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.

This post was originally published 

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?
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5,717 thoughts on “LIBERTY TAX SERVICE Franchise Complaints

  • August 29, 2019 at 3:54 pm
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    And today they bought Sears Hometown for $130M

  • August 31, 2019 at 9:49 am
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    You have to ask ‘why’? Sears Hometown definately on it’s last leg. Almost impossible to sell a liberty store. You have to ask ‘why’? If you can’t sell it only value is working it at a profit. You have to ask ‘why’?

  • November 19, 2019 at 8:41 pm
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    Is Liberty Tax still a viable business? I was surprised to see a couple of ads for tax prep and for tax preparers recently. I actually saw one last weekend with a lighted “open” sign. I thought most of the franchisees would have bailed by now. Hopefully some franchisees will post and let us know how it’s going.

  • November 22, 2019 at 11:26 pm
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    It’s going great and business is good! This would be from franchisees work. Not much to do with corporation.

  • December 5, 2019 at 10:08 am
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    Department of Justice truly missed what truly created the fraudulent tax return within the Liberty the system. The root of this problem goes back to Liberty’s lending program on territories, operating expenses and cash in the flash program. Liberty had a strict 100% fee intercept program where Liberty intercepted the fees on a bank type product from the franchisees to pay towards the loans they had from Liberty. These fee intercepts often left the franchisee with little to no operating cash. Which forced many of the franchisees to do unethical tax returns just to survive.

    Liberty’s new management team is not focused on tax returns, their focus and background is based on predatory lending. Even though there are restrictions on Liberty selling franchises for the next 3 years, it will be very easy for the new leadership to get around this. The Franchise Group will do this by opening Liberty Loan and Tax locations as corporate owned stores. This will allow them to expand, increase the number of offices and make their investors happy.

    These new hybrid offices will focus on lending money to individuals at rates around 155% yes 155%, these are short term loans. These new offices will be branded as Liberty Loan and Tax. Each location will have a cash recycler that will disburse the loans and collect the payments on site. Liberty has already open 40 of these locations, mostly in Tennessee. These offices will be opened 6 days a week, year around.

    Once these offices haves been established and the three-year probation period has elapsed on who they can sell a franchise to, these locations will be put up for sale at a high cost.

    This DOJ settlement is a win for the Franchise Group, John Hewitt as whole, not the Franchisee.

    The franchisees will take the hardest hit. Here are some of the ways that the Franchisee will take the hit.

    1. All of the burden of the compliance requirements will be put on each franchisee at a cost, most Liberty Tax franchise offices are already operating at low to negative income, and this will only increase the cost to support these new compliance requirements (hardware, software, storage, labor etc.). At the end of this upcoming tax season there will be fewer franchised owned offices as more owners will abandon their offices.
    2. What the client does not realize when they are having their tax return done at a Liberty office and their tax return has been selected for an internal compliance review and the franchisee fails to provide the necessary documentation to the compliance review board, the individual’s tax return will not be forwarded to the IRS or State for processing resulting in no tax refund loans or refunds. Once a client discovers that their tax return has not been forwarded to IRS or State for processing, because of an internal compliance review, this news will spread quickly amongst their family, friends and coworkers, today’s social media makes this extremely easy and quick. This news will be like a virus and will spread quickly.
    3. Liberty HQ does not have buyback program of existing franchises. These new restrictions will make selling an existing franchise extremely difficult during the next 3 years, as there fewer buyers that are qualified to purchase a Liberty Franchise. This will result in a declining value of existing franchises.
    4. Decline in new clients, the internet provides a wealth of information, and new clients that are looking for a reliable tax company will steer away from Liberty offices, as they will be seeing numerous articles on this DOJ fraud case against Liberty, this story will be nationwide. Most individuals will not read or understand the various news articles, once they see the words fraudulent tax return’s they will look elsewhere.
    5. Liberty HQ is not removing the original source of the problem and that is the “Cash in the Flash (CIF)” program. This program created an environment that offices had to do larger number of returns that had extreme high risk. These type of tax returns are bank products where Liberty HQ gained money numerous ways (bank fees, royalties, marketing fees, e-file fees, and check printing fees) plus 100% fee intercept from the Franchisee to pay for the various loans from Liberty HQ. The CIF and Liberty’s lending to franchise offices put these franchisees into a position that they had to do fraudulent tax returns just to meet Liberty’s 100% fee intercept policy. These types of loans and CIF program will continue, and franchisees will now have to charge a higher fee or continue to do questionable tax returns.
    6. Franchisees will be losing revenue on returns that fail to be processed by the compliance requirements. Most of the returns that will be selected for compliance reviews will be early filing returns. These are the type of returns where the individual is paid $50.00, CIF, just to have their return done. Along with losing the $50.00 paid to these clients, the franchisee will be paying all the cost to prepare the return (payroll and overhead).
    7. Client retention will continue to fall. The reason most clients have their tax returns done at a professional office is to help avoid audits, once existing clients learn more of this and the compliance reviews that are required, they are going to feel that their tax returns will more than likely be scrutinized by the IRS increasing the risk of an audit. They will be scared away.
    Finally, I suspect that part of the requirement when John Hewitt was required to sell his Liberty Tax ownership was a portion of the sales proceeds were set aside in an escrow account to cover any future fines from the DOJ, as this case on going during his reign. If this was done, then the DOJ fine would be paid from amount that was set aside. The DOJ should have barred John Hewitt from owning any tax business for life not just ownership in Liberty Tax.

  • December 5, 2019 at 6:25 pm
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    check out the office below

    Liberty Tax & Loans

    Tax Service
    Address: 3501 Dayton Blvd, Suite B, Red Bank, TN 37415

  • December 6, 2019 at 2:34 pm
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    Thanks, NCHillbilly! Interesting to see them switch. the 155% APR is depressing.

  • December 8, 2019 at 1:11 am
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    Can you provide a source for the new information about loans I have noticed they don’t have any loans posted to the website?

  • December 8, 2019 at 7:21 pm
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    Here is the trademark information for the new name Liberty Tax and Loan which you can Google and you will find locations located in Tennessee and Texas. All forty of these locations are currently company offices.

    Mark Identification:
    LIBERTY TAX & LOANS

    Last Applicant/Owner:
    Jth Tax LLC
    1716 Corporate Landing Pkwy
    Virginia Beach, VA 23454

    Serial Number:
    88647100

    Filing Date:
    October 8, 2019

    Status:
    New Application – Record Initialized Not Assigned To Examiner

    Status Date:
    October 11, 2019

  • December 9, 2019 at 11:56 am
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    Thanks also saw the liberty tax and credit repair. :(

  • December 23, 2019 at 12:35 am
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    The changes put franchisees in position to take the sign down and operate on their own. Some will decide to do just that. There is no value added from the company and the situation seems to clearly break the franchise agreement. Bank products are available to most tax offices. Highest risk is having returns not filed for some unnecessary paperwork. Paying royalty is gifting money. Got better sense than that.

  • December 23, 2019 at 1:28 pm
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    NCHillbilly,

    I have a question. You said that there are restrictions on Liberty selling a franchise for the next 3 years.
    Are you referring to the fact that new Franchisees must be either an EA, licensed CPA, licensed Attorney or a tax preparer with 4+ years of experience? Or are there more restrictions that I can’t find? And I agree these requirements will make it difficult for any current franchisee to sell their practice. I don’t seem many of these professionals wanting to pay $40K to join this organization. And I don’t really see too many professionals wanting to sell credit repair and all the other new add ons.

  • December 24, 2019 at 8:27 am
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    Jewel, you have described the legal restrictions.

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