LIBERTY TAX SERVICE Franchise Complaints

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

• Frustrated and Disgusted:

  In New Jersey the name “Liberty Tax Services” has very little brand awareness. When I was looking for a retail location. A couple of landlords told me they wouldn’t rent to me because they didn’t see the business succeeding. One, a retired CPA, told me I didn’t buy a brand I was trying to create one. Unfortunately I had alread bought the franchise.

  In the area I was in my market was more middle class then lower class. Even though I had a franchise It was basically like starting from scratch because the name “Liberty Tax Service” had no more brand recognition then my own name. In the 3 years I was at my second location (first one picked by the AD was a flop), I continued to grow at a 15% rate with a better then 60% retention rate. My average net fee in my final year was 180.00 per return. But because I was a Liberty franchise I had a minium royalty fee to pay each season. I did pay the $5000.00 minimum the first season but after that it jumped to $8000 the second season and $11,000 for the third and subsequent seasons. I eventually owed Liberty with interest around $28000. After going back and forth with Liberty I was eventually offered a mutual termination agreement and was able to avoid bankruptcy. Looking back I realize that if I had invested in myself instead of Liberty I would have been able to continue to grow the business and still be working for myself.

  Liberty/AD has yet to sell the territory. Since my location was improving year over year and I was the one bearing all the cost and was paying my royalty on the returns that I did. Wouldn’t it have made sense to tailor your franchise model to allow your franchisee’s succeed. It would be a win win situation. Of course I’m assuming that their in the tax prep business not the business of selling franchises.

  For people posting it would be nice if when you give your numbers that you provide as much detail as possible and your store location. Obviously for some with negative comments this won’t be possible and for the once with positive comments this won’t be likely.

• How much does Liberty charge to transfer the territory from one owner to other?
  How does the process work?
  If the new owner does not have all money upfront, how do we structure the deal to sfae guard future payments?
  Your help will be invaluable.

• I don’t think saying 19% is true of your royalty payments because you do get at least 1.5% back to spend as you wish on marketing/supply materials in December when you need it most. But I see your point. I guess you are questioning me on $2k. The office I referred to made btwn 50-60k cleared profit for sure this past tax season. I am guestimating addl ext returns but should be fairly close and I have a pretty good idea of my expected bank rebate amount but is a little bit of a guestimate I guess.

  As far as my insurance goes, I have several misc fees I include in the 5k misc
  I have 1mil coverage on contents/if I’m sued etc. I do not carry E&O insurance. I may carry this in the future and have multiple offices and a quote I received was 1,000-1,2000 for a decent policy for all. Again not alot of money but it does add up I suppose. As far as my staff being competent, I have not had much trouble finding competent employees for the pay range mentioned. Also, my office manager primarily processes all the returns and she is very competent to not make mistakes regarding tax returns.

  Again, I have not filed my business tax return or anything and will not until March of next year so I cannot give an exact to the penny answer of exact profit.

  But I know how much cash or additional cash I put in the bank this past tax season after all was said and done and since I have made 98% of rev and know with fair certainty what my exp are for rest of year I can easily say that office cleared 50-60k and will be very close to th 55k I quoted earlier. I’m confident I did not spend but maybe 3000 of the 5k misc. Also since you are trying to get to the penny, I have rented out my space a few saturdays since tax season and have netted about 500-600 in additional income so far and may end up with another 500 or so by the end of the year. I am really not even counting little stuff like this, but if you see the need to clarify the 2k royalty or my million liability coverage in which I pay 300/yr on which is already included in misc exp. I guess I will mention it. All my offices combined this year cleared 110k profit. I don’t owe Liberty one cent either. I plan on making 150k+ next year. I’m not saying any of this to boast or brag as I always try to remain humble.

  My first year I worked my tail off and not counting any pay for myself, I maybe cleared 10k at best. I wasted alot on marketing and payroll and learned alot from that and have operated more efficiently ever since coupled with my return count and revenue figures always increasing.

  To answer James question Liberty charges 5k to transfer the seller typically pays this not the buyer. You can try owner financing if not you will need to borrow from Liberty they most likely will loan you money at 12% interest which is very high right now. IF you default they can take your territory back. I would try and tap a home equity line or see if you can get a small bus loan with better terms or just wait until you have more $$$ before you start.

• Ed:

  Could you tell us where your store is located and the age of the store? Based on your average net fee your doing around 500 returns and I agree that with that volumne and your average net fee you can make money but most franchisee’s are not going to do 500 in their first year or have an average net fee that high.

  Since Liberty uses the same business model as Jackson Hewitt it would be safe to say that the resultes for a 1st year Liberty store would be in-line with the results of a 1st year Jackson Hewitt store. The 2010 financials for Jackson Hewitt provide the following breakdown:

  1st year store – average number of returns 166
  2nd year store – average number of returns 234
  3rd year store – average number of returns 253
  4th year store – average number of returns 277
  5th year store – average number of returns 297
  6th year store – average number of returns 334
  7th year store – average number of returns 482

  Last year Jackson Hewitt’s average net fee for franchised stores was $208.00.

  I’m saying that Liberty’s numbers are on a par with Jackson Hewitt even though Liberty does no national advertising and has less name brand recognition then Jackson Hewitt. So for anyone looking to buy a franchise you can use these numbers as a gauge for what your store will do. Some will do more and some will do less but on average your looking a 166 returns and if your lucky that will be paid returns. Don’t forget Liberty expects you to give away a 100 free returns.

• My stores are loacted in NC.

  Jackson Hewitt numbers are a little understated. They are factoring in Walmart Kiosks. It is rare to have one of these kiosks ever do over 100 returns regardless of age. Avg will be around 50 returns. Liberty is not publicly traded and they don’t provide numbers like this in annual report, but they do provide accurate numbers like this (up to 5 years I think) in FDD. If I remember correctly Liberty was ahead by around 100 returns or so on Jackson Hewitt #’s every year and will almost always do more than any JH office yr to yr comparison.

  I agree it is hard to make it first year. If you do 350 returns first yr you should stick with it. 350 should def get you to break even your first yr (you got to watch payroll) assuming about 50 free returns. I would say you need to be doing 800+ returns before you do 100 free.

  I occasionally monitor this just to see what everyone is typing. I’m not really looking to get into a hot debate as to wether this is a good idea or not. In NC Liberty has a very strong brand we are 4th I think in total offices per state but maybe 13th in pop so you can see we are ahead of the curve. I’m sure this helps.

  Some will make it some will not that’s for sure. I am relatively young franchisee in the system but have already seen different people come and go. I rarely ever comment but when I saw the post of the guy who did 843 returns and was losing money, that is just almost impossible. Like I said earlier give me that many returns and I would have that office making around 100k operating profit. No one on here looking at this should think you need to do that many to make a decent profit. Once you reach 500+ you should start to see some decent income flowing in. 500+ will not make you rich if you only have 1 office but will make you enough money that it’s worth your time. 800+ should start to make you rich if you can maintain that season after season.

  Break even should be no more than 300 returns.

• I will make one more quick comment to possibly hep out a newbie. Honestly I like to plan for worse case scenario when opening new office. Plan to do only 300 returns Liberty will tell you to budget for 500-700 but this rarely happens.

  Watch your payroll. from feb 15-april10 you will only need 1 person in the office at any given time. Also, you may need to close at 7 instead of 9 to save even more payroll. Also, don’t buy exp desks and chairs. Here in NC, you can go to surplus sites and get desks for $10-$30 that actuall look pretty nice and match. You will need no more than 4 prep desks. I get 3 computers and a processor and count that as my 4th comp. if doing 350 returns you will never have 4 going at one time becasue you won’t have that many staff in office at one time but if comp goes down you do have a backup. maybe 1 or 2 days out of the entire tax season you may have 3 going at one time. chairs cost $10 a piece prep chairs and waiting area chairs.

  Location is the most important thing pay the extra rent to get in walmart or other busy shopping center. You will not make it if you don.t PERIOD

  second most important is visibility. Don’t skimp on signs etc. Wavers are very important. During peak 2 weeks you need wavers out every day 8hrs a day.

  asking for referrals is third most important

  finally marketing is 4th most important

  This is all just my opinion. I will try to check this today and answer any responses but may not check back for a while after that.

• Ed – Be careful on your generalizations. There are many different types of territories and your generalizations don’t hold true to nearly all of them. Surprisingly “employee competence and professionlism and expertise” is not listed as any of your most important items. Seeing that the tax business is a customer service business, this surprises me. I’ve known Zees that have succeeded without A locations. The fact that you say you cannot succeed “PERIOD” without a top tier location is also a generalization.

• When rating important things I was rating for getting return count (customers in the door only) If you don’t have customers nothing else matters.

  I assumed you would hire competent people that could prepare a return. If you have bad employees or bad ownership/managerial skills or not enough operating money in January to function properly then no reason to even try it in my opinion. I’m sure it is possible to make it with subpar location. I was really just tryng to drvie home how important I think that is. I would prob not open an office personally (esp my first) if I didn’t have a decent location to open.

  I also quantified all of my remarks as “this is my opinion only” So someone else may view marketing as most important. I am just sharing what works for me. I’m sure they may not work for all. If you are A+ people person (I am not) you may move marketing up to top of the list and talk to 300 people a day and regardless of location do well.

  That is definitely not me. I (ashamed to say) do very little marketing, but do concentrate on good locations and good visibilty. This works for me.

• I recently received an email solicitation from Franchise.com on behalf of Liberty Tax promoting No Franchise Fee.

  The email linked back to a page that was all about how Liberty Tax wanted dreamers as franchisees. Please take a look at this page and share your thoughts.

  LIBERTY TAX: Are Liberty Tax Franchise Owners Living Their Dreams?

  Is this just harmless marketing spin? Or is Liberty’s targeting of those who will be motivated by ego and emotion part of the problem? Are they simply recruiting future commenters for UnhappyFranchisee.com with this approach?

• Ed – Don’t you have to do at least 100 free returns in each office to get the bank rebate? Did you meet those requirements?

• I see why your name is Questions now lol.

  The qualification is 100 per territory and yes I will be getting bank rebates to answer your question. Even if I didn’t qualify (which I do) my profit would drop a few thousand dollars and would still be above 50k in the situation I gave.

  I only gave my numbers as accuratley and detailed as I could. And while I did try to give as much detail as possible so anyone could easily follow along, I really think you are missing the bigger picture I am trying to communicate with this.

  Tough crowd on this site for sure. I usually check in once a week or so and read all the posts just to see what is being said. I rarely ever respond because I know no matter what you say to some people they will always believe the sky is falling.

  I can say with 100% assurance at least in my neck of the woods if you do over 800 returns (unless you are charging $50/return) you should make a decent profit. I can’t imagine this not holding true virtually everywhere in the country but can’t speak from experience on this. and like I said earlier, I guess even if you do 2000 returns if you try hard enough you can lose money.

  My basic point is 300 returns break even 500 returns you start to make a noticeable amount of $$$, 800+ returns you are making (or at least shoudl be) a fairly substantial profit with respect to your investment year over year.

  Can you change this scenario or that expense and gain or lose a couple of thousand sure but the big picture doesn’t change.

• AS of today liberty keeps bending me over. They denied me my bank rebate. had a 0% delinquency and did 212 ERC. they said one of the items was not in in time. Bastards. Just makes my loss bigger. bullshit tactics to milk the zees to bankruptcy bunch of assholes thats all i can say. we are only pee ons that enrich hewitt.

• I OBVIOUSLY DID NOT GET THE REFUND EITHER

  If your service bank is Republic Bank, then Liberty has great news for you! We are happy to announce that we will be paying rebates for funded ERCs starting the week of August 1, 2011. Rebates will be sent ACH/Direct Deposit to the bank account associated with your lowest active office. In order to be eligible for a rebate, offices must be located in a state that permits a Transmitter Fee to be charged.

  You will receive an email from Corporate by August 1, 2011 indicating your eligibility to receive a rebate. Rebate eligibility is based on your delinquency rate and compliance with the following Operational Standards:

  1. Submitted Fiscal 2012 Budget, 2011 P&L, and 2012 Action Plan

  2. Completed at least 100 Free Tax Returns per Active Territory and/or at least 200 Free Tax Returns per New Office

  3. Locked GRRs

  4. Registered your Tax School

  5. Compliant with Internal Audit

  Offices with a delinquency rate of 1.75% or less will receive $10 per funded ERC. Delinquency rates are based on the dollar amount of outstanding loans divided by the dollar amount of approved loans calculated as of 6/30/2011.

• Ed,

  Having reread your posts your assessment of your profit for one (where you didn’t say “both my offices’ profits were – you said my

  My avg net fee in that office was $220-$230 and I did just under 50 free returns counting unpaids.

  QUOTE: $115,000 net (divided by your ANF you stated at $230 = EXACTLY 500 paid returns – so lets assume you’re provided an estimate or used a good calculator).

  $15,000 total payroll for that office including all preparers and wavers
  – based on Liberty’s required opening of 9-9 + Sat 9-5 + Sun 12-5 = 73 hours open per week.
  Your 1% commission on $115,000 = $1,150 of that $15,000 is bonus – leaving $13,850
  This payroll amount divided by an average hourly rate of $9 as stated = 1538 hours over 14 weeks of tax season = 1 .5 people per hour employed.

  So did you use half a waver, a qurter of a receptionist and who the heck did your marketing etc….

  Something fishy here….

• 50 free returns doesn’t get you any rebates. You need 100.

• Bill,

  Thanks for the Jackson Hewitt info. Wondered about averages for their stores.

  I think the numbers are a realistic expectation for anyone going into tax business.

  Especially if you don’t already have 300 to 400 people that will follow you. Most of what’s being said shows that you have to market for your own customers.

• Potential franchisees:

  In 2011 Liberty had to issue $56,400,000 in operating loans to its franchisees for working capital and equipment. In 2010 it was $32,488,000. That’s an increase of 73%. The bulk of these loans are for working capital so the franchisee can survive for another season. In 2011 there were around 3300 offices so that would average out to a loan of $17,090.91 per office. In 2010 there were around 3000 offices so that would average out to $10,829.33 per office. If you have maturing offices and in 2011 you only grew your office volumne by 10% or 300 stores why would the need to loan working capital to your franchisees increase by 73%.

  My point for bring this up is to show that most franchisees are not making enough money to sustain their operations. In a way Liberty is force to provide these operating loans or many stores would fail. Since most of these loans are secured by the personal guarantee of the franchisee when the franchisee finaly gives up Liberty gets the territory back and then pursees collection of the receivable from the former franchisee. This is what forces many to go into bankruptcy.

  “Buyer Beware”

• Here is where the confusion comes in with Liberty and the numbers. Most of the financial issues that Zs are having is not a lack of profit, it is not being able to reach a positive cash flow. All debt through Liberty is short term which makes anyone borrowing money from Liberty subject to a difficult time cash flowing.

  There are many profitable franchisees about to sink or that have already failed because they are no where near reaching positive cash flow. This is the biggest problem right now when speaking of why Zs are about to fail.

  Running a good profit margin with Liberty is not that difficult and this business is still a great one. BUT, if you make mistakes your first year or so OR you expand too quickly and start borrowing money from Liberty at Premium Interest Rates for very very short term periods you run the risk of going under not because of poor margins but because of the time it will take you before you reach positive cash flow!!! Business Owners must understand the difference between Cash Flow and Profit Margins and be very careful because Cash Flow issues destroys more businesses than profit margins across the board when speaking of start ups.

  Do the math for yourself or analyze the Zs you know that are struggling if they will give you honest numbers and I gurantee you the vast majority are having cash flow issues long before they experience Profit Margin issues.

• LIBERTY WILL NEVER BE #1 in 2020. AND THIS IS WHY H&R Block became as big as it is by providing error-free returns to its customers year-in, year-out. It’s amazing how many returns it still does manually despite the fact there are so many online tax preparation sites and software available. In fiscal 2011, it prepared 21.4 million tax returns in the U.S., 1.3 million more than in 2010 and 400,000 more than in 2009. According to IRS statistics, the company prepared 16.4% of all the tax returns filed in the U.S. in 2011. That’s up 80 basis points from 2010. These are Buffett-like figures. However, if you’re a glass half-full type of person as I am, you see greater opportunities ahead LIBERTY WILL ALWAYS BE THE JOKE OF PREPARERS WITH THEIR SILLY HATS. LIKE IT OR NOT LIBERTYS CORE CUSTOMER GROUP IS GHETTO BLACK PEOPLE. WHEN HAVE U EVER HEARD H&R BLOCK HAVING VIOLENT CUSTOMERS ONLY AT LIBERTY CAUSE THEY CATER TO GHETTO LOW INCOME ONLY WHAT MIDDLE CLASS PERSON WANTS TO HAVE THEIR TAXES PREPARED BY A CLOWN OR PERSON IN COSTUME

• JP

  I agree that Liberty will never be number 1 but it has nothing to do with the customer that comes to Liberty or the franchisees. It has to do with the corporation itself. Liberty does not provide any kind of compliance or quality review of it’s franchisees other then bank compliance. The company’s main concern is to sell franchises , anyone regardless of tax knowledge can open a Liberty franchise. There is no tax training only a one week course to basically outlined their system and create a bogus budget. The quality of the product varies depending on the knoweledge of the store owner and their investment in training their staff. With H&R Block you have a proven track record, a quality reputation and a sold professional training program.

  The tax industry is changing and to compete you need an online presents. Liberty tried to establish itself by paying $5,000,000 for a second rate online tax software business called e-smart but then had to admit it made a mistake and write down the entire asset. Even thought the company is still using that online system it offers no challange to H&R Block or Intuit.

  JTH tax is at a pivotal time in it’s development. It does not have the financial strength to compete with H&R Block and to a lesser extent Jackson Hewitt. Currently the company’s balance sheet is solid but a bulk of it’s assets are receivables that are based on the underlying performance of its franchisees.
  The question here is can/will JTH Tax go public. I know JH says he never wants to lose control of the company like he did with Jackson Hewitt and that his goal is to be #1 but I just don’t see how they will compete in their current form.

• Can any of the former franchisees give me an idea if Liberty Tax sued them and enforced the 2 year 25 mile non compete agreement? After talking to some of the former franchisees, it seems that there might be a pattern here. At least I was convinced not to go with this franchise thanks to the honesty and candidness of these former franchisees! Has the Non disparage clause been ever enforced as well?

  I’d really appreciate the info. Thanks

• JUST HAVE YOUR WIFE OPEN THE NEW OFFICE AND HAVE HER DISPARAGE THEM SHE DIDNT SIGN THE CONTRACT CORRECT? THATS WHAT I AM DOING… ;)

• AND TO ROBERT KOONS, AINT HE A JTH SUCK UP HE ALWAYS HAS SOME POSITIVE SPIN ON ANY NEGATIVE COMMENT. HE MUST BE BLOWING JOHN HEWITTS HELIUM ANIMAL BALLONS :(

• AND TO ROBERT KOONS, AINT HE A JTH SUCK UP HE ALWAYS HAS SOME POSITIVE SPIN ON ANY NEGATIVE COMMENT. HE MUST BE BLOWING JOHN HEWITTS … HELIUM ANIMAL BALLONS :(

• I must say I am always surprised when I review the comments on this site. I too reviewed a franchise opportunity with Liberty Tax Service. I run serveral successful businesses presently.
  It was the show and tell in Virginia Beach that was an eye opening experience for me. The poor people that attended could hardly tie their shoe laces. The questions that they were asking about territories, can I go to someone elses territory to get clients, were to “purchase” tax preparers, how long did they have to stay in Virginia Beach for training.
  The attendees asked no technical business quesitons, budget vs. actual expenses of franchisees, I know during the prensentation of a franchisor that cannot be disclosed. However the attendees should have inquired about work flow related to tax preparation, tax software, error rate, rejection rate, tax law, customer relations and bank products. Nor did the presenters or AD’s offer any guidance in these areas. The only major issue pitched was that you had to have wavers. How silly is that!!!!
  After we took the bus tour of the Corporate office and a franchise location, I ran like hell.
  You would have to be out of your mind if you have any business sense at all to get involved with this organization.
  But, I must say it was a good mini vacation the Virginia Beach, tax deductible also.
  Any questions,

  Very Successful

• OKAY I GET IT I AM DUMB FOR BELEIVING IN JTH

• I understand that if yoy open up anothe office under your wife’s name, Liberty will sue and win. This info I got from a former franchisee in Iowa. It seems they have a pretty strong legal department or they know their judges very well or both.

• Opening up an office under your spouse is considered a “straw man.” Open an office outside your 25 mile radius, time flies then your non-compete will be over before you know it. Then open your next office right next to your former Liberty and charge the least amount of money that you can. If that Liberty became a corp store you will do very well.

• Mike, great advice… charge half the price you are charging now…. you will save 14% royalties that way and come out ahead…haha, fuzzy math…

• 19%……

• Royalties are 14%… You also pay 5% for Advertising in your area that Liberty does for you.

• So a 5% advertising royalty and a 14% royalty = a total of 19% royalty.

• 19% for the ability to use Liberty’s software and the discount you will get from Krispy Kreme’s to buy donuts for the city! You might get lucky like their best franchisee ever and get over $300,000 from Liberty in a gag order, just remember, don’t buy a franchise with this POS company, start your own business it’s easier than you think. The IRS will help you for free.

• I had a conversation recently with a LT insider who admitted that a large percentage who finance territories end up failing. Anyone thinking of purchasing a franchise will find that there is not enough money at the end of the year to pay the debt plus franchise fees, especially when LT starts taking all of your cash flow through ACH transfers for the first few weeks of the season to pay the debt. As MIke says, run, run run away from these clowns as fast as you can. They are only interested in their own bottom line, not yours………….

• IN Response to this:

  Tony on July 29th, 2011 3:24 pm Ed,

  Having reread your posts your assessment of your profit for one (where you didn’t say “both my offices’ profits were – you said my

  My avg net fee in that office was $220-$230 and I did just under 50 free returns counting unpaids.

  QUOTE: $115,000 net (divided by your ANF you stated at $230 = EXACTLY 500 paid returns – so lets assume you’re provided an estimate or used a good calculator).

  $15,000 total payroll for that office including all preparers and wavers
  – based on Liberty’s required opening of 9-9 + Sat 9-5 + Sun 12-5 = 73 hours open per week.
  Your 1% commission on $115,000 = $1,150 of that $15,000 is bonus – leaving $13,850
  This payroll amount divided by an average hourly rate of $9 as stated = 1538 hours over 14 weeks of tax season = 1 .5 people per hour employed.

  So did you use half a waver, a qurter of a receptionist and who the heck did your marketing etc….

  Something fishy here….

  Questions on July 29th, 2011 3:27 pm 50 free returns doesn’t get you any rebates. You need 100.

  Sorry, I do not check this site but about once every 2 weeks or so. Why in the world would I want to lie about what I made or didn’t make. IF you would actually manage your business and run your own numbers half as much as you have analyzed mine you should be able to figure out how to make money. But in response to your questions:

  First, I did receive my rebates as I did over 100 free returns per territory. around $2,700 for this office I believe.

  Second, My hours were as follows 9-9 from Jan 9-Feb 20 10-7 from feb 21 – april 10 9-9 trough rest of tax season. I was closed every sunday except for the busiest 2 which I was open 4 hours each. After Feb 15th up until April 12th or so only 1 person was in the office at any time and I would usually schedule 3 4hr waver shifts per week during nonpeak. During peak I would try to wave 8hr per day but always had no shows weather etc. You $9/avg pay is right on. wavers $7.25/hr managers $10 preparers $8-$9

  I never had a receptionist but staffed as many as 4 preparers at one time in the office during the busiest 2 weeks. On average, I kept 3 during the busiest weeks during peak times in the day. Obviously not 3 at 9am or 9pm etc. I staggered them coming and going etc.

  As far as marketing I did very very little. I guess my most sucessful marketing was by a guy who got $25 for every customer he brought me. I think he got me like 13-15 customers but not sure of exact # unless I look. It was at least 12 though.

  Liberty’s system is solid and a great place to start, but you cannot follow it to a tee. Like I stated earlier I think P&P training is the biggest waste of payroll etc. I could most likely make an office break even doing 200 returns. I would cut payroll to the bone and reduce operating hours or do whatever it took.

  I have tried to be as open as possible way more open than the post I was originally responding to that said you can’t make any money with Liberty I did 800 returns and lost a pile of money…………

  I would like to see that person’s numbers like I have presented mine. I would love to have each office of mine at 800+ returns, I would be very rich. But in the meantime, I can make a decent profit on 500+ and if I can do it anyone else should be able to :)

• Ed:

  The point here is whether it’s worth paying for a Liberty Tax Franchise. If you did no markting and just hung out a Liberty Tax sign how many returns would the name Liberty Tax Service generate for you? In NJ where I’m from there are only 64 stores/locations and since Liberty doesn’t advertise there is really little brand value. In the 4 years I was involved with Liberty Tax Service I had only a handful of people come to me because they knew of Liberty. Every other person came in because of the time and money I spent marketing and I retained those customers because fo the quality of service I provided.

  You comment about triming payroll and having shorter store hours in non-peak periods makes sence to me but if you don’t follow the hours outlined by Corporate your in violation of your franchise agreement and could be grounds for Liberty to take back your franchise.

  Most people who are on this site and speaking out against Liberty can’t give out to much information that could result in Liberty pursing legal action against them. However, the successful ones don’t have that issue so why don’t you tell us exactly where your stores are located? This would help me determine the demographics of your stores. This way potential franchisee’s can see what type of territory this business model is successful in.

• I’m in NC, We have around 130 stores state wide I think maybe more

  Avg household income in my area is somewhere around 50k (not the poorest areas but sure not the richest)

  I can definitely say that the name Liberty and the system definitely generates 1 out of 5 customers and is only getting stronger. I feel like it is more like 1 out of 3 customers use me just because I’m Liberty. As long as it stays more than 1 out of 5 I don’t mind paying the royalty, but see your point if you feel like Liberty generates little to no customers for you. I still believe in the end, Liberty will continue to grow and the brand will eventually be recognized virtually nation wide. So if you can stick it out it may pay off in the end.

  I am not trying to argue for or against Liberty, that is for each person to decide. My entire reason for posting was in response to the person who stated he was losing handfuls of money doing 800+ returns. IF an office is ran even halfway efficiently that is virtually impossible. IF you can get an office to 500+ returns it should be profitable. I have heard rent in NY can be as high as 5000+ per month, if this is truely the case I may need to rethink that number, but at least where I am at, 500+ should generate some income for you.

• One more quick point.

  IF you are looking to get into the tax business you need to be cutthroat. For one, you make all your money in a few months. You only get 1 shot at the customer, if you don’t get them you must wait an entire year to even have a chance at them again (you can’t afford to get it wrong) Also, staffing is very hard. Expect someone to work for sometimes only a few weeks in the year and then send them packing.

  But, if you still want to try it, you only really have 2 options independent or Liberty.
  Jackson Hewitt will not even exist in a few years and are under bankruptcy right now. Block has no virgin territories left and to get a decent corp store you are looking at 500k+ with 35% royalty I believe.

  Liberty offers realitively cheap entry and gives you a chance to make your original investment back in a year or so. Are they perfect, No no one is, but was obvious choice for me as I knew little about how the business operates.

• Ed:

  Jackson Hewitt will survive bankruptcy and be on better footing then it was on the last couple of years.

  As for HR Block there are not many franchises to purchase and as you pointed out a decent corp. store would cost $500,000. royalty’s if paid on time is 40% on first 5,000 of fees and 30% on any fees after that.

  As you point out you have two options go with Liberty or independent. After being with Liberty my view is to go independent. the 40,000 to purchase a franchise with minimal name recognition along with the royalties/advertising fees that start at 5000 the 1st year and go to 11000 in third year will cost you 64,000 in 3 years. That would be money better spent in building your own business. New small business start-ups have about a 37% success rate. Liberty adds nothing to your chances of exceeding that success rate.

  As for breaking even on 200 returns show me how you can still be in compliance with your franchise agreement and breakeven.

  As I pointed out in an earlier post Jackson Hewitt does publish it’s average net fee and breaks down by age of store the number of returns prepared. A first year store on average did 166 returns and as company it’s average fee was 208.00. Since Liberty and Jackson Hewitt are cut from the same cloth there is no reason to think that Liberty’s results wouldn’t be similar.

  My purpose on this site is to help potential franchisee see what the reality of this business is vs. the pie in the sky sales pitch that Liberty presents.

  Ed how long have you been a franchisee? Do you own more then one territory? Are you an area developer or affiliated with one?

• Ed,

  I think what you will find with people doing a decent amount of returns and stating they are loosing money is they are having severe cash flow issues not actualy taking a loss.

  Because Liberty does all of its financing short term it is very easy to get yourself into a cash flow nightmare and be close to bankruptcy while still posting a decent profit margin. It is a double edge sword when it comes to Liberty and financing. It is great and pulls many new Zs out of the hole when they do not do what they anticipated the first year or 2. But Liberty financing can kill your business quick if you do not have a handle on your finances. So many have no clue on the financial side of Liberty so they get caught up in the cheerleading and Ra Ra of expansions only to find out they cannot operate any further unless Liberty loans them money.

• As far as Jackson Hewitt being around after lets say 3-4 years or so, I predict they will have less than 1000 active offices and declining very quickly. I have been wrong before though.

  If you know alot about running a tax business and do not feel the Liberty brand has a decent presence in your area independent may be the way to go, not disputing that.

  I own 3 territories and am not an employee of Liberty, Ad etc.

  Liberty gives return counts per year 1st yr 2nd yr store and so on in FDD. It is published FACT the avg Liberty store outperforms JH stores by around 33% per year. so add 33% minimum. The difference is more now than that now with the new batch of JH numbers I suspect because they have walmart kiosks which typically do 50 returns distorting their picture, but please use legally binding FDD from Liberty to obtain actual results.

  NO ONE is 100% compliant John himself will tell you that. You better do what it takes to survive PERIOD

  As far as cash flow issues, I’m sure you are correct. I would never borrow more money than I could reasonably pay off after tax season. Borrowing money at 12% long term is suicide unless you really know what you are doing.

  Borrowing money to float a couple of months at 12% will not hurt to bad if absolutly necessary.

• honestly,

  I don’t understand your though process regarding cash flow. Cash flow problems are directly related to how much or how little profit you mak. Liberty offices are on the cash basis and the bulk of your income comes from January to April 15. This means at the end of April, if your profitable you should have enough cash on hand to pay for all of your expenses for the year, plus the profit which will be used to pay the owner and meet any business loan obligations.

  Ed,

  Survive is a good word for most “Liberty Franchisees” Since you own three territories you certainly have a personal incentive to state postive things about Liberty as a franchise. Do you have stores in the other territories?

  The Fedreral Trade Commission provides very llittle legal protection for franchisees. There is no requirement that franchisors complete item 19 of the Franchise disclosure document. If a franchisor choices to report it can use historial or forcast of potential performance. It is not requred to use all of it’s franchises in preparing historical data. It can pick a group or subgroup, it can pick any reasonable time period, it must disclose the number of franchisees in the group or subgroup measured ie. urban areas etc. I don’t no what Liberty represents on item 19 but I do believe it is based on a select group of franchisees based on top performing stores by age of store. But since you have the information please share it with us?

  So can you breakeven or not at 200 returns if you are 100% compliant with Liberty. Sounds to me your saying no. It also sounds to me if you had to do it all over again you would have gone independent.

• Where do I start??? FIrst, a person is not buying a territory, you are leasing, that means that JTH can take back the territory anytime they deem necessary. In the third year if you do not make a profit they will send you a “notice to cure” on or around April 15th. I received mine April 20th.

  I am a veteran of the United States Army with over 16 years of service returning from Afghanistan in 2008 to invest my money in a LTS franchise. I opened a store in January 2009 that was a company owned store. I met the area developer at the store really excited to be in business. I quote “This is an odd location to place a store,” he states. Hmmm, I thought, how odd for a person who has many years of experience in this business to say such a thing as this. SO, I go on. After 2 months of moving in my anchor store went out of business. The lease, according to LTS, shoudl have a “kick out clause.” Nothing in the lease says so. This was in the end of February. February 2009, I get a call from the property manager asking me if it is ok for an accounting business to move into the part of the complex that is owned by them. I said absolutely not!!!! The received a letter, that they hid from me from LTS Corporate stating not allowing them to move in. March 1, 2009 people are building next door. The property manager allowed the acounting business to move in. Here is the caviot. The ones moving in next to me had a Liberty store across the street prior to the corporation moving the company owned store to this location, from the center of the territory. The people next door, lets say their names are Jack and Jill. SO, Jack and Jill leave LTS and open a store called “LTS.” They told me how Liberty was but I ignored them, because I tried to do this business the way LTS wanted me to.
  LTS suggests to put in the lease an exclusivity clause to do taxes. The lease had an exclusivity clause, but it was for insurance. When I brought it up to corporate, they said it was a mis print. I said it will not stand up in court and I get no response from them.

  Around May 2009 I sent correspondance to JTH requesting them to move my store because they failed to disclose these problems before I showed up on the scene.

  The place where the store was placed was limited to marketing, The street to the east was all exclusive and the street to the south was inclusive. I find out that half the businesses in the complex face the east border are technically not in my territory. The border on the south has a huge apartment complex that has the east street address which makes it excusive to my territory. I tried to get corporate to understand this and they told me to market the other part of my territory which is over 2 miles away. LTS says that 85 – 90% of your customers come within 2 miles of the store location. I even hires one of their coaches to come to my store and show me how to market. I did it and did it work??? well, I do not think so, what a waste of $500.

  JTH lawyers wrote a letter to the landlord about the Accounting business moving in next door but all that came of that was they wanted me to take them to court. JTH did not support me in moving my store. When it comes down to it, they WILL NOT put any money on the table to support you as a potential franchisee.

  I want to speak about Mutual Termination Agreements (MTA). IF you, as a franchisee enter into one of these agreements, it is nothing but mutual. Once I received it I mentioned that I was taking it to a lawyer and they could not beleive I would do such a thing. I brought the franchise agreement, the lease and the MTA into the lawyer and they told me that I did not stand a chance from the moment I signed. I sure wished that all the hype they do at EOT, I still would have taken the franchise agreement to a lawyer. The lawyer suggested about 6 to 7 things to change in the MTA, they would not change one thing. You are supposed to sign it and send it back, no monkey business.

  Here I am having to file bankruptcy because JTH is all about business. I took the store from 238 returns to a little over 400. JTH does not care about the worth of your work just about finding some other sucker to buy into their scheme to leave you desolate in the end.

  JTH is not in the tax business, they are in the business of selling a franchise system that they claim works. If you get in, you will notice that a very small percentage of franchisees actually are in the top sellers of returns. Looking at the list out of 3500 stores most do not do over 400 returns per location. Only the ones who do over 1000 returns are going to be talked about.

  This is sickning that they will wipe you of retirement, savings, investment, and equities from your houses to buy into a boldface lie. When will the government step in and stop JTH from doing this.

  I also found out that the interest rates for Accounts receivables is 18% compounded. If you do not do at least 600 or more returns, your debts will not get paid off during your 5 year franchise agreement. After the 3rd year you will receive a “notice to cure” three times and then a termination of your agreement because you failed to pay off the accounts receivables.

  So if you are thinking about buying into this scam good luck, I will see your post on here in about three years and I can say I told you so.

• To: bankrupt July 2011

  First of all, thank you for your service.

  Anyone supporting Liberty Tax on this site after what you have told us needs to look at themselves in the mirror and realize they have sold their souls to the devil.

  Your story makes me want to go after these bastards anyway I can.

• Sounds like my Smart Tax franchise story below:
  STAY AWAY. Don’t let their sales smiles fool you. Yes they will deny this but I wouldn’t take the time to write this if it wasn’t true.

  They say it’s cheap to start a Smart Tax but don’t tell you about all the crazy over priced products they force you to buy. Besides every new store lately has been an outright failure loosing thousands and thousand with owners going bankrupt when they find they are money pits.

  Their support sucks, when you call in the middle of tax season with a client in front of you and an important question, their “support” staff is actually doing returns for the main branch’s customers at the same time. Very often you her them say things like “sorry I’m with a client I’ll call you back” and they don’t even call back half the time.

  It’s too new of a company and lacks the proper support especially since they spend their time and funds on selling more franchises and not helping the poor franchisees. Heck why should they care they get minimum fees from your office whether it gets a single customer or not. Plus they make you buy all kinds of Smart Tax crap at a premium like umbrellas, pens, envelopes, $1,000 plus murals, posters, mats, etc, etc, etc.

  Very unprofessional and they control all the funds, always threatening not to pay or let you operate from your office unless you put up with their unethical ways.

  When company decisions are made it’s not in the best interest of the clients and franchisees but the owner of the franchise and his main men.

  STAY AWAY don’t let the small start up costs fool you, they will take you to the cleaners. If you doubt this you should call individual franchisees. Beware though the franchisees are cautious of the Smart Tax spies calling them. You should still be able to sense when you call, aside from his main men Joe and Jorge every one is miserable.

• I have looked at Smart Tax after they called me and agree with the previous post mostly. They have a lower Franchise Fee but they make it up with very very high royalties!

  Plus if you study there site it claims you work a short season and vacation the rest of the year but they offier (according to the website) year round products which is appealing, if you ever ran a tax office, I just wonder how many of there Zs actualy run year round offices.

  I am not sure how they treat there franchisees but it is becoming common place for franchisors to cut back room deals where they get to profit off of there franchisees purchases of inventory which is at best unethical.

  The call I got stated they could sell me a territory where I would be able to do 2500 returns which I laughed at. Sure I could do 2500 returns but the reality of reaching that numbers for most is laughable. I will get to that number is a couple years in a few of my offices but it has taken a ton of work to do.

• Liberty is in campaign mode for their tax class and territory sales, FYI, don’t join this organization, call current and former franchisees to find out how much of a POS company this is! Stay away, far away, if you really want to franchise seek a different industry or atleast look into a better company like H&R Block they maybe more, you get what you pay for!

• Bill,

  Cash Flow and Profit are 2 different items especialy when looking at financing. When calculating your Profit and Loss you do not include repayment of capital borrowed no matter if it was to purchase a new territory or in alot of cases used to pay off season expenses. The only thing you include in your Profit and Loss is the interest paid and while high it usualy does not make a big difference on being protfitable or taking a loss. This is not specific to Liberty it is true with all business. On the other hand when calculating cash flow the repayment of capital and specificaly the terms or should I say length of repayment will make a huge difference. Usualy it is the first 2 years that causes people to have to borrow money to pay off season expenses while they are attempting to reach the break even point.

  My point is since the financing is all short term causing the repayment to be high you can easily find yourself making a decent profit but be negative and still borrowing money because your cash flow is negative. No different than buying a rental house. You can buy a house to rent out and finance it for 20 years charge market rent and be profitable and have a positive cash flow and be considered succesfull. But if you buy that same house and only finance it for 3 years you would be profitable but you would go broke even if you charged double or triple the rent.

  Liberty offering financing is great and something that is positive even with the terms they offier especialy if you are in a position where you cannot go out and get any other type of funds. But most Zs do not have an understanding between profit and cash flow and get themselves in too deep and digging out can be one of the most complicated things ever. If your going into business with Liberty or any franchise or non franchise system you need to understand these things because understanding them up front will reduce the risk of having them cause you to fail in the end.

  There are many more Zs having severe cash flow issues than there are Zs having issues making a true profit. Cash Flow not profitablity is the number 1 reason small businesses fail. Its just as true if not more true with Liberty as with any other type of business.

• Bill on August 18

  The #1 reason people have to borrow money in the first two seasons is their expenses exceed their revenue so they are operating at a loss.

  this is a cash business if you have more revenue then expenses you have profit.
  basically you brought in more cash then you had to pay out in expense. The first line of your cash flow statement starts with your profit or loss. The higher your profit the better your cash flow and the better your able to meet your debt obligations.

  A true profit would be defined as making $1 more then you have in expenses. That doesn’t make buying a Liberty tax franchise a good investment.

• I have to shut down after 2 years. Is there anyone out there that can advise me on the best way to deal with corporate without going through bankruptcy if possible.
  I can’t see fighting it any longer without any national advertising campaign. I’m in the New Orleans area and putting someone on the corner in a costume really doesn’t work here. Liberty has no name recognition here. I look at the media during tax season and H&R Block fills the airways and I have someone in costume waving on a corner? I don’t see where any of out advertising dollars are being spent to help out the franchisees. I believe more of it is being spent to sell franchises than anything else.
  My 1st year AD opened 10 stores in my area at the same time that i did. Imagine how hard it was for me to get anything done by him. This year he closed all of them and they are now possibly being taken over by corporate. I went through a new AD last year and now I learn that I have a new one for this upcoming season.
  I emailed her 3 weeks ago and asked for a telephone conference and haven’t hear back from her yet. Wonder if she is still with them?
  If anyone can tell me who they had to go through to shut down I would appreciate it.
  Thanks