LIBERTY TAX SERVICE Franchise Complaints

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

• The number is 1000 returns and it is by the end of the fourth year, not the third.
  It would be good to see other former or current zees confirming this.
  Although there were 3002 offices in 2009 (62 company owned) in or so Liberty franchisees, many may still only be approaching their 2nd, 3rd or 4th tax seasons. So it is closer to 1700-2000 who have not achieved this 1000 returns number by the close of tax season four.
  Although Liberty has the RIGHT to terminate the agreement, it is unlikely they would if the office is preparing 600 paid tax returns @ $200 whereby the franchisor still manages to receive ~$17,000 in franchisee fees.
  It is more a threat to have more control of the franchisee who would after year four be required to “pull their head in” and toe the company line if they didn’t want this clause enforced against them.
  I would like to see any other former or current zees post to confirm what is in their franchise agreement.

• So if a Liberty franchisee is not doing 1000 returns by the end of the 4th year, Liberty has the right to pull their franchise – or not – and resell it at their own discretion?

  Has anyone claimed that Liberty allowed defaulted franchisees to operate until they had a new franchisee for that market, then terminated them?

  Can they legally exercise that clause in the contract if they don’t apply it consistently and diligently (allowing some to continue in default but not others?)

  Why is 1000 returns the magic number? Is that breakeven for most offices?

• There is much more involved but effectively yes. I have spoken with several franchisees across several states who actually handed their territories back as they could not afford to pay the franchise fees, could not afford to pay the off season rent (common issue), could not afford to open the second or third territories they purchased originally and are NOW required to open regardless of whether they can afford it or not, were unsuccessful in selling it or Liberty determined they were in default and the territory would be recovered in some way and resold. In one instance, the franchisee purchased three, handed two back, could not afford to continue in their original territory, was offered a position to manage it and then repurchase it (or something akin to this through financing but after another year the office had grown in volume and the zor increased the cost of the buyback due to the added return count).

  Why is 1000 returns the magic number? Is that breakeven for most offices?
  – Break even is dependent on several factors… Rent, Net fees, payroll and marketing expenses among others factors.
  Eg.
  Average office size: 800-1000 sqft
  Average Rent/Utilities: $2000 per month
  Employee Payroll (includes tax preparers and wavers) : $25,000-40,000 per tax season
  Marketing Expense (Direct Mail etc..) : $5,000-10,000
  Office expenses (printer cartidges, client envelopes, copy paper): $1,500

  Total annual expenses: $76,000 (worst case)

  $76,000 / 0.81 (after 19% royalties and advertising fees) = $94000 in net fees (after any discounts).

  Assuming average net fee is $180 then $94,000 / $180 = 522 paid returns PLUS 100 required free prepared returns = 622 total returns.

  There are other miscellaneous expenses which include but are not limited to: tax classes, newspaper ads for these classes, coffee, donuts, cookies, cups, new costumes, coloring books for play area, popcorn, pens, inhouse forms, travel/accommodation to meetings, which may amount to an additional $3000 or 20 more paid tax returns.

  So 652 would generally be a safe break even total.

  Now factor that you received no income during this time. And a new office preparing 652 returns would rank in the top 20 new offices in the country and yet you produced no income for yourself.

  So the simple math is if you prepared an additional 348 paid returns at $180, deduct the 19% royalties and fees you would make $50,000 or thereabouts before business taxes and income tax.

  1000 returns = 900 paid + 100 free returns.

  Unfortunately, most franchisees don’t actually have net fees of $180. Some do, most do not.

  If your net fee is $145, you require an additional 125 paid returns to arrive at the same place.

  Getting $180 in year one is almost impossible unless you have a state and local tax return which increases the net fee. I would say that most offices take until their third or fourth years to read this amount or higher. This would mean the break even would not be met and the office would make a loss resulting in more financing or inability to continue.

  Hopefully my math is close.

• “moneypit” excellent comments and all accurate. In 2006, my expenses were were about $95,000 and in 2007 my expenses to run a liberty store were $98,000. I am in a high cost of living state, so maybe more than the average listed by moneypit, but on target.. First year store did less than 150 returns averaging $135 per return, which includes about 20 free. Alot of the $95,000 in expenses was for liberty advertising (remember, corporate doesn’t do it for you) and payroll, wavers etc. Funny as it may sound, I couldn’t give away free returns. Most people were suspicious of free returns because nothing is free. Second year got revenue up to $35,000, but with $98,000 in expenses, that’s $143,000 lost in 2 years. Add in the cost of the franchises (i purchased 3…don’t ever buy multiple units up front) and having to open another one….had to give it back to liberty so that they would “forgive” my debt. It’s not as easy as you think to get to 1,000 returns in 3 or 4 years. So “JoeyBlack” i don’t think it is over the top as you mentioned. You may be one of the lucky ones who did okay, but you are in the minority.

• I’ll get back later but as a former Zee with five territories I totally agree with everything I have read. Stayed at JH’s house in V Beach and the snake oil was stacked 100 high. You cannot imagine the losses, lies, deception and garbage I was sold from LTS.

• Boston Tax got it right. Liberty tax and Hewirr are predators in the first degree. Hewitt is the best used car salesman I ever saw. You can’t believe a thing he says and is clearly out to rip you off.

  I was in his franchise for a couple of years and received no return on my investment nor any help from the corporation ar the area developer. I even had a successful operation in the sense that I was able to generate 630 returns by my third year. After Hewitt and his cronies got a hold of my franchise royaties, I had very little left to pay for such things as rent, electric, A/C and payroll.

  My only comment here is to warn anyone that is even considering joining this group of clods, not to do it. Consult a lawyer, consult other franchise owners, especially those that are out of the franchise. Keep away from these clowns!

• MoneyPit, wow you are pretty right on the money.

  Because my business was new and seasonal no bank would approve a business loan for me (and yes I had really good credit at the time), so I did have to borrow money from Liberty not because I wasn’t credit worthy or a bad business person, unworthy of a loan but again the business was new and seasonal. In the end I took from my retirement and home equity to supplement what Liberty didn’t finance me (keep in mind Liberty didn’t approve or authorize me to pay myself a salary therefore I had to take some of my money to finance my salary)…

  That I was able to hold on for so long on a shoe string budget and absolutely no cash flow is a testament to my commitment to make it work and my business and accounting background.

  Again, despite my financial woes I was considered successful because I grew my office every year by huge percentage points, but being successful for Liberty is not how much profit you make but the number of returns you make. So I was successfully poor (I had growth but I couldn’t profit).

  I tried for 4 years unsuccessfully to sell my territory and couldn’t because of their 1 1/2 times net revenue rule. Basically they tell you your franchise is only worth 1 1/2 times your net revenues. So if you do 600 returns less 100 free for a net 500 returns at an AVN of $180 your Net Revenue is $90k x 1.5 means you can sell for $135k, from that you have to subtract the money’s you owe them first, this leaves many Zee’s with zero money to recapture off their investment or in some cases still owing other creditors. Unfortunately most take from their home equity or their retirement funds so when they sell (out of desparation) or from need they are left starting their lives from scratch.

  For anyone considering buying a Liberty Tax Franchise, keep in mind despite what some former and even existing franchisee’s tell you all is great in the land of Liberty, each Zee’s Franchisee Agreement states that if you are a franchisee or even a former franchisee you can not talk bad about them. If you do they can come after you and sue you, so most current and former zee’s will either not tell you the truth or avoid you completely.

  Personally I have many greivances about Liberty, they made a lot of promises to me some personally by John Hewitt (which if I were to disclose here I would give myself away as to who and where I am). My advise to you is don’t trust anyone over there. It took me 4 years to figure out that the ones which preach how great and wonderful Liberty is the loudest and the fondest are the ones that either get paid by John Hewitt or are shareholders or are both.

  Those which respond to this thread insulting other’s postings and comments are Liberty plants. John Hewitt and his minions really “hate” people talking or posting anything bad about Liberty; of course it doesn’t help them any to have bad publicity. The thing is the more people they screw over the more enemies they make and the more enemies they make the more people are willing to talk.

  Finally, buyer beware. Don’t do it! They will make all kinds of promises to you and then break each and everyone one of them and then accuse you of being ungrateful or my personal favorite under performing or just a plain bad leader and manager.

• Bankrupted is correct on all counts in my opinion (and of course, these are all my opinions in case “big brother” is watching as Bankrupted mentioned. Liberty is a marketing machine for itself as the franchisees are only there to make money for jth corp, the parent company of liberty, and not the franchise owners. take a look at the financial statements for the last 3 years for jth tax inc and subsidiaries, over 40 million in after tax profits on the backs of all the franchisees losing money. i agree that you would want to be involved with a franchisor who makes money, but the franchisees will never see it and the 40 million in profits is from all of us who went bankrupt or are paying off the loans for the next 10 years. liberty constantly takes back franchises that can never be successfull and then resells to another person. i have heard all the comments that former franchisees only lost money because they are bitter or didn’t know what they were doing. i’m sure there are a few out there who didn’t know what they were doing and bought the lines liberty sells that you can make 50 to 100k working only 3 months a year (what they don’t tell you is that probably means gross, not net after your expenses). however, like others on this thread, most of us are hard working, successful business owners who made a bad choice getting involved with liberty. Buyer beware is an understatement. If you like working hard for nothing and then losing your investment, then jump in. Its really unfortunate that this franchise is or was rated as a top franchise.

• Almost bankrupted —We too avoided bankruptcy but are still subsidizing our franchisor with the payment on startup debt for a UPS Store that a stand-by franchisee got for pennies on our investment.

  Wow! you say Liberty realized “over 40 million in after tax profits on the backs of all of the franchisees losing money.”

  Can’t you see that this business model “franchising” is protected in the status quo of regulation and the law because it allows those on the top of the pyramid to maximize their profits while the franchisees on the bottom of the pyramid “buy the risk” when they buy the franchise.

• How do you former franchise owners feel about the cost to your customers. My d-in-law went to a liberty, asked for an estimate, they said they couldn’t give her one, depended on how many forms, etc. (which I totally agree with) and when her simple taxes were done – they charged her $350 (gave her $50 cash back)…..I’ve been paying someone to do my taxes for over 30 years and NEVER paid more than $125 for all the necessary forms. Plus they wouldn’t give her her w-2’s etc. back until after her payment clears. I cannot believe they can charge her $350!!!!!!!! Do we have any recourse?

• Liberty uses the “Closing the Sale” technique. DON’T drop your fees. Increase the service to meet your price. Pricing is discretionary. If the client is stupid.. charge more, discount less. That’s why Liberty targets AGI (Adjusted Gross Income) territories which are the lowest in the nation or $35k and under. Very much a sales oriented trick and the $50 Cash in a Flash gimmick is targeted at the lowest income earners in the nation who jump at the chance of walking out with $50 cash! when in fact many franchisees ADD $60 to the invoice. John Hewitt has little concern for HOH filers who get a $6000 refund (and need it) and don’t blink at a $350-400 fee. My average net fee was $200. John Hewitt is the lowest form of predator who also claims to be a “christian”. Oxymoron to say the least.

• Honestly, owning a Liberty is a lot of work during tax season. It is probably better for a single person than someone married with kids. Truth be told, I’m a second year franchisee and I’m not that disappointed. The thing is, you really have to work hard, on season and networking off. Like any franchise outside of fast food, it requires lots and lots of work. It’s not easy. Picking up the right location and office is a big part. You are lucky to break even your first year. However,there are many success stories.

• Most Liberty franchisees reach their point of disillusionment after their 3rd year.

  All businesses require a lot of work, but Liberty, in particular, demands the same amount of work as if you were on your own without their help. It seems to me that if I am paying about 20% of my gross income to them, I should have a little less effort to make the business run. I’m paying them for their expertise to make my life easier, not harder.

  As for location selection, Liberty really has no clue as to local needs or traffic flow. My AD not only did not know my area, his first trip to my state was to help me with site selection. This is not a real boost for my morale.

  The point here is that if you are going to work hard, network in the off season, and generally do what it takes to run a business, why do you need them?

• No business is worth it’s salt, if its not a full service business. I am glad to know that I choose the right tax franchise that allow expansion, and not just a popular named business.

• What is this “Try it before you buy it” crap. They mean buy it so they can charge you 12% on the balance and then intercept your fees to pay themselves back. I’m down a $100K and trying to find a way to get out. They won’t even let me give it back to them unless I leave the system all together.

• The “try it before you buy it “crap is that…just crap. Liberty wants to trap you even more financially so that you are literally their slave. It also shows that they are having difficulty selling territories and are trying to do an apparent discount. Don’t forget, you are still liable for the royalty fees anyway which includes their marketing fees. This includes the $5000 minimum for a first year territory. Yes, they intercept their fees first so you will have little to show for your effort. Some deal.

  Even if you leave, they will most likely sue you.

• Please READ VERY CAREFULLY (from Liberty Tax Intranet 2/22/2010):

  “Are you ready to expand your Liberty franchise operation by purchasing an unopened territory? Would you like to finance up to 80% of the $40,000 franchise fee through a loan that is interest-free until January 2011, and make interest only payments for the first three years? Then take advantage of this unique offer to grow with Liberty, and secure your additional territories!

  Expansion Special Details:
  Completed paperwork and a 20% ($8,000) down payment must be sent to the National Office no later than March 31, 2010.

  Liberty Tax Service will allow you to finance the remaining 80% of the purchase price over the following four year period by signing a promissory note.
  o ***Interest will not begin to accrue until January 1, 2011***
  o Make Interest only payments by February 20 in 2011, 2012, and 2013.
  o Make the final payment (principle and interest) no later than February 20, 2014.
  The Expansion Special is limited to the first 100 territories to close.
  You must open an office in your new territory by January 8, 2011.
  This offer is good through March 31, 2010.
  Program is open to existing Franchisees in good standing.
  Contact your Area Developer to start the process today!”

  Upon signing an agreement in July, interest was charged from that time on the ENTIRE BALANCE. Even though the office was not opened until the following January and the first 20% was not due until the end of February, the interest of 12% was applied from the date the Spring Espansion Special agreement was signed.
  Think how you feel paying 12% interest on $32k ($3840 interest per year for four years) from the day you signed an agreement (in this case the special is open to March 31st!) But you won’t find an office until October because you don’t want to pay rent unnecessarily)

  John Hewitt and his cronies are bottom feeders preying on people desperate to own their own business and too deep in debt after their first tax season to be able to get out. God help them all.

• As a former employee, I have seen the crap that a particular franchisee gives the employee (I do not believe all franchisees are like that!) and the taxpayer:

  Promises of a good income. What they don’t tell the employee is: The fees to a taxpayer for a “simple” return is $400 -500. Add a Schedule C because the taxpayer was given a 1099 instead of a W-2 and add at least $100; as much as $200. When a customer walks-out, the bonus is zip.

  As a former employee of an EA, I saw him charge $175 to $250 for the same returns. And he was living comfortably!

  These taxpayers are mostly Hispanic, many African Americans. Charging for a Schedule M or EIC is unconscionable! Charging for a Schedule C at all, at those rates, when the taxpayer should have had a W-2 instead of a 1099; immoral!

  MANY taxpayers walk-out when they learn (not “told” because we were NOT supposed to tell them!) of the fees. My employer could have 5 times the number of returns with few walk-out if they would have charged 1/3 the fee!

  Greed supersedes logic…

• Pingback: LIBERTY TAX FRANCHISE: Praise from 1st Year Owner : Unhappy Franchisee

• New post on the Liberty Tax franchise.  LIBERTY TAX FRANCHISE: Praise from 1st Year Owner.

  Your comments invited.

• This site and these comments are just downright sad. For anyone looking to purchase a franchise please do not listen to these people because these same people will fail at most things they try in life. I am a Liberty Franchisee and have been for 6 years and here is what I have seen with so many franchisees. They buy a Liberty Tax Franchise and somehow they confuse all the hype for an assurance that because its a franchise you are guaranteed to make money which is not the case and not what they are ever told by anyone. Every franchise has its hype and as with any franchise unless the franchisee buying the business takes the responsibility and actualy learns the business side of the business so they know exactly what it will take to be profitable there is a very good chance that this franchisee will fail.

  Liberty has never been at fault for me loosing money or making a profit. That responsibility falls on me to determine what actions are necessary to maintain my profit margins. The better understanding I have of this the better job I will do maintaining my profitablity and positive cash flow. Libertys system is very large and and there are many of items to choose from when it comes to marketing and focusing on items that works for you is very important and imperative you figure out quickly. Even if Liberty says I should do something, I will not do it unless I know that it will produce the right results, so I choose the items I do that get me the greatest success for the least cost. Liberty has never forced me to do anything that would make me loose money that I did not have 100 percent control to change. This is called personal responsibility. Blaming Liberty for items like this is just called foolish. Sure Liberty is not perfect and sure I even am not in 100 percent agreement with everything they do. But I chose them and I chose them for a reason and I can honestly say that I made the right choice and even though we do not always agree it has been a very positive relationship on both sides and a Win Win deal.

  If your going to buy a franchise or if your going to start your own business the best advice I can give you is not go out and talk to failures. Go out and talk to the best of the best, which that could be in the franchise world or in the Mom and Pop world but I promise if you search the best people out you will find plenty that will be more than happy to let you learn from their mistakes rather than you having to pay for your own which is very expensive. Understand what it is going to take to become profitable and understand how the figures interact with each other. If you educate yourself as much as possible and seek out success and do everything you can to learn from their mistakes you will be well on your way to succeeding no matter if its franchise or other.

  Do not seek out the failures and people who spend their life blaming everyone else for there weaknesses and there failures. These people never do the things necessary for success and always have a great reason why someone else cause there problems that led to there failure. Its the same way in every franchise and in every business. Failures always have an excuse and they always have plenty to say but when it realy counts they never have many positive actions which causes them to repeat their failures over and over.

• Rob says “For anyone looking to purchase a franchise please do not listen to these people because these same people will fail at most things they try in life.”

  What does this say about the Liberty Tax franchisee selection process? Are you saying Liberty recruits people with a record of failure?

  Rob says “They buy a Liberty Tax Franchise and somehow they confuse all the hype for an assurance that because its a franchise you are guaranteed to make money which is not the case and not what they are ever told by anyone.”

  Wow! I wonder where they got that idea?

  Here’s what Liberty says on its franchise website: “If you have little or no experience running a business, a small business franchise opportunity will give you a step up on the competition. You’ll be allowed to use the franchise’s trademark. That’s invaluable in starting a small business franchise. Customers will know who you are as soon as you open your doors. And they’ll be more willing to use a brand they trust. You’ll also get a proven operating system to follow. You won’t have to worry about the pitfalls usually associated with start-ups. You’ll have a ‘how-to’ guide at your fingertips.”

  Rob says you need to learn business on your own in order to be successful. But Liberty says they give you all you need:

  “Your support team provides the system, tools, and concepts you need to be successful as a franchisee. At Liberty Tax, we are a family. Together we accomplish the Liberty Tax mission.”

  Rob says “Every franchise has its hype and as with any franchise unless the franchisee buying the business takes the responsibility … this franchisee will fail.”

  Rob, I agree with the last statement, but when a franchisor tells people no experience is necessary, that they meet all their criteria and they will receive everything they need to be successful for their franchise fee, I don’t think that’s hype. The word “fraud” seems a little more accurate, IMHO.

• “Rob” – “Koons”
  Only ROb I know is Rob Koons who writes so much like you do on the discussion board but your spelling and grammar is like Steve Tyler.
  Rob, I suggest you look at the top 100 offices list. Note the 100th office has completed 1145 tax returns. Accept that at least 100 of those are free to meet the franchise requirement of a minimum 100 free returns.
  Hence, office 100 of 3000+ offices just exceeded 1000 tax returns.
  And we all know the percentage net profit for Liberty offices is 30%.
  1000 paid x ANF $200 (check the top 350 entity report to see the ANF$) = $200,000 @ 30% = $60k
  office 1 making $200k
  office 100 making $60k
  Liberty has now been around more than 12 years.
  where does that put offices 200-3000?

  Yeah Rob….. we are all failures. We always have an excuse. If any financial analyst worked the numbers you might understand the model is a failure itself unless you have LOW LOW rent, operate in a sub $7 p/h min wage state.. blah blah.

  I question your sincerity but congratulate you on your success. Most of which is not duplicated by others who don’t have the knowledge to do so.

• Once again nothing that is being said on the website is fraud. Franchising does give you a leg up and Liberty does bring a ton to the table. No where does it say that by joining Liberty that because you have no or limted business experience that you do not have to ever learn the actual business side of the tax business. You do not need to have tax experience or business owner experience to succeed but as with any business you better hire the tax knowledge very quickly and also you better take the time to learn the business side of the business.

  Liberty also brings another thing to the table that in todays world is just not out there any longer and that is the financing they offer to there franchisees. I would explain further but I understand that the readers of this website will find anthing positive being done completely negative and part of a conspercy theory.

  I sold a new franchisee one of my offices and he paid full price which means 1.20 times net fees. He was 100 percent financed over 4 years and after his first season he had all the money needed to get into next season, he paid all of his bills, and still took a 40k profit. He was 25 but knew what taking responsiblity was about and instead of depending on the franchise to make him succesfull he spent long hours learning and executing.

  I still go back and say the comments here are not based in fact, they are nothing more than mob mentality attacks where everyone feeds off of each others failures and blame someone else.

• Oh yeah by the way the franchisee I sold my office to had a bad credit when he purchased and after just 1 season was able to raise his score by 90 points because of his hard work and dedication.

• In response to Rob: your assumption in those who failed are at fault is incorrect.

  I will admit some individuals spend there lives blaming others for there failures, however I am not one of those.

  Liberty failed me! Period! I was top 3 in my DMA. I knew the business inside and out, I knew every aspect of it, otherwise I wouldn’t have been top 3 in the DMA (and the DMA is large with many offices, so don’t think i’m talking about a DMA that has only 3 or 4 offices either).

  Perhaps you are from a small town and fixed expenses such as rent are small, however in large metropolitan areas, rents are high (yes, even in this ecomony) additionally the wages are high too, where we are the state minimum wage is considerably higher than the federal minimum wage. Insurance is high too in our area! You start adding all these factors in there is no way you can make a profit. There is only so much you can charge a customer, Liberty insists on retail locations which in large metropolitan areas will run you at $3k-$5k a month (yes that’s right $3k-$5k a month even in this bad economy right now)

  Finally, for the record and again for those of you who may not have had the opporturnity to read my comments from last year; I was profitable my situation was that I was cash poor. I had very high bank product clientele and since I was financed Liberty would fee intercept all our revenue and release very little.

  However I was such a good business person I was still able to be on top year after year for 4 years. When Liberty told me I had to put in more of my money in after I had already put in all I had and everything my family had, I just turned the territory back to them; my family and I had no more money; I didn’t get a paycheck for 4 years; Liberty wouldn’t allow it, yes I was profitable and I could’ve gotten a paycheck, but since there was no cash in the bank to pay me, well then, for those of you who know how cash flow statements work and financial statements you get the picture.

  After soul searching for weeks and discussing the matter with my family, I made the decision to turn the territory with 3 stores in it back to Liberty, only to have them (Liberty) sue me and spread malicious lies about me.

  So Rob you keep dreaming on about how wonderful Liberty is, your probably a plant anyways and a Corporate employee or a former corporate employee who was given the territoy. Whatever the case, as nice as Libery is to you right now they will turn on you quite suddenly and unexpectedly and when you are only trying to do what is right by you and your family.

• By the way, all I asked Liberty was to release the fee intercept for one tax season.

  I had only one season to get cash flow positive. They said no! Which is why I walked away.

  So in essence I did what was right for me, disassociated myself away from a company that refused to help one of there top frachisees in the DMA. Liberty for whatever reason found it necessary to aggressively lash out against someone who posed absolutely no threat once I had closed the nightmareshly chapter in my life.

  For those of you reading this blog… Just remember, the only ones that make money in a franchise is the franchisor, Franchisees have little recourses and are not protected by the regulators who are suppose to watch after predatory franchisors like Liberty.

• Rob, Rob, Rob… you’re clearly not paying attention.

  Instead let’s talk about the number ONE Entity.

  Khalid Baste of Chicago.

  Three years ago he owned 10 territories. I expect he owns more now but let’s say he still owns just 10.

  Net Fees – $ 2.5M – Total Returns – 9800 – Average Net Fee – $305
  If you work the numbers you will see 1600 returns were free. Or an average of 160 per office.
  The NUMBER ONE office in the country is his with 3500 returns.
  160 free.
  So 3340 returns multiplied by the ANF of $305= $1,020,000
  That leaves $1,480,000 from 9 offices or $165,000 per office.
  But then again he appears to own two other offices in the top 100 combined for 3200 returns (less 320 free) @ $305 ANF = $880,000

  Summary

  $2.5M – total
  $1.9M from his top three offices
  $600k from the remaining 7 or $86,000 per store before royalties ($16,000) rents ($12,000 minimum), payroll ($25,000 min.), utilities/phone/internet ($3,000 min.) and marketing/paper, printer carts, food, etc…. ($5,000 min.) Leaves you with $25,000 before payroll taxes, income and business taxes, going to the convention etc…

  Not everyone is a Dan Castellini but they hope to be.

  Not everyone is a Rob Koons either.

  Just accept the fact that although we might all be able to read John Hewitt’s biography, most if not nearly all, will never reach his success or come ANYWHERE near it.

  GO CAVS!

• My intent here is not to attack you or try to convince people you or anybody else is bad. I have no doubt that you ran a good operation and also that you experienced cash flow issues while running a decent profit margin. This happens very easily when all the financing is short term and you have either not been able to or do not have the credit to obtain outside traditional financing. I am not sure where 800 to 1200 square feet of retail space runs 3k to 5k a month. I am in a major city and rent runs for my 5 offices 1300 a month.

  We live in a country where we have freedom to say what we want and we also can come on forums such as this and tell our side of the story which usualy does not include all the facts. This is not to say that this is being done on purpose but I could spend many hours pointing out where the items being stated on this board are not the entire story just based on my knowlege of how the system works and there were other avenues that could of been taken instead of quitting or filing bankruptcy.

  I am not a plant and I am not a blind numb robot willing to agree or back Liberty no matter what. I have had my disagreements and have chosen a different route of solving them. I invested my life savings and put everything I had and then some in what I currently own. I also have never failed in business mainly because I have never quit. I could of very easily had nothing but failure stories except my dertimination kept me from ever walking away.

  Your opinion is that Liberty caused this to happen to you and I will never change that no matter what kind of proof I bring to the table. My comments are more for the prospective business owners and to guide them down the right road so they do not have to make some of the same mistakes I did. Inside of Liberty I have been very succesfull at doing this and the Liberty Model can produce great successes and has produced great successes. When getting into business seek out the successfull people and find the ones who are willing to let you learn from the mistakes you made. You will be amazed how many business owners out there will freely give their time to try to help you. I failed to do this a number of times and I have had regrets not doing it because it would of saved me a ton. But I do spend a great deal of time working with business owners showing them my mistakes and guiding them down the road where they can learn from my mistakes rather than their own.

  I wish you nothing but the best in the future and have no doubt you are very talented. I imagine if we were to sit down and talk while we would have our areas of disagreements I think we would also find that we would learn alot from each others experiences.

• John Hewitt- Read these postings and know that we no longer thing you are a “demi-god” as all of your minions make you out to be. You have done not one think to make me think you care about them. You give unknowing fools, like I was, lofty expectations, poor business advice and then offer to lend me money at gangster interest rates. Does it make you sick to know that hundreds of potential loyal followers are embarrassed to been have been bamboozled by you? It should. You could fix this by changing tactics but you won’t. It’s in your nature.

• And what was the $29.00 Liberty Tax Fee that you charged on all bank products about? I didn’t see any emails about that. Money grubber.

• I am not going to argure figures pulled out of the air with assumptions pulled out of the air for well know franchisees. Different franchisees have sat down and have different plans and different goals and have different amounts of cash reserves and credit lines. Once again the only reason to attempt to do that is to prove your point using half of the information or half truths.

  If you were working at a factory making 80k a year and I gave you a choice between buying 2 homes and I was going to finance either one for you which one would you decide to purchase. One home is valued at 100k and I am going to sell it for 100k and the other is valued at 1 million and I was going to sell it for a million. We could argue all day that if I sold you the house for a million that I was not doing what was in your best interest and that I was setting you up to fail. Only till the true facts come out will we be able to honestly say which made more sense. I was going to sell you the 100k home and was going to finance it over 12 months. The 1 million dollar home I was going to finance over 200 years. Now with all the facts its clear which one was the best deal and there probably was no way you could of bought the 100k home but you could afford the 1 million dollar home easily. If you do not have the full story making a judgement on a situation is almost impossible.

  I started with Liberty my first year with 4 stores. In reality 1 was an existing store and 3 were new. I was well capitalized for 1 maybe 2 stores but was not for all 4. I messed things up and made so many mistakes the first year that most would of never made it. After 6 years of owning a total of 8 Liberty Stores, I have sold several, I finaly figured out the entire picture and figured out what it took to dig myself out of the hole and have not only the Profit Margin but also the Cash Flow needed to make this work.

  You state the model does not and will not work, You are wrong and it does work but it does take hard work and execution. It just is not a select few who figure out how to make it work either. I worked with alot of franchisees this year and everyone of them have been able to do the same thing I am doing. I saw more first year franchisees reach profitablity this year than I have ever seen before. I saw second year Zs who struggled greatly last year able to turn it around and either reach the break even point or turn a profit.

  I have made a bunch of mistakes since I started with Liberty but can sit here and tell everyone that the mistakes were mine not Libertys. Liberty has afforded me the financial backing to live through those mistakes and press on. Not only me but they provide this financial backing to most Zs who operate within the system. Yes it is short term financing but it is better than having to shut your doors as you would with many other franchises.

  Since many of the Zs I know and have worked with do read this discussion thread off and on I imagine we will at least get a more balanced picture of what is realy going on.

• To all the prosepctive franchisees of any franchise and after reading a site such as this you start to doubt if you should consider a franchise let me share what I have learned from my personal experiences from all the businesses I have been in. This is not Pro/Con anyone or any company but something that all people considering buying a franchise or going into business needs to look at.

  Before deciding to buy and brand new territory or area you need to see if that particular franchise has any existing stores or locations for sale by existing franchisees. Opening a brand new location in any business can be a ton of work and while it is the best option alot of the time there are alot of opportunities to buy an existing location and work the terms of the sale out to your benifit increasing the odds you can become profitable quickly. Remember price is not everything so be sure to evaluate everything as a whole. Terms of the sale sometimes can be a very big motivater to buy an existing operation.

  First you have to develop your skills at evaluating an existing location and what you will have to pay. In so many instances I hear people say that they considered buying an existing location but since the current owner owed 100k and was not able to make it there was no way they was going to pay that much because it was overpriced and way too risky. But in reality as I stated in previous post unless you know all the facts and have the ability to evaluate the facts you may miss an opportunity. If the current owner owes the franchisor 100k this year and cannot refinance or spread these payments out. But since you purchasing the business would allow you to finance the 100k out over 3 to 4 years you need to evaluate how that would effect your profit margin and even more importantly your cash flow based upon those terms.

  Many times a business owner can be in a tough spot owing money as in the example I just stated. While it could take the current business owner 2 to 3 years to reach the point of positive cash flow (You have to know the difference between Cash Flow and Profit) with the terms you would be able to get on the purchase you would be able to achieve positive cash flow first year.

  There are many more reasons to consider and evaluate buying existing or new. If you do your homework and seek out the people who can answer your questions or teach you items that you do not understand, you can avoid the fear your going to be taken advantage of and be confident that you are doing the right thing.

• Rob:

  Reading your story, it’s clear that 1) you had a lot of prior business experience and 2) that you went through an incredible period of trial and error with multiple stores before you actually mastered this business model, and 3) you were well-capitalized enough to survive #2.

  People usually buy franchises because they don’t have extensive business experience and they want to eliminate the trial and error of a new business start-up. That’s what Liberty Tax promotes and that’s what franchisees pay for. If you reread the excerpt from the Liberty website I posted and compare it to your account of what you went through as a franchisee, it’s clear that franchisees are being recruited with unrealistic expectations about how easy this is and how comprehensive the support is.

  It makes one wonder why you aren’t upset that you paid for a plug-and-play system yet you had to go through years of trial and error. It makes me wonder why you are happily paying LT fees when you clearly could be working as an independent and pocketing the difference.

  My guess is that you’re actually an Area Developer (or franchise salesperson) and that you make money not only from tax returns, but when people buy franchises. Good guess?

• Once again your assumptions are incorrect and it seems like anything that is being said will be turned around to prove your point of view no matter what.

  The reason I struggled the first couple of years was not because of a flawed system. Plus to add to that my business experience did not help me the first year or for that matter the second year as you try to imply. My business experience and my choice to follow my own way of doing business is what caused the vast majority of my issues. Yes Liberty provides a track to run on but it is still up to the franchisee to either stay on that track or venture off and try their own way of doing things and that is what I did.

  My first year I was supposed to open 3 offices and the 4th was an undeveloped territory that I had to open within 2 years. I was advised by my Area Developer not to open an office in that territory because I had enough on my plate. I chose not to listen and located a location and made my case that it should be opened that year and it was approved but it was approved because I pushed the issue.

  Looking back at that year I made multiple decisions when it came to pricing and to promotions along with other items that were not part of Libertys system and I was advised strongly against but because I thought I understood the marketplace better than anyone else, I went ahead and did things my way and it cost me alot of money, not only that year, but also several years after that. There were several different things that I did which looking back if I would of slowed down and read the operations manual and focused on it and not my gut feelings that would of saved me a ton of money. As with any franchise the franchisee is still the business owner and with that allowed to make certain decisions that may turn out to be very wrong and will cost them money.

  What my business experience did allow me to do is to sit down and evaluate Libertys system and realize that I could follow the system and I could make a profit. I could do this even though I made a ton of mistakes of my own making at the beginning. Over the past several years I have seen many new Zs come in their first year and avoid the mistakes I made and either reach the break even point or make a profit.

  As far as the accusation that a Area Developer is nothing but a salesperson and shouldn’t be trusted is just once again throwing facts out the window to try to damage someones character to prove your opinions. There are 2 types of Area Developers. One is someone who has invested their own money purchasing a region and in return for that investment, and that investment can be very very large, they are responsible for the marketing and sales of the remainder of the territories and also the support of all franchisees in that area. It is a business like any other business and there are different levels of talent among Area Developers. But I will say this, that they have put up a sizeable investment and the idea that all they have to do is sell territories to anyone who fogs a mirror to be succesfull and make money is just wrong because if the area they own does not perform it will hurt them tremendously financialy. The other type of Area Developer is an employee of Liberty who is in charge of a number of franchisees and who are required to follow very strict guidelines set forth by coroporate. Neither are just “salespeople” .

  I will let other franchisees who have suceeded and happen onto this site explain their experiences with Liberty. There are plenty of happy franchisees out there and there are plenty that are very glad they made the decision to buy.

• Rob,

  I am a former HRB supervisor/tp and I have also been a Sch C entrepreneur. I believe what you are saying is true. HRB wasn’t “that bad”, but I didn’t know it specifically from an owner’s point of view. I do know the tax biz from an owner’s/entrepreneur’s point of view and after receiving my degrees in ACC and BUA, I am very intrigued by LTS. The company is growing, when the “Top 2” faulter and LTS is growing, I have to wonder why… but I think I know.

  This blog has been very helpful, but I agree that the majority of the complaintants on this blog are simply “passing the buck”. Perhaps they didn’t have experience or adequate counsel regarding the legalities of their contract. I will try not to make the mistakes they made, and I will consult legal advise with an open mind.

  Thanks for the input,
  llm

• llm,

  I think you pretty much nailed it. After being an entrepreneur for 18 years I believe that it is very easy to loose track of what is important in running a business and start to focus on all the extra bombardment of information you receive and instead of executing the plan that should be executed, you start to drift here and there letting things distract you from what you need to do.

  I know if I could go back and uncomplicate my view of the business and just focus on the few main points I should focus on that I would of seen success much sooner. The tax business is fairly simple business and if you look at Libertys model and break it down, it is not that difficult to hit profitability and have success. I say this after 6 years of doing this so I understand it is much easier to say now. But I know for a fact that the tax business and that includes Liberty is a great business and the profit margins are there and compared to other industries are great.

  I wish you all the luck in the world, no matter where you are or what company you are with, you experience success and you are able to pass that success on to others. Having the ability to help others succeed is what makes business so much fun and worth all the headaches.

• On a site like this it is difficult to separate the bs from facts. The truth lies somewhere between the nuttier criticisms and the kool-aid drinking fluff.

  Anyone who only charged $135 average in a high cost-of-living area (or any area for that matter) was not following Liberty’s recommended pricing. That’s a fact. And as far as the EAs and other firms people say chaged $125 on average, so what? H&R Block has the pricing power in this industry. Their average net fees are public record. A Liberty franchisee would be a fool to set their pricing lower than Block. Even in rural areas the average net should be at least $175, in average areas $200+, and in high cost areas like NY or Chicago, it should be over $300.

  There is a fear new franchisees have that they will charge too much and get no business. It took me three years to figure out that I had to follow the company’s advice. Everyone thinks they know better. It’s human nature. And it causes failure. People who have to change the system according to their own thinking should not buy a franchise, they should just hang out a shingle and go on their own. To buy a franchise and not follow their advice is just foolish.

  The person who claimed $350 for a “simple” return is nuts. No business could survive if it did that. Even in the highest net fee offices I’ve never heard of $250 for a “simple” return. Block charges 1/3 that for a “simple” return, so when you read nonsense like that just understand that it’s inflated hyperbole from a very disgruntled person. I’m happy to share honest information, but I have no patience for nonsense.

• Joey you speak the truth, but I’m not sure your info regarding the price structure at HRB is accurate. As a former HRB Sup/Tax Preparer, I work for an accounting firm in MI where times have been rough. My experience over the past 5 years with this firm has been that the new clients that who have come from HRB are amazed that we charge 1/2 or less than they paid for their tax prep. Not to mention the extreme additional fees they pay to get RR.

  I am in the process of acquainting myself with LTS, so I will judge them as I learn more. I’m not yet a franchisee, but I am interested. LTS has something the other 2 major brands are waning on or even lacking based on the recent reports.

  HRB charges outrageous fees based on the expertise of their staff. Yes, patrons can request experienced tax preparers, but the “average Joe” who walks into HRB gets “part-time Patty”, who works nights at the local gas station. The hefty fees for “part-time Patty” do not correspond with her expertise or training. That’s what I know.

• I just got back from Virginia Beach and the annual LTS convention. I have been a franchisee for 4 years, and worked for another LTS franchisee for 2 years before opening my own office.

  I currently have 3 opened territories, 2 of which I started as undeveloped territories and one that was purchased from another franchisee who needed to downsize.

  This was my first venture into franchising and I am extremely happy and glad that I chose LTS for my business.

  I have been doing taxes for a number of years (having learned from my father in my teen years) and was planning on doing taxes as my “retirement” job. I could never just retire and sit around all day. This was very well thought out on my part. As I was approaching retirement I decided that taxes would give me what seemed to serve best for me….part time job leaving the rest of the year free to travel and do what I wanted to do.

  I live in CA so I was required by the state to take a 60 hour course which I took through HRB (I had never heard of Liberty Tax at the time). HRB didn’t hire me (although I had the top score in the class) because I also held a full time job and couldn’t give them the number of hours they wanted me to work. It just happened that a friend of mine brought me a flyer from LTS as a new office was just getting set up next to her office. I called the number and the rest is history.

  I tell you all of this because I was originally thinking of just doing my own gig. Hanging my own shingle as they say…but being a female, was not all that comfortable going to “strangers” homes to do their taxes, and even more uncomfortable with having people come to my home for me to do their taxes. I had not even begun to do research of opening my own office (non franchised) when I discovered LTS.

  As Iook back, I can see I would have failed without the structure of LTS. Yes, I will admit it took me 4 years to actually have a net profit, and the cash flow is still the toughest part of this seasonal business, but I have a pretty good business sense, and treat my clients and my staff fairly.

  I haven’t yet topped 1000 returns as I read in prior posts here, although with just under 900 returns in year 4 at my first office, I have been able to pay myself a salary (Liberty has never told me I cannot pay myself!) and pay all my bills.

  I will agree that the 12% interest that LTS charges is a pain in my bank account, but I only use them to finance new territory purchases. I have decent enough credit that I was able to secure a small line of credit from my bank which gets me through the off season. I usually have it paid off by the end of February.

  Other posts in this forum have mentioned “big bad John”. If it wasn’t for John’s experience in the tax industry and entrepreneurial talents, LTS would not be well on the way to being the #1 tax preparation company in the world.

  Given the changes going on with the IRS and the upcoming requirement for all tax preparers to be registered, and testing and continuing education requirements it only points to the difficulty mom and pop’s are going to face in the future.

  I am glad to pay my royalty fees to be on the cutting edge of what is happening and being in compliance with these changes. I figure if I didn’t have LTS Corporate on my side to assist me with keeping up with all of this, I might have to spend far more than 14% of my net fees to an attorney to make sure I was in compliance.

  I realize this thread was started by “unhappy franchisee’s” but agree with some of the other comments from happy franchisees. If you fail at this, or any other business, take a look at what caused the failure. Is it because you EXPECTED to just throw your money at a franchise and it would be GUARANTEED to succeed no matter what you did (or didn’t do). Success takes work, success takes knowledge, success takes time. Take responsibility for what really caused you to fail, and stop blaming everything on LTS. LTS gives you the tools to be successful, what you do with the tools will determine your success.

• I’m a 5th year zee with Liberty Tax. I have 2 offices, one is a 5th year and the other is a 3rd year office. Bought a 3rd territory this year to open a new office. All offices have been in undeveloped territories. Back when I started I had all of $500 saved up in a checking account. Other than that and good credit, I had to rely on a lot of determination and grit. I wear the costume just about every day from Jan 1 through the first peak. At least I didn’t have a life savings to lose.

  Negative Nancys will certainly scare you off. You just have to realize that some of those folks will either always be a negative nancy, didn’t have it in them to wear the costume, or in some cases, just didn’t make it and want someone to blame for their failure. Granted, I don’t know what it’s like to throw in the towel and accept losing my life’s savings. It would be a bitter pill. And then to be sued to boot.

  Yes the LTS system is far from perfect. Even John Hewitt has flaws, and he’ll even admit to having flaws if you ask him. AD’s can be a limited resource. As soon as I realized that I moved on. Even after finding myself crying under a desk at 2am during my first tax season and asking myself what had I gotten myself into, I still love every moment of my experience. It’s been worth every penny.

  I’ve enjoyed reading this forum. This past week marked a pretty big shake up in the LTS system with a top franchisee being forced out. That’s what brought me here. I hope and pray the best for her.

  As for the miserable, well, they love company. I’d rather not join that club. My business is good. I never could have 0succesfully started this buisness on my own without Liberty Tax.

  Twelve percent simple interest? Crying the blues over 12%? It’s the transaction fees that will get you, not the 12 percent simple interest. Hopefully you can figure out what that equates to in an APR calculated daily.

  If you can do things better, than by all means.

  I’ll just drink some more of the Kool-aide.

  Good luck.

• P.S. – if you’re wondering if I’m profitable. The answer is yes. I’ve been profitable since year one. Year one was rather modest, and wasn’t enough to live on or pay all bills, but we’ve made it even with all the mistakes I”ve made. One mistake I made was I didn’t start taking corporate financing soon enough. It was after our 4th tax season that I was able to take home the same amount I took home from my old job, which was $40k/year….and I’m talking my net check. My household runs on $2500 per month. We lived paycheck to paycheck then, and live paycheck to paycheck now…..and it’s hard when you only get paid once a year. But that’s what has made us that much better. My next goal is to completely pay off our house in a tax season and then live on a home equity line of credit the rest of the year. We’d save about 6k in interest alone on the first year.

  There’s no such thing as a sure thing. Plug and play? Now that was funny.

• PPS – I’ve been doubling my AGI for the last 3 tax seasons. I’m hoping to continue the trend. It’s easy when it goes from 15 to 30.

• “This past week marked a pretty big shake up in the LTS system with a top franchisee being forced out.”

  What happened? How can they force a top franchisee out? Why would they want to?

• JDogg: you’ve so contradicted yourself on how wonderful Liberty is. I mean if they are so wonderful then why in the World are they forcing their top franchisee out? It makes no sense to get rid of your top producing franchisees.

  Anyone with any shred of common sense knows you don’t get rid of your top franchisees, then again, I heard that this year although Liberty may have grown in number of returns there offices didn’t generate the kind of revenue they were once known to do and in fact there once top producers were down in revenue. Again this goes back to Liberty is only concerned with # of returns and not necessarily the franchisees making money. Afterall, John’s goal is to be the” #1 tax preparation company in the Universe” notice how nowhere in his goal does it say “#1 profitable tax preparation company in the Universe”.

  But like “Guest” I am curious to know what happened, how they forced this top franchisee out, and why they would want to. Additionally, why don’t all franchisees know about this and how do you know about it? (I mean my sources didn’t know about it, and they are usually very well informed).

• OMG! It’s Annie Fuller!!!

  She is/was a Top Gun Franchisee. She was paraded around as the most successful franchisee in Liberty Tax Service. The would have franchisee send there staff to train with her.

  Why in the World would you force out your Top Gun Franchisee? Come on Annie Fuller! She was there best marketer and franchisee. I don’t understand.

• How do you know it’s Annie. Not mentioned above.

• There is a ton of information being said that is all just guessing and assumptions. No one will ever know what the real story is because Liberty will never speak about it.

  Annie had the potential to ge a great Z but to say she was the most succesfull Z ever is an overstatement of gigantic proportion. Annie had a ton of potential but that potential was never allowed to grow into anything because she was contracted by Liberty to promote and train. Instead of being a Z she never was able to do what a Z should do and thats run their business. She was expected to say certain things and do certain things to maintain her posistion which in the real world she would of done differently especially when it comes to her business.

  The people stating that no one can make money and stating that any one who claims to make money is lying is just old. Liberty Tax is one of the best opportunities out there today and the positives far outweigh any of the negatives. Now being honest there are a ton of Z who have not got the ability to capitilize on the tremendous opportunities because they are compeltely lost with all the drama and story lines. They allow all the talk to confuse them to the point of ruining their own buisiness.

  Liberty Offices can ahcieve very nice profit margins and just as nice Cash Flow. Liberty is one of the few franchises that offer financing to its Zs and while it is a little high considering business loans are not available anyplace especialy if you need the money, it gives Zs who understand business the ability to grow without putting their own cash in the game.

  Everyone can sit around and create a stir about things they will never get the full picture on or they can determine to run their offices and figure out more and more effecient ways of doing business. All the drama and all the stories will get you no place and will do nothing but confuse you and ensure you never reach the success that you could.

• Her name as well as what happened is being posted on other websites by existing franchisees whom ate upset the darling of LTS has been forced out.

• How did Liberty Tax force franchisee Annie Fuller out?

  Have they done this before to others?