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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^^How about if JTH sold franchise territories to people that were actually qualified to run one, to begin with? How about the books you have to buy for classes in November and then hire the people off the street with one week of schooling? Gimme a break. It's 10000% his fault and the way the franchise was set up (deliberately). You buy e-v-e-r-y-t-h-i-n-g extra. Many things marked up several thousand percent.
I know back many years ago, there were many areas of the contract that stipulated NO class action lawsuits. Ah, gee whiz, but why not?! They certainly deserve everything bad coming to them.
The best thing that's happening now is that reputable media outlets like Forbes are coming forward. Now we need to alert all media outlets and have them do thorough investigations. Amazing what they'll find. Hopefully they won't take as long as the DOJ is taking.
Unfortunately LTS is prepared for this and their largest home office dept. are the Lawyers. They will absolutely twist it so that it's the zee's fault, not theirs. Don't forget, he's perfected all the come back answers after 40+ years ripping people off.
Anon: I'm not a lawyer and I know these franchisee agreements are one sided but there still contracts and there still has to be performance standards met by the franchisor. If you hang in there you could prevail. It might be self-serving to contact the IRS and help them in their investigation.
The fallout from the failure that is Liberty Tax will be an interesting one to observe. I am certain of one thing and I and others have been saying it for awhile; Liberty Tax, as we know it today, will fail as a going concern.
The wheels are loose and the company is about to crash and burn. I hope the current zees can maintain what they worked so hard to have so far. We all know that it is the zee that does 95% or more of the work to make their tax businesses a success.
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FYI Kelly Erb of Forbes (and the TaxGirl blog) is a good friend of our site and reads your comments whenever researching Liberty Tax franchise issues.
Welcome to our little group, Kelly. There is a need for a good investigative reporter at this point. There is SO much negative to tell.........it's amazing HE has lasted as long as he has. Probably paying everyone off. All I can hope for is that justice will prevail (someday soon) and HE ends up in jail as he should.
Look for lots of Liberty Zees to consolidate or close completely after tax season. With all the various issues paid tax prep presents who wants to take out mountains of debt in hopes for a 3 month payday? Turbo Tax, IRS increased EiC Audits, ACA, minimum royalties, year round rent, etc. At some point the gravy train will stop and wise franchisees will look to quit the business or exit Liberty so they can save 19% royalties and marketing fees. Early season tax filing is definitely a dying part of paid tax prep.
Once upon a time John Hewitt and tax industry analysts touted that the ACA would be a boon to the paid tax prep industry. Well, what went wrong? As of 2/12/16, paid returns are down over 7%. Self-prepared returns are up over 2%.
The tax guru missed this one. One positive for Liberty is that their market share is so small that their amount of returns lost (possibly lower this year) could be minimal.
They still won't catch Block by 2020. Is that even one of their looney tunes statements anymore?
Look at the stock price I bet there is enough bad news even the money managers are saying where there is smoke there is fire. What happens to the company in the next 6-12 months will be interesting.
When I first started posting here with other franchisee it was with the intent to warn other potential franchisees about the problems with this company. I felt that most people like myself who were looking at this company would be blinded by the hype and just didn't have enough good information to make an informed decision. Initially I still believed in the concept of franchising but after reading the post on this and other sites I realize franchising is just a business model/gimmick, like rent a centers, and sub prime mortgages, to take advantage of people.
I often wondered why Sun Trust would continue to lend Liberty Tax millions on a credit line when it was clear from their cash flow statement that the whole purpose of the credit line was to be able to prop up failing franchisees. But the bank understood that the more successful the company looked the more potential the company had to sell new territories. They choose to ignore that this need for financing showed that franchisees weren't successful. Of course in the banks mind if the franchise failed the company could just resell the territory.
Wall Street had a similar process. How else can you explain why they ignored the numbers, or the poor management decisions to purchase i.e. E-Smart, or the lawsuits along with the comments from this site. Of course the other reason they continued to invest and drive the stock up to over $30.00 a share is the market is a form of gambling and they were playing with someone else's money.
Buyer Beware of Liberty, Sun Trust and Wall Street!!!
This is my first post.
I was with Liberty Tax from May 2012 until I was terminated in June 2015. I am currently enmeshed in a suit with Liberty Tax; and I have lost so much money as a Liberty Franchisee, $250,000, over three years, two tax offices, and three Walmart kiosks, that I have to go it alone, Pro Se, as I do not have the ability to even pay for a Lawyer. [Those who want to communicate with chuck should email me in confidence]
I'm looking for any help anyone out there can offer. I am trying to put together a Class Action suit; but I'm short on legal know how. I need one hell of a lot of help to put that together. Any ideas? I'm looking at a 3/15 date to file. I'm from Baltimore, 74 years worth. My number is [redacted]; and I have an office number of [redacted]. Call.
And if any of you are adept in the modern world - as I'm not - please get this to the Forbes Girl. Actually, I wish she and I could talk, as I've got all kinds of stories; and with the way some of you are talking here, has anyone considered the RICO ACT? You all seem to be "knowledgeable". Someone pick up the phone. I'm Eastern Time Zone, and work 7a till 11p If you're in California, don't call me after your 8p!
Chuck Hines
CHUCK:
We don't allow personal contact info in the comments section. To coordinate communication with other readers, please contact me at unhappyfranchisee[at]gmail.com.
Also, I am friends with Forbes Tax Girl Kelly Erb. If you would like to share your contact info and story with her, provide it to me by email.
Thanks,
ADMIN