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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All,
For those of you disguntled with Liberty Tax, please go to http://www.wltx.com and read teh article about the class action lawsuit. Sounds like Liberty Tax is in for a ride they’ll never forget.
Widowed
I am not an attorney but if you did not: “sign the franchise agreement”, the debt is unsecured, and you don’t live in a community property state, you are not obligated to pay your husband’s debt. As a matter of fact, you could open up your own tax practice in the same place that your husband had his, solicit his client base and as long as you don’t call it Liberty Tax Service there is nothing that JTH can do to you. Not that they won’t try!!! As I stated earlier I’m not an attorney so seeking legal advice before you proceed is prudent. If However you did sign the agreement, I would contact a bankruptcy lawyer before Liberty can say your in violation of the agreement. Once your in bankruptcy the franchise is an asset that would become part of the bankruptcy proceedings and JTH would be a creditor. Prior to actually filling the bankruptcy this could give you some leverage
Keep your head up!
Chuck
I read the article about the suit being filed in South Carolina. The suit alleges that JTH encouraged it’s franchisees to build up fees by filing unnecessary forms and schedules for their clients. I was involved with a franchise for 5 years and never heard the company encourage this behavior. However, They did encourge some questionable marketing ideas like “Cash in a Flash” This is where you give the client $50.00 in cash or gift card as an inducement to have their taxes prepared at your office and then just add the $50.00 to the tax preparation fees. I also listened to many a conference call where Anne Fuller was considered a marketing guru by the company and JTH even encouraged other franchisee’s to have her visit their locations to improve their store results. The conference calls where always interesting, with Anne going out and trying to round up customers. They talked about how she would literally go out to lower income areas and try to locate people who had not done their taxes and then take them back to her Liberty office. There was one recorded audio of her going to a Stop and Shop one morning, finding a guy buying beer, asked him if he had done his taxes yet, the guy said no, she paid for his beer and took him back to her office to prepare his tax return.
I don’t think JTH every verbally encouraged this type of behavior, but John Hewitt as the self-appointed King of the tax industry certainly turned a blind eye to it.
TAX FRANCHISES: Biggest Winners & Losers of 2010 Learn which tax prep franchise chains have grown – and which have declined - in the past three years.
Comments, insights invited
I went to Liberty the lady talked about how she was sleeping with a guy she bowls with. She kept getting up to anser the phone and her kids were running threw the store While she was suppost to be doing my taxes. Then come to find out after she told me to send in amendments she called me 4 hours later to tell me that I need to sign a paper that they are not responsable for my amendments. I told them I wanted my fee back I paid and she said after I sign the paper stating that they are not responsable. I will nnnnever go there again! Too many night talking to IRS and worrying about how they messed up my taxes! And 100% guarentee or money back is NOT TRUE!
They also stated they had a Masters in Accounting and my CPA that fixed my taxes didn’t. DONT GO TO THEM!
Has anyone noticed the latest scam that JTH has imposed on his franchisees. For every ERC and RAL, JTH collects $20. So now when your customer sees your fees, he also sees a cost of $49.95 just to take your fees out of the refund. I can suggest that has made several customers consider walking out until I lower the fee. Again, just another way to make happy customers.
Just curious if John Barilla is still out there?
This is about the point in the tax season where you begin to realize you just aren’t going to make it and that you have made a huge mistake, despite ‘following the system’. Good luck to you all, I’m afraid you’re going to need it.
Man the doom and gloom here is out of this world!!! This is part of the season I get exited. The early season is over and now clients that my preparers have spent much time building solid relationships start coming in. These clients pay by check cash or credit card, set appts, and truely appreciate the service we provide.
Last year we did well over 30 percent of our business in March!!! Thats paid business. And this year that will be even more and thats on top of having a great early season.
This business is not all doom and gloom. I know many do not beleive that but the opportunity to be succesfull is tremendous in this industry!!! No its not a walk in the park and yes it takes total commitment but there is not another industry or business I would want to be involved with at present.
I know the attacks will come but thats normal here. Everything nots doom and gloom. Late season clients who frequent paid preparers do so because of the value they place on the relationships with they have with the preparer. Build relationships with these clients and charge a fair price and late season will work.
Bob and Frustrated,
First of all I am sure you guys are the person. I just think it looks pathetic that you guys keep posting on here over and over. If you spent more of your time trying to run your business the right way you would be way more successful. Not preaching, just a thought
by the way sorry i didn’t mean Bob and Frustrated are the same person. Don’t Be Fooled and Frustrated are definitely the same person or life partners.
RUN FAR FROM THIS MONEY-PITT.I LOST HALF OF MY LIFE SAVINGS,AND
THSES PEOPLE LIED AND DID NOT DO AS THEY SAID THEY WOULD.
THIS PIECE OF TRASH IN VA MAKES HIS MONEY BY SELLING THESE MONEY
PITTS,THEN LEAVING YOU HIGH AND DRY.
Another testimonial of how inept this organization is to run anything larger than a small tax preparation office in Virginia Beach. Again let me repeat RUN FROM THIS ORGANIZATION LIKE YOUR LIFE DEPENDED ON IT, BECAUSE IT DOES.
Frustrated,
How many times are you going to post with different alias? You have lost all credibility that you might have had. Face it, at some point look at yourself in the mirror and blame yourself, not the rest of the world!!!
John:
I have one alias, Frustrated and Disgusted. I have never posted under any other name. Like your B2B person, my point is to hit the same point over and over. I again spent some time in a major city in the southeast over the weekend. Had a chance to stop in and talk to several franchisees. Same story over and over. If your store is in a low income area with a high visibility storefront, you are coming out OK. Higher income areas, the store turns into a money pit with no way out but bankruptcy. My point is that Liberty is out selling territories in areas that they either know and don’t care, or are so inept they don’t know will fail. I suspect it is a combination of the two. I see people investing hard earned money, follow the system, and are in debt up to their behinds with nothing to show for it. Liberty has an obligation to understand what markets and territories are viable and which ones aren’t. And don’t tell me they are all viable just because the territory exists. Unfortunately people are not aware of the pitfalls of this business, and the ineptness of this organization. JTH will sell any territory regardless of it’s viability. When it fails, he blames you for not following the system and resells it to someone else who again loses their money. Sorry, but this is a dishonest way to do business.
John
Most franchisees are not successful. If they where they wouldn’t need operating loans from JTH. According to the 2010 financials JTH Tax had to loan $32,488,000 in operating loans to its franchisees. Based on the 3,280 stores listed on this web site that breaks down to $9,904.88 per store. This shows the stores don’t generate enough cash flow to stay open. With the exception of certain stores the only winner in this is JTH Tax
Just curious, we all know that JTH is an SOB. How can we stop them from destroying more lives? Someone posted a thread to a lawsuit link above but it is not there anymore. We need a Class Action lawsuit against them ASAP, any suggestions?
While I think there are grounds for a lawsuit, getting to JTH is going to be tough. You have to show that he knowingly set out to mis-represent the opportunity which in a business environment is tough. There are some specific areas that should be explored which I will state to a lawyer, not on this forum. My suggestion is to find a good law firm that is well versed in franchise laws, and willing to create a link so that people can get in touch and supply supporting evidence. I know there are plenty who can supply the necessary documentation to get this started.
Mike and Frustrated:
I certainly would support a class action suit I just don’t know where to begin?
AM HERE CAUSE I DONT KNOW WHERE ELSE TO GO AM A WAVER WITH LIBERTY TAX AND I LOVED MY JOB AM IN TEXAS UNTILL WE FOUND OUT WHO THE OFFICE MANGER WAS HE DID WHAT HE COULD TO MAKE MY LIFE HELL LIKE I HAD TO BRING MY OWN DRINKS AND COULD ONLY GO IN TO USE THE BATHROOM NOT TO WARM UP OR ANYTHING HE TOOK MONEY FROM ME OUT OF MY JACKET WHEN I WAS OUT DOING MY JOB HE GRAB ME AND THOW ME ON A WALL AND TOLD ME I WAS GONNA DO IT HIS WAY OR LOSE MY JOB AND THEN WHEN WE WERE ALONE AGAIN HE TOLD ME IF I WOULD GO IN THE BATHROOM WITH HIM MY TROUBLES WOULD GO AWAY THEN I HAD TO TAKE OFF WORK FOR MY DAD WENT TO TRY YO WORK AND WAS SENT HOME THE NEXT DAY MY DAY DIED AND NOW I DONT KNOW IF THE GUY WHO HAIRED ME WELL BELEAVE ME OR NOT I NEVER SAID ANYTHING CAUSE I NEEDED MY JOB A WAVER IN NEED CAN YOU HELP
Mike:
I will get you started. Ask around and find out who is a good lawyer, is familiar with business and franchise laws who would be willing to at least spend the time and find out whether there is provable grounds for a lawsuit. When you talk to him, the basis of your discussion needs to be that JTH is knowingly selling a system that only works in select areas, and is committing fraud in telling people that they will make executive income if they purchase the franchise. In a ton of cases, not only have you not made executive income, people have lost thousands of $$ trying. His real system is to have you and tons of other people lose money to build his empire. At some point he will have critical mass, but done with yours, mine and many others hard work and lost money.
I just bought an existing LTS franchise last year. This is my first tax season. I did not quit my real job. Today is March 7, 2011 and I completely paid off my investment of the business today. I owe nothing. Basically the money I took out of my bank to buy the business, down payments for this, toner cartridges for that, every penny is back in my bank as of today. I still need $25K to pay the rent for the year and I haven’t t paid myself but I have to admit, I’m very happy with this years numbers. Next year if everything stays the same I will be at $25K profit and I did not quit my “real” job.
I looked over this site before buying. Wife even said after she read the above she wanted to do a “post nuptial” if I buy this business LOL Thankfully she didn’t go through with it. I had a very long conversation with a few successful owners. I did a lot of homework and I took the plunge. Knock on wood. Everything is going as planed. I feel sorry for the above posts. I’m by no means consider my self “profitable” at the moment but my path is very clear and I’m confident the franchise I bought will be profitable in a year.
How?
Luck lol. # 1 I got the business cheap. The last owner had a crap location and did not use wavers????? I moved the location, turns out, a very good location. I got 4 months free rent + $6K in improvements. I put three wavers on the corner. Cash in a flash works! Use it for early season, period. Now I’m stuck with what the hell to do in March???? I did two returns today, crap. I just bought three 50% off signs and I’m going to couple that with March Madness or something??? I gota get March rolling. April will take care of itself.
Anyway I just wanted to give some feed back. Lots of good information here, but continue your research after reading here. Also I’m no expert, I have only 3 months experience LOL. I will occasionally post updates and I would be happy to post some numbers as long as there’s no legal issues with posting here. My wife is a lawyer so I’m sure I can get the skinny on P&L’s and so on. Cheers all :)
I’m glad your doing good. Would you mind telling us what state your store is located in the demographics of your area? Most of the ones that I know who have had some success, which isn’t many in South Jersey are in lower income urban areas with a large population.
Thanks
My store is in Phoenix AZ area ,high populated low income. The location is ideal, of course. Why buy in a crap location???? Not all of this is luck. You have to do your research. It’s important to find out what works as well as what doesn’t work.
The reason I was on this site was to research the franchise over all (LTS). I was curious about the support they provided, tech support, marketing and so on. IMO: Over all the franchise works and I get what I pay for 19%. Would I be happier if they cost less? Yes, of course. However, that’s the price they charge and I agreed to pay for it, done.
My personal experience: The longest I waited for tech support on my computer issues was 2 hours. I had a computer fail and had a new one the next day. Of course I paid for the expedite fee but time is money also. Info I got from other franchisees was the same. Over all happy with the support provided but wish it was less than 19% LOL, go figure right.
Disclaimer: I’ve been doing this for 3 months, LOL, maybe my opinion will change, but doubtful. LTS makes money when I make money. LTS makes more money when I make more money. If they (LTS) was doing something illegal the courts would stop it, doesn’t matter how many lawyers they have or how much they spend on their lawyer fees. My wife is a lawyer and specializes in contract law, if there was something shifty going on with this franchise or any other franchise she would jump all over it free of charge. Of course she would collect a percentage of the punitive damages that could be in the millions
Basically as a franchisee I’m risking my time and money to make a profit. If that risk is acceptable I will do it. If not, I will keep my money in the bank at 2.5% LOL Nowhere in the contract did they promise me a profit. No one held a gun to my head to sign papers. If this fails it’s primarily on me. The economy is crap, I’m getting older, rent is going up, fuel cost are high, but I knew this going in. Good luck to everyone on here but don’t stop here and jump in a franchise with both feet, do your homework.
The basics are the same in every business. Where does the money come from? (the customer) and how much does it cost to get that money? (rent, franchise fees, labor and so on).
Someone tell me what to do about March???? LOL you can see I have a lot of time on my hands…….
John:
If you are happy, good for you. You need to remember two things. It sounds like you purchased the franchise for substantially less than the current $40K investment, and you probably got not only equipment, but a customer list etc. That goes a long way toward the success you are enjoying, not having to pay those up front costs. Someone obviously lost a bunch of money to allow your success to happen. Many franchisees you see on this forum did not have that advantage. In the next couple of years you are going to wonder why you are giving LT and JTH that 19%. They supply software which can be purchased on the open market for less than $1500 per year. You will realize that the customers are coming in doing so because of your efforts, not due to anything LT does. I can attribute less than 1% of my customers come in due to ever being on the website, and since H&R and Hewitt have better known brands, you are actually fighting an uphill battle to find customers. The 4% you are paying for Danny (the clown) Hewitt and his Marketing would just as well be flushed down the toilet. You are also paying for that A/D who has no clue about your area or customers, and does no more than collect some of your very hard earned money.
Certainly hope you have a good experience. We will be watching as your attitude changes.
LIBERTY TAX Scam Exposed by Franchise Owner
http://www.unhappyfranchisee.com/liberty-tax-scam-franchise-owner/
Yes, I bought the franchise at a substantially lower cost than the $40K going rate and it came with everything. Basically a turn key operation. Yes, the guy I bought it from most likely lost a bunch of money and was disgruntled. I believe he was making an emotional decision and I jumped all over it. He actually told me he would of gave me everything for free if I was whishy washy and delayed until December, just so he wouldn’t go through another tax season! Yes, I believe this added greatly to the success so far and I strongly recommend keeping the initial investment as low as possible!
You make a very good point about the A/D :) I agree! After the second month of paying my fees I realized I want that job! I’m irritated with myself it took me two months to see the light! I WANT that job :) I will spend this off season researching…….
John:
I don’t doubt your wife is probably a good lawyer, and in reading the contract, she looked at it from a lawyer’s point of view. I want her to go back and reread it from a business owner perspective. According to your contract, if you owe money to LT, you are charged 1.5% per month compounded which equates to a little less than 30% annually. If you owe money to LT, your fees are confiscated from your RAL and RT’s leaving you no cash flow. If you die and your wife cannot sell your franchises, LT takes them due to non-performance, your wife will still have to pay any owed monies even though she doesn’t have the franchises. Your contract states that you have signed a personal guarantee for the money even if your corporation fails. If you purchase a franchise through LT, you pay 12% interest, again, your payments are confiscated from day 1 of your season until the debt is paid off, leaving you no cash flow. There is no requirement that they offer any assistance in site selection at all, but you are required to only move into an approved location. There is no requirement on LT’s part that they supply anything but software for you to do taxes with. All that assistance you heard about at the initial meet and greet are just that, great ideas with nothing behind it. Just some thoughts for you to ponder.
F&D:
Every thing you said sounds correct, I haven’t double checked but it sounds right and I agree with the above for this conversation. In-fact my wife said she was going to print out a “post nup” LOL if I went a head with it! So anyway I signed the above paperwork. She was joking….. I think? Personally, with an attorney wife, I have absolute no excuse to complain. I signed it, my attorney looked it over, done! A deal is a deal, that’s the way I was raised. As an American my signature is law.
12% interest is a little excessive but personally I would not ask for that kind of loan. Same thing happens to me when I go to buy a used car, we start talking about financing and I ask about the cash price, big big difference. I mean that’s why I’m buying used right? I can finance something new but that is possibly the dumbest investment possible, except maybe lottery tickets LOL. By the way, I will never win the lottery. I also don’t do title loans and/or pay-day loans LOL. Just making a point.
Crossing fingers I don’t die. Hopefully, when I sell, the business will be worth more than I paid…… at least that’s the plan.
I will keep everyone updated with my stores progress, I have nothing to hide. I might not be so mouthy if I start losing money? Update: Today zero returns but I worked on 5 rejects and was able to get $1000 out of that.
It was money I should of made but the staff sort of messed up. Good day over all. I have 377 returns done so far. Last years total was 302, so I’m way up from last year and haven’t got to April yet. I ordered “50% off” signs, I will cut prices to get the customers in for the last two weeks of March. Staff is there anyway, might as well keep them busy and warmed up for the last quarter (April).
Based on your numbers you should pass 400 returns. 400 paid returns at 180 net fee is about the break-even point for most Liberty offices.
400 x 180 = 72,000, royalties of $13,680 and rent of $25,000 leaves you $33,320 to cover wages, utilities, supplies, merchantile license, donuts etc.
With rent of $25,000 I can see why the guy wanted out hopefully you didn’t sign a long term lease.
Bill:
Based on 400 returns, John should be able to feed his family on his “Executive” income quite well. Like most Liberty promises (what most other’s except for the kool-aid crowd would consider lies), he will find out why the former owner was willing to give his franchise away.
John, we love you like a brother, but we have all been down your road before. First year, great, we have customers coming in, wavers in front, B2B out giving away donuts, life is good. At the end of the season when we start calculating our winnings and losings, we realize it was not a very good year, but hey, it was the first. The next year we spend more on wavers, B2B, etc. thinking we are going to set the world on fire. End of the second year, oh crap, didn’t do well, but sowed a lot of seeds for a better third year. Third year, this time we are going to set the world on fire, end of the third year you come to realize that this is just a mediocre business (if you haven’t already filed for bankruptcy). The problem as you will find with Liberty is that your ratios are out of skew. You can’t give a franchisor 19% of your gross and get little or nothing in return. How much better would you feel putting that 19% in your pocket at the end of the year, or spending it on marketing to really boost your revenue, opening new stores, etc. Quite simply, this is not a good business model and it doesn’t work.
Frustrated and Disgusted,
Why are there 3800 stores if this model does not work? What about Jackson Hewitt’s model, which is exactly the same. It worked really well until the last 3 years when corporates management ran the company to the ground buying back its stock at $30. Just because you are a failure don’t make everyone think they will fail. You need to look at yourself in the mirror
Liberty Tax sells fracnhises extremely well.
2nd year offices report. Office number 75 is at 400 returns from 450+ new offices. So 375+ are on average 250 or under to date.
3rd year offices report. office number 75 is at 471 from 500+ new offices.
So 425+ are on average 300 or less to date.
Do the math.
You’re a cretin if you buy into all the crap.
Franchisees can’t leave when they’ve invested $50,000+ when there’s the hope that year 2, 3, 4 or 5 will be the salvation year.
And ask your AD how many territories were handed back to Liberty before you start trying to sound intelligent.
John Barilla
I posted this back in feb and you didn’t respond
Most franchisees are not successful. If they where they wouldn’t need operating loans from JTH. According to the 2010 financials JTH Tax had to loan $32,488,000 in operating loans to its franchisees. Based on the 3,280 stores listed on this web site that breaks down to $9,904.88 per store. This shows the stores don’t generate enough cash flow to stay open. With the exception of certain stores the only winner in this is JTH Tax
and you won’t now
Bill that is the stupidest question and that is why i didn’t respond. You think a $9k for a new business is a lot? If so, let me stop wasting my time responding.
After reading this board for the longest period of time and never commenting, I think the issue so complex is very few realy understands this business. Here are some facts. Most Franchisees fail or do not reach profitability because of debt. Some of this is because they may of came into this well enough capitalized but after messing things up they end up having to borrow money from JTH just to pay for the mistakes and it will not take very long before short term debt financing kills any profit especialy if you have not mastered properly running the business from a profitable standpoint.
The money paid in royalties and Advertising Fee does not make this an impossible model to succeed in. But you do have to factor that into the way you operate and you must make sure you understand your financials. If you have no clue on your Profit and Loss and your are just hoping to come out ahead you will probably never be able to reach it.
There are good points here on both sides but the answer is somewhere in the middle and the cause of some of these issues have not ever been addressed here on this board. Good Luck to everyone current and past.
John Barilla:
If I were the only franchise failing, I would look in the mirror. When I see 7 out of 10 failing in the area where I have my stores, I tend to look elsewhere. I also know that the Jackson Hewitt model is not doing well either. Maybe they both need to stop screwing their franchisees out of 19% of their revenue for software you can purchase for $1500 per year.
John:
Just because you don’t have a good answer doesn’t make the question stupid.
I have heard this argument that the 19 percent is what is making so many fail or have financial issues and that is just not the true reason at all. If doing away with the 19 percent would make the tax business all of a sudden profitable you would see tons of independents making huge margins and thats not the case. In fact most independents have a hard time even hitting 15 percent and struggle as much if not more than there franchise competittors. The main reason for that is even though they do not have the extra expense of the royalites they do not have any solid business models to run off of and underprice themselves and barely squeak out an existance and fail as quick as they start.
The reason franchisees fail is they do not excercise and usualy do not understand basic business priniciples either. They rely on this to be a business in a box which it is not and fall into a trap of thinking that if they do these certain marketing steps and follow some hype they will find huge success which is a pipe dream at best.
Now the blame does not all go back to the franchisees because Liberty has to take responsibility this also. Franchising is by nature a combat zone and anyone considering entering franchising needs to realize that it is not fuzzy bears and flowers. Its landmines and high explosives and the key is to figuring this out and understanding how to get through it and obtain success despite the combat zone.
Truthful and Honest:
I would like to understand your premise for suggesting that franchisees do not understand the basic business principles. I agree with you that a franchise is not a business in a box, but when your franschisor knowingly gives you erroneous information to make the potential opportunity look better and profitability look higher, you tend to think they know what they are talking about. I would suggest if you go talk to many struggling franchisees, you will find that they probably know their business pretty well. At least that has been my experience. The issue I find most often is that Liberty does not know their business very well, and cannot or will not help when a franchise is in trouble. They take the attitude you do which is that they didn’t follow the system. I suggest in my case that I was given horrible advice on everything from site selection, potential first year returns, and how to best market to my potential audience. I found that my AD had absolutely no knowledge of the area, (and still doesn’t), nor how to run a profitable tax business. Had it not been for my business background, I would have been bankrupt by now using Liberty’s system.
The question I think we all need to answer is what does Liberty owe their franchsisees for the $40K and 19% they are collecting. I would suggest it is a lot more than an operations manual and software.
I am a sole operator using a similar model to Liberty.
I am a third year office having prepared more than 300 returns less than a nearby Liberty office (who is also my friend).
He has $50,000 more net income than me, is a Top Gun, spends less than 25% of his net on payroll and he is a 5th yr + office.
I have more than $30,000 in the bank and he has a couple thousand more.
His average net fee is $15 more.
Our rents are comparable.
The simple difference is that where my friend has two wavers 12 hours a day, I have one 5 hours a day.
My payroll is 16% of my net fees.
He has RAL’s. We don’t.
His marketing is amazing. I only advertise in the local paper and Valpak.
He has given away $25,000 in royalties for the cost of software.
My software cost me $1100
Liberty model works… but you have to trim the costs to the bone.
Beg to Differ,
I congratulate you on understanding your business and executing! You are correct in you analysis on the business model. With that being said many do not understand the business side and they follow blindly for the longest period of time and then when they realize that they are broke they lash out at Liberty Corp for not promoting the business side of things and feel that they have been led down the wrong path and not be told the truth.
Congratulation on your success and your knowledge of the business!!
Beg to Differ:
I think you have again made the point that spending $40K and 19% only makes you poorer. What software are you using? Are there any additional fees for filing? How do you hire and train people ? How many preparers do you typically have in a season and are you actively also doing returns ?
Using Drake Software and a bank provider for RAC’s.
$10 fee for filing (paid to software company – only for bank products).
I use the IRS website for training and I have drafted a simple tax class.
We have 8 preparers. I work 70 hours per week. Open 9-7.
Payroll YTD is only $13,000.
Beg to Differ:
Congrats on your ingenuity. Time to jettison this over priced franchise.
Frustrated and disgusted:
final peak of the tax season but soon Liberty will be selling franchises and hopefully we can give them some insight on why they shouldn’t invest in this company.
To anyone looking at purchasing a Liberty Tax franchise, please keep this in mind. Liberty Tax, has no incentive whatsoever to help you as a franchisee, nor does your A/D. They will collect 19% plus of your hard earned dollars, and at the end of the day, you will have nothing to show for it. Not one person will come in to your store because you have a Liberty Tax sign vs Joe’s Tax Service, not one person will come in because you use LT software, not one person will come in because JTH thinks he is gods gift to the tax industry, all of which you are paying for with your 19%. They will come in because they saw your advertising, have gotten to know you and your preparers, and feel comfortable that you are interested in their business. There is nothing that Liberty Tax will do that will help you be successful vs. your own hard work and effort. I have done a lot of research since I purchased my territory and found that except for one or two die hards who are getting kickbacks by LT, the rest realize they were taken big time by an organization that offers nothing more than a lot of hype and empty promises. I have heard them all, and now laugh when someone calls me to find out how I like LT. They get the same response at each store they call, don’t do it.
Buyer beware!!!! Now that tax season is over JTH can go back to selling franchisees. That’s of course unless he’s too busy helping the people of Japan & Haiti, Feeding the Needy, Cell phones for Solders.
Don’t buy it!! Most stores 90% do less than 1000 returns regardless of age, if after your 4th season you are not doing 1000 returns you are in violation of your UFOC and Liberty has every legal right to your store even if you are at 999 returns!! Liberty wants you to work hard, invest your life savings then in a few years the store is theirs!! Check your contract, and ask how many stores do more than 1000 returns! They are selling a nearly impossible task! If you follow their model be in a low income high RAL area, one small problem, RAL’s are almost over with and probably will be next year unless JH finds some way to fund them I think he is doing a test with JTH Financial in Detroit area, keep your eyes open for this new venture because without RALs and with the dramatic increase in “free” return sites, most Liberty offices will be toast next year, unfortunately most zees don’t see what is on the horizon!! and John certainly at the Greet and Meets won’t be told how the industry is changing!
“Liberty Tax kicked sand in the faces of tax franchise competitors Jackson Hewitt and H&R Block by boasting strong systemwide sales growth for the just-completed tax season.”
LIBERTY TAX Boasts Growth in Tax Returns & Revenue
Comments invited.