Are LIBERTY TAX SERVICE Franchise Owners Happy?

110 thoughts on “Are LIBERTY TAX SERVICE Franchise Owners Happy?”

• I suggest calling Liberty Tax Franchisees to see if they are profitable or not. I doubt many are with as rapid expansion as they are claiming. They are also not a public company so verifying their growth in returns split by online and storefront will not be public information.

• Get your facts straight. John Hewitt did NOT sell Jackson Hewitt as you stated. The board of directors replaced him as CEO when the company was within days of bankruptcy because of the poor financial decisions he made. After being replaced as CEO, Hewitt then resigned from the board and started his two year non-complete.

  If anyone measures franchisee turnover, my guess is that Liberty Tax would rank on the bottom. They churn and burn their franchisees. Since the company often finances them, this is a way they make money. They sell a franchise at X dollars, the franchisee spends their own money getting it through a tax season but doesn’t have enough cash to make their note payment to the franchisor or Hewitt himself. The franchisor then terminates their agreement and sells their unit to the next franchisee who pays them 2X.

  The Liberty franchise is cult like. Franchisees are not allowed to make negative comments about the brand, Hewitt, or any of his in crowd or they are deemed non-team players, so you will not likely find them posting comments here. Franchisor retailiation would likely result in a termination of their franchise.

• An Insider wrote Get your facts straight. John Hewitt did NOT sell Jackson Hewitt as you stated.

  Interesting. The copy on Entrepreneur’s franchise listing states ““In 1997, after selling Jackson Hewitt Inc.–the tax-preparation service company he founded 15 years earlier–John Hewitt…” If not supplied by the company, it was certainly approved by it.

  The Liberty Tax website isn’t as direct, but implies Hewitt sold Jackson Hewitt: “Under Hewitt’s tutelage, Jackson Hewitt grew from a local six-office operation to 1,345 offices when it sold in 1997 for $483,000,000. Hewitt established Liberty Tax Service in Canada in September of 1997 when he acquired a Canadian tax franchisor.”

  It’s still not completely flattering that he created a direct competitor with the mission of taking business away from the JH franchisees he established, is it?

  Herb Melonby wrote I suggest calling Liberty Tax Franchisees to see if they are profitable or not.
  If you know any Liberty Tax Franchisees or ex-franchisees, please invite them to comment here – pro or con. This way they may share their insights anonymously.

  IMHO, Liberty Tax must be ponying up big advertising bucks to have landed the #3 spot on the Entrepreneur 500. Insider insight into the contentment of these franchisees can help prospects make an informed decision.

  Offline comments can be submitted in confidence to unhappyfranchisee[at]gmail.com.

  Thanks for your participation.

• Here’s the correct history if you’d like the truth.

  http://www.answers.com/topic/jackson-hewitt-tax-service-inc

  John Hewitt was fired as CEO of Jackson Hewitt in 1995 and resigned as Chairman of the board three months later. Cendent Corp bought the company in late 97 or early 98 – two full years after Hewitt left.

  It’s not surprising to insiders that John Hewitt is claiming credit for the sale. When he left Jackson Hewitt was days from bankruptcy, but that fact doesn’t play well into Hewitt’s story. Fortunately for Jackson Hewitt franchisees and shareholders, talented people were able to turn the company around and they came out stronger as a result. Hopefully for Liberty shareholders,he learned some valuable lessons from his mistakes at Jackson Hewitt.

• On the advertising comment – remember Liberty franchisee pay into the ad fund, yet they get virtually no electronic media – IE TV or radio. The company chooses to spend their ad dollars for clowns to stand on the street instead. I would venture to guess that leaves lots of ad dollars in their ad budget for the company to use to sell franchises and promote the brand nationally. I’m sure their franchise agreement allows the company to use the ad dollars any way they see fit. Most franchise agreements do.

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• Is LIBERTY TAX SERVICE a Great Franchise?
  http://www.bizzia.com/franchisepick/is-liberty-tax-service-a-great-franchise/

• An Insider wrote:I would venture to guess that leaves lots of ad dollars in their ad budget for the company to use to sell franchises and promote the brand nationally. I’m sure their franchise agreement allows the company to use the ad dollars any way they see fit. Most franchise agreements do.

  Most franchise agreements allow franchisors to use the funds as they see fit to promote the brand and unit-level sales – but not directly for franchise sales, which is a corporate expense. I do not believe that using an ad fund for franchise sales ads would be legally defensible, and franchises we’ve worked with keep those funds clearly separated.

• Looks like An Insider had it right about John Hewitt:
  “At the end of the 1995 filing season, Jackson Hewitt, “battered” by the effect of the tax rule changes, according to CEO John Hewitt, was hanging on by a thread. The firm’s franchisees reportedly had not paid $3.5 million in fees to the company, which soon was nearing default on several loans from NationsBank. During the remainder of the year, 96 offices were closed. There was a management shakeup as well, and the firm began seeking a new CEO, with John Hewitt shifting his focus to long-term strategy from day-to-day operations. In June of 1996 newcomer Keith Alessi, who had most recently served as vice-chairman of supermarket chain Farm Fresh, Inc., was appointed to the top post. Three months later John Hewitt resigned from the company. Vowing to remain in the tax business, Hewitt later announced plans to form tax preparation services in Canada, England, and Australia, with the United States to follow when a two-year noncompete period was over.”
  Sept/Oct 1996 Hewitt resigned. It was December 1997 when HFS (Cendant) made the $480M purchase.

  So the Entrepreneur history is wrong.

  Still haven’t heard from franchisees as to whether they’re happy. Any out there?

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• I am a Liberty Tax Service Franchisee. Yes, I am VERY happy being a franchisee. I have hit some bumps in the road along the way, but it was caused by my inability to follow a given system.

  I have discovered that when I listen to proven suggestions and followed said suggestions AND believed in the system that I bought into, I became profitable.

  I am not sure who began this thread, or even to what purpose, but if it was a “prior” franchisee, be honest with yourself in that if you had done the proven techniques, then you too would have been “happy” and successful.

  And to touch on another topic on this thread: Is this about being a happy franchisee or just someone mad at the CEO of Liberty Tax Service?

  Thank you,

  Happy Franchisee in Roanoke, VA

• T Roberts wrote: I am not sure who began this thread, or even to what purpose… Is this about being a happy franchisee or just someone mad at the CEO of Liberty Tax Service?
  Thanks for your insight. To answer your question, the thread was started by me – a neutral 3rd party – with the intention of providing an unedited, unbiased forum for franchisees and ex-franchisees to share their experiences (especially for the benefit of prospective franchisees) both positive or negative.

  Industry insiders and savvy observers know that high rankings in the Entrepreneur 500 are meaningless – or worse (even grounds for suspicion). Many of the top franchises they list (also top advertisers) are also the most highly litigated. The UPS Store, Quiznos, Jan-Pro, Jani-King, Curves all enjoy high rankings yet get many negative comments from franchisees. Others are solid opportunities with happy, successful franchisees and dedicated franchisors.

  Which is Liberty Tax Service? Encourage fellow franchisees to share their experiences. If the comments are overwhelmingly positive this thread will only reinforce the positive image of the Liberty Tax Services franchise opportunity.

• Don’t know if they’re happy, but Are Liberty Tax Services franchisees honest?
  I just read http://hamptonroads.com/2009/07/liberty-tax-penalized-116m-case-over-its-advertising
  “A California court imposed $1.16 million of civil penalties on Liberty Tax Service, saying Liberty engaged in deceptive practices when promoting its refund anticipation loans to tax-return filers…”

  “In a decision filed June 15, Superior Court Judge Curtis E.A. Karnow said Liberty falsely portrayed its refund anticipation loans as tax refunds from the IRS. Liberty also failed to educate its staff about the legalities of advertising and failed to control its franchisees, he said.”

• If you are a franchisee in VA then you were getting my ad dollars. In my state no i repeat NO advertising from Liberty was EVER done. they spent the money on TV ads for your state.

  We had over 20 franchisees in our state and were told that we did not have enough to warrent tv and radio ads. We were in the top 5 rated offices in our state and we could NOT sell our franchisee. We walked away after years of pouring money into the LIberty approved marketing. We never made any money!!! We worked hard for years and followed their program explictly so don’t tell me it’s our fault we weren’t profitable. Especially when we were told to every year raise our prices until people complain and you lose business.

  Anyone who says they are happy with Liberty Tax Service is lying. They have become brainwashed into the Hewitt cult.

• In Response to the one that said they were “scammed”. I do not know which state you are talking about. I am in a rural area, Roanoke, VA. Look it up. We did not do TV, we did not do radio and any newspaper was by us.

  As for the monies you said were not spent on you, as I am sure you are aware that that money was delegated per area. I will not justify your ranting by going into detail, but just so you know: I am very happy as a franchisee. I am not brainwashed. I am a vet of the US Army, so I think I am able to think and act for myself. Military taught me that much.

  You are not happy. We get that. Don’t justify your dissatisfaction by stating that the rest of us do not know when we are happy or not.

  Any other issues?

  Tammy

• I was a Liberty franchisee for 4 years. I too followed there system distributing donuts and following there business to business techniques as instructed in there guerilla marketing training camps.

  I was considered successful, I had consistent 3-digit percentage growth every year and was always on there list as top 25 in growth and in net fees, however because I had borrowed money from Liberty I was left with no cash flow to effectively operate my business, that in essence set the stage for my bankruptcy.

  To Liberty I was a disgruntled franchisee who didn’t follow the system and was a poor manager, yet I have written proof that I was a great franchisee in good standing with Liberty until I started complaining about their financing practices and management practices; in particular John Hewitt and our Area Developer.

  Once I started complaining my funding was stopped and I was left out in the cold. I have been harrassed and intimitaded and bullied by Liberty and was sent a letter stating that if I ever mentioned I was a former Liberty franchisee they would sue me. In addition our Area Developer is going around stating and spreading untruths about why I am no longer a franchisee to my former peers.

  Liberty franchisees are not happy, I’ve spoken to plenty of them through conventions and trainings to know that. Even the successful ones (and I know plenty of them and I’m still in good terms with them) are unhappy with Liberty as well but would never say so because they are scared of the consequences.

  I have ended up bankrupt by Liberty. Now I see there ads on Careerbuilder.com saying to become a business owner with annual salary of $40,000 a year… That’s sooo not true. They don’t allow you take a salary John Hewitt says that owners salary come from profits only.

  If you are seriously considering getting into the Liberty system call every single one of those former franchisees on listed in the UFOC. Don’t just listen to the ones that have positive things to say, listen the ones that have negative things to say too and then from there I think you will be able to determine the truth, after all there are 3 sides to every story, his side, her side and the truth and somewhere inbetween his side and her side you will find the truth.

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• I am a former successful franchisee. We had over 50 other franchisees in my state. Not many are happy or profitable. It is true that the advertising dollars were spent in VA for the most part. No support was ever given to us. I can only speak for myself, but I am totally unhappy with Liberty Tax and the treatment they gave us ‘Z’s”. The happy day of my life was when my contract ended with them. Of course, they ended up suing me as well.This is a common thread about Liberty. Do you know what Liberty calls former franchisee’s? DEFEDANT!!! Don’t ever get involved with Liberty Tax.

• I am a current Liberty franchise owner in VA. I own 2 stores, one of the stores is very profitable and the other is not (just opened). I also have 2 other small businesses and I am a highly successful professional. I would suggest for anyone looking at opening a franchise, that you perform a due diligence and work for a current owner in the business you want to purchase. During by vetting period, I spoke to happy, unhappy, disgruntled, successful, and unsuccessful franchise owners before opening a liberty tax. I know many franchise owners in the Liberty System and outside of the Liberty system. In any system you will have people who are happy and unhappy. Unfortunately, in any business the happiness level is dictated by failure or success. I think the previous bankrupt poster should have made sure they had more capital. If you can’t make it through 1 year without borrowing a ton of money, then you should not be in business. One of the main reasons most businesses fail is under-capitalization and high leverage rates. Before opening any business, always make sure you have enough working capital once the business is open. To answer the question, am I happy “Yes, I am.” Is the system perfect, no but it has improved every year.

• What an education! I have been doing some research into this system and have been amazed at the methods of deception these people stoop to. I talked to a former franchisee who is in litigation with Liberty and she told me a very sordid tale of how Liberty preys on those who are unemployed, minorities or uninitiated into the tax business. They have also sold a bill of goods to some accountants saying that this is a way to expand your business. She also referred me to a few former franchisees in the northeast that were downright militant about the practices of Liberty Tax.

  Of the 6 ex franchisees I talked to, all left due to Liberty’s interest in soaking them out of cash. I also talked to 8 current franchisees and they seem to be interested in leaving ASAP. They also alluded to a case that is currently going to the court system now that some of them have contributed to and are awaiting its outcome from an appeal. They also said that the franchise agreement is very one sided and that any legal issues need to be resolved by a particular federal court in VA with no rights to a trial by jury. I’m still trying to find out the details of that case!

  As a result, I’m not even going to consider this group as a viable way to make money. My advice: Do research and you will find out the true colors of this franchise!

• Happy and profitable.

  I have seen a number of franchisees who claim to have followed the system that don’t. It is the potential franchisee’s responsibility to understand the system they are buying into. I don’t know of any franchise or business out there that does not have risks which need to be evaluated.
  As far as the marketing money goes, I get to personally decide how to spend a portion of it, in addition to the part that gets spend in my local area. I don’t have a problem if some of it is spent to recruit more franchisees. As the liberty name and brand grows, so does my business.
  I have always had great support from Liberty. Liberty can make more money off of a succesful franchisee than trying to re-sell the territory of a failed franchisee.
  Am I brainwashed? Only if that money sitting in my bank account isn’t real.
  Happy franchisee – Salt Lake City

• Tammy! You are a Vet of the Service and I address my comments to you.

  Please try to understand that franchisors are subsidized by dishonest regulation and permitted to sell their franchises to the public without disclosing to the new buyer how many of their “founding franchisees have failed” and how many of their franchisees are not actually profitable.

  This is a unique situation in a commercial sense because always the seller, who profits, has the duty under the law to disclose all material facts to the buyer. The failure of government to mandate that franchisors disclose the UNIT financial performance statistics of their system to new buyers means that many invest without knowing the actual odds of failure and/or profitability of the units within the franchise systems from the historical standpoint before they sign an often malicious franchise agreement.

  For example! If 60% of founding franchisees survive to breakeven or profits and 40% fail, but a certain percentage, , perhaps, can be churned (in a firesale) to a new franchisee, the franchisor survives quite nicely, Even if the franchisor can’t churn and turn units, he still survives because he, of course, doesn’t have any of his capital invested in the franchise unit that fails.

  There will always be failures, of course, even in the best of systems but those systems with high failure rates of “founding” franchisees and a history of low profitability (unknown to new buyers) are taking advantage of the ineffective Federal Regulation that permits them to churn out of view of the public who buys their franchise.

  This ineffective and deceptive regulation of franchising does perpetuate franchising in the economy and you, who are a winner, and a former member of the Armed Forces feel that the comments of the losers are hurting your asset —but this isn’t true, –YET! But, remember that the losers feel that they were defrauded because they weren’t provided the odds of success or failure by the seller of the franchise and were led to believe that there was little risk and great opportunity for a job and profits, etc…

  http://thegreatfranchisingrobbery.blogspot.com

• I’ve been a Liberty franchisee for nine years. I have owned as many as four territories but have scaled back to two that I can comfortably handle. I am profitable. It has not been perfect, but it has been acceptable. The thing I dislike the most is that the company will sell a franchise to people just because they can fog a mirror, and anyone with a sliver of business sense can see that some of them are completely unsuited to be self-employed. I’d personally rather see the company exclude such people from consideration, but for obvious reason they allow them to give it a shot. Each one who won’t market or won’t leave their office to promote their business or won’t follow Liberty’s advice inevitably blame Liberty when they leave the system. I’ve never once heard a single individual take personal responsibility and say they had any role in their own failure. Amazing how consistent that is. They just bad-mouth John Hewitt (whom I don’t personally like all that much, but who I respect) and the company. In my view, that speaks volumes more about them than it does about Hewitt or the company.

  I’m quite happy with the advertising dollars. Liberty bought radio time and a yellow pages ad for my territories. They also gave me a budget of several thousand dollars to spend on marketing materials. They produce a lot of marketing material from their marketing department that I use. I’m not sure what all the whining is about in that regard.

  As far as litigation, how many cases has the company lost. Every disgruntled former franchisee can sue, but how many succeed in proving all the deception and fraud the alledge? I had the opportunity to meet Hewitt, all the corporate officers, and many of the lower level employees of the company before I bought. I also had the name and phone number of every franchisee and former franchisee before I bought my first territory. Nothing was hidden from me, and I spoke to a vast number of people. But yes, many people simply cannot be self-employed. They don’t have the temperment or disposition or intelligence for it. And yes, Liberty will sell them a franchise. So you need to know yourself, because nobody can know you as well as you know yourself. And you have to be honest with yourself.

  And, if someone believes Entrepreneur is corrupt and can be bought off, well then I think they should take that up with Entrepreneur.

• Some interesting observations. Franchises have a higher success rate than initial start ups. Fewer fail in the first 5 years. The reason for their success is that they provide operators with proven successful systems and procedures. The best have the most comprehensive systems. They work, but someone still has to work the systems and processes. And for many buyers the most challenging is the process that attracts customers and converts them to revenue. For others the challenge is that they want to reinvent the wheel. They were really not suited to being franchisees in the first place.

  I have evaluated several of the major franchises and there seem to be disgruntled franchisees and happy franchisees with all of them. And the reasons seem to be much the same. In general I am impressed, and in fact use franchises as an example of the benefit of developing and documenting effective systems for businesses at my free information site dealing with selling a business.

• Martin:
  You are perpetuating oft-repeated bogus franchise statistics (in other words, lies) that were exposed as such more than 10 years ago. The IFA has instructed their members not to cite this 5% statistic because it has no basis in fact. Several studies show that franchises may have a higher failure rate across the board, and an SBA study showed that their franchise loan defaults were statistically higher in incidence and significantly higher in default amount than independent start-ups.
  Read: Lies, Damn Lies & Franchise Statistics at franbest.com

  The significance of these studies is not that franchises are bad, just that you can’t make a blanket statement that franchises are good. You need to evaluate the cost, benefits and risk on an individual basis. There are good franchises, bad franchises and grab your checkbook and run like hell franchises.

• I have been reading this stuff on this blog for awhile now. I just couldn’t believe that so many people were having difficulty with this franchise. As a franchisee, I can understand the multiple frustrations that they must be going through, but, until recently, I was not very sympathetic. That was until Liberty Tax decided to sue me when I left them at the end of my contract. I could not believe what was being described by others was happening to me.

  Needless to say, what a lot of franchisees are saying about the predatory practices of Liberty Tax and the outrageous lies they hand to us franchisees, are absolutely true! Especially the part about the name Liberty gives to ex franchisees: DEFENDANT.

  A fair warning to anyone who is considering this franchise is to Run Away as fast as you can in the opposite direction! They offer no support, no advertising and no knowledge of taxes! their business model is to rip off the franchisee and once the franchisee is bled, go on to the next unsuspecting victim. You would think there would be a shred of consumer protection out there, which there is not!

  STAY AWAY FROM LIBERTY TAX! THEY TAKE YOUR MONEY AND RUN!

• Liberty does have an excessive amount of litigation with its franchisees. They also have a lot of turnover of franchisees. A lot of the criticisms I see don’t strike me as valid based on my personal experience, but if I was going to move to another area I would not buy a franchise to start a new tax buisiness. But that’s mainly because now I know the industry and the business. After the first couple of years Liberty’s help diminishes in value until the point where they get in your way more than they help. That’s where I am now. Also, it took me two years from the piont where I stopped expanding before I got to the point where I made the first dollar of profit. Most people can’t wait that long.

  Jackson Hewitt franchisees have an association that helps represent their interests with their franchiser. Liberty franchisees would benefit from organizing as well, but it will probably be a while before they realize that. The company has a lot of tools in its arsenal to discourage that, including a huge legal budget.

• I am interested in Liberty as a good friend of mine is a happy owner. However, most of the comments here mention law suits.

  Why is Liberty suing the former owners? What is specificaly cited in the case?

  As for the other comments does anyone have legitiment sources. For example, court rulings including case number.

  Thank you

• Liberty will sue franchisees if they don’t pay their royalties. They will sue franchisees if they use Liberty marks in a way that gets Liberty sued by H&R Block. Liberty will sue if they terminate a franchise agreement and the former franchisee continues doing business under their name. Liberty will countersue if a franchiee sues them.

  All of their litigation is listed in their franchise disclosure document. A summary of the claims of each side is also listed.

• I am a former franchise owner too. I spent thousands to have management consultants and lawyers look at this company before I moved forward. They told me not to do it, but I went ahead anyway. My mistake led me to my family’s financial demise.

  Anyway, I contacted many franchise owners before I joined the “liberty family”. They didn’t tell me anything until after I signed the paperwork (BECAUSE THEY ARE SCARED TO GET SUED BY LIBERTY – THEY MAKE THEM SIGN A NON-DISCLOSURE) Liberty area developers and their corporate office will make you project how much you will make in a year, get your hopes up, work towards that, and in the process dig yourself a financial grave.

  They even have this stupid formula – if you spend this amount of money of marketing – (an idiot that buys donuts or candy for business owners in your neighborhood, etc. according to their marketing plan)… you should expect to make x amount of dollars.. yeah right!

  Recession proof my a** – Liberty will burn you to the ground – guaranteed! I think they make more off their suckered franchisees than their royalties.

• Let me get this straight. You paid someone to tell you what to do, they said not to do it but you did it anyway? Then, you paid Liberty for a franchise even after going to Virginia Beach and having them explain how they market (yes, buying donuts and all the other stuff you ridicule) and you bought even though you thought their marketing plan is stupid. So obviously you didn’t do it. And now you are a former franchisee, and its all their fault?

  And we are supposed to believe all this is true? Come on, I wasn’t born yesterday. So what’s your real beef with Liberty?

• “Let me get this straight. You paid someone to tell you what to do, they said not to do it but you did it anyway? Then, you paid Liberty for a franchise even after going to Virginia Beach and having them explain how they market (yes, buying donuts and all the other stuff you ridicule) and you bought even though you thought their marketing plan is stupid. So obviously you didn’t do it. And now you are a former franchisee, and its all their fault?

  And we are supposed to believe all this is true?”

  Unfortunately, it probably is true. There ain’t no cure for stupid.

  They say a fool and his money are soon parted. Maybe Liberty figgered if they didn’t take Sean’s money, someone else will.

• Liberty Tax – Best Place to Work 2009
  (http://www.libertytax.com/best-places-to-work-2009.html)

  I’m curious to know how they got this title.
  The article states “Number of local employees 279 full-time; 11 part-time; 138 seasonal.” That adds up to 428 employees.

  How is it possible that Liberty Tax got the #1 title to be the best in the Hampton Roads (Hampton Roads = Virginia Beach area), if they have a total of 428 corporate employees?
  Even if every single one of the employees were to vote, Liberty Tax would have received only 428 votes, which does not sound like a whole lot of votes to reach #1.

  So I ask the following questions:
  How were the votes balloted and counted?
  How many total votes did they get?

  From what I read in this thread, Franchises are not happy with Liberty Tax. How about corporate employees, are they happy?
  The article lists the following corporate employee benefits, but what’s the truth?

  Benefits include

  1. Full-time employees are granted stock options each year based on annual performance. Eighty percent of the company’s employees own stock.
  – The company is private; hence the employees cannot exercise their stock. The employees call their stock options “the golden handcuffs”. Most corporate employees state that the only reason they hang around is to wait for the company to go public so that they can sell their stock, and leave the hell hole.

  2. Corporate employees receive free tax preparation at local Liberty offices.
  – That is true, but what percentage of the corporate employees actually get their taxes prepared by Liberty franchises? Very few! Most corporate employees file their taxes with HR Block, Jackson Hewitt, or Turbo Tax. The reason being is that they DO NOT trust the Liberty Tax systems. As to those corporate employees that do file their taxes with Liberty Tax, they have no clear understanding as to how the back end technology works.

  3. Flexible scheduling and commuting are available for all employees on a departmental basis and those looking for childcare options are eligible for a flexible spending account for those expenses.
  – Flexible scheduling? If you consider “flexible” to be expected to be at the office 9am to 5pm and once they head home, they’re expected to work from home for the rest of the evening. The schedule is flexible if you’re a slave.
  – Childcare options? That is non-existent!

  Here are some insider “Fun Facts”

  – Corporate employees are underpaid and overworked!

  – Corporate built a new multi-million dollar building in 2009; however, corporate didn’t give its employees any raises or bonuses in 2009 claiming that the economy is in a recession. YET, Liberty Tax states that they had a 22% increase in revenue in 2009 compared to 2008! (http://www.franchising.com/pressreleases/11749/)

  – Liberty Tax has introduced in 2007 an online e-file system called “eSmart Tax”. The thing that is not widely known about eSmart Tax is that it’s a dinosaur system – originally built in 2001, and patched to work with current technology. eSmart Tax is not only full of bugs, but it’s unreliable. Liberty Tax was able to conduct less than1% of its business through smart Tax last year (tax year 2008).

  The bottom line is that Liberty Tax is bad news for franchises as well as corporate employees.

• Curved Logic, do you get your jollies flitting from article to article, mocking ex-franchise owners who’ve lost everything?

• I take no pleasure in exposing hypocrisy, championing personal responsibility and enlightening the masses. It’s tough, lonely work.

  I do, however, enjoy flitting on occasion.

• Shame on me! I believed in the Liberty system and got screwed. I’m guilty of being naive about the busines. I’m guilty about being duped by a group of hucksters. Comments about buyer beware are valid. Too bad when you are unemployed or otherwise down on your luck, people like this organization prey on people like us.

  Yep, I was stupid to even consider working with these people. I was easily influenced by their slick presentations. I was out maneuvered by John Hewitt. Companies like Liberty are out there to get the last cent you have, whether it is in your IRA or sitting in equity of your home. Their great marketing plan was not even revealed to me until I paid them their territory fee. Then I sat in class to see their version of marketing. I guess I could have spent $14.95 to buy Levinson’s book on guerilla marketing than to spend the tens of thousands that I did for Liberty to read to me his book.

  As I confessed to being stupid in signing on for this franchise opportunity, stupid is not an exclusive talent for a few. It can happen to anyone. Please learn from my sorry tale of Liberty lawyers and lies!

  A good warning here is to anyone else looking into this opportunity is to clear away from Liberty. You’ll be sorry if you don’t.

• Has someone owned H&R Block franchise? If so, please let me know how it is. I am seriously considering owning H&R Block franchise, and would really like fellow entrepreneurs’ opinions…

  Thank you so much.

• SerenaBell: Are you thinking of buying one of the 500 Corporate Offices that H&R Block intended to sell off as franchises? They have indicated in their announcement that these corporate offices are not unprofitable. Or, are you starting a brand new franchise, or are you buying a “used” H&R Block from another franchisee? Do an Internet Search to see how many “used” offices are for sale in your State.

  H&R Block is, of course, the blue chip in Tax Preparation, etc.. and has been around a long time — but are they going to franchise now because it is a cheaper and less risky way for them to compete with the other tax preparation franchisors? Additionally! remember that the software available on the Internet is a growing competitor, as well, and more and more people are using the Internet and software to prepare their taxes.

  I’m sure those with actual expertise in this area will come in and talk to you!

  Let the Buyer Beware When Buying Any Franchise! Do your homework!

  http://thegreatfranchisingrobbery.blogspot.com/ Read Article: Disadvantage of Buying a New Franchise for Prospective Buyer” in a Google Search and read Ten Good Reasons Not to Buy a Franchise by Nolo in a Google Search

• Dear Carol,
  Thank you for your response. I was actually looking into buying one of the “existing” franchises around Denver, CO area. I don’t know if this is a smart move – but, I was thinking if I buy an already “existing” H&R Block branch, then I might be able to save some initial start-up costs such as finding the location, buying the furniture, training new employees etc? Based on my research, it seems like it would be easier – if you buy an “existing H&R Block brand name” with already established customers…then, I just need to buy and operate the branch?

  Reading about all the issues about Liberty Tax made me very worried. I was actually thinking of buying Liberty Tax franchise first, but thank god, I didn’t. I am know looking into H&R Block…and just wondering if any of the issues that franchisees had with Liberty Tax may be issue with H&R Block as well. Any advice?

  On thing you pointe out, for sure is very important – the Internet and software tax preparation tools! This is definitely one of the most important things to consider. But, on the other hand, I feel like taxes are going to get even more complicated and I feel like people will be needing professional services. Plus, for many people, it might be worth paying a few hundred dollars to save future headache (in case they get auditied or something like that). I am not sure. There is a lot to think about. All the problems with Liberty Tax is making me think twice about H&R Block….Any advice or word of wisdom?

  Sincerely,

  SerenaBell

• Just be careful, Serena! If you decide to buy, please spend the money to have a CPA look over all of the disclosure of the current owner and reconcile the “books” of the current owner to verify what you have been told in terms of overhead and profits.

  If you are buying from a broker, don’t believe that the broker might not fudge a little to make the sale.

  Please read “It Ain’t Fraud if you know Better” in a Google Search to understand that once you buy the “used” franchise and sign on the bottom line, you will live with the contract you sign and you will have no legal recourse if misrepresentations were made in the sales process.

  Hopefully, some of the Liberty Tax franchisees and ex-franchisees will talk to you and give you their opinion because they learned the hard way and would be able to identify whether or not an H&R Block franchise would escape the problems they faced with Liberty.

  Good luck to you, Serena Bell!

• Serena Bell,

  Good for you that you are not jumping into this eyes closed! Remember, Liberty’s Owner, John Hewitt, once worked for H&R as well as Jackson Hewitt. A pattern here is that HR has a great name presence, but the individual locations might be dogs.

  My recommendation, for its value, is to start your own tax prep business: The Tax software companies are more than willing to help you out. A caveat is that you really have to know the business in that you are able to prepare a tax return yourself.

  As for research, Carol is absolutely correct in that it is a very good idea to talk to former franchisees so you know both sides of the story. Good Luck!

• Stay away from franchises, no matter how good they appear to be.

• Thank you so much for your responses! Very helpful! I will make sure to think twice about this before jumping into any commitments! Good to know…
  Thank you again for everyone who responded :)

• Oh, any recommendation on how to find and meet franchise owners in my area?

• Serena,

  Where are you? You can look under IRS electronic filing providers on the IRS Website.

• Serena:
  The Franchise Disclosure Document (FDD) every franchisor must furnish to prospective franchisees contains contact information for every franchisee in the system (and those who recently left the system). If you get an FDD from each of the franchisors you can use the list to contact owners and ex-owners in your area.

• Serena! Remember that the franchisees you contact have no legal duty to open their books to you or to show you their P&L statements. Many do not want to knock their own asset and want to keep the selling prices as high as possible. There is a conflict of interest in trying to do your due diligence with the franchisees listed in Item 20 the FDD but if the franchisor doesn’t make an earnings claim in his FDD, it is against the law of the FTC Rule for them to make an earnings claim outside of the written FDD and the Contract. Kind of a Catch 22!

  If you buy this franchise based on false representations made to you by current and ex-franchisees, who have no legal duty to you, remember that this is how the franchisor protects himself from making ANY representations to the buyer of the franchise in terms of success and profits in a sale to an original owner or in a resale. In order to buy this franchise, both you and the seller will have to sign a release of liability to the franchisor in order for the franchisor to approve the sale. If things were not as they were represented to you, you will have no legal recourse

  Do your homework! Let the buyer beware! Good Luck!

  Carol

• Good to know. Thank you so much for all of your comments. It is very helpful.

  I am wondering – those of you who bought/owned Liberty Tax or any other franchises, have you ‘personally’ bought/owned/operated the business or have you set it up as a separate entity such as LLC or LP and operated the franchise through the entity to protect your personal assets are protected?

  I am very shocked to read all of your comments and find out how Liberty Tax ripped off so many people. It saddens me to learn that they can go after your personal assets and retirement. Is there a way to protect yourself from this? Why are they not legally responsible to provide an “audited” financial and P&L statements to the franchise buyers? It almost seems impossible to do “due diligence” as a franchise buyer if their earnings are unaudited and misrepresented. If you don’t have inside information, experience and knowledge, even with the professional advisors’ help, how are you suppose to know? Why is it not required for them to provide us audited/fairly presented financial statement?