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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View Comments
Joey,
Liberty's main business is litigation. That is where the largest number of their corporate employees are. There is a distinct reason why prospective franchisees are not invited to the corporate office: It is because it is such a small operation that is disproportionately driven by its legal department with John Hewitt at the helm.
I am a former Texas franchisee that has had litigation from Liberty against me. This is not at all an exclusive club. The reason for Liberty's growth has been the fact that they prey upon the unemployed and will sell the sizzle instead of the steak. The company never gave a care about the franchisees-ever! Just ask former franchisees and litigants. the answer is the same. I believe that they will continue to dupe unsuspecting people into their very expensive system just so they can establish their brand at no cost to them and the sweat of others.
The AD's are only in the business of flipping territories. When I left mine, I understand they sold it for six figures! I guess there are people that are still unsophisticated in spite of the fact that there is a lot more former franchisees out there sounding a warning. Buyer Beware!
As a Liberty franchisee with multiple offices for several years I have to agree with most of the negative comments listed above.
FACT: You CAN make money as a Liberty franchisee based on the following (and you MUST have four of the five criteria listed):
1. You have three times as much money as the start up fees state.
2. Your Area Developers understand the tax business (this is tricky). My AD's are deceptive individuals who stack newly opened offices with free tax returns then sell them to buyers who are informed the "FREE tax return program" generates new paying customers the next season! Less than 10% of customers who paid zero return, and even then they expect their returns for $20-40! Part of the Liberty franchise agreement is that you MUST prepare 100+ free tax returns.
3. You have a business background - understand cash flow, budgeting, payroll management, purchasing, marketing to designated markets and excellent time management and people skills.
4. You can survive working sixty to seventy hours per week for 14 weeks during the first two tax seasons with little to no income.
5. You have an office with EXCELLENT visibility (Liberty generates more than 40-50% of it's customers from their Liberty wavers), excellent staff prepared to work for minimum wage and $$$$ of direct mail, door hangers, coupons and roadside signs.
If you can handle all this... well, you're a better man than I was.
Liberty will make you a "TOP GUN" a term they offer to virtually any franchisee who prepares over 500 returns AND is a suck up.
To these and others like them, they also offer the rent to buy or "try before you buy" program where Liberty allows the franchisee to open a second office with only 20% down. Followed by 12% interest on the balance. Not from the beginning of the tax season, but from the date the agreement is signed!
So you learn in January when you are opening your second territory office that you have been paying 12% interest on $32k or thereabouts since last AUGUST!
As far as the franchise agreement goes, have you or you wife or son or daughter sign it. So when you have spent your 14% franchise fee every month to a corporate body that does nothing to support you with the exception of commercially available software (Taxwise up to 3 years ago), and 5% advertising royalty which comes in the form of cookie tins, t-shirts in XL and XXL and hispanic radio marketing (my territories are predominantly all white/black!), sell for what is the higher part of pathetic and start your own no-name office.
Finally....... try selling your office for half of what you spent trying to build it up.
And to that poor uneducated, inarticulate, unschooled Liberty franchisee in GA who I spoke to numerous times trying to help.... I wish you well.
Liberty Tax should NEVER have taken his money. He has virtually lost everything.
Good to see franchisees sharing THEIR performance statistics with each other and warning off new buyers. As long as franchisors can hide the risk and the actual performance of units from new prospects, they will continue to line their own pockets at the expense of franchisees who lose everything. http://thegreatfranchisingrobbery.blogspot.com
The Internet will change the face of franchising for the better because HISTORY is repeating itself.
Thought I would share a quote from the Nov-Dec Franchise Times where Julie Bennett, in her article about the Minnie and Micky fiascoes in franchising said they were a part of a May 1970 front-page article in The Wall Street Journal that said: "Once considered the darling of Wall Street and the savior of the small businessman, franchising is spurned on Wall Street and cursed on Main Street."
Carol -
The internet will immortalize your stupidity.
See you next Tuesday.
John Savitch
Who is this John Savitch? And what is this "See you next Tuesday." Is this some kind of threat? Should I call the FBI?
Apparently, the "powers to be" are frightened that their "assets" (their franchisees) are talking together on the Internet about "encroachment" and "churning" and bad performance of the franchised business plan, etc.. because this will warn off new prospects.
"John Savitch":
There aren't a lot of restrictions on comments here other than no disclosure of personal contact in and no threatening language.
What DO you mean by "See you next Tuesday."?
Please explain.
It does sound creepy and vaguely threatening.
Your comments are being held for review pending an explanation.
If there's no explanation, I'll make it a ban from future commenting.
ADMIN
I am not John Savitch but I know what the "See You Next Tuesday" comment means & it is a way to say a nasty word for a female body part .... John Savitch should be ashamed of himself for using such a vulgar term & he should be banned from posting on this forum in my opinion.
Savitch meant C U (N)ext (T)uesday.
Trace the IP address. Send it to me and I will find him.
And unless the comment at 1:47 is a cryptographer, that "may" also be "Savitch"
Boy that's the last time I try to help...no I am NOT Savitch as I stated. I was just trying to help Carol. I thought what he said was disgusting. I have posted here before because Liberty ripped me off as well. I hope you DO trace the REAL Savitch & get him to stop posting such vulgar things. Sheesh!!!!
Admin -
Had no idea the phrase was so insulting, rest assured it won't happen again.
Mea culpa
John