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Accounting Franchise: Liberty Tax Review (2020 FDD)

Source: 2020 Liberty Tax Financial Disclosure Document(FDD)

What is Liberty Tax?

Liberty Tax 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. Liberty Tax 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.

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. 

Liberty Tax 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

Ongoing Franchise Costs and Fees:

Royalty: 14% of Gross Revenues*

Advertising: 5% of Gross revenue

Payment: Royalties are due on 5th day of 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:

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.

Download our guide! See how Liberty Tax compares to its peers and explore other business services franchises! 


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