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Founder of Liberty Tax Franchise Tells All

Written by: Patrick Findaro
Last Updated by Facundo Bermudez: August 16, 2022
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This article is based on the video featured above, originally recorded for Vetted Biz Youtube Channel.

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Liberty Tax Franchise has been in the income tax preparation business and has offered franchises in this business since 1997. As of December 28, 2019, there were 2539 Liberty offices in the United States, 2407 of which we franchised and 132 of which Wefile operated. It is a retail income tax return preparation business, which primarily attracts customers from the low to middle income brackets.

The business is seasonal with most of the customer flow occurring from early January through the middle of April each year.

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Initial Franchise Fee

$0-$40,000

The initial franchise fee and resale franchise fees are $40,000. The resale franchise fee applies to a territory that has been previously sold. If a territory includes existing operations, the total cost will vary depending upon the Gross Receipts of the Territory and other pertinent market and economic factors. You are not required to spend any specific amount of money on any initial advertising for the opening of your Liberty office, but most franchisees will spend between $5,000 and $7,500 on initial advertising. 

Franchise Cost:

The total investment necessary to begin operation of a Liberty Tax office is $20,700 to $73,900

Additional Cost Breakdown:

Below is a list of the costs that factor in the range of startup costs from $20,700 to $73,900.

  • Initial Franchise Fee: $0-$40,000
  • Initial Advertising: $5,000-$7,500
  • Travel and Living Expenses While Training: $1,000-$2,500
  • Equipment & Furniture: $3,000-$5,000
  • Signs: $500-$1,000
  • Rent: $3,000-$6,000
  • Payroll: $5,000-$7,000
  • Insurance: $200-$400
  • Additional Funds (3 months): $3,000-$4,500

liberty tax

Ongoing Franchise Costs and Fees:

Royalty: 14% of Gross Revenues-.

Advertising: 5% of Gross revenue.

Payment: Royalties are due on 5th day of the month.

-Minimum Royalty: Depending upon the year of operation, the Minimum Royalty will range from $5,000 to $11,000.

Franchisor Liberty Tax Consolidated Statements of Operations:

Franchise Group, Inc. and Subsidiaries

Consolidated Statements of Operations

Transition Period Ended December 28, 2019, December 29, 2018 (Unaudited), and Years Ended April 30, 2019 and April 30,2018

 Transition Period From 5/1/2019 –Period From 5/1/2018Twelve Months Ended
(In thousands, except per share data)12/28/201912/29/201904/30/201904/30/2018
Revenues: 
Product$96,139$ –$ –$ –
Service and other$29,735$16,647$132,546174,872
Rental$23,636$ –$ –
Total Revenues$149,510$16,647$132,546174,872
Operating Expenses 
Cost of Revenues 
Products$71,820$ –$ –$ –
Service and other$768$ –$ –$ –
Rental$8,661$ –$ –$ –
Total cost of revenue$81,249$ –$ –$ –
Selling, general, and administrative expenses$173,860$68,267$124,060$162,321
Restructuring expenses$ –$9,345$9,345$4,952
Total operating expenses$255,109$77,612$133,405$167,273
Gain (loss) from operations$(105,599)$(60,965)$(859)$7,599
Other income (expense) 
Other$37$(12)(113)$63
Interest expense, net$(9,349)$(1,802)$(3,023)$(3,181)
Income (loss) before income taxes$(114,911)$(62,779)$(3,995)$4,481
Income tax expense (benefit)$(10,445)$(19,726)$(1,839)$4,346
Net income (loss)$(104,466)$(43,053)$(2,156)$135
Less: Net (income) loss attributable to non-controlling interest$36,039$ –$ –$(10)
Net income (loss) attributable to Franchise Group, Inc.$(68,427)$(43,053)$(2,156)$125

 

tax

 

Key Takeaways: 

The Franchisor Liberty Tax is not a profitable business with a net income loss in 2019 of 68 million in Liberty Tax has seen a decrease since 2018 when net income was a loss of 43 million.

Competition:

The primary competition in this market is from H&R Block and Jackson Hewitt. Other competition comes from other national, regional, and local tax return preparation and accounting businesses, as well as from the Free File Alliance, online income tax preparation services, and nonprofit tax preparation assistance groups. There is also competition from SiempreTax+.

Conclusion:

Liberty Tax Service offers a franchise program to operate tax return preparation offices utilizing special marketing techniques and operating procedures. 

While this may be the business for you, make sure to also check out other businesses offered on Vetted Biz and in the business services industry. 

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