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?
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No franchisees in the Louisville DMA has made any money either in over 8 years that I have been told from every one of them. That includes a few Top Gun franchisee. It seems strange to be a “Top Gun” owner and have a loss or no profit and cashflow each year. Yet, more stores are sold to fresh blood year over year. Great curb appeal for the next Area Developer purchase. Only Corporate makes money as well as some of the Area Developers who are willing to play the game and use us as pawns.
That is very nice that the waver did that for a funeral. And yes, you bet they caught that one on camera. Wavers are to be trained to have ettiquette and salute fire trucks, etc. It is in the video training that you are to have them watch. By the way, I am in that video, how special. This should not be a rare thing. The wavers have the best job in the company if they have a good boss. However, I am certain that the clip was brought to the news just as all the Roadside Parties for charity are. It was also posted all over the internet. Why? To get a “media hits” and be seen as a goal in marketing for the location and the name brand.
The publicity is strictly to be just be seen and for purposes of “brand recognition”. The bottom line reads numbers, not hearts. Consumers respond to this appeal as a result when properly executed. Doing it for charity gets you free food and supplies for your party from other companies down the street if you put one of their banners,pencils, pens and coupons to their restaurant, car lot, furniture store on your tables while you put on a big show. Some will do it just because they want to help you raise money because they too are a small business and could use the extra traffic coming from your event. Some give supplies to you because they like you or the charity. The money that does get raised for charity is great news in any amount…but make no mistake, this is a marketing tactic taught in training and from bestseller reads. The conference calls also remind you as well as the Area Developers when you call to say, “my store has been dead and have no money”. OF COURSE!! If you are not doing 10 returns a day, even free ones…Have a charity publicity party and make sure you beg “business to business” for donations of supplies to make it big and call news crews and fax press releases! You need that traffic noticed in your parking lot one way or another. After all, these neighborhood businesses will want to help because when we finish with the client, they spend their refund at the car lots and furniture stores. It is good marketing and in many books, but speaking truth in business; it has self-serving INTENT to increase “visibility”.
The waver on the other hand, should be paid well for his job, but most are not. The recommended pay for them and tax preparers are terribly low. As Corporate says, they pull in 99percent of the business after all like walking, dancing signs or “human-directionals”. Does that sound like actual people in Corporate’s eyes, or just tools?
Another video is the staged performance of the Harlem Shake at the Corporate Headquarters. It starts by showing how bored and burned out everyone in the room is. Then one person starts to dance, then suddenly everyone is hit with contagion and dances too. This originated from an idea from Annie Fuller in a Columbus Ohio meeting for franchisees when she tried to prove to John Hewitt that since she is the poster child, she could get all of us to dance before he walks in the room. Of course we did, because Annie said so and her theory was correct. Now she is gone and they using her ideas, again. This particular clip is to make franchisees believe that people actually like working for Corporate and can sympathize how stressful a season is in our shoes and sometimes you just have to shake it off to get energized and it starts with just one person to set the mood. What better time to pump up owners when they are slow and were just told to fire most their payroll off to save money?
Jackson Hewitt also already did this technique in the commercial with the song, “this is how we do it” which featured awkward, uptight tax preparers dancing. Liberty started a slogan within the Company, not advertised of “this is how we Hewitt”, stolen from someone else, again.
Liberty also did a commercial in Virgina with the same concept in 2007 (I was there and also in it with Danny) which basically implicated a super busy store where everyone was having fun. We did the lawnmower dance, and the sprinker…good times. This took several days and there was a full camera crew and many actors and extras that filled the streets and brought attention. Funny how most people never saw that commercial on their televisions because after the production of it, not many Area Developers were willing to throw in for the expense to buy air time. But hey, it was a good tax deduction for Corp and whoever bought that store may have done well the following year since it looked like a Hollywood movie being filmed for way too long.
Yes, some stores have horrible wavers and horrible everything, but take note…those are mainly from poorly managed Corporate-owned stores who purposefully bring the value of the store down for the next buyer to think they can afford. When that buyer comes in and just does normal procedure and picks the store back up again to decent numbers, they become top gun for such improvement. They break down higher return stores in a season or two, only to resell it to someone who can show growth just by putting a “under new management” sign out and doing their best. That new franchisee suddenly believes he has achieved something great and has some great skill that a previous owner did not!!!!! WOW TOP GUN MATERIAL THE FIRST YEAR! They have so many strategies for selling stores, it is just a game and they pick their moves every year. Then, they take, take and promise and flatter your loyalty and keep you committed and believing. YOU market to everyone but most importantly, THEY market to prospective and existing franchisees. Without franchisees interest and attention and need for survival, they do not exist. That is Liberty Tax priority. Everything else is maintenance work and cleanup.
Nobody is putting new franchisees down either, just warning that they just have no clue of the history of what they are getting sold into or thinking of getting sold into.
Take it to a serious college professor or an analyst now and watch how fast they tell you to run. There is way more info out there about this company than there was when the veterans got in. Growing pains became growing pains in their butts to control the negative attention. And do not go by the previous year’s profit and loss of a store, they are FAKE and overidden by the Area Developers who needed that previous owner’s budget passed by Mark Baumgartner and others. Come on, seriously..tell it like it really is!! How about call every previous owner that ever existed in that area? Gather every story and perspective and then run. But you will not get that from Corporate, you will get phone numbers of people who have to play along. If you ask too many questions, they will act like someone else is interested and redirect your speed of the decision and perhaps come back at you later when you are not so picky. They need you and your dream, nothing less and nothing more is expected of you.
-Trisha
I am a second year franchisee and my second year was worse than my first,
I am a second year franchisee and my second year was worse than my first. My first year I was told during all the briefs before you sign up, that liberty was a great company. Lots of support for new franchisee. And you basically have an area developer to help mold you, hold your hand and tell you what you need to do or be doing to get your business moving.
I DIDN’T GET THAT. I received a brand new area developer, who knew nothing about taxes, or liberty. Basically just what he read in the manual. NO CORRECTION, not even that. I recall calling him when I first started setting up my computers, and I asked him how do I get on Zee-net (Liberty corporate website) and what’s the website I use. His response was I don’t know. Which at the time was very unsettling to me, but I told myself he’s new and I’ll give him a chance.
Next came, getting my computer set-up. Tech support at liberty was horrible. My computer did not get set-up until after the season had started. Which of course, right from the start I had to turn away business because I didn’t have the support. You call and call, and leave emails with liberty support, and it takes them two to three weeks to get a response. And when they call you back, they call you in the middle of the night or at 6 am.
Next issue was, I didn’t have checks to print tax preparer’s returns. I put that issue on zee-net as well. I didn’t get checks until the end of February. And anyone who’s been in the Tax preparer business knows, you don’t start preparing any returns for anyone, unless you have the checks to print to get people there money. Unless you want a riot in your office, because customers know exactly what day there money drops, and they want their checks that day. So of course I missed peak season my first year. Now let’s not forget that during this whole time I have office rent $1100, utilities, and staff to pay.
So I let my Ad know of all the issue I was having, his response was the lovely corporate one, increase your B to B, do more free returns. He didn’t like my response.
So of course my first year at Liberty didn’t go so well, but I didn’t want to give up so easy. I was told that Liberty would be offering 24 to 48 hour ICA loans (rapid refunds), and since liberty had their own bank, they had the jump on everyone else. So I drank the Kool-Aid and I said I’ll give it another go.
Year two, I decided to go with a Walmart kiosk, thinking that business would be much better, since Wal-Mart has a lot of traffic in there stores. Not the case. Before you get a Wal-Mart Kiosk one should ask themselves, why does Jackson Hewitt not want to be here anymore? But that another conversation.
Year Two: HORRIBLE.
TECH SUPPORT: just when you thought year I was bad, year two even worse.
Well I started the season advertising and promoting our 24 to 48 hour ICA Loans. Doing B to B, renting billboards, basically just letting everyone know what we offer at Liberty. Well everyone knows that the IRS push back the filing date, which you would think would give Liberty Tech two additional weeks to get their act together. Not the case. So I start getting customers, right away I’m having issues, bank pages won’t prints, just minor stuff, not really a big issues, until our first couple customers come in to get their approved $950 ICA refunds.
Their approved and the moneys their but the checks wont print. Ok I say no problem. I’ll just put in a support issue to tech support. It took them two weeks to call me, and they call me at 11:00 PM to tell me that there’s an issue with the software and not to do anymore ICA Loans. And that all one ones we’ve done will be converted over to regular tax refunds. My response: until when, cause I have customers who’ve been waiting for their rapid refund for days and they want their money. His repose, there are kinks in the system and don’t do any more for the rest of the year. Of course I had a lot more questions, but somehow I was disconnected with no call back.
So I break the news to my staff and the customers, and there not happy. Now once the customers refund finally come in, I notice right away that the ICA loan money has been taken out of their checks, plus fees. So it takes Liberty an additional 10 days to get each of these ICA loans that were done there refund. So of course I know right away these customer and their friends won’t ever use my services again.
Liberty SUPPORT IS HORRIBLE. And I think they knew about all the issues they were having with their system, and just failed to tell the franchisee, so they could make their money. All I think about is how much business I turned away and lost due to liberty. AND HOW MUCH I WILL LOSE IN THE Future.
I HAVE SINCE TERMINATED MY CONTRACT WITH LIBERTY AND I AM STILL WAITING ON THE LETTER
LIBERTY TAX IS A FRAUD. Trish, excellent post. Unfortunately we are one of those “veterans” you speak about………..that waver was Liberty’s guerilla marketing at it’s finest. Nothing more.
Douglas: So sorry you had a bad experience. Welcome to the club. You should know, however, that getting out now is the best thing you can do for yourself, your sanity and your future. By leaving now and walking away, you have cut your losses and their money supply.
We have lost several hundred thousand included in one 5 year contract, mainly to lawyers fees.
I SO APPRECIATE AGAIN THIS WEBSITE THAT WAS CREATED SO THAT REAL PEOPLE CAN TELL THEIR STORY TRUTHFULLY AND WITHOUT INCIDENT.
TO ANYONE READING THIS THAT IS CONTEMPLATING BECOMING AN LTS FRANCHISEE:
PLEASE…..DON’T SIGN UP. IT IS AND HAS CONTINUED TO BE A FRADULENT FRONT. THEIR IS N-O SUPPORT WHATSOEVER. THEY VIEW YOUR QUESTIONS AS AN IRRITATION TO THEIR GOAL OF RIPPING YOU OFF. THIS COMPANY WAS DEVISED TO LINE THE POCKETS OF THE CORPORATE HONCHOS AND THEIR LAWYERS, NOT THE FRANCHISEES.
Douglas: You are so right…………the AD’s are clueless. The computer people are clueless. Corporate is clueless. What they are not clueless about, however, are your numbers and your income. That, they always get right.
This company was founded by a guerilla marketing guy who was thrown out of H & R Block and who was thrown out of Jackson-Hewitt. He is a rip-off artist and a thief. He is NOT a tax guy. He does not want to see franchisees suceed. He wants his franchisees to remain clueless so he can rip them off easier.
Douglas: Good luck to you. You are smart to get out now and don’t look back. Hope this website can help many others BEFORE they buy into this scheme.
There never was any support from Liberty in my experience. The only business model that I can discern is the way that John Hewitt and Liberty steal money from franchisees. They, as you all know and can verify, have many methods of doing this. From the original sale of the territory to the preferred vendors to the royalties to the Company Bank to the horrible software and on and on. I’m really not sure as to why Liberty and Hewitt have survived this long, only just to prove what PT Barnum said that “there is a sucker born every minute.” How true!
Doug Jones, I feel for you. I was one of the earlier Franchisees in the system (before 2001), so I saw and participated in the unscrupulous acts promoted by this company. There is a whole group of us pissed off by this lack of corporate concern ranging from no support to outright fraud. The Area Developers are singularly the most irresponsible group assembled next to the Hewitts. If this company is not a subject for NBC’s series on Corporate Greed, I don’t know what is.
We all have to realize that the formula for making money in this business has radically changed. The targeted group of poor and disadvantaged are increasingly getting more savvy to the ways of Liberty Tax. They know increasingly that they can retain more of their EIC from just going to the free preparation sites or organizations. If I were make a prediction, this is an industry on the way out simply because the party of refund loans and fraudulent returns is over. Turn out the lights!
TexasTee:
Yes, they have it down to a science how to rip people off every step of the way. One you didn’t mention was the Judges in the Eastern District Court. Did you have any experience with them? We did. Totally paid off by Liberty. Not sure if anyone has ever won a case against Liberty. Interesting that they make you come to Virginia and it’s the same few Judges that oversee the Liberty lawsuits. Hmmmmm.
Douglas:
We can’t wait for justice to be done. This man has been able to get away with this type of behavior for decades. He has no soul. Ever see that tv show Undercover Boss? There are franchise CEO’s that go undercover to check in on their franchisees and to HELP them in any way they can to improve business. Can you imagine JTH EVER doing something like that?!!!!!!!!!!!!!!!!!!??
NEVER EVER EVER EVER. He has no heart, no soul and will continue to rip people off left and right until he can finally be stopped and locked away. I, for one, cannot wait to celebrate that day.
Do top gun’s make any money? Or are they just financed? You see reports on very few cases and the same people are up top. I just can’t figure out if being a top gun result’s in money or just fame for yourself in the company. I have noticed over the years, the people change quite often, but I am not much into this company never planned to be, just another vendor to make money for my family, which it is NOT and hasn’t but take money from my family. As they tell you, don’t quit your day job, well duh! You can pay them if you don’t have your day job!
Anyone leaving after this tax season, like after Oct or so? I might just do it for the summer and suck up more business!
@Douglas,
So sorry to hear your situation, and welcome to your new family! Like you, all of us in one way or another have been affected by this POS company! Since you are realatively new to Liberty, you must know alot of new franchisees as well, let it be known to all of them your situation if you haven’t already. Atleast there is strength in numbers and by the amount of unhappy franchisees in Liberty we are getting stronger by the day. Tell everyone about this website, post on Yahoo message board under finance/Tax, post the truth EVERYWHERE so that prospective franchisees and customers know what Liberty is really about.
SanFranDan: To mention my experience with those judges in VA causes heartache. I never was allowed to testify on my behalf, the trial was scheduled inconveniently, and Liberty would provide a parade of witnesses that would make up anything that they could think of. The judge bought right into it and my lawyer and I were just left shaking our heads. Boy, I wish I had a jury there! The legal process that Liberty initiates is expensive. You have to hire a local lawyer that the court recognizes and travel there to see them hang you. Not fun. I used to think that Federal Judges were incorruptible, but I sure was wrong! It was obvious to my Lawyer and his boss that the court was somehow fixed, even the appeal was denied. The trick is to get your case out of that particular court, a very tough trick to pull off. All I can advise franchisees is that when they leave, which is inevitable, get yourself a decent lawyer that franchise law. Even that is not by any means a guarantee. Hewitt and his boys at Liberty know how to influence that court in particular. How many cases are pending now? My guess is a lot and Liberty loves to be the plaintiff.
@Mike Can you post a link to the yahoo board –
@Guest – Are there some top gun’s in the DFW metroplex area according to Liberty? Or is that area oversold?
@Mike
You posting 50 different ways and replying to yourself not only makes you delusional and very good candidate for a mental institution but does not mean this website has recruited many unhappy franchisees. Your responses to the waver kneeling for a a funeral shows what type of person you really are.
Just to help you out John fagina barilla I am certainly not mike and would invite on down here to kiss my country ass! I don’t give two squirts of duck shit about your tax business or your beloved wavers you seem enjoy bringing your great oral pleasure to but I do enjoy a great post against greedy corporate assholes. As I said I no nothing about taxes other than I have to file,but I do know how little men like you are led down the garden path by their little bitty peters and then when they realize they’ve been dupped they start defending themselves with lies that are repeated so much you begin to believe them yourself
Incoherent. No one turns away business. Sorry Trisha but the Harlem Shake is danced all over the country. Most people have never heard of Annie Fuller.
But I agree that a lot of franchisees will try to get out after this season.
East TN: It seems that this kind of ignorance like John Barilla was the same thing that got the funny guy with a mustache in power in 1933. Heil Hewitt.
@franchisee@go to yahoo.com and under finance (left hand side) put in stock symbol TAX for (Liberty) on left you will see message board, sign in and post away!! Another great way to spread the TRUTH about Liberty, there are a lot of investors that read this site. It’s a nice way to let the truth be told about a company instead of the spin from the CEO’s etc.
@John Barilla Hewitt-looks like you finally learned how to read-now go give out some free returns!
@ all, I went by a new Liberty yesterday, of course they were closed, the office hours on the window said “frome February 25th until March 3rd-office hours are from 9 am until 3 pm other times by appointment” looks like another new Liberty will be soon closing. Can’t imagine they are too busy, the location is horrible, probably highly recommended by the AD. I am going to try and meet them tomorrow and tell them what to expect.
@Mike – Thanks – will work on that.
Also, only being open 6 hours a day??? Wow! I know Zee’s are cutting back on hours, but WOW!! Were you the one calling that office in Jan looking for the $50?
@Franchizee-don’t know anything about any $50. I don’t think this office did very many returns, they are very hard to find.
If you are going to post under the yahoo maessage board, please indicate/tie in this website. I would love to find more unhappy franchisees to post their thoughts here, makes it more cohesive.
More of us posting there and more of them posting here.
When I was a zee, there was no $50 to contend with. Always something for Liberty to find a way for you to part with your ever shrinking money supply.
@SanFran – Are you posting on the Yahoo website?
@ Mike – It might of been Bill calling a new office seeing if he could get the $50 CIF. Thanks
No, I know nothing about it. I’ll look into it, though.
Got interesting calls today. Clients of Liberty who filed on January 28th got a letter last month saying there was a problem getting their checks and it will be resolved and paid out by March 4 2013. Today, they received new letters in the mail, INSTEAD OF CHECKS, saying they must completely file again as if they never did.
How nice of a notice on the day they expected a check after all this time!! I am sure there were no Corporate ZNET Announcements to WARN the franchisees that may be affected with phone calls that will be coming in this week. Did anyone even get an email from their Area Developer? I would sure want to know ahead of time when Liberty Tax Corporate Office would dare contact my local clients with a letter of disappointment, wouldn’t you?
Do the offices affected expect a super peak now or just plenty of traffic coming in to get their w-2s back with more heartbroken ex-customers?
Another reason for taxpayers to file somewhere else. Another reason you just cannot trust Corporate to inform franchisee’s about their failures.
-Trisha
@trisha
Is this nation wide or only in certain areas?
@Trisha – Is this regarding the ICA loans? I have not seen anything and first I have heard of this. I will check with other zees to see if anything is up with their offices.
Whoa. Mike & Franchizee:
Thanks for the info. re: Yahoo. We all have the ability collectively of bringing this company and this man to his knees. I say lets go for it. Just like they did in Egypt by ousting that dictator, we have the ability of ousting JTH. LOVE IT.
By collectively posting on that website message board we will have many investors and potential investors looking at what we write……..powerful! I say we all do it together. I’m in.
Our office is currently investigating Liberty Tax Service Franchises. If you have or have had a Liberty Tax Franchise we would be interested in speaking with you regarding your experience. Please contact us at (314)522-2312 or email us at kms@fortmanlaw.com
Thank you,
Law Office of Jonathan E. Fortman, LLC
“JTH Holding, Inc. (NASDAQ:TAX), parent company of Liberty Tax Service, announced today that it will report its earnings for fiscal 2013 third quarter ended January 31, 2013, including interim tax results through February 28, 2013, after the market closes on Tuesday, March 12, 2013. At 4:30 p.m. ET on the same day, the Company will host a conference call to discuss its earnings. To listen to the call, dial 800-510-9661 (domestic) or 617-614-3452 (international), passcode 55071337, approximately 10 minutes prior to the start time of the call.”
http://www.istockanalyst.com/business/news/6325801/liberty-tax-service-to-report-fiscal-2013-third-quarter-results-on-march-12
@ the good Dr. should be very interesting, what do you think up, flat or down in returns for same store offices? I am betting down. Maybe if they opened enough new offices they might be flat or up 5-8 % in total returns for all offices but I doubt it. Most likely return count for the now “FASTEST Growing/DECLINING EVER” will be down 5-10% and by the end of the tax season likely down 8-15 %. Just my guestimates-any other guesses? John Hewitt Barilla will probably say that Liberty is up 300%!
Was in an office last night speaking with the owner who went from 1 office to 5 offices in one year in only the second year with Liberty and was told that he is down more than 15% this year. Problem is I know that two of his 5 offices are brand new locations and he’s only looking at the total amounts of returns from year to year. So if you pull out the returns he told me the two new offices have done – he is down same store count closer to 30% or more. Pour soul, I really felt bad for him. He’s drinking the cool aid but fortunately he does see the scam of Liberty now but he’s in so deep at the moment it’s going to be hard for him to get out. Potential franchisees, it’s best to stay away – FAR AWAY! Do it on your own, you can do better than these those crooks.
One other thing, he told me that overall those in his DMA they are down anywhere from 10-15% with a couple people being slightly up.
I say down by 12%
Our DMA, if we got anything to prove, down 10-15% from last year. What is worse, last year we were down too. So from two season’s ago, we are probably down 30% or so. Hard to pay bills on that much of a decline.
What is interesting, no number’s being sent from the AD to the DMA because the number’s from a couple of years ago were not correct and well when you have the SEC breathing down your next, your (real or fake) numbers better match up!
Wow! Hope somebody here can help me. This is my 5th year & I am in serious trouble. We will not do fraudulent returns and our numbers are down 50% from last year. I owe Corp over $100,000 after paying CASH for 2 territories & now they will not give me any money to keep the lights on or pay the employees. As you all may know, Liberty lets you keep the January Drop, but there was NO January drop this year – so they have kept all the money! I am about to close up – but what do I do about the clients who are in process? What do I do about the leases? Owed Utility bills, etc.? Sure hope somebody with experience can help me! I am going to have a break down. What do I do? Do I bankrupt the corporation I formed to do these businesses?
@SanFranDan(Danielle) SANFRANDAN, can you give me a link to the Yahoo Site? I sure hope so!
guest,
if you are in the tax buisness and don’t have any money this time of year, I think it best you go file bankruptcy and never think about operating another tax prep business either franchised or mom n pop.
It is almost impossible not to have money this time of year.
@ALL-Nice Yahoo posts everyone-thanks, it’s nice to get more of us together!! Looks like the same Liberty folks followed us over there too….it’s all good… the more the general public sees how they treat their customers…because franchisees are their customers…the more people will see the REAL Liberty…so for all the Liberty SUPPORTERS, keep on bashing the ex zees!!! I love it!!
@All–and I forgot to mention, post under TAX (Liberty) and better yet, post under symbol HRB, that is H&R Block, since they are a REAL company they get a lot more readers and investors looking into the tax industry and Hewitt-reads their message board ALOT!!!
I followed Mike’s directions. yahoo.com register to open an account. go to the finance section tab at the left. Type in tax. click on JTH holdings. go to message boards on the left. write a message.
Mike, is that it???
I posted one message yesterday, but plan to write more. Thanks for the suggestion on posting under HRB too. Will do.
@Guest – I am down by 45% and don’t know if it will recoop this year. This year is worse than last year, so basically two tax season’s ago was the best year.
@Ed – You’re dumb! If you have intercept fees for all bank products and still people are not paying up front, then you will have no income coming into your bank account. You have income, just nothing to operate with.
@Guest – I would check all my leases and start talking to my leasor’s and start closing the one office with the lease closest to ending. Turn off all the lights and turn off the phones and internet and put the heat at the lowest setting. You will have to have the sign’s turned around. Hopefully, you can set up the territory for sale or tell them to buy it back and take it off your amount owing.
Check with a bankrupcty lawyer also. Sorry this is happening.
Mike: I bet a friend that Liberty will be +1%YOY through 2/28 on returns although the rest of your predictions and office results have me doubting myself now. My thinking was that it’s always the new offices that seem to save Liberty. See link below for last year’s results when they reported up +11% through 2/29.
http://ir.libertytax.com/phoenix.zhtml?c=233197&p=irol-newsArticle&ID=1701715&highlight=
One of the nice things about Liberty going public is they have to provide better information than they provide in the franchise disclosure documents. If you read the financials you will see numbers of stores open/closed average fees, average returns for store. In the FDD they can provide numbers using select stores to twist the numbers to help promote their franchise. I don’t know how states can have blue sky laws to protect stock purchasers but don’t require the same disclosure from franchisors.
Yeah, I was in Sheboygan, Wi. recently visiting your office manager at that location, when he authorized me to do some taxes for some people without being trained and without being compensated. He had called his boss to see if he could have me for a day and his boss said no, but he had me help him anyhow. I wonder if Mr. Smith knows his tax return was done by someone off the street and not by an actual employee of Liberty. I wonder how many other offices are taking on laborers for free without being trained or even being hired by the company?
The Liberty Tax Corporate Business model is two fold. The only one they are above board about is that they are a tax preparation service. The software is fairly decent, the hype of Set the Standard, Improve Each Day, and Have Some Fun sounds good; however, there is a sordid underbelly that keeps this from being a viable business plan. Liberty limits each ‘territory’ to 25,000 people, and most areas will have at least 25 other businesses in that area doing the exact same kind of work. This means it breaks down to about 1000 people per business on average. Considering the average household is 4 people, it is now down to 250 potential tax returns. Do you really believe in this economy that all of those people are filing taxes? So let’s reduce that by 10% for the elderly, unemployed, and tax dodgers. You are now at 225 returns. Oh wait, isn’t there this thing called Turbo Tax available that claims free federal return for you to do it online?!?! Oh yeah, and it is advertised as much as H&R Block. So figure about 15% of people decide to save some money and do it themselves. Now you are down to 191 tax returns for your territory. If you ANF is $275 (higher than the Liberty total average) this would mean you should Gross $36,528.75. Liberty believes 5% of your sales will be bad debt, so you are reduced down to $34,702.31. 19% goes directly to Liberty in Franchise fees, so you are now down to $28,108.87 to operate you business.
Now to have the pleasure of making that money, you must have your office open a minimum of 1170 hours for office hours just for January thru April. Just having 1 waiver and 1 preparer on duty for this would mean 2340 payroll hours. If you pay minimum wage, you would pay out $16,965 for payroll bringing you down to $11,143.87 left for Rent, Phones, Internet, Utilities, Insurance, regular toner, MICR toner, paper, pens, coffee, marketing supplies, etc, and you still have all the off season expenses.
This brings us the to UNDISCUSSED 2nd half of the Liberty Business. Fleecing the Franchisees. Liberty has the 19% Royalty, we’ve already discussed that; however, it also has major requirements for the franchisee to uphold in order to be within their franchise agreement. These requirements put an undo financial strain on the Zee that requires their businesses to make much more money than someone going by what was in the best interest for their own business situation. Liberty offers loans (known as FAC’s) to the Zees to help with the off season bills which average about $30K per store in a modest priced area. This loan is at 12% interest, and it will be withheld from the money earned the following season. Add to this the invention of Cash In A Flash, and the CIF FAC that runs about $10K for the season, and the ZEE is up to a debt of $44,800 before the first return is filed for the new season. These means Zees are operating at a loss!!! Liberty takes ALL money coming in before sending it to the Zee until their loan is paid off (if the amount of the loan is greater than $40K per store)!! Meaning more bills are piling up and no income is coming in to cover them except for the occasional cash sell that starts happening in mid to late February.
Are these numbers simplistic? Yes; however, they are closer to the reality than someone claiming they are going to earn $2M in 20 years from 1 store!!! John Hewitt, Liberty Tax Service, Inc, and JTH, Inc are in business to make money for themselves, and they have developed a way to do that and leave franchisees holding the bag. Unless a Zee can do over 1000 returns a year, they will not have a profitable business; however, John Hewitt and his corporate machine win weather the Zee succeeds or not. Because once a failed Zee loses their office, they sell the territory again!!!
BEWARE!!!! LIBERTY only wants to LIBERATE you from YOUR MONEY!!!!
Thanks to everyone for the invaluable information. Also, what is a reasonable number of clients for a new franchisee? (How many customers should a new franchisee expect to have?)
What is the reasonable number of clients that a new franchisee should expect?
Disgusted multi site zee is pretty much on target. One thing you forgot to mention, each Zee has minimum royalties, so if your gross is less than about $78k as a third year Zee, you will pay the $11k minimum plus the 5% of advertising royalty. I thinks royalty worked out to almost 30% because of the minimum requirement, liberty is the only one who made money during my time as a Zee.
Thank you……. That is a hard question to answer. Look at FDD they give you what an avg first year store does. I think it is around 350 or so.
In my opinion, you need approximately 300-350 to break even (that’s if you watch all your controllable costs) You will do approx 50 free/fully discounted returns so in reality you will need to do 350-400
After you reach 500+ you start to making a little money. 800+ and you can get rich at this over time.
I have been with Liberty for many years now and my best office will do around 750-800 and this is a top office in my DMA. It is rare to get an office over 800 returns. I also have a couple other offices each over 600. So I do ok at this, but it’s definitely not for everyone.
@Ed – You are correct about the number of returns an office can process. Most office’s if numbers are correct is way less than 500 returns.
Balancetrend is correct – Most offices end up paying at least 30% of their money to royalties. Mine will be at least that. The little offices are being out marketed and out spent by the bigger offices, so if you are the 4th zee and lower in a market you will eventually die on the vine. First in offices do better than any other office later in a market.
Multi-zee – is absolutely correct on everything, now take that number an multiply it by the number of offices one has and you have a disaster.
How many zee’s on this site, if they could send back their contracts today? I would most likely after season. It is worthless.
Thanks again to everyone. You guys will not recover your losses; but you are helping people make smart decisions. From your experiences, do you guys think that the name helped you bring the people in (as opposed to a “mom and pop” with eye-catching signs)?
When I had my stores, the first one was the best in terms of numbers. I attribute that to me being there all the time. The managed stores, those that I hired a manager for, did anywhere from break-even to horrendous losses. I had incompetent managers, people stealing cash and supplies, expensive marketing done by the book that produced no sales. You can’t get an 800 return store without you being there! You cannot be in 2 or 3 places at once. I remember “putting out fires” constantly in each store because the manager was sick, the keys to open were lost, the manager didn’t show up, the preparers were strung out on something and etc. You get the picture. The minimum royalties far exceeded the net from any store. These, more often than not, caused huge financial losses. Now, lets talk about an exit strategy that all of us needed or will need. Face it, Hewitt is going to sue you! He is going to sue you in his favorite court. You cannot win because of the structure of this court-The court even requires you to have a local lawyer handle your defense. How many outside lawyers in VA Beach has Liberty used over the years? Many of the local lawyers have recurring ties to Liberty and Hewitt, so they are not inclined to shake the money tree. That is reality. The best thing to do is to pack up and leave the store and have no forwarding address. Get out of the Tax business otherwise they will hunt you down and intimidate you and your clients with threats of litigation. That is what they do best. Too many lawyers in this world and they are just as greedy and immoral as the Hewitts. I learned way too late that I did not need a bogus system set up by the Hewitts and Liberty tax to obtain customers. The customers come to you because you provide the service, not a costumed waver. This company gets sillier and sillier but, they also get Greedier and Greedier. The more of us that are able to get out the word about these crooks, the better!