UnhappyFranchisee.com asked: Are LIBERTY TAX SERVICE Franchise Owners Happy? If you’re familiar
Entrepreneur magazine has ranked the Liberty Tax Service franchise #3 behind McDonald’s & Subway. However, some commenters who claimed to be former Liberty Tax franchisees left stern warnings on the Franchise-chat forum.
This post was originally published
BostonTax wrote:
I’m a former Liberty Tax Franchisee
I hope you are ready for a little enlightenment! I held a successful Liberty Tax Franchise for 5 years until I decided to let the franchise agreement lapse. I did this for a few reasons:
1. The royalty fees were outrageous! 14% went to normal royalty while and ADDITIONAL 5% went for so called advertising royalties. The ad royalties were supposed to be put back into your local market to build the brand name. This was never done! All advertising in addition to the ad royalty I had to pay for because it did not fit into Liberty’s concept of advertising. I don’t know exactly what the concept was because our AD could not give an answer and the approved methods changed by the week.
2. Corporate was totally unresponsive to the needs of the franchisees. The AD system is designed to recruit anyone who can write a check for 100K. No other skills or ability required.
3. The minute you are behind in a royalty payment, they send you a notice to cure. After that, if you don’tpay, they try to terminate your franchise agreement.
4. Upon termination, Liberty enforces through legal proceeding a 2 year, 25 mile radis non compete clause that is in the franchise agreement. This is enforceable in the Eastern Division of the Federal District court, where, at least 2 Liberty friendly judges preside.
5. Liberty does not recognize chargebacks for bad debts as an adjustment for your royalty fees. All royalties are based on your gross, not your net collectable. This was an ongoing issue with them and the accounting department did not have the ability or the inclination to resolve!
My best advice is do not go with these guys, they are bad news. If you like to have people collect royalties and provide no support, then this is the franchise for you! It is very expensive to get into, the initial fee is around $32K just to buy the territory plus those pesky royalties. You can’t make money on this concept.Most of the surviving franchisees I’ve talked to in the last 2 years have experienced great difficulty not only in making a profit, but in the corporate support or lack thereof.Remember, 19% of your gross is getting kicked back to Liberty, which is excessive by any standards. Please do yourself a favor and call former franchisees ,those that are currently getting sued (they are very likely to talk, as I found out), and current ones to try to get the straight poop.
Barbara Green wrote:
I too was a Liberty Tax Franchisee and I agree with everything you said.
The only reason for purchasing any franchise is because the business model is a proven marketing success as evidenced by the profitable franchisees. That is why you pay a license fee of $25,000. Being profitable is not in the cards for a Liberty Tax franchisee. Liberty Tax’s market/ business model is aimed at individuals who have very simple tax returns, i.e one W-2 and standard deduction which is why they were very successful in Norfolk, Va. That market is full of military people with one w-2.
Liberty will sell anyone a franchise at any location, in any georgraphic area, even if there is not a chance in hell of the franchisee being successful.
At one time, I too owned a Liberty Tax Franchise for one tax season. It was only one season because of the behavior of the Regional Manager who called me on January 15th demanding and screaming “Why had I not generated 200 tax returns and that maybe this business was not for me. I was stunned and confused since employers are given until January 31st. to give w-2’s to employees. Apparently, he thought that I was in Norfolk, Va. where that is possible.
It only goes downhill from there. The bottom line is I lost all of my investment in this businees (approx. $80,000) because I closed it rather than becoming a victim of this unethical company. NOthing would make me happier than to be a part of a class action lawsuit.
WHAT DO YOU THINK? DO YOU OR HAVE YOU OWNED A LIBERTY TAX SERVICE FRANCHISE? ARE LIBERTY TAX SERVICE FRANCHISEES HAPPY? WHY OR WHY NOT?
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Welcome to Liberty Tax. I would suggest you look for a good franchise attorney who can hopefully negotiate a better settlement for you and your family. There are some great ones out there. Remember, JTH got fired from Jackson Hewitt, and has decided to use his Liberty franchisees to make him bigger than H&R Block. Liberty loves to get people in over their heads and then threaten them that they need to "fulfill their contractual obligations". I suggest from experience that many things they force you do are not in the contract., especially when it comes to locations. When you talk to the attorney, as part of his due diligence he/she should be able to get the names of people who have been forced into similar situtations. There are a lot of them out there. If not, there are plenty here. JTH is a corrupt and ruthless individual. Good Luck with your situation.
What Liberty did to my husband was morally unconscionable. And, it frustrates me to no end that they pretend to be a morally upstanding entity. My husband was an extremely hard worker, no one would dispute that, including Liberty corporate. He followed the Liberty directive for operating procedures, staffing, guerilla marketing, business to business marketing, etc.. He listened in on weekly conference calls and implemented suggestions. We saw very little of him during tax season and no ROI to make it worth our while.
I have no doubt that Liberty is "buttoned up" legally. I'm sure they have more attorneys than Harvard Law School. Clearly, I don't stand a chance in trying to "lawyer up" against them, however I feel a moral responsibility to at least shed light on my huband's experience.
Thanks for your feedback.....
Widowed,
I am sure I speak for many here when I say I'm very sorry for your and your childrens' loss. I admire you staying strong for them thru the holidays, which must be rough. You have our condolences and prayers.
Excuse me for being indelicate here, but I'm not sure what you're saying is the basis of your lawsuit. Are you saying that Liberty Tax or the stress from it played a role in your husband's death? Is there evidence that it was a factor or is your suit more general?
I think it's important to know the basis of the suit before commenting on whether it's viable. There also may be precedents.
Guest:
I doubt Widowed wants to lay out her issue on this forum. I am pretty sure I understand what she is dealing with. If you read your promissory notes and contract, JTH collects your Liberty debts from your heirs and from your estate if you pass. Her husband borrowed money from Liberty to build his business. He passed away, and left a business which Liberty is taking back. She is still left with the indebtedness of the business even though his business no longer exists. JTH would sell his mother into prostitution if he could make a buck doing it.
That is the problem with this business. There is no residual value. He passes, the value of the business is low and the debts are enormous. She will end up paying Liberty for the debt, and was given nothing for the business.
She is in my thoughts and prayers. And for those of you reading this who are considering buying a franchise and financing it through this corrupt organization, think once, twice and three times before you sign anything.
All,
For those of you disguntled with Liberty Tax, please go to http://www.wltx.com and read teh article about the class action lawsuit. Sounds like Liberty Tax is in for a ride they'll never forget.
Widowed
I am not an attorney but if you did not: "sign the franchise agreement", the debt is unsecured, and you don't live in a community property state, you are not obligated to pay your husband's debt. As a matter of fact, you could open up your own tax practice in the same place that your husband had his, solicit his client base and as long as you don't call it Liberty Tax Service there is nothing that JTH can do to you. Not that they won't try!!! As I stated earlier I'm not an attorney so seeking legal advice before you proceed is prudent. If However you did sign the agreement, I would contact a bankruptcy lawyer before Liberty can say your in violation of the agreement. Once your in bankruptcy the franchise is an asset that would become part of the bankruptcy proceedings and JTH would be a creditor. Prior to actually filling the bankruptcy this could give you some leverage
Keep your head up!
Chuck
I read the article about the suit being filed in South Carolina. The suit alleges that JTH encouraged it's franchisees to build up fees by filing unnecessary forms and schedules for their clients. I was involved with a franchise for 5 years and never heard the company encourage this behavior. However, They did encourge some questionable marketing ideas like "Cash in a Flash" This is where you give the client $50.00 in cash or gift card as an inducement to have their taxes prepared at your office and then just add the $50.00 to the tax preparation fees. I also listened to many a conference call where Anne Fuller was considered a marketing guru by the company and JTH even encouraged other franchisee's to have her visit their locations to improve their store results. The conference calls where always interesting, with Anne going out and trying to round up customers. They talked about how she would literally go out to lower income areas and try to locate people who had not done their taxes and then take them back to her Liberty office. There was one recorded audio of her going to a Stop and Shop one morning, finding a guy buying beer, asked him if he had done his taxes yet, the guy said no, she paid for his beer and took him back to her office to prepare his tax return.
I don't think JTH every verbally encouraged this type of behavior, but John Hewitt as the self-appointed King of the tax industry certainly turned a blind eye to it.
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Comments, insights invited
I went to Liberty the lady talked about how she was sleeping with a guy she bowls with. She kept getting up to anser the phone and her kids were running threw the store While she was suppost to be doing my taxes. Then come to find out after she told me to send in amendments she called me 4 hours later to tell me that I need to sign a paper that they are not responsable for my amendments. I told them I wanted my fee back I paid and she said after I sign the paper stating that they are not responsable. I will nnnnever go there again! Too many night talking to IRS and worrying about how they messed up my taxes! And 100% guarentee or money back is NOT TRUE!
They also stated they had a Masters in Accounting and my CPA that fixed my taxes didn't. DONT GO TO THEM!
Has anyone noticed the latest scam that JTH has imposed on his franchisees. For every ERC and RAL, JTH collects $20. So now when your customer sees your fees, he also sees a cost of $49.95 just to take your fees out of the refund. I can suggest that has made several customers consider walking out until I lower the fee. Again, just another way to make happy customers.