Franchisee “Joey Black” claims that the unhappy franchisees (and ex-franchisees) of Liberty Tax who vent here are “over the top” and in need of a reality check. What do you think? Excerpts highlighting his main points follow the full text of his comment, below.
Here is Joey Black’s comment, posted on LIBERTY TAX SERVICE Franchise Complaints:
The comments here from people who did not make it as Liberty franchisees are frankly over the top. I spent $70k on each of the offices I’ve started, and that was it. Why someone would expect to spend three times that is beyond me. People complaining about the royalty are particularly suspect. Jackson Hewitt charges more, and H&R Block charges its frachisees a whole lot more. Same for the ad fees. And this year, Liberty gave back half of the ad fees to the franchisees to spend on marketing materials. They paid for my yellow pages ad. They produce all the ad copy, graphics, etc.
But none of this was hidden when I signed the contract. It was all right there. And what franchise business doesn’t charge royalties and advertising fees? And interest on notes you’ve signed? Didn’t you read what you were signing? Again, it’s all there in the contracts you sign. Good grief, at least complain about legitimate things. Otherwise you end up looking worse than you’re trying to make Liberty look. You didn’t know what the interest structure was on your note, but you wanted to do peoples’ taxes?
Now, most people who fail as franchisees are people who are not suited to own their own business. And they could be identified up front, but Liberty will accept your money and sell you a territory if you can fog a mirror. They pretend theirs is an exclusive club and you’re lucky to be let in, but that’s a lot of hype. They have a large tax department to support franchisees, software development, technical support, operational support, marketing, etc. to the idea that most of the company is the legal department is ludicrous. I know their VP of legal and corporate counsel. It is not a big department, but yes, they are very willing and eager to litigate. You need to know that going in. That’s why it is important to talk to real franchisees, both current and former, successful and unsuccessful. I make good money as a Liberty franchisee, but I have had to learn what is real and what is BS. They leave me alone for the most part, which is all I want now that I understand the business.
Yes, the franchised business is harder to sell than Liberty would lead you to believe. Yes, buy one and run it for a year before buying multiple units. Yes, 12% is a very high price to pay for money. If you have to use Liberty’s 12% money you probably should not be going into business. Most financially sound people don’t have to pay 12% to borrow money. Yes, many of their Area Developers are useless and you just want them to stay out of your way but they are your only conduit to the corporate office for support sometimes. You have to deal with that. And yes, if you are profitable at all, just a little bit, in your 2nd tax season you’ve done very well. If you have to have profit to sustain yourself in tax season #2 this is not a business for you. These things are true. But there’s a lot in this thread that is not true for most Liberty franchisees. A lot of it is failure looking for something to blame.”
Joey Black’s Reality Check: Main Points
Startup costs: “I spent $70k on each of the offices I’ve started, and that was it. Why someone would expect to spend three times that is beyond me.”
Royalties & Fees: “Jackson Hewitt charges more, and H&R Block charges its frachisees a whole lot more. Same for the ad fees.”
Advertising: “…this year, Liberty gave back half of the ad fees to the franchisees to spend on marketing materials. They paid for my yellow pages ad. They produce all the ad copy, graphics, etc. “
Due diligence: “…none of this was hidden when I signed the contract. It was all right there.”
Franchisee failure: “…most people who fail as franchisees are people who are not suited to own their own business.
Sales hype: “Liberty will accept your money and sell you a territory if you can fog a mirror. They pretend theirs is an exclusive club and you’re lucky to be let in, but that’s a lot of hype.”
Franchise support: “They have a large tax department to support franchisees, software development, technical support, operational support, marketing, etc. to the idea that most of the company is the legal department is ludicrous.”
Litigation: “…they [the franchisor] are very willing and eager to litigate [franchisees]. You need to know that going in.
Profitability: “I make good money as a Liberty franchisee, but I have had to learn what is real and what is BS.” “if you are profitable at all, just a little bit, in your 2nd tax season you’ve done very well. If you have to have profit to sustain yourself in tax season #2 this is not a business for you.”
Financing: “12% is a very high price to pay for money. If you have to use Liberty’s 12% money you probably should not be going into business. Most financially sound people don’t have to pay 12% to borrow money.”
Area Developers: “…many of their Area Developers are useless and you just want them to stay out of your way but they are your only conduit to the corporate office for support sometimes.”
Blaming others: “…there’s a lot in this thread that is not true for most Liberty franchisees. A lot of it is failure looking for something to blame.”
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Joey seems to be a little taken in by the corporate stand. The facts are that Liberty clearly mis-represented the profits and costs of each territory when I was involved with them. I was shown initial costs that included royalties, territory acquisition and office start up expenses to be in the $53K range. Taking an innaccuracy factor of 50%, I originally figured costs to be in the 75K range. These costs were exceeded due to the high costs associated with the marketing royalty that was not presented as a cost in my initial projections.
As for the royalties for H&R Block, at least they do some (extensive) advertising on a national basis. Liberty does not. At least you know that your money is going to some good use other than to line the pockets of the corporate officers.
The AD's only qualification is that they are able to cough up $100K to buy a region and try to market it to unsuspecting people.
The reality check here is that this group is a bunch of scam artists intent on bilking you of your savings and retirement. You are then rewarded by strenuous lawsuits that are very costly to defend in the VA Federal court that is by far friendly to Liberty. I hope Joey realizes that if he ever wants to leave the franchise, he has no choice but to be sued by his wonderful franchisor!
As I said before, I had my own practice before I met these thieves, and they sold me on the fact that they could 'grow' my client base under their system. I was sadly mistaken!
This is not a profitable model, no matter how many corporate dweebs write in to this blog. The best advice is to learn from the mistakes of the others that have experienced the litigation of Liberty There has to be something to the concerns and warnings expressed here just by the sheer numbers of contributors. Be warned from an ex-franchisee that this is a franchise to stay away from!
Learning the hard way! Yes! the deck is stacked in the courts and in arbitration against franchisees because it is the franchise systems who are protected by federal regulatory policy and the "invincible contracts" in which the the franchisor promises very little to the franchisee in writing ---because he doesn't have to under the terms of the FDD and the contract.
Attorneys like Richard Solomon of Franchise Remedies have written that the franchise contract is a license to lie, cheat, and steal and guess who licensed the franchisor ---the FTC!
All of the franchisor's promises outside of the written disclosure document and the actual contract are moot once a prospect signs the "invincible" franchise agreement packaged with the disclosure document.
http://thegreatfranchisingrobbery.blogspot.com/
Carol you are mistaken.
The FTC does not "license" franchisors.
FTC Rule and FDD's DO act as LICENSE to sell the intangible, the franchise, to the public and the contract of sale is packaged with the license, and the "package" legitimizes the franchisor in the eyes of the prospective buyers of franchises.
The legal definition of a license is "The permission granted by competent authority to exercise a certain privilege that without such suthorizxation would constitute an illegal act,"
Obviously the Rule and the FDD;s do act as the license to sell the franchise because it is illegal to sell a franchise without complying with the FTC Rule/state Franchise Disclosure Documents and providing a copy of the FDD and Sales Contract to the prospective buyers of the franchise ten days before finalizing the sale. Franchisors buy the license and "fraud insurance" as well when they comply with the federal rule and state FDD's governing the sale of franchises to the public.
http://thegreatfranchisingrobbery.blogspot.com/
1) My daughter signed a franchise agreement with Liberty and I co-signed as guarantor.2) Liberty has cancelled her franchise on frivilous grounds and we are currently in litigation. 3) Fortunately we had the money and the lawyers, both in MS and VA, who were able to move the case to Mississippi, so we are litigating here instead of Virginia.4) LIberty works on the assumption that their franchisees will have no money to litigate in VA, and they will win default judgments. This is their biggest swagger stick with which they intimidate franchisees.5) There was fraudulent inducement to contract 6) No post contract promises were kept. The AD's lived in VA and rarely stepped foot in Memphis TN and North MS 7) We protested on the discussion boards, and were banned from posting.8) LIberty knows the truth but will not tell it to the franchisees. The franchise regulations allow the franchisor to reveal the true figures, but also gives them the option not to do so. They choose not to reveal , as the true story is that 10% of the franchisees make money and the rest dont. 9) Liberty knows that the future of the tax preparation industry is in online tax preparation. That is why they are so focussed on their on line service Esmart.com. A brick and mortar store has no hope of making money unless its a full service financial center like us where overheads can be spread over many revenue streams. 10) The contract clause that disallows disparaging comment is unconstitutional11) The non-compete is also unconstitutional and has been struck down by the Supreme Court on many occassions.
How come Liberty's website implies that John Hewitt left Jackson-Hewitt as a result of him selling the firm? The press also spreads this myth which is being spun by Liberty Tax.
The truth is: that Jhn Hewitt resigned from Jackson Hewitt shortly after he was replaced as CEO. Effectively he was fired from the CEO job in June 96. He resigned complety from the compant in September 96. Most likely he was forced out completely. Jackson Hewitt was sold in December 97 well after John Hewitt was gone.( a simple search on the history of Jackson Hewitt will reveal these facts) It looks like some magazines just took Liberty Tax's spin on the facts and did not conduct an independent review for themselves.
These people play loose and fast with the truth.
Joe Black can you ask John Hewitt about this the next time you see him. Ask him if he did resign or was he fired from Jackson Hewitt for bad management.
New post on the Liberty Tax franchise. LIBERTY TAX FRANCHISE: Praise from 1st Year Owner.
Your comments invited.
Both Mario and Viera Kay have good arguments. Mario is right that one needs to know franchisors will litigate before you go in. But remember 99% of litgation is on the 2 yr 25 mile non-compete. This can be defeated if argued properly. The burden of proof is always on the person asking for the non-compete (Liberty) as to why they need it. If they located a competing store within 25 miles of your location, and they didnt think that was unfair competition for you, then they have a hard time in court proving why you are an unfair competition for their existing locations. Who told me? Carl Khalil currently Librty's top legal honcho. Before joining Liberty he had a website http://www.breakyournoncompete.com (TM). Also Viera Kay is right. Liberty is a John Hewitt cult. There is no succession plan. If tomorrow John Hewitt drops dead or goes senile, Liberty will come tumbling down like a house of cards. We visited Virginia Beach to see their set up but didnt go ahead as they had no plans beyond John Hewitt and he is pushing 65.
Hewitt's "story" is the company's best marketing hype for growth. They play it over the top. Yes, John's not going to be doing this for ever. Yes, he was forced out of Jackson Hewitt. He did not want to sell the company, and the majority of shareholders did. All those things are true.
Folks who believe in national television advertising should go with Block's system and pay the much higher advertising and royalty fees. My comments on Liberty's 5% were to address the criticism in another thread that the company doesn't spend that money in the local Liberty territory. That's not true. They give 1/2 of it back to the franchisee to buy marketing materials, albeit at inflated prices through Liberty's pet vendors (and there's a financial connection there as well). And they buy the local Yellow Pages ads. And in some markets they pay for radio ads. They also do direct mail in the territories with some of that money. And yes, some of it covers the corporate overhead. I suspect some goes for their marketing of new territories as well.
Look, I've seen enough people fail as Liberty franchisees. I'm not trying to paint a rosey picture for anyone. I'm just trying to sort out the facts from the inflated complaints, like people who sign a promisory note for 12% and then complain about the exhorbitant interest rate.
Hello There!
I am pretty shocked by the comments I have just read on this site. I worked in a Liberty Office in North Carolina for a season, then bought the franchisee out. I have found every single minute dealing with every department of Liberty Tax Corporate to be a pleasure. All their staff are highly trained. Any tax questions I have are answered incredibly fast, all technical support is superb! MY Area Developer is fantastic and has provided me fantastic guidance through out my first two years as a franchisee. The funding they provide to me off season has had reasonable interest to help me though the off season. They even finance my opening a 3rd office. I have not had a problem paying the money back in the beginning of the tax season at all.
I appreciate every single person at Liberty Tax Corporate Offices in Virginia Beach for being there for me and the incredible response I have gotten from every phone call or e-mail. The royalties are very reasonable considering all the incredible support that is available. Having been an IT instructor and the owner of a Computer Business in NYC before launching this venture as my semi-retirement in a small town, I can only say that being a Liberty Tax Franchisee is a shear joy! Do I like doing taxes, paperwork and reports. . .NO!
But I find the manner and method of getting support of any kind, including financial, has given me a stress free opportunity to run my own business, provide training and employment for local residents, help people who are being stomped on by the boot heel of Uncle Sam and earn some money.
Liberty Tax Corporate has supported me in my long range and short range plans and provide any guidance I need! Just the other day, I told somebody that with the excellent support and the respect and care that they display to their franchisee is worth DOUBLE the royalties they charge!
Why is my experience with Liberty Tax Corporate so much better than the complainers on this site? I think it is because my main goal is to do all I can for my clients and perform due diligence in all matters and always have my employees trained in the rules of compliance with all government, banking and tax regulations.
I certainly don't do everything perfectly, I am human, but I am thrilled to own 2 Liberty Tax Franchises. This season will be the beginning of my 3rd tax season as an owner and I expect to make a profit. Anybody starting a business and expecting to make money before the third year is living in a dream world.
I am one very, extremely happy franchisee and adore my Area Developer because of all the wonderful advice he provides to me.
Sincerely,
Connie Crawford
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