Tax Franchise Owners Say Don’t Buy a Franchise!
Which tax franchise is best to own?
Several tax franchisees on the Liberty Tax discussion thread recommend: No franchise.
If they had it to do over again, they would have started an independent tax preparation and gone it alone.
UnhappyFranchisee.com commenter finally gone wrote:
If anyone wants to see if franchising or in this case a tax office is the right move for you I suggest you do this. First compare buying a franchise to opening your own store using the same amount of funds. Take the Franchise Fee you were planning on paying and set it aside to open your own business so for example sake lets say 40000. Take 10k or so to pay yourself while you educate yourself about the business and build yourself a real business model. It may not take the 10k but for example purposes it is just a number but take the time needed to educate yourself the right way. This may take 3 months or even a year but learn the business.
Then go ahead after your education period and start the process of opening your business. The cost your going to spend to open your own branded tax office in reality is not going to cost you any more than you were going to spend opening a Franchise Store and since you were seriously considering it you should have the capital to do this without touching the remaining 30k you put aside by not purchasing a Franchise.
Now your ready to open and go through your first season. I know some of you are asking what about software and support? It may amaze some of you but you can purchase top of the line software with excellent support in many cases for nothing just because if you are going to offer bank products and are going to be doing a decent amount of returns the software company will waive the fee because the amount they will be paid via the bank for your production. Even if you decide your not offering bank products software with support is not that expensive at all.
Now were off and open. Take 10k to 15k of the money you were going to pay just for the franchise fee and use it to promote your business and your services. If you did your homework during the time you took to educate yourself this will be easy. You could spend more but that’s up to you. I would split it between my first and second year. You should by now have a good idea what works and what doesn’t if you did your homework.
Now here is where the numbers really start making sense. If you are a Franchisee your only getting 75 percent of every dollar your making. Why?because your paying royalties and advertising fees and those get paid no matter if you received anything from them or not. If you do 100k in fees under your own brad your 25k better off.
It is not that hard to realize that taking your money and getting yourself educated and prepared is by far the right way to go but you need to do budgets for both and look at what your really paying when you sign a franchise agreement.
I hope this gives you at least a starting point to make an informed and logical choice. Because the difference between these 2 options can change your life. In Franchising they tell you your in business for yourself but not by yourself and that is so appealing. They do not tell you what that means. It means when you try to do something to help your business succeed they can and will tell you what is acceptable and it matters none that what they tell you may harm you or stunt your business growth. It means that anytime they wish to interfere and change things they can and you paid them allot of money to give them this right!
Frustrated & Disgusted agrees, writing:
finally gone, you are so right.
People think that buying a franchise also buys them a proven system that will increase sales faster than would have happened otherwise.
I have over 20 years of corporate marketing background. There is no such thing as a proven system. What creates demand in one area, does not always work in another. Giving away $50 Cash in a Flash [A Liberty Tax promotion] in one area may flop in 10 others. I tried CIAF and it fizzled big time. Wavers can bring in some customers, fail in another. Local marketing to businesses had minimal return.
What always works is true word of mouth by giving good service and having satisfied customers. Every business owner will attest to that. That can easily be done with or without franchise help.
Hence, build your own brand, your own business by creating satisfied customers.
What do you think?
Is buying a tax franchise a waste of money or a smart way to start a tax preparation business?
FRANCHISE DISCUSSIONS by Company
H&R BLOCK Franchise Complaints
JACKSON HEWITT Franchise Complaints
LIBERTY TAX SERVICE Franchise Complaints
ARE YOU A TAX FRANCHISE OWNER OR FORMER FRANCHISEE? ARE YOU FAMILIAR WITH TAX PREPARATION FRANCHISE OPPORTUNITIES? SHARE AN INSIGHT BELOW.
TAGS: tax franchise, tax franchise opportunity, tax franchise complaints, Liberty Tax franchise, H&R Block franchise, Jackson Hewitt franchise opportunity, tax preparation franchises, starting a tax business, unhappy franchisee
12 thoughts on “Tax Franchise Owners Say Don’t Buy a Franchise!”
Okay, ADMIN, I’ll bite! I’ll be the first post on this new thread of your forum :)
I was a corporate tax manager before making the biggest mistake of my life by entering into a 5 year contract with Liberty Tax Service. I joined because I had a corporate, business & tax background and was a little unsure about starting out on my own–financially. I looked to join LTS after doing research into several tax franchises, besides the big three listed. I ‘thought’ (mistakenly) that if John Hewitt was the CEO, with a background at H & R Block and then of course starting Jackson Hewitt, he would be the best person to guide me into growing my own tax business, away from corporate life.
THAT WAS SUCH A FATAL MISTAKE on my part. I never had joined a franchise before, and I had no idea what was about to hit me. And how one sided their contract really is. And once you leave, Liberty takes ALL of your clients. Not only the ones you just marketed to and formed a relationship with for 5 years, but in my case, I had some pre-existing clients that I had before I even joined LTS. (Read this paragraph over & over & over again. Do you really want to join a franchise that preys on you like sharks?) There is absolutely NO way that you can win anything against them. They will fight you to the bitter end. No matter how much money it takes on their part.
At that time, several years ago, they were big on lots of fluff and air and I bought into it. Conventions that played into your emotions. Marketing people to tell you to sign ‘right away’ before such & such happens.
The next 5 years I spent with them were in every shape & form ‘over the top’ stressful. I thought, how ridiculous this is that I’m paying so much money out in royalties. Money that I could have just kept and held onto if I HAD JUST STARTED MY OWN TAX BUSINESS AND NOT SIGNED THEIR CONTRACT.
It got soo, soo, soo much worse as those 5 years went on. People coming in off the street to work as a “waver”. They would sell drugs on the corner. People signing up to take the tax prep class and then subsequent hiring (with a couple of weeks of tax class experience, big deal), employees ripping you off left & right if you have more than one location because they are NOT professional tax people that work all year, not just a few months out of the year.
It goes on and on and on and on. The NIGHTMARE that just won’t end. Liberty makes sure of that. TRUST ME ON THIS. They will not let you go, even years after the contract expires. They hunt you down to make sure you are no longer doing taxes or if you are, that you OBEY their non compete, etc.,etc.,etc. to the letter of the law.
Why join a tax franchise like Liberty that is 100% in charge of what you do, how you do it, when you pay, when you hire, when you use the restroom……no kidding. There is NO freedom whatsoever in this franchise to put your own stamp on your own business. Even though they ‘tell’ you it’s your own business, it’s the extreme opposite of that. They tell you it’s your business only when you need to pay for everything. OR they send you ‘notices to cure’ for every Tom, Dick & Harry reason.
I would sincerely recommend ANYONE reading this post who has ANY desire to join Liberty Tax Service franchise, to back away and go elsewhere. ESPECIALLY IF YOU HAVE A TAX BACKGROUND. START YOUR OWN PART TIME UNTIL IT’S BUILT UP ENOUGH!!! If you DON’T have a tax background, also back away. Do NOT trust ANYONE with your business and dollars ever again.
MANY, MANY of us reporting on the Liberty Tax ‘main’ forum say that we would NEVER join LTS again. Take it from us and save your hard earned $$. And your piece of mind. And your stress level. Again, it is SO not worth it.
I will second what SanFranDan says: Back when we both got in Liberty was growing and you had this figure John Hewitt that was at the fore front of using computers to do tax returns and had built a successful company “Jackson Hewitt”, which all came into play when I made my decision to become a franchisee in 2005. Today it’s 2014 and what we see is that the business model that was the cause of Jackson Hewitt’s success is no longer. Quality Tax software is readily available at low cost, RALS which drove the industry for all three of the major retail tax prep firms are going, what bank products that are still offered can usually be obtained right from your tax software provider. Add on to that more scrutiny by the IRS, quicker turn around of refunds and volunteer groups offering to provide free returns to low income filers and you have a much more different landscape then in 2005. But the most important is the man we believed John Hewitt to be turned out to be completely false. He is smart but he is not ethical and is really just a con artist.
Franchising today has basically become away for anyone with a relatively good idea to capitalize on that idea without proven it a viable business model. Through slick marketing and poor regulations franchisors are able to sale franchises without having to provide verifiable financial information and if they provide any financial information it can be based on the franchisors chosen. i.e. their I best locations.
It is important for potential franchisees to understand that the contracts are one sided but they are legal and binding agreements. The courts will uphold the contracts unless you can prove that the franchisor failed to meet their contractual obligations but that is highly unlikely.
I was a Liberty franchisee for 14 years. I made a good living at it. I will agree that if you can figure out how to run a successful tax office on your own, you don’t need to buy a franchise. If you can figure out how to make hamburgers that people will come out in droves to buy you don’t need a McDonald’s or Burger King franchise either. So, let’s say you have figured out that it would be good to send out direct mail to promote your tax office. Should you mail it in mid-December? Between the holidays? Early January? Late January? The end of February? When will it be most effective in drawing new customers to your business. If you know how to market, how to manage, how to deal with the IRS, how to educate new employees, etc. then you don’t need a franchise. Most mom-and-pop tax offices don’t do well, but you might be different. Buying a franchise won’t guarantee you’ll do well either. If you’re simply not well suited to be a business owner, then it won’t matter, you might fail either way. You really should talk to people like me, as well as people who failed as franchisees. Then decide which you are most like. You should know yourself better than anyone else. I loved my 14 years as a Liberty franchisee.
Jim: the first step in having creditability on this site is to disclose your current relationship with Liberty Tax Service?
Second step is support your comments with facts: franchises accounted for 23% of the market the remaining 77% where handled by CPA’s, EA’s and Mom & Pop businesses. What facts do you have to support your comment that most Mom & Pop’s don’t do well? I would argue that do to the high prices charged by the franchises, Mom & Pops can attract business with lower fees and don’t have the overhead associated with a franchise.
If you paid $40,000 for a franchise and the best thing they can do for you is tell you when to do a direct mail which only has a return of 1 to 2% you’ve been had.
All of the software company’s offer tech support and you can always hire trained people.
Why did you leave Liberty?
I am sure the franchise fee was quite a bit lower when Jim joined. I suspect it was $25,000 or less. Possibly the royalties back then were lower also and the competition was not over done.
The people who joined in 2003 or earlier have a totally better experience with LTS and their success is by and far much higher and satisifaction is very high. After 2008 when John wanted to grow, the tide was turning.
It sounds like Jim sold and is sitting pretty, but most don’t with this franchise.
Bill, I’m not here to play your games. My words speak for themselves. They are either credible or they are not. My comments are even valid in their own right or they are not. Yes, Franchizee, I retired from the business after 14 years. That’s normal. Yes, the franchise fee in 2001 was $20,000. Before that it was $12,500. As a franchise system grows it acquires more value. I was the first Liberty franchisee in my area. Nobody had heard of it. But the royalty was still 14%, ad fee was 5%, and the total is still lower than either national competitor. And in any service franchise where there is no cost of product, the royalty is in a similar (or higher) range. I’m aware of quite a number of long-term stable (which I presume means profitable) zees and I am aware of some who have failed miserably. I could have predicted most of the failures I’m aware of, but unfortunately it is true that Liberty will sell you a franchise territory even if you don’t seem well suited to operate your own business. That’s why I tell people they have to do their own self-evaluation for themselves. Liberty won’t do that for you. How can they know you better than you know yourself?
Oh, but I’m happy to support claims I make, sorry, I missed that. Liberty used to circulate a spreadsheet of surrounding Block, JH, and mom/pop tax offices in my territories. Most of the m&p offices did under 200 returns. There were occasional ones that did 500 or more, but that was a miniscule minority. You can seek IRS EFIN statistics if you want to confirm. Most EFIN numbers efile fewer than 150 returns. These stats are out there for anyone doing their due diligence. The sad thing is that so many don’t do due diligence before buying. Due diligence is a must. Anyone too lazy to investigate what they are getting into is likely not to succeed because they have already exhibited one of the big warning signs. Laziness.
Jim, I am considering buying an existing Liberty Tax franchise. Could you advise me how to get IRS EFIN statistics (you mentioned) – number of returns e-filed by every other office. I’d like to do due diligence not only for a place I might buy, but about surrounding area as well. I am not able to locate it. [redacted contact info]. I greatly appreciate all your help.
Before you buy into this cult, ask yourself a few questions: why did so many Liberty tax offices get shut down last year (google Liberty tax in the news)? How many new franchisees make it to their second, third, fourth season etc.? Why are you buying an exisiting franchise and not opening a new office if it is such a good thing, save some money? What is the turn over rate for Area Developers? Etc. etc. If you need help getting an EFIN number from someone on this board you are already in big trouble.
The way I see it is that if ‘John’ has done his research and actually read through all the negative posts about LTS on this forum, has seen the stock trades, the news articles about fraud in several cities perpetrated by Liberty themselves, heard what goes on at training sessions or used to happen, how unreliable AD’s are, how much spyware is loaded into all the Liberty software & hardware, how your clients will never be your clients as long as Liberty is involved……it goes on and on and on and on………if this has all been really researched and ‘John’ is still interested in buying into an existing franchise, boy do I have a lot of swamp land to sell him. All I can say is good luck, buddy. You’re gonna need it. I’d much rather hold onto my money than give it to Liberty, knowing what I know now, not then. YIKES
I always think that people like John are a plant just to pull us away from the main link about liberty.
John please see my comment on “Liberty Tax Franchisee Complaints”.
Look at the locations numbers for at least last three years. More important. If declining return count, pay less.