All Feed Back NEEDED looking at potential fed ex turn key routes to purchase

qcarter

Member
Couple more things to check.
Work comp, get his ex-mod and loss history. If he's been operating with minimal losses for years he'll be paying a lower rate than you'll get with a new company. If you ever plan on being in or near a truck, insurance will rate you as a driver, that's an extra $10Kish that he's probably not paying with himself as the only manager.
Capacity. See how busy his guys are. Both ways too, I've got routes that look pretty empty leaving but come back full. If you need to add another route soon, it will eat into your margin fast.

I greatly appreciate your time and knowledge on what to look for and ask. You have brought up a few things that i haven't thought of. Thank you. This is what i was hoping for by joining this open forum. Thanks again!
 

It will be fine

Well-Known Member
I greatly appreciate your time and knowledge on what to look for and ask. You have brought up a few things that i haven't thought of. Thank you. This is what i was hoping for by joining this open forum. Thanks again!
No problem. If you need anything else you can PM me and I can give you my email.
 

barnyard

KTM rider
The math does not work as you presented it.

You are saying 5 routes will bring in mid $200k?? or about $50k per truck??

I suspect each truck needs to gross at least $100k a year just to cover expenses, putting nothing in savings or reinvesting in new equipment.
 

qcarter

Member
The math does not work as you presented it.

You are saying 5 routes will bring in mid $200k?? or about $50k per truck??

I suspect each truck needs to gross at least $100k a year just to cover expenses, putting nothing in savings or reinvesting in new equipment.


Without having the settlement sheets infront of me and not exact numbers, his total gross with what his isp contract is for + per stop rate, per package rate and bonuses he averaged a month roughly is a little less the 50,000 a month (before expenses) then subtract is average monthly expenses which was a little less then 30,000 and it came to close mid 200's per year. This is and ISP route so he negotiates his own rates so every isp route may differ.
 

STFXG

Well-Known Member
T



Thank you. Yes my dad can drive and this terminal just opened 1 month ago. Brand new. So he just moved to this one which in fact helps him because now he cut down his travel time for all routes. Its cut it more then half. Mechanic is in place to go over trucks. Appreciate your actual advice.

Whoa whoa whoa stop the clock.

Did any of his rates change with the new terminal building? Is there a grace period when they will adjust after moving to the new building? Or did he sign a new contract when they changed buildings?

After the 2 year contract you will likely take a huge pay cut. Since it cut his routes drive time in half they aren't going to pay the same rate next contract. Often there's a period of time after moving routes before they can adjust numbers down. You're going to eat it and he wants out while the numbers look good.

Jmho
 

It will be fine

Well-Known Member
Whoa whoa whoa stop the clock.

Did any of his rates change with the new terminal building? Is there a grace period when they will adjust after moving to the new building? Or did he sign a new contract when they changed buildings?

After the 2 year contract you will likely take a huge pay cut. Since it cut his routes drive time in half they aren't going to pay the same rate next contract. Often there's a period of time after moving routes before they can adjust numbers down. You're going to eat it and he wants out while the numbers look good.

Jmho
Doubt it. No core zone in ISP. The only charge that changes is fuel, which at least for me is not very significant. If he's already in the new building the new agreement likely reflects that. They prefer to renegotiate before the moves occur or at least shortly after.
 

Grounddown

New Member
Being ISP they won't change the rates with the move to another terminal. My routes were moved to a different terminal and my contract stayed the same. No real difference when my contact ended and renegotiated a new contract, in regards to travel time to route areas. Will his current drivers make the move to the new terminal?
 

RALD276

Member
I bought a year ago, just passed my anniversary. It has not been a smooth, turn key transition. There are so many factors to consider, but as has been stated earlier, be ready to drive. If you can't/unwilling drive, you will be in trouble at some time if you don't have dual redundancies. If your father has 2 routes (did I read that right?) and you are buying 5, that's seven guys that could have issues - sickness, injury, etc. Have a second level. You will be glad you did. If you end up in a bad position, the terminal can pull you contracts...I have yet to see that happen due to service, but it can. There is a reason the SBA won't finance FedEx routes/equipment.

I would be careful to trust the numbers. My seller also touted $200K and his gross numbers matched, but it turned out he ran 8-10 trucks during the previous peak to inflate his gross by $25K. He also did nearly ZERO maintenance. If you clear $200K I will fall on my face and worship you. Plan on a more realistic $20-30K contribution per route to the bottom line - IF YOU HAVE SOLID TRUCKS. This business looks real good on paper, no so much at the end of the year. There is a reason FedEx is continuing to have record profits. Before you buy, I would do as suggested, and rebuild the last 24 months of stop counts, package counts, mileage, hours, pick-ups, anything you get paid for. Check everything and be very thorough about estimating every cost - add in your dog grooming, electric bill, etc, because I don't think anyone can build accurate proforma income statements until actually running the business. You are just too dependent on the sellers records. You get paid in pennies and pay in dollars. Doesn't take much to wipe out a quarterly or monthly bonus.

Lastly, trucks, trucks, trucks is like location, location, location is to real estate. These will make or break you. Our first year we put over $40K into 4 trucks. Don't underestimate a single repair. If the seller tries to down play the repair, he is lying. A cheap repair is $400. That is 1.5-2 week's profit on a truck. I was seeing bills at the rate of $1500 to $2000 a clip. If he has any manual trucks, get rid of them. You will have a harder time locating drivers. Also, being his last 5 routes, you probably have the last 5 trucks no other buyer wanted. BEWARE.

Lifestyle is significantly impacted unless you pay someone else to do the work for you. I am still doing work at midnight every night, but I like numbers and understanding patterns to take advantage of those patterns. I haven't been able to take a family vacation yet. If you want to talk, I will give you my phone number or email address and we can chat.
 

Grounded.

New Member
There are a couple of things to keep in mind relative to what advice you will receive on here. First, the majority of folks posting on here are a bunch of malcontents who have an ax to grind with FedEx for one reason or another and their opinions are far from unbiased. Second, there are tremendous differences between different areas of the country and whether a route is rural or city.

I can only speak for my particular market - Long Island, NY, which is one of the most profitable for FedEx. I will tell you that FedEx Ground routes here can be a very good investment. I currently own two routes and I drive one of them full time. New York is not an ISP state, so there are plenty of single route owners in addition to multi-route owners as well. The route that I drive myself is close to the terminal and averages less than 50 miles a day. I gross $145k and net $119k after all FedEx expenses (scanner, liability and vehicle insurance, workman's comp, drug screen, etc.) and other expenses (maintenance, fuel). The other route I own grosses $116k and nets me $47k after all expenses and paying a driver $50k.

There are plenty of smaller routes in less populated areas that are not very profitable and that is some of what you are reading about on here and why some of these folks are unhappy. Routes around here are in high demand and consistently sell for 1.5x net earnings on average, so you are paying for that profitability and the fact that you can sell that route without too much difficulty if need be. So, my advice to you is to speak to other contractors who are actually from your area and have firsthand knowledge of the market you'll be investing in because their advice will be far more relevant to your situation.
 

RALD276

Member
Knowing what you know now, would you purchase again?
Out of curiosity how did the seller find you?

I spent a long time looking into other businesses and franchises and didn't want to reinvent the wheel. Found the routes for sale on bizbuysell.com. It was a basket of lies after that - even the 2013 tax returns were "draft" so they could be falsified.

It's funny you ask the "again" question - or maybe not so funny...I was asked that question by another contractor. This is my 5th company I have personally owned and I know that start-ups take long days and money to get momentum, and we just bought a neighboring contractor which will either sink me or sprint us forward. It has been a roller coaster ride. We are lucky to have drivers that are receptive to our programs, and that has made it easier to keep the good ones and dismiss the bad ones. We were awarded a PSA for the supplemental we were running, but have created an additional as well as the one we just bought so have 2 supps. The trucks have been the bane of my existence. As is too often the case, the previous contractor milked the life right out of them. I would have been better off not buying the trucks, taking the money I put into fixing them and bought new. I would have had new trucks and only $1.5k in truck payments per month.

We just bought another PSA+1 so, I guess we would likely do it again. I learned from this and was much more shrewd the second time around. "BELIEVE NOTHING ANYONE TELLS YOU - ESPECIALLY THE SELLER" is my advice to all (Rule #1). I came from doing 6 digit hand shake deals on a regular basis. Unfortunately, there are a lot of unscrupulous contractors, so buyer beware (but that is also the golden opportunity - FedEx Mgt has totally embraced our management style). I would handle the trucks as noted above. The worry and frustration of unreliable trucks is a living nightmare, that I would only wish on my seller. Luckily, I didn't finance the routes, paid cash, and glad I did. This is a cash flow business and if anyone buys on seller finance, you are running a huge risk having a cash crunch on bad weather weeks like we did in Feb. We lost 15% of our work days (read "profit") and barely made payroll this last Monday (but this was in part due to having three additional drivers on the payroll for which we had not started to receive settlements from FedEx). Each work day is like an apple waiting to rot on a shelf - once it is gone, there is no recovering it. I am now finally to the point that I am budgeting my expenses and not just bleeding. So that helps, but it took a year.

To be honest, it is a bit depressing to read this forum and all the negativity about something that I sunk a good chunk of money into.

The other contractor I referenced above has several routes in two terminals and said he and his wife haven't taken a paycheck since they bought the routes. I have at least paid myself the minimum required by the state for directors of a company, but still had a loss on 12/31/14 - but paying myself a nominal salary is a small victory. Peak was non eventful and I think with the 4 PSA's and 2 supps, we were operating at peak I netted $1000 extra over the entire month of December (including the payout I made to a home owner for a maroon temp getting stuck in their front yard - don't ask. I heard so much about people buying new trucks with cash, the new peak bonus starting early, blah, blah blah - refer to Rule #1 above.

To insulate myself from the effects of ignoring rule #1, I have poured over and over our 2014 financials and compared to my proformas as well as correct the 2015 financial models. I have 3 spreadsheets that track volume, averages, histories and predict loads, stop counts, break even stop counts for each PSA, annual gross and net incomes based on a weekly average. I am always tweaking the numbers to dial it in. I think it helps me make better business decisions, but it is not easy to keep up with all the data logging. I hope to build a custom DB that will track everything I need and then I can spend less time entering data, and more time data mining.

So for now, the answer is a tentative yes. I hope it turns into a resounding yes in a couple of years...if not, I will sell and move on.
 

RALD276

Member
There are a couple of things to keep in mind relative to what advice you will receive on here. First, the majority of folks posting on here are a bunch of malcontents who have an ax to grind with FedEx for one reason or another and their opinions are far from unbiased. Second, there are tremendous differences between different areas of the country and whether a route is rural or city.

There are plenty of smaller routes in less populated areas that are not very profitable and that is some of what you are reading about on here and why some of these folks are unhappy. Routes around here are in high demand and consistently sell for 1.5x net earnings on average, so you are paying for that profitability and the fact that you can sell that route without too much difficulty if need be. So, my advice to you is to speak to other contractors who are actually from your area and have firsthand knowledge of the market you'll be investing in because their advice will be far more relevant to your situation.

Well said. And in my situation, the management here at our terminal is very easy to work with.

I have one country route (180-200mi/day) and 5 city. The country route breaks even much earlier than the city routes, but the stop count is less. In the end it averages out and makes about the same as the city - but my city is country compared to Grounded...
 
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