of their agreement as a franchisee? Also, I would never invest in this company now after reading these boards…so I thank everyone for their honesty.

  16. bill says:

    guest: I agree with your premise that tax offices need to change but I’m missing your point when it comes to tax offices selling insurance. Many accounting firms incorporate, if not directly, access to insurance products.

    This current wave of retail tax preps providing insurance services due to the ACA is just a marketing tool like gift cards and cash in a flash. For a company like Liberty who never puts its money where its mouth is, this is just lip service. Keep in mind that selling insurance requires a license in each state so if Liberty was to incorporate insurance into their franchise model they would also need to be more selective in who could purchase a franchise.

  17. guest says:

    HR Block, Jackson Hewitt, and Liberty are all getting into health insurance. Some of the local mom and pops are getting involved too. Retail tax prep has enough stores and offices. Now the focus is on maintaining clients. Yes, its a marketing tool.
    Don’t forget most businesses need marketing tools. Getting a license is one of the best ways to understand ACA. Probably most of these don’t care as much about selling franchisees anymore. Expanded services is good for 2015, 2016, 2017.

  18. SanFranDan says:

    ^^Emma:

    Your post is music to my ears! :) You are a very wise person to back away. Excellent choice. I know in my case, even with multiple offices, I was not able to hire everyone that took the classes with me. However, I still believe that tax preparers should be licensed and it needs to be much more regulated than it has been. If that is more difficult for Liberty going forward, then wonderful!!! Many years ago, I studied for my license in Life, Health and Variable Annuities. You need to keep it up with continuing ed classes and if tax is going in that direction, then boy am I glad to be out.

    LTS will GET YOU coming, going, any which way they can. Yes, they had requirements for holding classes before the beginning of each tax season. LTS itself is a disgusting company to be a part of. I certainly cannot vouch for H& R Block, Jackson Hewitt or any other tax franchises. LTS stinks and anyone that signs a contract will see very quickly that they are dealing with sharks, not normal business people. John Hewitt is not a normal business person, he is a shark, a rat and whatever adjective you want to use. Hope he rots in hell. That’s an understatement. They are sneaky, dishonest, and money grubbing. This franchise preys on people and people are tied up with them for years. No matter how hard you try to disengage, they still come forward and lock you in year after year after year using every legal term in the books. Someone had once posted that their legal dept. is not organized……….well my experience was the opposite. They keep hiring lawyers and their legal dept. is by far the largest dept. and the most busy.

    Emma: Congratulations to you on realizing what a con artist this company is and backing away. It is such a please to hear this from strangers!!! :) You will save your money and your sanity. Good for you!!!

  19. SaraEA says:

    Can someone explain exactly how the chains are getting into health insurance? If they are helping clients sign up through the exchanges (they have to be registered brokers to do that) that get a small commission–hardly enough to justify the education and time. Since their target tax clientele tend to be lower income, I would think many would qualify for Medicaid in those states that have expanded eligibility, or state health insurance if they make a little more. Is there any commission at all in those programs?

    I see the big income related to the ACA coming from tax returns. The individual mandate created a bunch of new forms and a host of complications. Did the client have insurance? Is it qualifying insurance (won’t have to worry about determining that until 2015 tax year according to IRS). Did they get an advance premium credit? If so, did they bring in Form 1095A from the insurance company? Lots of extra work on every single return, and lots of people who got advance premiums will have to file even if below the filing threshold. Don’t need an insurance license to do the returns, just a heck of a lot of education.

  20. Sad but true says:

    SaraEA,

    Do you have any recommendations for any on-line training for the ACA?

  21. Franchizee says:

    Sad but true – I use WebCE out of Texas that has online courses for a reasonable price.

    SaraEA – I spoke with an insurance broker last week and I found out that the premium paid by insured’s are coming 80% are coming from the government. I asked the broker, what happen if they have a life changing event, they may owe back the money. The broker just looked at me like a deer in the headlights. I told them, I will have the barer of bad news if they don’t qualify.

  22. Franchizee says:

    Merry Christmas and Happy New Year and Happy Holidays to all who used to be with LTS. 2015 looks better and better not being with those yahoos!

    Remember anyone looking at this company to help them build their tax business, they don’t help you, they take it from you once leave. If you don’t tow their specific line, then they will harass you and possibly sue you into submission. No one wants to be with a company that you freely give money to and have them turn around and sue you later in the game.

    LTS has a negative following of clients. You basically have to pay the people just to show up to write a tax return. It is an insane business model, that only put’s a franchisee in more debt with the company.

    For all of us that have left the company, BRAVO! We will keep posting as long as necessary.

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