LIBERTY TAX SERVICE Franchise Complaints

5,730 thoughts on “LIBERTY TAX SERVICE Franchise Complaints”

• I am also a former Liberty Franchise owner. I would agree with everything in the other two messages and add, they missrepresented not only the number of tax returns I would do but vastly understated the cost involved in getting into one of their franchise’s. I tried to stick it out for four years but by then they had wiped out my life savings and there was no way I could continue. Rest assured they encouraged me to continue to throw my good money after bad right up untill the end. If any one gets a class action Law suit going against them please post it here, I personally know two other former owners that Liberty helped drive into bankruptcy in less then two years of doing business with them. The problem is none of us have the finacial resources to get one started.

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• I have to agree with a previous statement: Liberty will sell ANYONE a franchise……even a person who was CONVICTED of FRAUDELENT INVESTMENT SCHEMES…… I’m sitting with tons of unpaid fees now, and this loser is sitting in jail and most likely will never have to pay for what he did…..and even if he does have to pay, I’ll probably be so far down the totem pole, my grandkids will never see the money…….and I don’t even have KIDS old enough to have kids yet!

• Agree all you want. You are stupid

• Wow Bill what an intelligent response! Too bad for you I have the proof to back up what I say!

• I thought about opening a Liberty office but after reading how much money it cost for a buy in and all the other start up costs, I thought it was easier to keep that money and continue to work for myself and use my own name. If anyone wants to know how to operate a tax office less expensive I can help.

• all your comments are enlightening. Just returned from an open house and they made it seem simple…seems like you could save yourself operating expenses by doing it yourself….any insights taxlady

• There is a case currently going through the courts that is challenging the Liberty Tax Franchise agreement. The guy who is being sued is a former Liberty franchisee and is willing to talk! He is in Springfield , MA and has had some success in beating Liberty. Most notably, his lawyer successfully argued a vast reduction in money damages due Liberty which could and should make any lawsuits in federal court too small for them to consider. His lawyer will be happy to accept more Liberty clients (of course!). Talk to this guy, he is listed as one of the current lawsuits on their prospectus. I won’t list his name here, but he is easy to find and has some success in litigation against Liberty. Good Luck! As a result of our conversation, I would not even think of being a franchisee. Call him-his name is John.

• Thanks for the advice…in the process of doing my due diligence so I will be sure to talk to John…appreciate the insights

• If you want info on the former franchisee that John Palmer referred to, contact me at biz.tax@hotmail.com and I have permission to provide you with his contact number! You will be asked if you are with Liberty Tax since they have been calling him to try to entrap him because of the current lawsuit. The information will be helpful and I only wish I had this resource before I lost my money to Liberty Tax!

• Look for the case of JTH Tax vs. Fein

• If someone will email a pdf of the complaint (in confidence) to unhappyfranchisee[at]gmail.com I’ll post it.

• What is the current cost of purchasing a Liberty Territory? It seems to me they might be very expensive compared to others like Jackson Hewitt or Colbert Ball. Any body know?

• To the taxlady:
  I would like to take you up on your offer to provide insight into opening up a tax office for less than the franchisors offer.

• I would like to be a part of a class action lawsuit. I also feel that they misrepresented the oppertunity. I bought 3 territories. Invested my life savings and filed for bankruptcy last year. I was lied to from the beginning.

  Customer service did not exist from corporate to the franchisee

• Anthony,

  Please remember that your franchise agreement may preclude you from filing a class action suit against Liberty. If you e mail me I can give you the contact info of someone who is in current litigation with these crooks and has had some success.

  [John: We don’t allow posting of personal contact info or email addresses in comments. Feel free to share your information here in the forum. Thanks. ADMIN]

• Anthony — I’m sorry you lost so much and had to go into bankruptcy but be sure and study the history of “class actions” and franchise litigation. Now that class actions are usually removed to the federal courts, franchisees will be even less successful than ever before in litigating misrepresentations and fraud.

  Franchising was regulated my the federal government in late 1979 in order to take franchise contracts out from under the provisions of state law and to protect franchisors from “fraudulent inducement to contract” claims in the state courts according to Robert Purvin, an attorney, who wrote the book Franchise Fraud and who was Chairman of the American Association of Franchisees and Dealers (AAFD).

  If a Class Action Attorney doesn’t explain this to you and tell you the odds, run fast! There is tension between state law and federal law and the courts are under siege by failed and failing franchisees who believe that they were defrauded by promises made in the presale process. Franchisee attorneys do not work on contingency, of course, because the odds of recovery are so slim —and the odds of being made “whole” as to your losses are practically “nil.”

  Now and then a franchisee does get a small judgement if they can hang on through the years and the appeals, etc… but, of course, the attorneys don’t lose on either side and don’t take franchisee lawsuits on contingency. Notice that “the promises about “customer service” are probably not very specific in your written contract and the UFOC/FDD and breach of contract is very difficult to prove and even more difficult to prove was proximate to your damages, etc…

  LET THE BUYER BEWARE OF FRANCHISORS AND ATTORNEYS!

  http://thegreatfranchisingrobbery.blogspot.com/

• This is very scary stuff!!! I am on the brink(or I was) of purchasing either a Liberty or Instant Tax franchise. After reading some the these responses I am truly becoming frightened of the whole franchise idea.

• To Nancy Jones:

  Save yourself money, effort and trouble. Don’t even think about getting involved with Liberty Tax. There is enough input here to help you with your decision ! Look up the list of former franchisees in the Northeast and you will find former franchisees that can give you an honest evaluation!
  JP

• I am pursuing the due diligence of being a Liberty Tax franchisee and came across this forum. Thank you all for sharing your experiences. The franchise seems to be very successful in my area ( Dallas) I attended the first seminar where other franchisee owners were there and claimed to be very happy. I have an existing client base to start from and have been in accounting for years but am not a CPA and need a year or two of more classes to get my CPA. With the Liberty Tax I wouldn’t need it and can make the same money. How could I do this without having a franchise? Thank you.

• gried:

  Talk to the former franchisees that ahve been listed in this forum. There are several that had pre existing clientele that were burned by Liberty. Did you know that Liberty would have the right to exclude you from servicing your old clients if you should decide to leave them? How would that affect the business you worked so hard to establish?

  The short answer to your question is that there is a myriad of people out there that actually make a living setting up people like yourself for this type of business. Look in the Northeast, where I personnally know 3 of them! Liberty will not offer you an honest shortcut to expanding your business. the truth is that you hold the key to expanding your business through your own clients and their happy referals.

• To Gried:

  I am a former Franchisee with these less than honest people! Do not ever let them get a hold of your private client information because they will innundate them with advertising and try to lure them away to other Liberty Franchises in the area. They have no real marketing prowess and are really good at taking our royalty fees with no support. They developed a large group of franchisees here, in Florida, and not many are profitable and most are very disappointed with the lack of support they offer. Their software is unreliable, especially at tax time (when you need it).

  To answer your question, you do not need a franchise to grow your business. You need to service your existing customers well so that they will give you referrals to their friends. There is no marketing magic bullet that Liberty offers that can possibly offer you the same degree of success as you can yourself.

  As for the meeting you went to, I also attended on of those and was reeled in by them. It turned out that most of the franchisees were not at all from my area nor even from my part of the country! Most were from Virginia (where Corp HQ are) and were specifically shipped in for the show. The Liberty Franchise owners that you probably saw were new to the system or part of Liberty’s sick corporate structure. Do yourself a favor, call the ex franchisee’s, call the ones that are being sued by Liberty and call franchisee’s with more than 3 years in the system. I think you will get a better picture of what the Liberty Franchise is all about. Don’t let them separate you from your money-They managed to bankrupt me!

• For any of you that are still even considering Liberty tax as a possibility, why don’t you do a little searching on justia.com which is a search site that lists legal cases that have been initiated by Liberty Tax. Search by typing in JTH Tax on the search screen and a whole list of defendants (ex franchisees) are listed. Ask any one of them hoe they would rate their experiences with Liberty!

  I thought it interesting that this was a very large list that seems to keep the Eastern District Court of Norfolk, VA fully employed! Coincidence?…

• The Liberty comments about losing all your money are accurate and not just disgruntled people who didn’t know what they were doing. I was sucked into buying franchisees and came out losing more than 200k after 3 years. Due to franchise laws Liberty can’t tell you before you buy how successful their franchisees are, because if they could you would never buy. The success stories at the pre-training sales pitches are corporate owned stores and maybe 1% of the population of franchisees (a dog and pony show). The other 99% will lose their money, have their franchise taken back, maybe get sued, and then Liberty will sell the franchise to someone else all over again.

• run away wrote: …Due to franchise laws Liberty can’t tell you before you buy how successful their franchisees are, because if they could you would never buy.

  They may have told you that, RU, but it’s not true that laws prohibit them from disclosing sales and profit numbers. Franchisors often state that they are prohibited, but actually they can provide financial performance data to prospects as long as they disclose it in Item 19 of the Franchise Disclosure Document. They must, however, provide the basis for their numbers.

  Most franchisors, for various reasons, do not provide financial performance info in their FDD. One would assume that if it furthered the sale, they’d include it.

• Ha! Ha! Run Away told the truth! I read the other day where Mr. Franchise says that 90% of franchisors DO NOT DISCLOSE “earnings claims” — and I say even “earnings claims” aren’t actually true disclosure of the unit financial performance of the systems because they may be averages that can be skewed.

  What are the various reasons franchisors don’t disclose earnings claims, Sean? l. Because they don’t have to, under the FTC Franchise Rule or the State FDD, and this protects them from lawsuits from franchisees who don’t thrive and can’t then prove they were fraudulently induced to contract by misrepresentations or omissions, etc. in the forming of the contract. 2. Because if the disclosure reveals low or no profitability of units, this would kill the sale of the franchise. 3. Because even if the earnings claims were currently good, they might not remain good, and then it would sure look like “fraud” if the franchisor stopped making earnings claims to hide from new buyers the fact that the earnings were declining.

  The original lie of the FTC Rule lives on — i.e. that the purpose of the FTC Rule was to mandate that “essential” information be disclosed by franchisors that would enable prospective buyers of franchises to assess the risk of the investment in the franchise and compare it with other investments. The real purpose of the FTC Rule, as indicated by experts and attorneys, is to protect the franchisors from fraud and to deny a “private right of action” for franchisees even when there is a violation of the FTC Rule.

  http:..thegreatfranchisingrobbery.blogspot.com

• Carol – see you next Tuesday.

  John S.

• Carol,
  Is there a way to contact you?

• Yes! John! You can E-mail Admin at unhappyFranchisee[at]gmail.com and tell him that you have my permission to access my Email address.

  I don’t know how I could help you but I do feel that you are honestly trying to help the Liberty Tax franchisees who are failing and don’t know what to do when Liberty Tax demands a “failure” fee that is obscurely defined in the terms contained in the contract the franchisee has signed in good faith. The good faith franchisees don’t understand that the franchisor has premeditated their failure while at the same time they have not disclosed the odds of failure. Too bad! So sad! —So many have been had!

• Here is the problem as I see it. Some Liberty franchisees make money and are happy with their business. Some fail for what ever reason, and they blame the company. I’ve never heard of one blaming themselves for their failure.

  Now, Liberty does have a habit of treating its franchisees as if they are morons. That is frastrating to franchisees who are not morons. The company oversteps its authority under the franchise agreements in myriad ways. They litigate way too often, having sued so many of their franchisees and former franchisees. The list of failed franchisees is enormous. I don’t believe they intentionally lie, but one person claiming to speak for the corporate office will say one thing and then another person will not abide by that commitment leaving franchisees always wondering what they can depend on. They do many things that stupidly damage their relationships. However, as I said, some folks do well. If that was not the case then the company would not continue to grow.

  The best advice for prospective purchasers of a franchise is to compare yourself honestly with those who succeed and those who fail. Are you more like one or the other? Personally, I would not purchase a Liberty franchise again because I know the tax industry now. If I move to another area I am perfectly capable of building a local mom and pop operation that would likely do better financially. If you don’t know anything about a business then you need to buy someone else’s system. Be prepared to be treated like you are stupid, and be prepared to act as if you are if you wish to be in the company’s good graces. Liberty doesn’t pay its corporate employees very well so they also don’t get the best and the brightest. The people who are highly compensated are the ones to watch out for, though.

• By the way, I believe it is time for Liberty franchisees to consider forming a franchisee association to represent their interests similar to what Jackson Hewitt franchisees did. Right now all franchisees are at the mercy of the whims of the corporate office. They have no power because they are not organized, and the company will always place its own interests above that of franchisees.

• Have to tell you, when there is a posting that says “the list of failed franchisees is enormous” it says alot. Obviously there will always be franchisees that fail due to their own workings, but when failure is more the norm than the exception, there is something wrong. I have run successfully a small business in the past, and followed the liberty system more so than a lot of other franchisees who I knew during the past few years. Part of the flaws are you purchase a franchise to rely up systems that work, an organizational structure you can rely upon, and a brand name recognition that will bring people in. Liberty advertises this to their potential franchisees, but in most cases does not deliver. I firmly believe after being involved that the successful franchisees are either lucky, or hand picked to succeed by the corporate office as they get better development assistance than others. The area developers, who are one of the keys to the store’s success, are in it to flip territories and not for the franchisees success.

• Joey,

  Liberty’s main business is litigation. That is where the largest number of their corporate employees are. There is a distinct reason why prospective franchisees are not invited to the corporate office: It is because it is such a small operation that is disproportionately driven by its legal department with John Hewitt at the helm.

  I am a former Texas franchisee that has had litigation from Liberty against me. This is not at all an exclusive club. The reason for Liberty’s growth has been the fact that they prey upon the unemployed and will sell the sizzle instead of the steak. The company never gave a care about the franchisees-ever! Just ask former franchisees and litigants. the answer is the same. I believe that they will continue to dupe unsuspecting people into their very expensive system just so they can establish their brand at no cost to them and the sweat of others.

  The AD’s are only in the business of flipping territories. When I left mine, I understand they sold it for six figures! I guess there are people that are still unsophisticated in spite of the fact that there is a lot more former franchisees out there sounding a warning. Buyer Beware!

• As a Liberty franchisee with multiple offices for several years I have to agree with most of the negative comments listed above.
  FACT: You CAN make money as a Liberty franchisee based on the following (and you MUST have four of the five criteria listed):
  1. You have three times as much money as the start up fees state.
  2. Your Area Developers understand the tax business (this is tricky). My AD’s are deceptive individuals who stack newly opened offices with free tax returns then sell them to buyers who are informed the “FREE tax return program” generates new paying customers the next season! Less than 10% of customers who paid zero return, and even then they expect their returns for $20-40! Part of the Liberty franchise agreement is that you MUST prepare 100+ free tax returns.
  3. You have a business background – understand cash flow, budgeting, payroll management, purchasing, marketing to designated markets and excellent time management and people skills.
  4. You can survive working sixty to seventy hours per week for 14 weeks during the first two tax seasons with little to no income.
  5. You have an office with EXCELLENT visibility (Liberty generates more than 40-50% of it’s customers from their Liberty wavers), excellent staff prepared to work for minimum wage and $$$$ of direct mail, door hangers, coupons and roadside signs.

  If you can handle all this… well, you’re a better man than I was.
  Liberty will make you a “TOP GUN” a term they offer to virtually any franchisee who prepares over 500 returns AND is a suck up.

  To these and others like them, they also offer the rent to buy or “try before you buy” program where Liberty allows the franchisee to open a second office with only 20% down. Followed by 12% interest on the balance. Not from the beginning of the tax season, but from the date the agreement is signed!
  So you learn in January when you are opening your second territory office that you have been paying 12% interest on $32k or thereabouts since last AUGUST!

  As far as the franchise agreement goes, have you or you wife or son or daughter sign it. So when you have spent your 14% franchise fee every month to a corporate body that does nothing to support you with the exception of commercially available software (Taxwise up to 3 years ago), and 5% advertising royalty which comes in the form of cookie tins, t-shirts in XL and XXL and hispanic radio marketing (my territories are predominantly all white/black!), sell for what is the higher part of pathetic and start your own no-name office.

  Finally……. try selling your office for half of what you spent trying to build it up.

  And to that poor uneducated, inarticulate, unschooled Liberty franchisee in GA who I spoke to numerous times trying to help…. I wish you well.

  Liberty Tax should NEVER have taken his money. He has virtually lost everything.

• Good to see franchisees sharing THEIR performance statistics with each other and warning off new buyers. As long as franchisors can hide the risk and the actual performance of units from new prospects, they will continue to line their own pockets at the expense of franchisees who lose everything. http://thegreatfranchisingrobbery.blogspot.com

  The Internet will change the face of franchising for the better because HISTORY is repeating itself.

  Thought I would share a quote from the Nov-Dec Franchise Times where Julie Bennett, in her article about the Minnie and Micky fiascoes in franchising said they were a part of a May 1970 front-page article in The Wall Street Journal that said: “Once considered the darling of Wall Street and the savior of the small businessman, franchising is spurned on Wall Street and cursed on Main Street.”

• Carol –

  The internet will immortalize your stupidity.

  See you next Tuesday.

  John Savitch

• Who is this John Savitch? And what is this “See you next Tuesday.” Is this some kind of threat? Should I call the FBI?

  Apparently, the “powers to be” are frightened that their “assets” (their franchisees) are talking together on the Internet about “encroachment” and “churning” and bad performance of the franchised business plan, etc.. because this will warn off new prospects.

• “John Savitch”:
  There aren’t a lot of restrictions on comments here other than no disclosure of personal contact in and no threatening language.
  What DO you mean by “See you next Tuesday.”?
  Please explain.
  It does sound creepy and vaguely threatening.
  Your comments are being held for review pending an explanation.
  If there’s no explanation, I’ll make it a ban from future commenting.

  ADMIN

• I am not John Savitch but I know what the “See You Next Tuesday” comment means & it is a way to say a nasty word for a female body part …. John Savitch should be ashamed of himself for using such a vulgar term & he should be banned from posting on this forum in my opinion.

• Savitch meant C U (N)ext (T)uesday.
  Trace the IP address. Send it to me and I will find him.
  And unless the comment at 1:47 is a cryptographer, that “may” also be “Savitch”

• Boy that’s the last time I try to help…no I am NOT Savitch as I stated. I was just trying to help Carol. I thought what he said was disgusting. I have posted here before because Liberty ripped me off as well. I hope you DO trace the REAL Savitch & get him to stop posting such vulgar things. Sheesh!!!!

• Admin –

  Had no idea the phrase was so insulting, rest assured it won’t happen again.

  Mea culpa

  John

• Moneypit/Unhappy Customer: Thanks for the explanation. FYI Moneypit is not Savitch, and the term has made the Urban Dictionary.

  John Savitch: You are claiming that you were using an incredibly vulgar term but didn’t know what it meant? That, I believe, would make you either a 4th grade boy or a complete moron. In your words “The internet will immortalize your stupidity.”

  The other option is that you insulted a grandmother in her 80s (sorry, Carol) with the most vulgar term possible because she dares to have an opposing opinion.

  Mea culpa?

  Go away.

• Gee Sean! Telling my age again! Guess I will have to forgive Savitch. Maybe a little “sex” would help me get my message out there. I’m thinking about writing a book entitled “What do the Joy of Sex and the Joy of Franchising have in common?” — but, of course, the answer is too obvious.

  http://thegreatfranchisingrobbery.blogspot.com

• Carol: Sorry for the vulgar comment by John Savitch. He has been shown the door.

  Maybe we can get the discussion back on topic now: The Liberty Tax franchise opportunity.

• Moneypit has it right, for the most part. My experience based on Moneypit’s five criteria:
  1. 100% correct-you need at least 3x start up fees.
  2. Area developers in my opinion, are the downfall of most franchisees. they are not familiar with tax industry and make money off of churning your franchise. so if you succeed or fail, they still make money. My AD was useless and only took a stand for something when it benefited him. He has another full time job and preached what you were doing wrong instead of helping. i followed the system, took their advice and then was thrown to the curb when you can’t bring in the number of returns they want because the AD does nothing for your area.
  3. A business background helps, but don’t rely on it thinking you can make it work with a strong business background. there are too many other forces as work where the business background won’t do the trick.
  4. do not plan on making any money the first two to three years in this business. one of the successful owners i knew of lost $200,000 before making his first dime back. I didn’t believe it until I lost about the same but didn’t have the funds to continue.
  5. Excellent visibility is key, but even with that, customers are more loyal to block and JH than you think. You know the old saying, nothing worthwhile is free. Those free and reduced price returns do nothing for you. if you are buying the franchise thinking the liberty name will bring people in, you are wrong.

  If you still want to buy a franchise, don’t buy multiple units up front!! Don’t believe the sales pitch that someone else is ready to buy…they are not. Even if they do, you can most likely buy it from them next year after they lose all their money. If you are successful, there will always be an opportunity to purchase another unit after you have made money with the first one. In my opinion, one of the biggest reasons for complete failure is purchasing multiple units up front. You pay high interest on the loans from corporate, and then have to give them back for nothing when you can’t afford it anymore to avoid litigation from corporate.

• The comments here from people who did not make it as Liberty franchisees are frankly over the top. I spent $70k on each of the offices I’ve started, and that was it. Why someone would expect to spend three times that is beyond me. People complaining about the royalty are particularly suspect. Jackson Hewitt charges more, and H&R Block charges its frachisees a whole lot more. Same for the ad fees. And this year, Liberty gave back half of the ad fees to the franchisees to spend on marketing materials. They paid for my yellow pages ad. They produce all the ad copy, graphics, etc.

  But none of this was hidden when I signed the contract. It was all right there. And what franchise business doesn’t charge royalties and advertising fees? And interest on notes you’ve signed? Didn’t you read what you were signing? Again, it’s all there in the contracts you sign. Good grief, at least complain about legitimate things. Otherwise you end up looking worse than you’re trying to make Liberty look. You didn’t know what the interest structure was on your note, but you wanted to do peoples’ taxes?

  Now, most people who fail as franchisees are people who are not suited to own their own business. And they could be identified up front, but Liberty will accept your money and sell you a territory if you can fog a mirror. They pretend theirs is an exclusive club and you’re lucky to be let in, but that’s a lot of hype. They have a large tax department to support franchisees, software development, technical support, operational support, marketing, etc. to the idea that most of the company is the legal department is ludicrous. I know their VP of legal and corporate counsel. It is not a big department, but yes, they are very willing and eager to litigate. You need to know that going in. That’s why it is important to talk to real franchisees, both current and former, successful and unsuccessful. I make good money as a Liberty franchisee, but I have had to learn what is real and what is BS. They leave me alone for the most part, which is all I want now that I understand the business.

  Yes, the franchised business is harder to sell than Liberty would lead you to believe. Yes, buy one and run it for a year before buying multiple units. Yes, 12% is a very high price to pay for money. If you have to use Liberty’s 12% money you probably should not be going into business. Most financially sound people don’t have to pay 12% to borrow money. Yes, many of their Area Developers are useless and you just want them to stay out of your way but they are your only conduit to the corporate office for support sometimes. You have to deal with that. And yes, if you are profitable at all, just a little bit, in your 2nd tax season you’ve done very well. If you have to have profit to sustain yourself in tax season #2 this is not a business for you. These things are true. But there’s a lot in this thread that is not true for most Liberty franchisees. A lot of it is failure looking for something to blame.

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• Joey Black’s comment above has been upgraded to a full post. A lot of points here to be discussed & debated:
  http://www.unhappyfranchisee.com/liberty-tax-services-unhappy-franchisees-need-a-reality-check/

• Can someone tell me if this is true?

  I heard that Liberty Tax has the right to revoke your franchise, keep your franchise fee and resell it to someone else if you do not achieve something like 1000 tax returns by your 3rd year in business?

  Additonally, I was told that the majority of Liberty Tax franchises that have been open for 3 years or longer do not do 1000 returns per year, making the majority in violation of the agreement.

  This sounds a bit far-fetched but maybe not. Anyone?