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How to Open a Liberty Tax Franchise [Cost, Fees, Requirements]

Since 1861, Americans have paid income tax. There are currently more than 140 million individual taxpayers in the United States, which is expected to grow. Tax preparation franchises offer a uniquely reliable seasonal business with high customer demand and low overhead costs.

On September 1, 1997, tax legend John Hewitt acquired a Canadian tax franchisor, U&R Tax Depot. In 1998, the company opened five offices in the U.S. and became Liberty Tax Service®. Today, that company has more than 3,000 Liberty Tax Service®© offices in the United States and Canada. According to reports, in the 2018 tax year, Liberty Tax prepared more than 1.7 million individual tax returns.

With the company’s headquarters located in Virginia Beach, Virginia, the company’s mission has remained the same as when it first opened: offer the flexibility of a personal tax consultant and the security of a large, established company. Over the years, Liberty Tax has been known to continually provide its unique range of tax preparation services and expand its presence in the competitive personal income tax industry.

They have been ranked as one of the top franchises on Entrepreneur magazine’s annual Franchise 500 list every year since 1998, including a Best of the Best award in 2016. Liberty Tax was also listed in Bond’s Top 100 Franchises. Accounting Today named Liberty Tax® to its Top Tax Firms list in 2016 and 2017.

They are the #1-ranked non-food multi-unit franchise by Multi-Unit Franchisee magazine and have been awarded a top spot among franchises by Black Enterprise, Poder/Hispanic Enterprise, and Military Times Edge. The company CEO Brent Turner continues to buttress the company’s reputation for excellence by developing and implementing strategies that directly contribute to maintaining its competitive edge in the tax business.

The chain often incentivizes referrals by giving customers $50 for every referral who becomes a customer. At other times, the company tempts people to switch to Liberty and only pay 50% of what they paid a competitor last year to prepare their taxes.

Liberty Tax is owned by parent company Franchise Group, Inc. Founded in 1972 and franchising since 1973, the number of locations has been declining since 2013 and currently stands at 3,006 (down from 3,352 in the previous year), of which 84 are company-owned and 261 are located outside the US.

Liberty Tax® is a family of dreamers and doers, each from different backgrounds, but all with the same goals: to live life on their own terms, to thrive financially, and to support themselves, their loved ones, and their community.

Financial Requirements of Opening a Liberty Tax Franchise

  • Cash Required: $50,000
  • Net Worth Required: $250,000
  • Total Investment: $58,700 – $71,900
  • Franchise Fee: $40,000

How to Open a Liberty Tax Franchise

Generally, buying into a tax preparation franchise is exciting, but you want to be sure that you are making a good commercial decision. Below are six key things you should do to ensure you make a wise investment with Liberty Tax.

  1. Perform your Due Diligence

Just because you like the company doesn’t mean acquiring Liberty Tax Franchise will suit you well. Even the company suggests that you get as much information as you can about current and likely future demand for its tax products or services.

Research the company’s data on sales, outlets, growth, and marketing plans. Talk to existing franchisees and ask crucial business questions. Business-wise, always remember that even if there is strong demand at the moment or in the past, this does not guarantee strong ongoing demand.

  1. Read and Understand the Documents

You must read and understand all the documents provided to you, including the franchise agreement. Always ensure you fully understand the operational and financial obligations you will be under if you purchase Liberty Tax Franchise.

Properly analyze the contractual rights of the franchisor, such as rights to determine sources of supply and supply prices, control over marketing and advertising, and the ability to direct the way in which services are rendered. Note that you will also need to be clear on the grounds on which either party may terminate the contract. Remember, the franchise agreement is a binding legal contract once signed.

Given the amount you are thinking of paying for the franchise, it makes sense to pay for good professional advice in the terms of the agreement. Professional advice can save you from making a very bad and costly business decision.

  1. Know your Obligations, Strengths, and Weaknesses

Have it in mind that the franchise agreement will define what aspects of the business are your responsibilities and what aspects are the parent company’s responsibilities. Indeed all franchise arrangements are different, but Liberty Tax claims to be better.

You need to be clear about what your obligations are and whether you have the skill set to perform those obligations. Indeed you may be experienced at customer service but not understand essential financial management or accounting.

You can make the arrangements with Liberty Tax to handle all the financial and accounting requirements and provide the system for you to use. Consider carefully whether you have the necessary skills to do all the things required of you in the franchise. If not, you will need to outsource those functions.

  1. Key in the Numbers and Assess the Risks

With Liberty Tax you are not landing a job, instead, you are buying a business opportunity. It’s your responsibility to make the franchise successful within the terms of the agreement. You must thoroughly understand the commercial elements of the franchise agreement.

What determines what you must pay to the company once the franchise is operating? If the business is not as successful as you hope, note that it doesn’t affect the fee you pay to the company. All in all, get professional financial advice to help you understand the commercial aspects of the franchise agreement and assess the financial implications if key variables change.

  1. Know your Exit Options

What are your medium and long-term objectives? If you plan to sell the franchise once you’ve built its business success, be clear on your contractual rights to do so, and any limitations or requirements set by the company. Note that the longer the term of the franchise remaining, the more valuable the business is likely to be.

Since Liberty Tax operates from leased premises, have it in mind that an effective exit will require an exit from both the franchise agreement and from the lease – two separate legally binding contracts which may be with two different entities. Liberty Tax will encourage you to seek professional advice and spend time understanding the opportunity.