LIBERTY TAX SERVICE Franchise Complaints
UnhappyFranchisee.com asked: Are LIBERTY TAX SERVICE Franchise Owners Happy? If you’re familiar
with the Liberty Tax franchise, please share a comment below.
Entrepreneur magazine has ranked the Liberty Tax Service franchise #3 behind McDonald’s & Subway. However, some commenters who claimed to be former Liberty Tax franchisees left stern warnings on the Franchise-chat forum.
This post was originally published
BostonTax wrote:
I’m a former Liberty Tax Franchisee
I hope you are ready for a little enlightenment! I held a successful Liberty Tax Franchise for 5 years until I decided to let the franchise agreement lapse. I did this for a few reasons:
1. The royalty fees were outrageous! 14% went to normal royalty while and ADDITIONAL 5% went for so called advertising royalties. The ad royalties were supposed to be put back into your local market to build the brand name. This was never done! All advertising in addition to the ad royalty I had to pay for because it did not fit into Liberty’s concept of advertising. I don’t know exactly what the concept was because our AD could not give an answer and the approved methods changed by the week.
2. Corporate was totally unresponsive to the needs of the franchisees. The AD system is designed to recruit anyone who can write a check for 100K. No other skills or ability required.
3. The minute you are behind in a royalty payment, they send you a notice to cure. After that, if you don’tpay, they try to terminate your franchise agreement.
4. Upon termination, Liberty enforces through legal proceeding a 2 year, 25 mile radis non compete clause that is in the franchise agreement. This is enforceable in the Eastern Division of the Federal District court, where, at least 2 Liberty friendly judges preside.
5. Liberty does not recognize chargebacks for bad debts as an adjustment for your royalty fees. All royalties are based on your gross, not your net collectable. This was an ongoing issue with them and the accounting department did not have the ability or the inclination to resolve!
My best advice is do not go with these guys, they are bad news. If you like to have people collect royalties and provide no support, then this is the franchise for you! It is very expensive to get into, the initial fee is around $32K just to buy the territory plus those pesky royalties. You can’t make money on this concept.Most of the surviving franchisees I’ve talked to in the last 2 years have experienced great difficulty not only in making a profit, but in the corporate support or lack thereof.Remember, 19% of your gross is getting kicked back to Liberty, which is excessive by any standards. Please do yourself a favor and call former franchisees ,those that are currently getting sued (they are very likely to talk, as I found out), and current ones to try to get the straight poop.
Barbara Green wrote:
I too was a Liberty Tax Franchisee and I agree with everything you said.
The only reason for purchasing any franchise is because the business model is a proven marketing success as evidenced by the profitable franchisees. That is why you pay a license fee of $25,000. Being profitable is not in the cards for a Liberty Tax franchisee. Liberty Tax’s market/ business model is aimed at individuals who have very simple tax returns, i.e one W-2 and standard deduction which is why they were very successful in Norfolk, Va. That market is full of military people with one w-2.
Liberty will sell anyone a franchise at any location, in any georgraphic area, even if there is not a chance in hell of the franchisee being successful.
At one time, I too owned a Liberty Tax Franchise for one tax season. It was only one season because of the behavior of the Regional Manager who called me on January 15th demanding and screaming “Why had I not generated 200 tax returns and that maybe this business was not for me. I was stunned and confused since employers are given until January 31st. to give w-2’s to employees. Apparently, he thought that I was in Norfolk, Va. where that is possible.
It only goes downhill from there. The bottom line is I lost all of my investment in this businees (approx. $80,000) because I closed it rather than becoming a victim of this unethical company. NOthing would make me happier than to be a part of a class action lawsuit.
WHAT DO YOU THINK? DO YOU OR HAVE YOU OWNED A LIBERTY TAX SERVICE FRANCHISE? ARE LIBERTY TAX SERVICE FRANCHISEES HAPPY? WHY OR WHY NOT?
.
See the postings on the yahoo message board, for Block, HRB, post all your comments about Liberty there, I know for a fact that John reads these. We MUST stick it to him like we are his “beach house” babes!
Liberty Tax Service Files Registration Statement for Proposed Initial Public Offering
If Liberty goes public that will be fantastic!!! I have been soooo waiting for that!!
Why is it great that Liberty goes public, Mike?
Mike,
Lets hear the nonsense, go ahead. Why have you been waiting for this? This should be good!
How do you think this will effect franchisees?
Guest 2.
This could be a great thing for the franchisee, if and only if they spend some money on advertising. I doubt this will happen, because it is not how they HEWITT!! Read the postings on Blocks Yahoo Board for some good analysis. Just remember if you or I own ONE share we can go to the Shareholder meetings and visit John.
Great analysis as usual Mike. Why do you bother with you comments, you add nothing to this site.
Liberty’s business model is broken. RAL’s are history. The Tax Office of the future will have Professional, Trained, Licensed Tax Preparers, not $8.00 per hour part-time employees with a 10 week tax school training. I see nothing in their current system that is heading in this direction. Prospective franchisees need to really research the market before becoming involved.
Hey folks here is the problem—-TAX. There are 25 million who owe over $300 Billion to IRS right now. IRS has programs, lots of them that assist you in delaying paying taxes.
No one in mass is going to pay hundreds of dollars to pay more taxes.
It is a REFUND game and you can play for free online and get all the bogus REFUND$ for free using many online options. As long as you can get free, it will be hard to pay for TAX SERVICES.
If you are considering buying a Liberty Tax Franchise, don’t do it they are a horrible organization. Heard (could be just hear-say-do your own research), they have had Area Developer (s) that are convicted felons, do you want that kind of “support?” Maybe that’s what Stu-gotz or maybe he/she will clarify? Just remember that Liberty paid thier best FRANCHISEE EVER over $300,000 to be quiet, nobody on this board that supports Liberty will clarify, justify or explain why!
What would your clients think if they found out? Stay away from these individuals- you will likely lose all your money. Do your own research, don’t just take a few postings or meetings with Liberty to make a determination, ASK AROUND before you sign ANYTHING!
The saddest part in all of this is that Liberty feels the need to harass employees of other tax services to try to get them to work for Liberty. A letter is fine but it gets a bit extreme when they are calling nonstop to seek your services as an employee or franchisee. -.- Not cool!
The average fee charged by Independent Tax Preparers is $75 to $125. Liberty’s model is based on fees of $200 & up. These high fees were tolerated when they were included in next-day loans (RAL’s), but in the new world of no RAL’s, fees will become very important. Can Liberty adapt to a new fee structure?
Annoyed: Great comment, don’t let anyone you know work for that POS company! Keep up the posts and let us know more about their desperate attempts to get good people!
100 million REFUNDS?
$317 Billion in REFUNDS
What is this Tax stuff?
John,
Only 15% of my customers applied for RALs my average fee was $250. If RT’s were banned, I would agree with you, but RAL are not as important as you make them out to be.
I think anyone that is 100 percent or close to that, dependent on Bank Products or “Early Season” business is taking a risk. Independents can charge whatever they want but many of them are not making a profit at that level. My fee is above $200 and not dependent on bank products at all. The majority of my business is done after Feb 12th and its not because I am in late season territories, its because thats the way we wanted it to be and marketed to make sure it was that way. Sure the early season helps but I would never bet my entire business on it.
The tax business is once again evolving. The days of Intuit seeing massive growth is over. I think they will be flat or see very little growth over the next couple of years. The “Tax Proffesional” is going to be in much higher demand and pricing will go up not down over the next several years overall. Sure the “Early Season” business may see some decrease in fees but overall pricing will go up. Anytime you regulate an industry such as they are doing with the Tax Preperation Business pricing almost always goes up plus you will see significant consolidation. Alot of that consolidation is going to be from the “Fly by Night” or “Scam” preparers who open shop up for several months and encourage and help scam the system for big refund checks. Some will be from regular mom and pops who have been in the business for years and just they do not like change so they will sell out.
I am thrilled I am in the tax preperation business right now! I cannot think of another industry I would rather be in at this present time just because the opportunities are so great. Certain Franchisees in every franchise system are going to become very wealthy by doing the right things just as there will be the same amount of independents that will be able to do the same thing. On the flip side many will not do so well and I am sure it will not be there fault, it never is.
More than half of all refunds are delivered and spent by Feb 14. Over 50 million.
The accurate and professional crowd makes up 25% of the refund traffic.
As far as getting rid of the non CPAs, great idea. The prices will go up unless At home Al EA goes online and charges to do the return using an internet connection.
25 million now owe IRS $300 Billion. That is big news for those compliant tax pros.
REFUND 2 REFUND
Does anyone know of a former franchisee who has been sued by Liberty for violating the two year non-compete agreement? If so, how did the lawsuit turn out?
Honestly:
Are you a Liberty Tax Franchisee or area developer? How do you know that independents aren’t profitable? They can charge less because their not paying any royalty fees of 14% to liberty and are not required to maintain staffing or hours based on the Liberty model.
Doug,
There ae some that have been sued, as for the outcome not sure. If you go to Justia.com search JTH Tax Inc. you can start there, get the names of those that Liberty has sued. You probably have their phone numbers in you liberty offering. If not google them I am sure you can track some down, it’s pretty easy. Please share your discoveries here for us. Good luck, you will find some good info!!
Yes I am a Franchisee and I know about indpendents because taxes are my business I have went out and talked to many of them and have freinds that run there own non franchise operation.. As I stated many of them are doing well and many are making money but on the other hand many are barely surviving and charging lower prices has not been the answer of all answers. The same goes with franchisees. Many are making money but there are still many that are not.
The whole price issue being the answer just is not proven in the market place. The key to being succesfull is understanding your business, giving above quality service, and the most important thing is being able to put all the pieces together so you can attain a reasonable profit margin. So many in this business have no clue how everything fits together and even if everything goes perfect they still would not make much profit if any. Within 5 miles of me there are tons charging under $100 for tax preperation yet non are bigger than I am.
Owning a Franchise costs!! Your going to pay close to 20 percent of everything you pay in. Either you can see the advantage in it and figureout a way to make the profit margin you desire or you can’t, simple. If you cannot then go out on your own. But thinking that being on your own and that by not paying the 20 percent is a gurantee that you will make it is just not true. Sure I can honestly say right now that I would make much more money being on my own than owning a Liberty Franchise! But without everything I learned being a Libertry Franchisee, and I paid for all of them, I would not be able to go out on my own with the confidence that I would be succesfull.
So right. There are less than 20 firms that do more than 20,000 returns in US.
Bob’s Taxes does not have enough distribution to do 100 returns from his mom’s house. ChEAper is not the answer. It is minimizing Fixed Costs and charging enough to cover your variable cost is what wins this one. Try do do 500 returns is a good benchmark. 1000 is better.
But you need online too. Customers do not pay. They do not pay IRS either. So how do you get to do 1 million returns?
By doing REFUND$ for those that do not owe IRS. This is all so simple.
The franchisors want 20%. The more zees the better for them. The problem is that REFUND customers can get REFUND$ for free online. This was not the case 10-12 years ago. And the IRS allows for balance due returns to go uncollected.
No TAX customer want to pay anyone. So if you want to have a part time loosing business do TAXES out of Mom’s bedroom 50 times make $5000 and work at Wal-Mart the rest of the year.
John Hewitt’s like PT Barnum after every tax season he finds a way to get his name in the news. This year it’s the initial stock offering, before this he offered to be HRB’s CEO and before that he was going to merge with Jackson Hewitt. It will be interesting to see how well this IPO does. While the company makes a profit it’s cash flow statement shows a bulk of it’s money being lent to franchises as operating loans so they can survive until next tax season. These loans also make up a bulk of the assets on the balance sheet. If I was an investor I would question the underlying value of these type of assets.
For people looking to buy a liberty franchise, there is a piece today on investorplace.com that talks about liberty’s business model being a good model for the investor because the franchisee bears all the costs.
Buyer beware.
Bill
You are right on with your analysis. What anyone looking at a franchise needs to understand is that every dollar in revenue is valuable, as they are hard to come by. Giving hard earned $$ to a franchisor like Liberty who collects $5000 minimum the first year, $8000 the second year, and $11,000 the third, but does nothing but supply $1200 in tax software is a huge waste, and for all intents and purposes like throwing money in the garbage. There are other bad franchises out there, and you can read about them on this site. Most have one thing in common. The franchisor wants to maximize their own revenue at the expense of the franchisee. Someone on this site said that he gets a good percentage of his customers because of the Liberty name. I can suggest from my experience, and that of many others that your own advertising brings in 99% of your customers. The wavers work, but B2B, roadside parties, making your store look like a brothel will only turn most customers off. Liberty appeals to the extremely low income taxpayer. If you do not have a good percentage of those in your territory, you will fail and fail miserably. And one other issue; in the contract a franchisee can get admonished and cancelled for making negative comments. Therefore realize that if you go and ask other franchisees about their stores. I have visited many, and can tell you from first hand experience, there are several store owners who will outright lie about their success. How do I know? The numbers don’t add up. As many have said, this franchise is a horrible investment. Stay away from it at all cost.
There are far more legitimate criticisms that could be made about Liberty as a franchisor than I see here. Most comes across as mere bellyaching. Consider, howoever, the current posting on their internal website. They have a list of territories available for sale and the number of returns already being done by other Liberty offices from that territory. In other words, they are recruiting new offices to take business away from their existing franchisees. The have made it so that franchisees are not just competitors with Block and Jackson-Hewitt, but they are also competitors with one another. Franchisees have to watch their backs from their franchisor and also from their fellow franchisees, both of whom are competing with them. That’s fundamental. Another issue is their ability to use the 1000 return count as a club to get rid of any franchisee they want to. It is rare for a new tax office to do 1000 returns by its third tax season. Yet, by including that in the franchise agreement, they subversively set the expectation that this is the norm. And, they give themselves grounds to terminate if the office doesn’t achieve that. Of course most don’t, and they like getting royalties, but it gives them grounds to terminate anyone who stands up to them when they become abusive. Nobody cares about resentments toward John Hewitt. The PT Barnum comment is funny. Who cares about his publicity? Look at core issues that actually affect franchisees.
Honestly did hit one nail on the head. If you know nothing about the industry, what you pay is well worth it to learn how to operate a tax business. Once you have run an office for 3 years, the value decreases. Oh well, that is going to be true of any franchised business. Especially a service business.
Mr. Conway,
Hum? It does make you think.
Liberty sounds a lot like china doesn’t it?
Liberty Tax will bankrupt you! Don’t buy into these SCUM SUCKERS!! You will regret it, but if you must just ask what their franchise retention is, if it is a great opportunity it should be in the several years not 3-4. Do your homework.
Joseph Conway:
You bring up some very good points. I looked at the website, and having visited many Liberty stores, know the situation with many of these locations. People get upset when someone on this site says John Hewitt lies. Well, how about the fact that many of the comparables that Liberty shows for the for on sale territories are the best producers, not the ones that are also close and failing. I know for a fact that two of those listed have stores in very close proximity that are producing significantly less than the high store they are using as the opportunity store. Anyone who has owned one of these pieces of crap also know that you can have a store within a couple of miles in any direction that is in a high EIC area s and are producing far more than you will ever produce.
People need to realize that there is a very basic tenant that at the end of the day will will determine how well you do. If the value of everything you do and spend money on produces additional revenue and profit, you will most likely be successful. Unfortunately giving a franchisor 19% of your revenue that does not produce that value in revenue and profit will in most cases force failure.
Refunds are King in the TAX business
Don’t buy a Liberty Tax, did you know that last year 316 Liberty offices closed?!!! Don’t buy into this POS company, you will regret it!
Let me again suggest that anyone who wants to deal with one of the most unscrupulous organizations I know of, go and buy a Liberty Tax franchise. Joseph Conway says most of the rants on this board sound like whining. Some I would agree with. Currently every franchise owner within 10 miles of where my location is has a commission agreement with Liberty to sell their territory , and will sell for anything they can get. Does that sound like a solid investment to you ?
1800MrRefund.com will buy then all. Call MR REFUND.
Mike, what goes around comes around. Wah, wah, wah. So satisfying to me to scan down these posts and see all the time you’ve wasted on here. He who laughs last……
If you buy a Liberty Tax, you will be bankrupt, funny so many of the Liberty supporters i.e. the Area Developers, that comment on this board don’t provide ONE reason to buy a Liberty, I love it!!! Forevever will I tell the TRUTH about Liberty at every chance I get, HERE, YAHOO, FACEBOOK, EVERYWHERE AND ALWAYS!!!!!
Online Refund fraud is killing Liberty.
There is no way you can pay $10,000 a year to do 300 returns.
Volume wins the game.
Online refund fraud kills the us.
Just learned about another multi-site franchisee who called it quits after two years. Couldn’t make it. Used up all of the equity in his house, savings, etc. Had one site that was doing very well, two that were failing which caused them to lose bunches of money. Kind of blows the theory that it is the franchisee who didn’t understand the business. Again, go to Vegas, your chances are the same.
Frustrated,
just found out you are not even a franchisee. Rumor is you tried to buy a franchise and they denied you because of your not too bright and now you hold a grudge against the company and all the other franchisees. Get a life!
Hi Frustrated,
Sorry to hear about this newest addition to the group, I am sure he was promised the world, any idea what area of the country he was in?. Hopefully, he will post on this board. I do wish that there was some way we could all contact each other.
Mike,
Contact each other and do what? Keep whining and crying? Misery loves company.
If you are considering buying a Liberty Franchise just remember 316 Liberty offices closed last year, that is around 10% of the total US offices. Not ONE Liberty supporter that comments on this website provides any valuable insight as to why anyone should purchase a Liberty office, and for all the co-detractors, keep up the good fight, for I know of several possible franchisees that changed their minds due to this website. Keep up the good fight, next season that 316 should double.
Stugotz:
Unfortunately I am a franchisee. And even more unfortunate for you, I am going to post on this site until John Hewitt either dies or retires. He has robbed so many people out of so many thousands of $$, and it continues over and over. He refuses to realize that you have to do more than supply software for $40,000 and 19% of your revenue. What is even more unfortunate is that he gives at least half of that to A/D’s who have no accountability whatsoever. When you talk about not too bright, my A/D is positively worthless. John Hewitt considers him one of his shining stars which tells you how not too bright John Hewitt is. The next level in the organization is his son, who thinks marketing is nothing more than being a clown in front of your building. Again, “bright strikes again”. Look in the mirror, the next time you call someone not too bright, I think you will find that in most cases the person pointing the finger is usually just jealous of what someone else has.
How come no one has a better way to do a million 1040s.
No brand.
No online.
No teledotcom.
MR REFUND has all you need for free.
LTS better start doing criminal background checks.
Frustrated,
Look in the mirror, the next time you call someone not too bright, I think you will find that in most cases the person pointing the finger is usually just jealous of what someone else has.
I agree 100% with you!
Frustrated,
What is the name of this young A/D?
I grew suspect of LT when an AD puppet called me and told me how great LT was and that the AD would be in contact with me shortly. She ended the call by asking me how much capital I had to invest in a new franchise. Wow. None of YFB! Did somebody already post this unhappy franchisee site on LT’s FB site to let the potential buyers beware? They need to be taken down.
Sean,
You are right! What are they thinking asking you how much money you got to invest? You should not need to disclose anything to them!
You need to just show up like Mike and Frustrated did and you gonna wake up rich one day and when you don’t, just come on here and blame the whole world for your failures except yourself. Wow you guys continue to amaze me.
If you are considering opening or buying a Liberty Tax office, consider how many postings are on this website both from those that have been scammed by Liberty and those Liberty supporters that still continue to scam and especially the ones that claim they support our troops. Compare Liberty to ANY other Tax Franchise AND ANY other industry, soooo many complaints should make you run.
Anyone that is thinking about opening a Liberty should see these back and forth discussions and run as fast and as far away from this organization so you won’t end up being part of the roughly 50% failure rate of new franchisees.