UnhappyFranchisee.com asked: Are LIBERTY TAX SERVICE Franchise Owners Happy? If you’re familiar
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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View Comments
John B. - How many Zees are going to close there stores to offset the increase of 400 that you speak of?
Cut back on the kool-aid.
Liberty would be DOWN in returns if it weren't for the 400 unfortunate souls that bought into the system this last year. This POS company is doomed for failure, they can't even pull off an IPO. Don't become one of the fools, see you in Vegas!!
Back to my original question on April 20th. I wanted to stop using liberty and do this myself. These seem to be the options:
1) take the liberty stuff down and come up with a new name by next tax season. That sounds very risky.
2) wait until may the contract expires next year and and hope they do not come after me over the non compete agreement. Does anyone know how well the noncompete can be enforced?
I want keep my current location but ditch the liberty nonsense. Is this possible?
I have made a small profit in my store however in my area I think I could be the only one. I was hoping that a franchise cannot protect the noncompete unless the business is profitable.
Thank you everyone for your advice.
Option 1 is not good at all, I'm sure they will come after you legally on that one.
Option 2 is more realistic, but legally, you are still in violation of your non-compete and they probably will come after you. It probably all depends on your AD, if they feel business is being taken away from their Liberty office, I'm sure they will pursue it. Best bet would be to wait out the 2 years and then open your office right across the street from your former Liberty location.
Keeping the store but ditching the Liberty stuff wont work either, that is almost the same as #1.
Could Liberty not renew a franchisee after 5th year for some lame reason? What would the franchisee recourse be? Could they then open as independent?
I know for employment purposes at least in my state you cannot hold someone to a non compete unless you were making well over the average salary. I was thinking you add to that I have all the franchise of the year awards and still am scrapping to make a profit what is a guy to do? I was told a third of us would be very successful don't I have a case that business model is a dud? Therefore legally can they keep me in a dead end business?
To guest27 you could only be so lucky. You recourse would be not paying 19 percent royalties. If you can stay in business for 5 years they are not letting you go.
Franchise owner,
You probably have a case, as we probably all do, unfortunately we are all to scared to "talk" to each other and Hewitt knows it, so nothing is done legally. Furthermore, after we all go broke who has the money to sue him? He knows that as well. The only thing that is certain, is Liberty is a BAD investment. What we all need to do is continue to keep warning potential franchisees about the company.
It sounds like they got you beat.