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?
.
Have you seen Liberty Tax Services rating on Glassdoor.com?
Liberty Tax Service
Overview | Salaries | Reviews | Interviews | Photos | Jobs | Connections
Liberty Tax Service – Boise – “work picture”
http://www.libertytax.com HQ: Virginia Beach, VA
A Liberty Tax Service Franchise Owner said:
“becoming a franhisee was life changing”
“flexible, good training, reliable systems” – 56 Reviews
Overall Company Rating
5.0 Employees are “Very Satisfied”
Overall CEO Rating
Liberty Tax Service Chairman, CEO and President John T. Hewitt
John T. Hewitt
100% Approve
@Trish,
Do you have any “insiders’ going to convention? Hopefully, they will give you some good info! Can’t wait to read your posts.
@Todd,
CEO Ranking 3.1 of 5
Employees say it’s “OK”
CEO Rating (Based on 32 reviews)
John T. Hewitt – Chairman, CEO and President
72%Approved
Working for vs. working with a company are two different things. John Hewitt wants you to put up your money with the sole purpose of advertising and developing his brand. The more you spend, the better he likes it. The chance of you failing are extremely high. Don’t be fooled. The guy is a scam as evidenced by recent posts. Stay away, there are much better opportunities out there.
The Liberty Tax magazine they put out recently (one) was mentioned in a recent article about them contracting with Constant Contact. What does constant contact with clients have to do with the real message in the magazine about EMPLOYEE and FRANCHISEE RETENTION?
Switching gears again, make it sound good as they want to. They don’t care about customer retention, that is on the backs of franchisees. They pretended to care about franchisee retention, but truth is they care about turnover and spending on training newbies to love Liberty when the old calls them out on their overcharging and royalty secret ways to hike it up with their accounting methods.
What kind of company sends you a renewal contract and states that you forgive them for all past wrongs, discovered or undiscovered? And that you promise not get involved in any legal class action which you may be a party to for damages to collect? That’s not smart to expect a 5 year loyal franchisee to motivate them, when you are sending flags that you are starting a new beginning or end of something.
-Trisha
To all;
It can’t be said enough. John Hewitt is looking for anyone who will spend their life savings, retirement investments, or any other source of funds they have to promote his business. He doesn’t spend a dime of the companies’ money for any type of promotion whatsoever except Facebook, or any other free internet opportunity to promote his business. It is all on the franchisee which is why this is a bad investment. Figure it out. By the time you pay rent, marketing, salaries, licenses, and other expenses, you are most likely losing money. Stay away.
So, did anyone go to Convention and come back with any horror stories? Would love to hear them if you did. My wife came back with renewed excitement (as she always does), talking about all the fanfare, the party atmosphere, and the free gift giveaways — you know, the stuff they lure in new victims with?
Curious to hear any and all sides on this.
Liberty Tax Nabs Troutman Partner As General Counsel
By Derek Hawkins
Law360, New York (March 07, 2011, 7:06 PM ET) — Liberty Tax Service last month picked up a former Troutman Sanders LLP partner to serve as the company’s general counsel and vice president of legal and government affairs.
James J. Wheaton, a 10-year partner at Troutman, joined Liberty Tax in late February, according to the company’s website.
Hired by Troutman in 2001, Wheaton chaired the firm’s mergers, acquisitions, and business ventures practice group from 2007 until his departure. He also chaired the securities and capital markets practice group for a year in 2006.
OK SO THEY NABBED WHEATON to “Join” LIBERTY TAX IN 2011?? REALLY??
OH AND LOOK KATHY WAS SECRETARY BACK THEN BEFORE MOMMY DAYS OF JOHNS CHILD AFTER HER SUIT AGAINST HIM FOR SEXCAPADES WITHIN.
What about this 2001 Arkansas Corp Filing? w/Wheaton as Vice President
Corporation Name JTH TAX, INC.
Fictitious Names LIBERTY TAX SERVICE
Filing # 100203929
Filing Type Foreign For Profit Corporation
Filed under Act For Bus Corp; 958 of 1987
Status Good Standing
Principal Address
Reg. Agent REGISTERED AGENT SOLUTIONS, INC.
Agent Address 16 W CENTER
FAYETTEVILLE, AR 72701
Date Filed 09/18/2001
Officers JOHN T. HEWITT, Incorporator/Organizer
JANE MURPHY , Tax Preparer
JOHN T. HEWITT , President
KATHLEEN CURRY , Secretary
JAMES WHEATON , Vice-President
MARK BAUMGARTNER , Treasurer
RORY WALTERS , Controller
Foreign Name N/A
Foreign Address 4575 BONNEY RD
VIRGINIA BEACH, 23462
State of Origin DE
–Trisha
TO ALL THE POTENTIAL LIBERTY FRANCHISEES:
THIS WAS ABSOLUTELY THE WORST EXPERIENCE OF OUR LIVES. DO NOT, DO NOT, DO NOT GET INVOLVED WITH THIS COMPANY.
RUN THE OTHER WAY AS FAST AS YOU CAN AND DON’T LOOK BACK.
THIS COMPANY HAS CAUSED MY HUSBAND HIS CAREER THAT HE HAS DONE FOR 30 YEARS. THEY ARE SNAKES, LIARS, MONEY GRUBBING IDIOTS AND OUR HOPE IS THAT HE GETS EVERYTHING THAT HE DESERVES, INCLUDING JAIL TIME AND EXPOSURE INTO HOW HE’S REALLY RUNNING THINGS.
THERE IS NOTHING ELSE TO SAY EXCEPT DO NOT GIVE YOUR MONEY OR TIME TO THIS FRANCHISE. IT SUCKS BIGTIME. THERE IS NOTHING OF ANY REDEEMING VALUE TO THIS MAN OR HIS SON……HOPE THEY ROT IN HELL.
FYI of the day: Regarding unilateral or mutual terminations.
A contract is illusory
if there is no real
enforceable obligation between the parties.
If one party can breach
the contract and walk away
without any consequences, then courts deem that
to be no contract at all.
How many feel that your contract was terminated due to convenience?? Let me know.
To all who went to convention this year:
I did not go to The Liberty Tax Convention, ever, so whomever told people I was there…and made statements regarding me or my opinions, please do show the burden of proof. If anyone has questions, feel free to ask here.
Anyone who knows me, knows I was not there, however some are telling people I was there and speaking out about many things. Not true. Has anyone else heard this tale?
So how was convention for those who went?
–Trisha
The only tangible information I’ve heard from convention so far is that Liberty will no longer be doing an IPO, supposedly because they are now gunshy due to the problems Facebook had with theirs. They are still going to be publicly traded, but there will not be an IPO.
New information:
It was suggested to me by a famed franchisee/AD to start a blog about Liberty and get paid for it. How odd of advice?
THAT would be a violation of USC Title 15, Ch. 22, Subchapter III, Section 1125. So for any who are thinking with intent of diluting the brand and their directors and executives FOR PROFIT, you cannot do it.
Corporate will tell anyone to do anything illegal to give them a reason to seek damages under “trademark infringement” especially when intent is to profit on your behalf and people will make Declarations of proof to the courts after they tell you to do it on Liberty Tax Plantiff side.
Read the Chapters all zees and ex-zees– and be proactive, not reactive.
–Trisha
Guest9:
Regardless of John’s spin, Liberty is not going to be traded on the NYSE or NASDAQ because there was no interest in the road show. Most serious companies do not explore going public, then decide to be traded OTC (Over the Counter), in order for their employees to liquidate any vested options. It’s a joke. Kayak.com filed an S-1, then decided against the IPO after Facebook. You won’t find Kayak on OTC or the Pink Sheets anytime soon.
Trish:
Is there any class action suits that former franchisees can join?
So, I AM FINALLY NO LONGER UNHAPPY!!! IF YOU WERE ALL CLOSE BY, I’D INVITE YOU OVER FOR A BBQ TO CELEBRATE. I kind of feel like it’s an AA group and we’re all over coming this addiction together and I’ve finally broken by bonds that bind me down.
Well, it is nice to now the franchise is someone else’s worry now. I did lose some money on the sale but it’s worth it to be done.
Dodgerdawg,
Congrats on getting out, I wish we were all close and could go to your BBQ, if nothing else have a beer on me! Keep us posted, and continue to be a contributor so others will be forwarned.
@ Dodgerdawg,
You got away with your shirt, now get a BBQ stain on it for us all. I am glad you are pleased at your outcome, even though it should have been better for you. Remember, that everyone’s stores has value, those who differ are making a big mistake in saying so or undervaluating it’s worth and costs.
@ bill,
of course there are suits and class action suits, more importantly, do you realize the IRS has been investigating what they have been doing and see this site as well? Secondly, if you are Bill Latham, do not speak at or to me.
@guest 9,
Do you suspect just some insider trading and reselling market territories is the moves made right now, they are making some fast income suddenly, knowing what is coming on their heads. Hefty bonuses and options were given out this season to the executive players. Many have been ignored on financing issues, many have been termed. They took it off for a good reason, facebook had nothing to do with their IPO decision…they know what they are doing and they believe they have time to do it.
PS> Cendant is in the top 10 class action suits after buying Jackson and Hewitt just before John and others’ departure who let’s not forget are so new to the Liberty Tax Executive/Director roster. What they did? Look it up. Inflated revenue for over 10 years through acquisitions and got caught up in it.
-Trisha
no comment.
That would be the best thing that could happen if Liberty was investigated and shut down! Hypothetically speaking, what would that mean for a Zee? Obviously we have to find out software and wouldnt get support from Liberty, etc. But would we be able to just continue business with our ‘former’ Liberty customers as if nothing happened?
IF ANYONE IS CONSIDERING BUYING A LIBERTY FRANCHISE, THIS BOARD SHOULD SCARE THE SH*% OUT OF YOU! DONT’ DO IT!! JUST REMEMBER ALMOST 50% OF NEW OFFICES DON’T MAKE IT IN TO THE SECOND TAX SEASON!!
To Whom It May Concern:
We are currently researching claims against the Liberty Tax franchise. If you currently own or have owned a Liberty Tax franchise we would like to speak with you regarding your experiences. If you are interested, please call or email us.
Thank you,
Jonathan Fortman
314-522-2312
Thank you Mr. Fortman,
First,
Can you tell us your intent and if you have a relationship on Liberty Tax if any? Are you seeking class action for the franchisees or other investigative research?
Second,
Another attorney is also interested in speaking to everyone. Not meaning you may not join firms, but we have a large base of contacts. You can contact me for his information on the Franchisee/AD/Corp EE sides. I have full info permissions granted, you only need to contact Admin to get my information or look me up on FB.
Third,
Mr. Fortman, you may want to speak to the IRS regarding where they are in the matter. You may also contact me via admin permissions or through fb as everyone else which I granted contact info permissions.
Fourth,
Please be prepared to let us know what type of cases you have represented, where, and what cause and natures upon conference. It is like putting together a ball team together of which players are worth the time, so you can understand we are selective. Thank you very much for reaching out, but expect a few twists and perhaps a call from Corporate soon with perhaps (speculation) an offer.
Last, as a personal request on behalf of all subscribers who are less fortunate under critical circumstances placed on their financial resources:
Please consider to make financial donation to this website, which makes all of these contacts and communications possible. I assume it would be greatly appreciated to make such an honorable gesture to the owners of unhappy franchisee which we are all thankful to have access to.
-Trisha
A few days before the convention, I advised all of you that we were proceeding with our plan to become a public company, and hoped to have additional news soon. The purpose of this email is to let you know that we officially became a public company earlier today, and tomorrow morning, our Class A Common Stock will become available for quotation and trading through the OTC Bulletin Board system, under the symbol “LTAXA.” We have also filed an application to list our stock on NASDAQ, and that application is pending.
The new public-company version of the Investor Relations portion of our website is now available at libertytax.com by going to the Investor Relations section from the “About Liberty Tax” link.
The success of Liberty’s first 15 years is attributable to the hard work of our many franchisees, area developers and employees. I look forward to sharing our future success with you, as well.
John
Financial statements were released. Revenues up! Net income up! Cash up! Borrowing capacity up! The future looks brighter than ever!!!!
Pingback: LIBERTY TAX IPO: Fiscal 2012 Full Year Results, OTC Trading : Unhappy Franchisee
Liberty Tax Press release:
LIBERTY TAX IPO: Fiscal 2012 Full Year Results, OTC Trading
http://www.unhappyfranchisee.com/liberty-tax-ipo-stock/
Stores up, overall store average down from 462 to 457. Fees down frrom 191 to 188. Growth in stores 9% Grown in returns 7%. As I stated on this board last year if the IPO didn’t go off they would need to borrow, which is what they did borrowing $25,000,000 in long term debt. Without the loan they would not have had enough cash flow to service all their obligations.
I don’t see the company offering the try and buy idea in this fiscal year. They need the revenue from the sale of the franchise.
What is a new franchise selling for?
Did you hear John try to explain the Sch M and how it impacted lower income etc. and return counts etc. Hey John, that was offset by the increase in EIC!! He is trying to spin it!! What a fool, the fact is they are TOTALLY RIPPING EIC clients off with tax returns that are in the several hundred dollar range for simple returns, and he wants to increase fees by 3-5%! Love it!! ARE THEY TRYING TO dilute THE AVG FEE, by giving away some free returns in March? DON’T INVEST IN THIS COMPANY!
I am searching information for liberty tax services franchaise information. I wonder if some one can tell the cash flow for an average store. How much gross sales, how many file in total per years. how manny employee and salaries? how much leasing fee, utility fee, office and supplier? 19% loyalty(including marketing). etc. I need to know how much money I could make per franchaise before I buy a liberty taxx services in Ontario.
Thank you very much!
Here is how much money you make.
The number of paying REFUND customers who WALK Into your office that do not have liens on their REFUND times the fee.
If you do TAXES balance due. There is no REFUND to collect from.
Make it simple. Ho many REFUND customers do you have now?
Charles Cou,
Read the hundred and hundreds of comments on this site, please. You will make NO MONEY, NO CASH FLOW, period!
You will be lucky to do 300 returns, with 50 of them free and several more with liens….meaning you will get zero. Of the 200 returns, say you make $200 each, you have $40000. Take out the 19% royalty, $12000 in rent, hundreds more in utilities, insurance, supplies, pay for you staffing (thousand$ more). Next throw in ‘marketing costs’ and you are in the hole BIG TIME! Again, there will be no cash flow. If you have read all of the posts on this page and still buy into this ‘system,’ you will likely do less than 300 returns and lose even more money.
Re; Charles Cou
Liberty Tax is a bad investment no matter how you look at it. You may be in Canada, and while most posters on this board are from the US, I doubt the fortunes are any better. You get nothing for your money.
Re; Mike
There are a couple of things that I think are very important about the recent announcements from Liberty. The first is that even though Block and Hewitt have announced and closed a significant number of store fronts, Liberty was unable increase their revenue and number of returns significantly, even in many cases taking over those store fronts. Clearly Block and Hewitt still have stronger brand preferences than Liberty, even when they are in many cases closer to the customer. The second is that even with the new laws that are reducing the number of preparers, revenue per return is decreasing. That is not a good sign for retail tax. Clearly the US Gov. tax outlets and others who are doing low cost, no cost returns are having their impact.
Just a side note, again I did more than 300 returns with revenue in the mid-70’s, rent is $3K per year all inclusive, marketing about 6K, and software less than $1K. Normal weekday business hours, with some Sat. for established customers. I will do another $12-15K the rest of the season for those who have not filed and some business doing books for small business. No John Hewitt to listen to, no hassle or bad advice from corporate, and just an easy business to run. Good luck making that with this worthless franchise. Anyone want to join me?
RE: Charles Cou
You’ll probably get a lot of biased information on this site – and not in favor of Liberty Tax either but bear with me for a moment and I’ll tell you how I see it. I sold both of my Liberty offices about two weeks ago after having been a franchisee for 3 years. In my 3 years I only personally saw two franchisees that made any real money and one of them interestingly enough doesn’t follow “the system” and is one of the most outspoken critics of Liberty I have ever seen but somehow he does a decent business with one office. The other guy I know makes good money in one of his five offices (two are mediocre at best and the other two are under performing offices) and he told me it was pure luck that he got his one good office – which subsidizes his other non-performing locations.
You will hear that you don’t need to be an expert on taxes because they are – WRONG. I can’t tell you how many times I received bad advice from tax support. Now, to their credit there were a few tax analysts that seemed to really know what they were talking about and did really well but you’re not guaranteed the best analysts every time you have a question and when I received bad advice it cost me real money in terms of unhappy customers, potential referrals and not to mention the money back guarantee as well as the guarantee to pay interest and penalties from the IRS if you make a mistake which happened to me more than once by relying on bad advice from support.
When Liberty takes you to an open house or to EOT (effective operations training) they will bring in the best franchisees to tell you what can happen and get you all pumped up. What they don’t tell is that 9 out 10 franchisees do about 150 returns their first year – or less. After 3 years, I was doing just over 400 per office. Remove your discounts and free returns, Cash in a Flash, and Send a Friends I had an avg net fee of $226 per return and remove remove the free returns and I only had 551 paying customers and then I had almost $12,000 in non funded bank products from people to whom received the $50 cash on the spot promotion so in essence I paid them $50 to do their taxes which is not fun to do. Although, that promo really works for the low income clientele but that client is rarely your solid loyal return client that comes back year after year.
I would suggest that you make sure you have plenty of cash to get you through 3-4 years of building your business and get some sort of off season income to support you through those tougher times. But at the same time I would say – why pay Liberty 19% when that extra money can go right in your pocket?
I believe that the best businesses are built on reputation, referrals – because you’re the best at what you do, customer retention, etc. – things that you don’t need Liberty for. Preparing taxes is not a some magical secret that Liberty has a competitive advantage over the next guy. Remember, this is retail tax prep which means you have to locate your office in a high traffic expensive location. Retail tax prep is like anything else retail – people shop until they find the best deal and if I didn’t have to pay Liberty 19% of my fees that would have been more than $20k for me right back in to my pocket.
There’s no doubt that you are paying for the brand and it is a recognizable brand nationwide so there is value in that no doubt. Your biggest variables are your rent and how much you’ll be spending in the office rather than hiring employees to do it for you which make a huge difference in this business.
If you wanted to contact ADMIN to contact me directly feel free as I can give you some pointers and even help come up with some projections for you to consider.
I’ll say this, I love helping out clients and doing taxes but bottom line is if I had the opportunity to do it all over again – I’d wouldn’t touch a Liberty franchise (or Jackson Hewitt or Block) with a 100 foot pole as I believe you can make more money on your own which is why I chose to leave the Liberty system.
Dodger – What kind of multiple did you get on selling your stores? I’m surprised you were able to find a buyer.
I tried going through a business broker and they all said that national average on Liberty Tax franchise sales is about 45-50% of fees which would have meant I would have had to come out of pocket to sell my franchise to some. Needless to say, I chose a different route. I found a fellow franchisee nearby who had a lot of money and got as much as I could out of it which I was happy with. I still lost money but at least I came out of it with something which is a lot more than other can say about their exit from Liberty.
My arrangement was that the buyer assume my debt with Liberty which was about 50% of my net fees for last year. He pay the transfer fee and give me cash – which is exactly what happened. The multiplier was .67. Liberty will try and tell you it’s about 1.2 to 1.3 – DON’T BELIEVE THEM. THERE IS NO VALUE IN THESE FRANCHISES. If you really want to get into it, buy an existing office with existing clientele as you will surely find someone willing to get out of it. Do not try and buy it through corporate, you will get ripped off.
Canada is completely different. I would advise you to talk to someone in Ontario.
Dodgerdawg, great info! It’s valuable info. Thanks.
Dodgerdawg
How did you leave the system did you sell your offices or just stop being liberty? If so how did you get around the non compete. I want to leave the system but do I have to sell all of my clients?
Thanks
@Franchise Owner:
I sold my offices to another zee which in Liberty lingo is a zee to zee sale. As such, I did sign a non-compete but it’s also part of the original franchise agreement as well. I’m not terribly concerned about it because I had existing clientele long before entering the Liberty system and they will stay with me for the most part I think. I intend to honor that non-compete but remember it’s only within a 25 mile radius of your territory and I have options outside of that radius so I would not be violating my non-compete.
It sounds like I got kind of lucky in comparison to what has happened to others so what I say is really only based on my personal knowledge and situation. First off, do you owe money to corporate? What was your return count? I would seek the advice of a business broker (only because they’ve probably dealt with others trying to leave a franchise system) and a franchise attorney to see if you can initiate the termination. Is there a specific reason you want to leave the system? how long have you been a franchisee? I wonder if you opted not to renew the franchisee agreement after 5 years if that impacted your ability to still operate a tax prep office without violating the noncompete. I’ll bet Trisha who has posted on this site could give a little more insight on to how to retain clients. I believe after she was terminated she still has the clients but the term was initiated by corporate and not her.
Does anyone have any experience with Liberty trying to enforce the non-compete clause?
@Guest 8
I agree with you. My experience was here in the US and the US and Canadian operations are probably quite different. So what I say only applies to US operations as far as I know.
@Dodgerdog,
The overriding protectable interest that franchisors assert to justify such covenants is “goodwill”, which is the notion that a business’s value as a whole is greater than the sum of its parts. Other common protectable interests such as confidential information AND long-term clients – MAY NOT directly apply to franchise operations.
What a franchisor truly seeks to protect against is the ability of a franchisee to learn its system and simply replicate a business model under a different name. You see more cases of trademark infringement or intellectual property action taken by Liberty Tax Service than other cases. These type of cases are the more expensive route, and having bankrupted franchisees is a great defense and easy win.
Upon termination of contract, Liberty Tax Service stipulates in a post-termination letter, that you return their Operations Manual if you have one.
There are many problems for a franchisor (Corp) that can arise from having a non-compete and a non-solicitation clause in the same contract. Non-solicitation covenants probably don’t protect the franchisor enough, but if you have both clauses in a contract, they are hard to enforce- SOMETIMES.
The franchisor would have to carefully note that failing to enforce all non-compete clauses would undermine the franchise system, which is built on permitting franchisees to exploit someone else’s investment in branding, advertising, and development of goodwill.
Keep in mind that you, as a franchisee, have individually invested through pre-existing relationships in your territory to build clients and some of those clients came to you without regard to what Company brand or system operations you were associated with. These type of clients will still follow you anywhere else that you go. It is really the client’s say of what attracted them to come to you or if they were marketed under Liberty Tax marketing operations by true fact. Example: My mother is my client, not a Liberty Tax Client. In a non-compete or non-solicitation, there must be clear explaination of what a franchisee CAN and CANNOT do, not just a vague clause.
Courts always will consider the potential hardship to one bound by a covenant, plaintiffs – whether employers or franchisors – so they should always make as part of their case, an affirmative showing that they are not seeking to restrict too much.
With respect to the interest of goodwill, it is much more difficult for franchisees to claim that restrictions are overbroad on hypertechnical grounds or to assert that the covenants do not protect a legitimate interest. It is very common, generally speaking, and especially with retail businesses, to see non-compete agreements against terminated franchisees enforced regularly.
I know many who have opened an office 3 spaces down after being terminated not only from Liberty, but also Jackson Hewitt and no injunction was filed. What is the problem with stopping them? It is not so easy to get an injunction against SOME with the right circumstances presented in a court.
With all respect to the franshisees, past or present, it is a wise investment to speak to an attorney about the scope of the clauses who specialize in tort and contract law.
You may find that a clause is too restrictive in many parts of the contracts, or even flat out illegal.
You may NOT use symbols (crowns, etc) that even slightly resemble their name or logo which has been done and Liberty Tax has legally pursued these type of competing ex-franchisees regularly because basically you are pursuing clients using thier brand by mimicking, hence stealing from them.
IMO, it is the customer who decides if they want to do business with you where ever you may be located.
-Trisha
I would MOVE down the street, start calling all clients right away, I WOULD TRANSFER THE MAIN PHONE LINE TO MY NEW LOCATION! Many of our clients will change their phone numbers, don’t send them a direct mailer no need to,
Liberty will send them direct mailers and will call them MANY times during the tax season to make sure they return. If I call them now and forwarn them NOW most will come back. Don’t forget to tell your Liberty experience!
Copied from Dodgerdawg, “My arrangement was that the buyer assume my debt with Liberty which was about 50% of my net fees for last year. He pay the transfer fee and give me cash – which is exactly what happened. The multiplier was .67. Liberty will try and tell you it’s about 1.2 to 1.3 – DON’T BELIEVE THEM. THERE IS NO VALUE IN THESE FRANCHISES. If you really want to get into it, buy an existing office with existing clientele as you will surely find someone willing to get out of it. Do not try and buy it through corporate, you will get ripped off.”
****This statement is not accurate. I state these facts. At a premium Corporate buyback interest, as stated in their contracts between May and August, the contract clearly states the value and purchase price must be 200% of your revenue before discounts. By corporate admitting what they would pay for a store to buy it from you, they must pay premium by their value analysis, which makes it is obvious there is value in every territory.
Next, I will share more importantly, that a franchisee once lost a case by saying something similar about their opinion of value. As the Courts agreed that he as the business owner was deemed an “expert witness” who can account for the value. Unfortunately he put the burden of proof upon himself and used the wrong numbers to do the math. You would never have a stong case against Liberty Tax by making a statement like this, because you have no damages in the event of improper termination (without pay or undervalued purchase) and would not win a monetary judgement gain, if under your expert testimony- there was NO OR LITTLE value.
There IS selling value in every store. What you choose to be talked down to, is based on your own negotiations through all parties participating with each having what they want from the deal. If you are able to get what you want without a fight and pushback from Corp approval is rare. However, you just may be uncertain exactly what your losses, overall, truly are.
Each acquisition is not structured on the same terms when selling this franchise and many are indeed unfair and in majority because of actions of the parties to the transaction.
-Trisha
@Trisha
My statement is accurate because that is what happened in my case and personally, I know of not a single franchisee who has came out ahead on a sale of their franchise but that doesn’t mean that people don’t, I just have yet to see one who did. And by the talk on this board, I don’t think I’m alone in my experience and have only heard the 200% of fees from you and no one else. I don’t ever recall seeing that in my contract but I haven’t reviewed it in awhile either.
In my discussions with people who have sold and through my sale – stores have to hit a minimum number of returns and fees in order for corporate to buy it back from you. And in the 3 examples I am personally familiar with (because I was involved in all 3 which were two purchases and one sale) corporate would not buy them back because it was below the minimum requirements. Corporate will first want to try and sell it for you and they charge a flat 10% (which is a pretty standard fee I found out from other people) and also the $5,000 transfer fee per territory that either buyer/seller pays. I had my offices listed with a large broker marketing nationwide for 9 months and didn’t get one serious inquiry and I had my offices priced at .8 of fees to try and move it fast (and I still would have had to pay the 10% commission and someone would have had to pay the transfer fees). It wasn’t until I found my own buyer who paid .67 of fees that I got my offices sold and it was to someone already in the system.
My opinion is that there is very little value in these franchises – you cannot recoup the franchise fee you pay. I have talked to 3rd parties who have no interest in the offices who have national statistics to support my claim. I think if there was value in these franchises Trisha would have made some money on them. Not to attack Trisha but we have to be realistic here. I voluntarily sold my offices and exited the system of my own free will and Trisha was terminated for violating terms of her franchise agreement.
If I saw some good hard examples of Liberty paying 200% of fees to franchisees exiting the system – then I would believe there is some potential value but until I see otherwise I stand behind my claim of these offices having little to no value.
Trisha;
You will grow a lot of gray hair waiting for someone to purchase your money losing territory. I know a particular situation where the franchisee had three stores/territories, one store doing well over 400 returns. The other two stores/territories were dogs.He signed a mutual termination. Liberty would not buy them, nor would anyone else. He ended up bankrupt losing basically everything. I suggest that most franchisees are terminated, and Liberty just takes them back.
@ Dodgerdawg,
I am not disagreeing with all of your statements by far.
Because you are different than me, by terms of my termination (proper of improper) vs. a voluntary selling transaction, you have a different understanding of what can be said and what cannot and how it is stated. So speaking among those in my common circumstance with who read this board, there are alternative opinion and statements that need made for those still seeking relief. I only argue there is measureable value to each store, there is measurable damages to each store. I do not argue with the sayings of you and others that it is a bad investment in the majority of people’s experiences. Many of the statements on this board give Liberty a legal advantage to do more harm to those in unfavorable circumstances. I think alot of speculating and probing has been intentionally performed here. So sticking to the facts is best. The 200% premium info I shared, is on my renewal contract from Jan 2012. I read, no one had to tell me. I am not attacking your story, I am happy that you shared with us your relief and freedom from Liberty Tax Service as you seem satisfied with your own remedy.
To answer an earlier question: I find this. And I speculate that I have read more Liberty Tax Court cases, depositions, answers and judgements and related opinions of similar cases than anyone in this forum. So I ask you to consider these terms when looking at who is suing who for injuries and what type of relief you or they are asking for.
Irreparable injury “must be neither remote nor speculative, but actual and imminent.”
Moreover, if an injury can be “undone through monetary remedies,” it is not
irreparable.
It is well-settled that “equitable relief is available only in the absence of an adequate remedy at law.”
“A recent U.S. Supreme Court case calls into question whether courts
may presume irreparable harm merely because a plaintiff in an intellectual property
case has demonstrated a likelihood of success on the merits.”
“That a suit to rescind a contract induced by fraud and to recover the consideration paid may be maintained in equity,
at least where there are circumstances making the legal remedy inadequate, is well
established.”
-Trisha
The financial value is determined by the market. It’s not a good bet in most businesses that value will be determined by a factor of sales or gross/net fees. Buying Dodgerdawg’s stores are probably a good investment for the person that did if they have no major debt to payback or they have a lower interest rate and more time to pay back.
Some people reading the board are trying to sell and can work with the info on the sale.
@Trisha
You are right in that you situation and mine are drastically different and I sincerely hope that yours gets resolved quickly to your satisfaction.
@Guest 8
Agreed. The person who purchased my offices had a lot of cash, from what I could tell. I did not have the luxury of having a ton of cash and found it very difficult to obtain financing. I learned quickly that cash is king.
While everyone on here has their own experience, my reason for posting is to inform
potential franchisees to stay away from Liberty. The company does not provide any real value which all of your statements support.
Buyer Beware!!!!
Re; Bill, Mike Trisha
While we all came to the same conclusion for different reasons, I think that anyone who after reading all of these comments and still buys is a fool. You can call us a bunch of malcontents etc. but there are so many besides us who chose not to post, and I know several, who have tried and failed. They are not idiots, they are not stupid, most were people who attempted to follow a system, and found it did not work. I guarantee you that when you are putting up as much money as many did, and then find out that you have funded an organization that doesn’t care whether you are successful or fail, just as long as you spend tons of money to advertise for THEIR company, you will feel as we do. At least 50% will fail by the second year. That’s a very bad ratio. I look back and still wish I had seen this site before I purchased.