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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Get away from these crooks, Sharon! You have seen how they operate and how they try to suck every last cent out of their franchisees. Chalk it up to a $2500 business education expense that you would not have learned about in college. Liberty Tax and John Hewitt are mere gangsters and need to be jailed.
I have been attempting to contact this Liberty Tax Site without any results I can not get anyone to answer the phone or even be @ the business site message on answering services states they are open on Monday’s 9am- to 5pm. no one is ever here @ theses times and no one will return my calls…I need my taxes done and filed. I also need them in order to get the Trusty to help with my current situation…I need someone to contact me ASAP…
Chuck Jones, Whatever you do, DO NOT GO TO LIBERTY TAX.
I just went on the PACER site for federal court documents. The civil case in South Carolina settled last month and has been dismissed. The settlement amount was not stated.
Well they would of been crucified with a jury and it would of been a disaster for the next tax season. Make’s perfect sense.
I think it may be easy to forget there are hard working franchisees who hav nothing to do with the decisions of the franchisor.
The problem is that a rotten fish stinks from the head down.
That’s the problem afflilating one with a franchise, you have to take the good with the bad.
You can always do the “try before you buy” when buying a company store. If it doesn’t work out for you then no problem. You can give the store back at the end of the season.
Try before you cry is a scam. Who is on the lease? Ask the landlord if you can try before you by.
I’m back. The dismissal of the RICO case in SC is very disturbing. It means that JTH will continue to pay people off rather than surrender. He settled. But we on this website should not be satisfied, knowing what the real truth is. We need to make noise that will be noticed.
Jerry Arrington and ADMIN: Please take notice………it’s time that man is exposed nationally for what he TRULY is……a scumbag, a predator, and a professional ripoff artist.
A few weeks ago NC Hillbilly posted the address to Walmart’s headquarters. If EVERYONE posting and reading these comments would write to Walmart and tell them what type of Franchise LTS REALLY is, maybe collectively we can produce enough evidence for Walmart to reconsider.
Walmart Headquarters
702 S.W. 8th Street
Bentonville, Arkansas 72716-8611
Because it’s one thing to post on here but it’s another thing to TAKE ACTION.
Again, I can’t wait for him to be locked away. He deserves nothing less.
It’s just a matter of time before they are caught doing illegal acts. They are on the trap line for the IRS and other states. There is a crack in their armor and if they are truly doing wrong to anyone it will catch up with them, because the money will dry up.
Also, John is a very bad money manager and has leveraged too much to keep franchisee’s afloat during the off season. That money is going to dry up someday Either he will bankrupt LTS or he will go to jail. The dye is cast.
Civil trial and settlement: It is disappointing that there isn’t more publicity about this case and the settlement. However it does give credence to what we already know about John Hewitt. Just like he did at Jackson Hewitt, he will either put Liberty into bankruptcy or be pushed upstairs.
When they release the financials there should be disclosure about the settlement and other pending cases. Don’t know when the case was settled but on 6/28/13 519,500 shares of Liberty stock where sold. Think there possibly be some inside trading?
We all know this is the time of year Liberty likes to sell franchises. Thanks to this website we have a forum to get out important information about the risk associated with dealing with this company.
Keep up the good work!
I like the idea of writing to Walmart I also would suggest contacting your local Small Business Associates and making them aware of this website as a resource for individuals looking to purchase any franchise.
@Bill – I am sure selling some stock has something to do with paying off something or floating the company. But that in it’s self is not illegal, but helps him pays the bills.
One thing about John, he is more than willing to spend “our” money very freely versus he does not give us much in return. It will be interesting to see how much people will receive back for guerrila marketing kick back. Last year was a joke and I am sure it will be worse or just none at all.
Funny how Hewitt manages to buy his way out of adverse predicaments that are not in the VA court that he has bought off…
I AM GONNA REPORT THE OFFICE ON SOUTH CIRCLE IS COMMITING FRAUD MAKING COMPANIES FROM NOWHERE SO PEOPLE CAN GET BIGGER REFUNDS IM SO MAD BECAUSE I WENT TO THEM THIS YEAR AND FOR THE THIRD TIME MY AMENDED WAS RETURNED TO ME FOR INFO NEEDED
WE SOLD LEFT LIBERTY AND SOLD OUR TAX BUSINESS. LTH IS TRYING TO SUE US FOR LEAVING DOES ANYONE KNOW OF A GOOD LAWYER IN THE FREDERICKSBURG AREA.
I would seek out Marks & Klein in red bank NJ. Ask for Jerry Marks. There law firm specializes in franchise law. I have used them and they got the franchise off my back.
Jerry Marks’ information is posted here:
http://www.unhappyfranchisee.com/resource-directory/franchise-attorney/
Be sure to let these attorneys know you heard about them on UnhappyFranchisee.Com, please.
We were also sued by LTS and had to find a VA lawyer to defend us. We lost thousands of $$ between the lawsuit and lots of legal issues that followed. LTS has the whole state of VA sewn up. Many lawyers we approached said they didn’t want to deal with JTH. His reputation in that area is as a scoundrel. He will take the approach that he is right and will throw money into any situation just to prove that he is right and that money can buy anything. Smart to use a NJ law firm who can practice in VA. At one point we had 8 lawyers working for us, locally, statewide and in Virginia.
^^Franchise scam: you are soooooo lucky they got off your back. Good for you.
Any updates from Trish, Admin? Anyone working hard to topple this man? I hope we can catch up to him. He seems to be one step ahead of everything. For how long can he keep this up before he comes crashing down? He really thinks he is above the law and that his money will pay him out of any mess. Let’s prove him wrong. :)
Can anyone provide us with an update on what Liberty is doing regarding the sale of more terriorties. i.e. buy before you try etc.. I imagine with home prices going up they will be looking to do less financing of stores.
For anyone looking to buy this franchise – ask yourself if you really need to be paying a franchisee fee along with 14% royalties to enter an industry that has no barrier to entry. If you think it’s because of the brand, do a simple survey and ask a random 10 people to name a retail tax prep service. 9 out of 10 will respond H&R Block the other 1 might be Jackson Hewitt or Liberty. There is nothing that this company can offer you that you can’t do yourself.
Company stores are 0% for the first two years and then you start to pay. Apparently they are ready a turnkey. So that pretty much sums up the territory sales at the moment. One would have to be in city with a company store to take advantage of this special offer….3 year 25% due and so on.
It still is a loser business model no matter how you finance it. The franchisee is always left holding the bag and you don’t make any money until at least your 3rd year, if at all. The company stores exist mainly because franchisees chose to walk away. Think about that.
Exactly TexasTee – As of late, there is no money making in the 5th season. They don’t tell you when you will make money anymore since the high priced EIC tax returns are gone due to public demand and the banking industry getting their books audited. A zee five years ago was actually making money on average, where the larger zee’s aren’t making it as of now, due to the above and the changes in the IRS and their due diligence requirements. Processing taxes is profitable, just not with a franchise.
Franchizee: Your exactly right. The high fees and RAL product is the business model that Liberty was built on. Now that its gone so is their business model.
$40,000 franchise fee, 14% royalty and 5% advertising and for that you get an outdated business model which includes a $1200.00 software package, a questionable brand name,no national or regional advertising and all the verbal harassment that comes with this franchise. You as the franchisee supply the success. Or you keep the $40,000 and go it on your own. Buy your own software for around $1,200.00, Try to find a retail location near a HR Block/Jackson Hewitt. Do your own marketing(guerrilla marketing), advertise that your 10% cheaper then the national chains , Staff your office with yourself and if necessary maybe one other preparer. If you don’t do one tax return you will have more money in the bank than if you are Liberty franchisee.
Buyer Beware!!!!
No viable business model anymore is what Liberty Tax is touting! Without the abject poor or those that are under educated or under financed, Liberty Tax and John Hewitt have a an outdated system that cannot make money. As everyone says here, Bill, Franchizee, TexasTee and etc., you can predict the ultimate demise of the Liberty System. i only wish that it happens sooner as opposed to later so that no one else gets ripped off By Hewitt and Liberty.
Can anyone confirm, when a zee ordered a RAL product up to 5 years ago, that the zee would make money off that product even if the refund was not funded by the IRS? I did not have that privilege of that “free” money, but it seems that was the case. As of late, zee who have been with LTS for the past 10 years or more are starting to loose their shirts, and everything in between. LTS set up a foul proof franchise in the beginning where, as long as you requested a RAL it was a guarantee payday for the zee. Someone else took the hit of not being paid. I have had some customer’s wondering why I won’t do their tax returns anymore, because there is no money. They assume I get paid no matter what…So there has to be some truth to that model. Heck, I would spend like a mad man if I got paid on every case and no consequence for a bad debt.
Whenever I had a RAL that did not get paid, I was not paid. However, I was still charged a royalty on the fee and never got a rebate from Liberty no matter how many times I requested it. That was about 8 years ago.
Bad information on the RALS.
There is tremendous information being given from the 7-eleven conversations. Valuable to any franchisee.
I wonder why guest didn’t elaborate? The RALs are a thing of the past. I had to fight with Liberty for 2 years in order to get a partial refund of the royalties they took on unpaid RALs. They refused to refund the marketing royalty. What a bunch of crooks!
There was the type of loan where a person could get money within 24 hours. Was that one a guarantee on payment? Sounds typical of not being able to be reimbursed for money stolen.
Right now, we can’t even fix an invoice at all. Even the AD’s can’t do it. They took it out of our hands. You can send an email and maybe someone will respond or not. You have to fix right up front or fix another invoice to balance your books.
Guest; one of the most valuable pieces I found is how churning the franchise location is more profitable to the franchisor then the actual franchise royalties.
All Franchisors see large profit in the early years do to the sale of new locations.
Now Franchisors look to profit even more by reselling those same locations by forcing out the current franchisee. It will be interesting to see what happens with Seven – Eleven. The argument that franchisees are not independent contractors but employees because of the control exercised by the franchisor would on the surface have some validity. This was the case regarding the janitorial franchisor in Mass.
This site should be a must read for anyone who is thinking of investing in a franchise. As I stated previously everyone of us should contact our local SBA office and make sure their aware of this site. It wasn’t available when I was
researching Liberty.
Buyer Beware!!!!
Bill you are absolutely right. LTS writes out of both sides of their mouth. On one hand, you are an “independent contractor” for (IRS purposes only) and on the other hand, you have these extremely rigid and firm times, dates, rules, regulations and minimum monies due no matter if you make any money or not. They have a contract which is signed, which in some respects is vague to say the least, but when they want to hammer anything, they refer to the “operations manual”, which is where all the rigid rules are hammered out. However, it seems like double speak, when one is audited by the IRS or a bank, poof, you become this “independent contractor”. We are so much an independent contractor to fartherest (sp), that LTS does not even issue any 1099 for our money earned. Very strange, but they abuse the Zee’s like an employee from the worst corporate company in the USA.
The 7-eleven issue will get national coverage. Sounds like employees to me, same as cleaning company.
Does’nt matter the company, you have to read the agreements. I recently investigated another franchise, but the agreement had a clause for balance of payments on the royalties if you close the store. It’s a 20 year agreement. I did’nt think about the agreement was too long in the first place.
Some good, some bad. Research and get a review of disclosure documents is the way to go.
I haven’t touched base here in a week or so because I am a bit depressed that this guy continues to get away from the Law. Will someone please update me with some positive news that they finally have enough evidence to convict this SOB?
He is slippery, slimy and oh so good at what he does—ripping people off. It’s an art that he’s perfected.
Please, someone………….update us here that he will finally be held accountable for this miserable company he produced. He needs to be stopped.
Anyone looking to buy an LTS franchise—DON’T. You’ll forever regret paying your hard earned dollars to be ripped off and belittled. If 2500+ posts aren’t enough to deter you, nothing will.
The DOJ is still doing their work. Not sure how far along, but they are still serious in their discovery. I am sure the DOJ wants everything in order before they pull any triggers on him and LTS.
That would be my thinking, as well. Let’s get rid of these crooks once and for all!
Don’t ever think of buying this franchise! They are a bunch of crooks that are able to steal your money with the help of the government. Anyone who signs up as today’s franchisee is tomorrow’s defendant when Liberty is through with you. John Hewitt and his so-called management team are a bunch of thieves. Their ship is sinking as the DOJ continues their investigations. Anyone who has been a franchisee knows the questionable business practices of this morally empty company.
I am a franchisee and I keep growing top line and bottom line every year. Seems like the same losers posting on here with different names repeating the same lies over and over.
^^It’s back. Oh goody. :(
guest1974: Welcome aboard. Since your one of the successful ones prehaps you’ll share with us where your located? What volumne of returns you do? your average net fees? Does Liberty finance you with operating loans or are you self sustaining?
It would also be nice if you commented on your feelings about the buy before you try program or the idea of purchasing a franchise for $2,500down with higher franchise fees. How do these programs add value of your individual franchise?
As a former franchisee trying to inform potential franchisees I like to speak specific about my experiences and try to be objective as possible. Thanks to Liberty going public much of the information I provide comes from their financial statements. That’s why I’m looking forward to seeing this years results.
Is it my imagination or has John Hewitt been on the down low? He’s usually good for at least one press grabing headline a year.
Looks like guest1974 can’t substantiate his/her profitability. No surprise there since Liberty is a bad business model designed to steal from franchisees as well as clients. Add the lack of support by Liberty and you have the recipe for disaster. That is what is happening to the Liberty franchisees.
They can’t seem to give the territories away! It is hilarious!
Too bad that Guest1974 refuses to understand that many people have lost money with LTS than gained. If the story is the same similar lines, a rational person would think that possibly there is a thread of truth in these posting. Just because John Hewitt does not let anything out about failing offices, doesn’t mean it does not happen. John Hewitt tells anyone who fails, it is the person’s fault, did not follow his system, didn’t throw enough money at it, etc. Instead of saying, maybe I am a greedy sob and should not over sell an area, so who ever owns a LTS, can be successful. Of course that will never happen. He is too greedy and so are all his AD’s, which will the be the downfall of this company along with his mismanagement of funds, more debt than income.
Also, LTS is not a business model, but a DEBT model. There is no business, if one has to take out loans after loans just to survive to the next season.
Seasonal business with annual expenses. Think about that for awhile. 2.5 months of income that should last 12 mos of expenses. It doesn’t.
When I left my territory, Hewitt managed to sell it for around $100k in debt to someone who did not have a tax or business background. If my territory was actually worth $100k, how come Hewitt and company refused to buy it back? They wouldn’t even let me market it through their system as an established store. I was literally forced to abandon it and got sued in the process, like most folks on this website.
These guys at Liberty Tax are just plain crooks. Getting involved with them is a huge mistake. You cannot make money under this system because it is based on the refund loans which are no longer allowed. Looks like everyone in the franchise system or who owns the stock will get screwed.
Franchising which started out as a system that benefit the franchisor and the franchisee has morphed into a way to simple milk money out of franchisees. The main reason it is so successful is we want to “believe”. On my own I didn’t have enough faith in myself and I also had family to worry about so I thought here was a good opportunity to grow a business without relying just on my skills. It would be a combination of a supportive company and a willing franchisee. I did contact other franchisees, I did research the company, I did read their prospective but when your only giving what the company wants to give you and your not aware that the franchisees you speak to are under contract to not say anything negative you are at a big disadvantage. Franchising needs to have more oversight
JTH filed for an extension to submit it’s financials for the year ended 4/30/13. It appears the SEC has questions on how JTH records its revenue from the sale of franchisees and area developers.
I know John Hewitt likes to get his name in the paper around this time of year but I’m sure he wasn’t counting on this. Under his leadership the company purchased on line tax software company E-smart and subsequent had to write it off, He was named personally in the suit with the State of SC Vs. JTH (terms of the settlement have not been released), there are at least three other suits pending and now questionable account practices from the SEC.
^^Great news. Hope there is more to come. His software is full of spyware and hope he gets everything negative coming to him. He deserves it. I hope everyone out there tracks him and finds him guilty.
Looks like the financials are as cooked as the rest of the company. Its obvious that if you cheat your franchisees, you will cheat the government and your shareholder’s. JTH records their installment sales as when sold, not when received. This could cause inflation of revenues (Income Statement) and increase in liability (balance sheet). Does ENRON ring a bell?
Hewitt loves his lawyers and it looks like they are going to get a good workout. I only hope that other prospective franchisees see these postings and realize what scum Liberty Tax is! I only wish this site was available when I did my due diligence. I also only got positive remarks from current franchisees. Little did I know how well these comments were orchestrated.
This company is simply a bunch of thieves and hucksters.