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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

4,933 Responses to “LIBERTY TAX SERVICE Franchise Complaints”

  1. SanFranDan says:

    AWESOME!!! Not for the current franchisees, sorry :(
    Next, go after the CEO and his inner circle! YES!
    It’s about time. Better late than never!

    Almost 5,000 posts! Hope our comments have helped, yay!

  2. SanFranDan says:

    I just looked at some of those links. Hewitt is a pathological liar. HE is the reason this is happening now. Not some small group of wayward people looking to rip off the gov’t. Hewitt is the cause of the fraud. LTS admitting to turning in their own franchisees. That’s an important fact that can’t be overlooked. Many of these franchises must have done something to piss him off, like stand up to him, and he calls the feds on them. Nice, huh? That I can prove. It happened to me. So, Mr. Hewitt, not every franchisee that you call the IRS on is a fraudster. It begins at the top with you, my friend. YOU, who needs to pay for what he has done to so many innocent people around the country.

  3. NCHillBilly says:

    Liberty Tax creates internal compliance task force following turbulent tax season

    By Kimberly Pierceall
    The Virginian-Pilot

    Liberty Tax says it’s forming a compliance task force to be led by one of the Virginia Beach-based company’s board members.

    The announcement follows a turbulent tax season for the tax preparer’s franchisees that included an IRS raid in Southern California, criminal indictments in Maryland and federal investigations.

    Earlier this month, the company closed one franchisee’s 28 locations in New York days before the tax-filing deadline. It has been in a legal tussle with the man’s business partner in Nevada and California to seize control of 23 other stores they own.

    In Wednesday’s statement, CEO John Hewitt said the company would not tolerate fraud.

    “An extremely small percentage of franchisees are under scrutiny,” he noted, adding that when the company has discovered wrongdoing, it’s terminated franchise agreements and sued franchisees.

    The company said Gordon D’Angelo would lead the task force that would “add a level of rigor and scrutiny to tax preparation done by Liberty franchisees.”

    The announcement doesn’t detail how the company would go about doing so, and a call to the company’s chief compliance officer, Jim Wheaton, wasn’t returned.

    D’Angelo has been a member of the company’s Board of Directors since 2011, a hired consultant and, starting in April 2015, an executive earning $25,000 a month assisting in franchise development and marketing. He worked for H&R Block before becoming a director of Jackson Hewitt, the firm CEO John Hewitt founded before leaving to start Liberty Tax. In between, D’Angelo co-founded the investment brokerage firm NEXT Financial Group.

    Kimberly Pierceall,

  4. guest says:

    Sounds like harassment by someone making $300,000 a year. They don’t seem to know what to do. At least this all should mean new marketing programs because Baltimore killed cash-in-a-flash. I see new colors, new themes, and re-training for franchisees. Revamp local marketing and spend some real money on advertising.

    Any word on Jackson-Hewitt? Their offices have no visibility in our area.

    HR Block sent out mailers asking tax offices to join them now and sell later. We got three of the letters.

    Just finished best season with Liberty ever. Straight tax prep, and customer service. No paid ads, almost no wavers. Return customers and referrals, but the
    company reputation is very damaged.

  5. NCHillbilly says:

    The DOJ, IRS and the various states that have either halted, terminated or raided Liberty Offices this year need to find the real cause.

    I suspect that there are key reasons for this rampant fraud.

    1. Cash in the Flash — The way this program was being marketed by various Liberty Offices and promoted by Liberty Corporate created a great opportunity for fraud. The franchisees use this as a way to get early clients to file tax returns at very high cost. This program adds at least $65.00 per return to the fee plus, if the office is giving out $100.00 bills it adds $125.00 to the return.

    2. Liberty’s lending practices to Franchisees should be really looked at. The various agencies should see how many of the Liberty offices that were closed down, raided or efiling terminated, how many of these offices borrowed money from Liberty Corporate. When an office borrows money from Liberty Corporate they are put on a fee intercept program. Basically all of the offices bank products fees are intercepted to pay towards the loan. This type of lending practice creates offices inflating the price of the early returns, using this money to pay down the debt to Liberty Headquarters. Offices that rely on early clients as their primary base are more likely to file a fraud return knowing that need every client to give them sufficient funds to make it through tax season.

    3. Liberty’s new $750.00 loan program — another way to do bank loan products to the clients, except for the franchisee pays for the cost of the $750.00 loan product. The franchisee then adds this cost back into the tax preparation fees. Even though word was put out not to. The cost was $45.00 per $750.00 product. A franchisee would add $60.00 back to the cost of the product to cover the loan fee, the additional royalty and advertising fees that this product would generate.

    4. Liberty’s marketing program is a joke, It is left up to each office to market on their own. There is no standard marketing between franchisee owners.

    5. Liberty’s conference calls, most of the franchisees that were closed down or raided were Liberty’s top offices. They use these offices on conference calls and promote what they are doing. Two of the Franchisees that were shut down this year where part of Liberty’s Elite 18 Group and the remainder offices were Top Gun stars. Other franchisees seek out these top performers and try to duplicate what these offices are doing.

    By now there are nearly 100 Liberty offices that have been terminated, shutdown, or efiling suspended. There must be a common denominator and the common denominator is Liberty Corporate and John Hewitt. These offices were spread from the East to West coast across the entire United States.

    Creating a new department will not solve or resolve this problem. Instead this hired gun will be looking on how to shift the blame further away from Liberty Headquarters and John Hewitt. Shifting the blame and responsibility to the Area Developers and Franchisees. Liberty Corporate runs like a dictatorship, those franchisees that follows what Liberty Corporate wants are rewarded those franchisees that don’t are harassed, thrown under the bus, and provided no support.

    If Liberty Headquarters really wanted to solve this problem they would need to bring in an outside agency. Allow them to have full access and come up with some recommendations.

    As of today Liberty Corporate has not made any announcements to the Franchisees of this new department that has been stood up.

  6. Dr Zhivago says:

    “Instead this hired gun will be looking on how to shift the blame further away from Liberty Headquarters and John Hewitt”

    I believe D’Angelo is a long time and big time investor in Liberty Tax. He’s no doubt taking on the role to try to limit his losses. Hewitt has no authority on fraud, so the job must be turned the job over to someone else. Probably needed an inside hire because anyone from the outside might begin to note the rot in corporate.

    Yes, they will blame ADs, franchisees, and anyone but themselves. Millions are on the line here. It’s about to get real. Expect to see more shutdowns over the summer. They will seek out the big boys first who have filing patterns similar to the Baltimore, NY, LA, and Las Vegas operations, then go after the small fries.

    Slightly shady Liberty franchisees will be cleaning up their acts in the first half of 2017. They essentially are on notice.

  7. Franchizee says:

    Well, if John and his people don’t know by now, they have a shot over the bow of their personal Titantic. DOJ are going to down the food chain. I am glad to be out and not have that pressure of writing as many tax returns as possible. No time to talk to people to make sure they ACTUALLY qualify for any of the credits.

    People have to realize, only the “top dogs” got the kudos. If you are writing perfect tax returns, offering excellent personal service and not causing letters to be spewed out weekly from the IRS, you are a nobody with any franchise but especially this franchise.

    AD’s will only harass the little people like me and give great praise to the ones writing junk and defrauding the government which if people are not aware are us taxpayers.

    H&R does the same thing, just they have a larger book to go through. I still see junk coming from them.

    If it is happening at LTS it is actually happening everywhere and is a systemic problem within the tax code.

  8. Dr Zhivago says:

    I think return growth should bounce back once this year’s filing deadline stats are included. The 4/15 stats cover 2015’s deadline but not 2016’s deadline.

  9. T.EA says:

    It will improve but won’t be surprised if there is a decrease because of non filers because of the ACA.

  10. Sad but true says:

    News for Liberty has been bad all year. Losing these franchisee’s to fraud and closed offices impacts their revenue. The cost for internal controls will affect their profit too.

    Good news is they can write off the losses. John is probably very depressed these days.

    This is not the time to be investing in a Liberty franchise.

  11. guest1 says:

    Agree on return bounce-back. Still think more returns out there with people who are not going to file until next year. They owe or think they owe due to low withholding or ACA. We had more owing than priors. All on payment arrangements.

  12. Concerned Zee says:

    Liberty just hit a yearly low today! Liberty has an audit committee of 100% insiders!! It’s the thief auditing the fox. All the auditors are EIC millionaires. Without EIC many of them would be working at a used car dealership down the road peddling high interest loans on beater cars. Do not approach this company it will be a financial and emotional drain and you won’t be able to get out without losing your investment. Liberty=Ponzi all the money gets to the top leaving employees and franhises with scraps. Some make money like the top 18 elite commiting fraud every day of tax season willingly or negligently. How do so many of these top offices do 500 to 1000 returns before mid February? Sch C EiC Fraud that’s how. They get $500 to $800 if they can produce a refund of $3000 to $6000 and all the offices know how to get there. Do a legit return get paid $0 do a fraud return get $600 which do most top zees and employees pick? Bablu, Balki, Maryland, South Carolina, Detroit, Vegas, Los Angeles, Black Enterprise, DOJ, Google these names and places with Liberty and see what you find.

  13. SaraEA says:

    We all know Liberty corporate has had a bad year. All the bad publicity had to pull them away from counting their money to spending their energy on making it look like they had nothing to do with the “rogue franchisees.” I am worried about the zees who weren’t closed and had their business affected by the horrid publicity. I imagine that stores in and around Maryland had their clientele disappear, and since MD is so small the local news probably affected stores in neighboring WV, VA, and PA. Has corporate done anything at all to help you weather the storm?

  14. Anon says:

    No, corporate has done nothing to help. In fact John has been incredibly invisible. He’s said nothing for most of the season, which is how I knew the year was bad from the start. He usually is his whole blowhard self touting BS numbers that are spun however he wants. Not this year. He’s not lying now, he just says nothing at all about what is going on. It is a rudderless ship at the moment, and is sad for all of us stuck and unable to get out. They won’t help, you can’t sell, you can’t walk away, corporate won’t go under as they are sacrificing the franchisees to save their skin so DOJ doesn’t take them down. There is nothing good happening. Sure some people still make money, even in this system, but I’d tend to bet that even those that are were down this year due to the mess corporate allowed to happen.

  15. balancetrend says:

    Out in 2012, thank god!!! Its been all profit since I left the Liberty machine!

  16. NCHILLBILLY says:

    SaraEA you are correct there has been no response from Liberty Corporate.

    The Zees from Maryland, Northern Virginia, Delaware, and Pennsylvania should get together and organize a lawsuit against Liberty Corporate for failing to protect Liberty’s name. These owners should be compensated for the loss in value of their offices. These offices should be compensated for the loss in value of their franchise.

    If there is any Zees that are organizing this or a law firm reach out to neighboring Liberty owners. Individually Liberty Corporate can snuff us out, but as a group we may stand a chance.

  17. Screwed By Corporate says:

    Right now there are at least 5 or 6 sets of attorneys representing different groups but everyone is not united. If Admin can help us get organized we can all team up with the same attorney. I recommend we go with one that has experience dealing with franchisors and franchisees. Who is going to take the lead to get this organized?

  18. SanFranDan says:

    Admin & Bill:

    You guys know best. Is Jonathan Fortman the right Attorney for this? I know work is being done behind the scenes. Is there anything that can be shared here?

    What happened to Uphillbattle? She/He seemed to have tons of info. on this……..

  19. NCHILLBILLY says:

    More bad news for the fastest growing tax service.

    Liberty Tax Service Reports U.S. Tax Results Through April 22nd

    VIRGINIA BEACH, VA — (Marketwired) — 04/27/16 — Liberty Tax, Inc. (NASDAQ: TAX) (the “Company”), parent company of Liberty Tax Service, announced today that for the 2016 tax season, from January 1 through April 22, the number of returns prepared in its U.S. offices declined by 3.9%. The decline in U.S. assisted returns reflects a challenging season, along with the Company’s efforts to ensure that returns prepared are compliant with company standards and the law.

    As previously announced, the Company recently created an Executive Compliance Task Force tasked with seeking to ensure that franchisees meet its high standards.

  20. SanFranDan says:

    ^^^^Ha.

    Their newly created ‘Executive Compliance Task Force’ should begin with a sweep of the upper management including dumbell himself and they should all be released of their services, fired without pay, pension, severance, etc. Stock was down a lot today too, awww.

    Can you spell F-R-A-U-D???

  21. mike says:

    Screwitt is taking a beating today in share value!!! At this rate he is going to have to sell the whorehouse, I mean beach house!! TAX (ticker symbol) is down about 12% as I type this wonderful message!! HEWITT HOW DOES IT FEEL TO LOSE LOTS OF MONEY LIKE THE FRANCHISEES THAT INVESTED IN A FRANCHISE WITH YOU???????

  22. Out and Glad says:

    The problem Mike is that he was given his shares. He is just loosing profit, not money being invested.

  23. Sad but true says:

    The demise of Liberty is a slow crawl. Where o’ where did Barilla and the few pro-Liberty commenters go to? There is nothing good to say!

    Today the IRS reported 2016 Filing Season Statistics as of 4/22/2016. Tax Professionals had a small 0.5% Change in E-filing receipts by the IRS. This means that Blocks 5.8% decrease in filings and Liberty’s 3.8% decrease in filings were significant reporting’s. I keep harping on these IRS numbers because it shows that the tax filing consumer is either going to Jackson-Hewitt or Mom and Pops. The consumer has wised up to the fact that the prep fees charged at Block and Liberty are way out of line. This is bad news if you are trying to sell a tax franchise to potential franchisee’s.

    Anyone who invests in a tax franchise today is not wise. The trend of market share going elsewhere continues. Hey, what happened to the baloney that the Affordable Care Act was going to mean more business for these firms? It did not happen and it will not happen.

    So, what can Liberty use as a selling point; We are the fastest growing tax fraud company ever?

  24. mike says:

    Out…has his market cap value of his company crumbled and most importantly trust in him by investors has obviously been lost which means that he can’t spin this POS as the “FASTEST GROWING EVER”……EVER AGAIN nor will he have any success in selling future franchise territories??? Now more than EVER will the current franchisees be EXPECTED to expand to make up the current and future decreases in return count? Also and most importantly to me, anytime he has lost ANYTHING isn’t it a good day for those that have been duped by the sales cons, all in my humblest of opinions:)????

  25. Texastee says:

    Fraud is the right word in describing Hewitt and Liberty. He has to be quiet this year because he is acting as the informant on his franchisees. Maybe Wall Street finally recognizes this system for what it is: A complete scam. I can’t believe that the DOJ is going to rely on this crook to turn in other crooks. I think that is why Trump has so much traction. People see and believe our tax system and government are corrupt and pander to people like Hewitt. How else could have the company survived all this time with the government fully aware of the fraud surrounding Liberty?

    Trouble is, he hasn’t lost any real money-he has just lost value in the stock he did not pay for. If you look at the insider trading statements, it is quite evident that Hewitt was planning on the bad financials as early as last summer when he exercised and sold (privately!) a huge number of shares. I’d be curious how many shares his family members unloaded in the last few weeks. Still smacks of inside trading, anyway.

    I would like to think that the market is catching up with this bum. Somehow, he manages to escape punishment, criminally and financially. Let’s hope this is the company’s demise.

  26. SaraEA says:

    Sad but true, your analysis of the IRS efile stats is spot-on. Just about all paid tax professionals are under mandatory efile, so when that industry is down .5% and Liberty and HRB are down way more than that, it indicates that taxpayers are leaving the chains and going to other tax pros. (Not to JH–they aren’t publicly held so don’t have to announce their numbers; I suspect they are down just as much as the other chains.) This is different than other years when the increase in self-prepared efiles was much higher than it was for paid tax preparers. Looks like the self-prepared growth has leveled off and taxpayers are choosing CPAs, EAs, and mom and pops–anyone who isn’t a chain–instead of trying it on their own. So maybe the ACA has helped the paid tax prep industry, just not the chains with their high prices.

    Is anyone else here suspect that Liberty’s return count is down only 3.8%? With the highly publicized scandals about the company, occurring at the height of filing season, I would have guessed that returns would be down much more. Was there pressure to increase the number of free returns? Something smells here….

  27. guest says:

    No. The bad news effects the cities were it happened. No reporting at all about other states in my state. Overall the customers dont care if it didnt happen in your store.

  28. Out and Glad says:

    Just so people know, there are still zee’s that are drinking the kool-aid. I know of one that has purchased 11 company stores. The zee has steadily been gaining stores.
    The crazy thing is that the zee signed the deal with corporate 3 weeks before the end of the season. Why would you buy the stores until closer to next season?
    I wonder if Corporate wanted the stores sold before the end of the season so that they could get out of any possible fraud? If that is so, the zee could be on the hook for being shut down.
    Does anyone else know of company stores being sold to zees before the end of the season?

  29. Screwed By Corporate says:

    Out and Glad,

    It did happen last year in Baltimore. When Vanessa Dickens was terminated and later arrested, her stores were offered to other zees in April. Some fell for it and bought the stores not realizing they were full of fraud. This season they were suspended right away by the State Of Maryland, probably for spite because of what Vanessa Dickens had done.

    Corporate is acting stupid like they had nothing to do with it. Also, because they pissed off the Comptroller, who is a clown himself, they suspended 28 total offices in MD. Total BS from Corporate and this idiot comptroller who has no idea what he is doing but is just angry and feels like Corporate just changed the name of on the EFIN and kept the stores open. Seems like everyone got screwed except corporate.

  30. Concerned Zee says:

    Company is only down 3.8% because John opened dozens of cluster offices around the company in the hopes to resell them to existing zees this upcoming year. With those offices factored out the Average store is down 10 to 15 percent return count. Corporate is probably up in total Revenue because of the $45 RAL fee charged to every franchisee for the $750 easy advance. The Zees had to eat that cost by increasing fees to all of the clients.

  31. Sad but true says:

    It is not only Liberty Corporate practices that should make you run away from investing in a tax franchise but also the tax prep industry trends.

    Let me explain; buying a Liberty tax franchise is a big investment. Chances are your ROI will never happen because your year to year losses will just make it impossible to achieve an ROI. Your starting costs for just 1 location will be at least $60k and more likely in the range of $80k to $100k. Guess what, unless you buy an existing location, you have ZERO customers on your 1st day of opening your doors. Guess who spends all of the money to acquire clients? You! I can go on and on about the yearly royalty and ad fees and a bunch of other negatives. At the end of all your expenses for investment, running the business, etc. – NOBODY will buy your business from you. That is so abnormal a business process because normally a business that builds clients can sell it. Trust me, you will be miserable if you decide to buy into Liberty.

    As for industry trends, Block and probably Jackson Hewitt (along with Liberty) will go the way of the dinosaur. It is not just Liberty that is struggling. The tax consumer is smart, why pay $400 to $500 for your return when you can go to a Mom and Pop for $150 to $200 for the same return. The game is up on these guys. The Block guy on the plane with all of the money better have a parachute and jump before the plane crashes. As for Liberty, if you like taking your chances by swimming with sharks, you have nobody to blame but yourself for your failure. Even the successful franchisee’s are getting hosed at 19%.

    Finally, just patiently waiting for it all to fall apart for Liberty and Block!

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