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
I think those were some high volume offices they just shut down. Looks like major damage control for Liberty corporate.
What happened to Steve Doletzsy? When did he leave?
Yes it's a big deal. You can bet he'll be charged next year mid tax season. It's over for this year. At least they closed those offices. They should leave them closed for at least one year. Need major overhaul and re-training required for all franchisees. Company just has to take the lumps if it's gona survive. A whole lot of jumping ship before 2017.
Sure, wait until the last week or so to do this. Will Liberty pay back the royalties received so far this year from these locations. If they don't, they are an accomplice or working with the IRS. Either way, not a company you want to be associated with.
How do you spell Liberty? FRAUDS!!
By my count that makes 65 offices closed down this year. This makes the 3rd year that office closures have increased. We now have office closures in Florida, Georgia, South Carolina, Maryland, New York, Michigan, Nevada, and California.
I would have several questions:
1. When will the IRS/DOJ connect the dots, and investigate corporate, to many locations are shutting down for this to be a couple of bad apples?
2. When will the legitimate operating franchisee's sue corporate for not protecting the brand name? If I still had my offices, I would be worried about the "Liberty Tax Service" name.
3. Can Liberty survive these problems? It is funny for those who can remember how John was stating that he had programs in place to find fraudulent returns. What happened to Jackson-Hewitt (top franchisees in Oklahoma were shut down for fraud), could not happen to Liberty. It is interesting that major fraud issues with tax franchisee's happened where the Grand-daddy of the tax industry was a major player.
^^^ Out and Glad:
To answer your first question: The IRS/DOJ have already connected the dots years ago. They are probably doing an extremely thorough research to make sure when they get their guy, he will be brought to justice and to jail and not pay off the legal team or settle as he has in many other cases.
Guest:
Major overhaul and re-training? Well that begins naturally with the Corporate office. It matters what they teach in and OUT of the classroom, in writing and NOT in writing. Since JTH has been doing this for years and getting away with it, he just brought it over to LTS and continued the fraud. The IRS/DOJ will catch up with him. Now they (JTH and his dumbo staff) are squealing on the individual franchisee offices because they are trying to keep the focus off themselves! :(
Out and Glad:
Question #3: Yes, one hundred percent accurate.
Question #2: My clients came to me because of ME! Not any Liberty Tax brand name. As far as I'm concerned, the Liberty Tax name is a huge joke. Do you know how many people laugh at the costumes and don't really take it seriously as a professional national tax prep company???
Thank goodness I'm out. A most horrific nightmare I lived through for years. Now my life is back on track and I'm happier than ever to be away from the tax business altogether. It cost me a lot both personally and monetarily but I survived somehow. All I can say is DO NOT INVEST ANY OF YOUR PRECIOUS $$ INTO THIS COMPANY. BACK AWAY & DO IT YOURSELF OR LOOK FOR OTHER OPPORTUNITIES, NOT FRANCHISING AS A WHOLE BUT ESPECIALLY NOT THIS FRANCHISE. THE EXPERIENCE WAS UNBELIEVABLY STRESSFUL AND SO NOT WORTH IT IN THE END. I JUST WISH I HAD THIS WEBSITE AND PEOPLE LIKE ME TELLING ME TO BACK AWAY. I WOULD HAVE BEEN SO GRATEFUL. Do your due diligence and look at the headlines in various newspapers!!! Starting in Baltimore...........this company is and should be on it's way down. Unfortunately they will be pulling innocent franchisees along with it.
One question I would like answered is a Franchisor responsible for Fraud if it supplies the software and support on which fraudulent tax preparation is conducted. If it can monitor types of returns processed and provides the vehicles for all of the refunds via Bank Products should it be held liable for some sort of wire fraud? If you process high perfentage of clients from a cluster of offices with Sch C EIC having hair salons and sitters and tax prep fees north of $600 per return and you as the franchisor know this and don't stop this shouldn't you also be held jointly responsible in the fraud. Its a conflict of interest because your life blood is banked off of tax prep fees and royalties. If you audit this yourself you cut off your sources of income. The IRS has to be tougher on the Franchisor and make them be held at the same or if not higher level than the franchisee. Until this is done the Fraud will continue.
I would think that the franchisor is as responsible as the franchisee would be when it comes to fraud. Liberty tax has actively aided and assisted its franchisees in committing these frauds and should be held accountable. Perhaps the reason that the DOJ has not taken any action is because Liberty is actively ratting out its franchisees. Ironic that they are the ones teaching those same Zees how to maximize fees through dummy Schedule C's such as handyman businesses, babysitters and other schemes. Its kind of like lobbyists and congress: the lobbyists write the laws for the congress that are favorable for their clients.
I'm still convinced that there is a deeper dynamic in what Liberty is doing to defraud the government, and the government's reluctance to put a stop to the abuse. It just seems that both sides of the law are in cooperation with each other and that John Hewitt stands to make a profit by abandoning his Liberty ship and leaving others (shareholders) to pay for the mess. Hewitt's probably a citizen of some Caribbean island out there that has no extradition agreement with the US. This is coming in view of the substantial decline in share price. Its just entertaining to see how many investment institutions will be left holding the bag. Who cares?, its a tax write off anyway.
Latest news is a zee's office having been raided with a search warrant by the IRS and computers seized from his office. Not sure if this is Bablu. If it was why would they not say former zee? Is there really more problems ahead?
Screwed..where did you hear about the raid?