LIBERTY TAX SERVICE Franchise Complaints

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?




5,456 thoughts on “LIBERTY TAX SERVICE Franchise Complaints

  • December 11, 2017 at 3:37 pm
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    Liberty Taxes problems are continuing to grow:

    http://markets.businessinsider.com/news/stocks/Liberty-Tax-Discloses-Resignation-of-Independent-Accounting-Firm-1010936572

    Liberty Tax Discloses Resignation of Independent Accounting Firm

    PRESS RELEASE GlobeNewswire
    Dec. 11, 2017, 07:30 AM

    VIRGINIA BEACH, Va., Dec. 11, 2017 (GLOBE NEWSWIRE) — Liberty Tax, Inc. (NASDAQ:TAX) (the “Company”) today disclosed in its Current Report on Form 8-K that KPMG LLP (“KPMG”) has resigned as the Company’s independent accounting firm and that the Company will delay the filing of its Quarterly Report on Form 10-Q for the quarter ended October 31, 2017.  As detailed in the Form 8-K, there are no disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. Additional information regarding KPMG’s resignation can be found in the Form 8-K.  The Company has begun the process of selecting a new independent accounting firm.
    As disclosed in the Company’s Form 8-K, KPMG’s resignation is due to concerns around internal controls over financial reporting as it relates to the integrity and tone at the top set by Liberty’s founder, current Chairman and former Chief Executive Officer, John Hewitt. 
    Ross Longfield, Chairman of the Company’s Audit Committee stated, “We are disappointed that KPMG has resigned, however, we appreciate the long term relationship we have had with them.  The Company will work as quickly as possible to engage a new accounting firm and to complete their review of our second quarter results.”
    Hewitt was terminated on September 5, 2017.  The Audit Committee has high confidence in the existing management team and is confident that the management team will help to lead the Company through the resolution of the accounting concerns.
    The resignation of KPMG does not impact the normal course of operations of the Company.  Liberty management, employees and franchisees are focused on preparations for the upcoming tax season.

  • December 11, 2017 at 4:32 pm
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    NCHillbilly, thanks for the post! I was just about to do it myself. When an accounting firm as prestigious and large as KPMG withdraws from an engagement, there is something definitely wrong with their client. You don’ give up revenue flow from a listed SEC company lightly unless there are some very serious concerns. I wonder now if the DOJ will finally wake up and investigate Hewitt and Liberty? The IRS does not seem likely that they will. I think there is going to be some more serious stuff coming down the road.

  • December 11, 2017 at 5:48 pm
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    This may have an lasting impact on Liberty Corporate’s line of credit. Lenders become pretty nervous when there are not acceptable accounting practices being used.

  • December 11, 2017 at 8:50 pm
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    The resignation of KPMG now makes it obvious that the recent resignation of the CFO was indeed a big deal. Something was going on that made an early exit necessary. “Out” has been bringing up the point that franchising in general is good only for the franchisor, not the franchisee. Liberty will be a case study in the annals of franchising history.

    A potent point is that your franchise is only as good as the franchise itself. When the brand itself is sullied, you could run the best outfit in the group and still be dragged down. I remember being in a food court after a food poisoning outbreak at Taco Bell. I was a few thousand miles away from where the outbreak occurred, but there was not a soul in line at that store. By the same token, when the state of MD stopped accepting electronic returns from dozens of Liberty franchisees, I’m sure the ones who ran tight ships suffered even though they did everything right. (Still wish we could hear from some of them about their experiences then.) Something is obviously amiss with Liberty’s financials, and if lenders won’t loan franchisees all across the country will be unable to compete through no fault of their own. Something to think about before entering any franchise–the future is out of your control.

  • December 11, 2017 at 9:43 pm
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    TexasTee,
    There is a current grand jury investigation into John Hewitt and Liberty taking place in Downtown Los Angeles. I know this because I’ve heard it through the grapevine that after the IRS raid in Los Angeles and Orange County back in spring 2016, IRS investigators began interviewing employees that summer, and multiple subpoenas to testify were given out.

  • December 11, 2017 at 9:58 pm
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    Don’t forget there are thousands of franchisees in the system. There is value in the company because of it. Some investment group would buy it at a reduced price.
    Fortunately its close enough to tax season to get through without loans if something happened.
    The impact of the confusion will probably happen mid to next year. By then we will know what to expect from tax reform. A smart franchisee has a back up plan. In my state we’ve had multiple companies try to be a franchise and fail after about 2 to 3 years. Nobody remembers them.
    HR Block, Jackson Hewitt , Liberty are the biggest because of the people who own the stores. It will get sorted out, but it’s not going to be pretty. The results probably suck, that’s probably why the accountants are not happy.

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