Purchasing FedEx Ground route - advice and feedback on impact of ISP conversion

Discussion in 'FedEx Discussions' started by chris hamachi, Nov 13, 2014.

  1. chris hamachi

    chris hamachi New Member

    Hi guys,
    First time poster, but been doing a lot of reading on the board. I’m looking to purchase a set of 6 routes and wanted to get some feedback from the members of the board. There’s a good mix of the drivers, contractors and previous employees, so I’m glad I’m able to get an overall sense what I’m in store for. If anything, the two main take away I got from this was,

    1. Your drivers will make or break your business so take care of them; and remember to have a backup driver.

    2. Have a good understand of the cost, especially the costs of maintaining the trucks. Have 1 truck as a backup.

    Question to folks like bbsam, gixxer squid, STFXG, CJinx

    1. How different were your contracts with Fedex before/after change from ISP model?

    a. From the post, it seems like the #’s are a lot worse, is there a factor I can add into the current settlements to estimate what the numbers will be after conversion to ISP model?

    b. Aside from settlement #’s, what are the other factors that will change once routes have been converted to ISP model?

    c. How will the cost mode change with the change to ISP model or will there be no change?

    2. What is the typical # of stops per route before it’s too much for one driver?

    3. For 6 routes, how many backup drivers and backup trucks are recommended? If we grow more, 8-10 how does this number change?

    Please note, I know everyone on board is passionate about their beliefs and their opinions regarding Fedex. I am not looking for discussions on how evil Fedex is or UPS vs. FEDEX. I am just looking for an insiders opinion on what he/she may think the current risk is to their investment as an independent contractor, with the understanding that a good business model is first and foremost to take care of the drivers and trucks.

    I am actually meeting with the route broker early next week to a full review on the settlement numbers and all the associated cost. Any feedback is greatly appreciated.

    Would love to have a PM conversation going or even a phone call would be awesome.

    Thanks! Good luck with PEAK!
  2. Operational needs

    Operational needs Well-Known Member

    Nice to see someone post on here AFTER having done their research. :)
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  3. CJinx

    CJinx Well-Known Member

    Sorry, can't help. I am not a contractor or an ISP; just an employee of FXG.
  4. STFXG

    STFXG Well-Known Member

    I am not an ISP either. I am an IC; just another employee of FXG. ;)
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  5. chris hamachi

    chris hamachi New Member

    Thanks for the replies!

    CJinx, hope things are not too crazy w/ PEAK!

    STFXG, what is IC? Independent Contractor? Any tips/advice?
  6. CJinx

    CJinx Well-Known Member

    It isn't crazy yet. Things tend to heat up after Thanksgiving.
  7. STFXG

    STFXG Well-Known Member

    Yeah. Independent Contractor. My advice is to not pay too much since you are buying in. Everyone selling is waiting for a sucker... don't be it.

    Number of stops varies by the route and the driver. A heavy industrial area won't be able to do as many stops as a downtown guy. So that's hard to say. The more you work your drivers the more you will burn them out and have them quitting. Unless you pay them well enough.

    1 backup vehicle is plenty as long as the trucks aren't bulked out daily. You can always pick up a rental truck if you need more than 1. When you get up to more routes you will probably have to replace at least 1 truck in your fleet anyways. Just keep one of the older ones as another spare.

    Other than that I can't help you out with any of the ISP stuff. Good luck!
  8. chris hamachi

    chris hamachi New Member

    Thanks! Will PM with some of the settlement #'s I'm seeing, not looking for a crazy good deal, but just as you said, don't want to be a sucker either.
  9. UpstateNYUPSer

    UpstateNYUPSer Very proud grandfather.

    Is it safe to assume that you will wait until Peak is over to review the numbers before closing on the deal?
  10. chris hamachi

    chris hamachi New Member

    yup! will look at those numbers as well, you expect the net profit to go up or down post PEAK? Assuming seller does the right thing and higher enough extra drivers and doesn't work the current ones to death. That's one of the reason I wanted to check the typical # of stops/driver.

    Also, will not close deal till after PEAK, post January if everything lines up.
  11. STFXG

    STFXG Well-Known Member

    Peak is usually more profitable unless someone overstaffs. Some guys bring in too many temp drivers and lose their asses.
    Volume in January always stays up a bit and levels again in February (returns, gift cards, etc from xmas). Volume increases around 10-15 percent yearly.
    Are you looking at HD or Ground routes? That makes a huge differencs.
  12. chris hamachi

    chris hamachi New Member

    For this particular sale, 5 ground routes and 1 HD route. I've read on the board ground were more profitable, your thoughts on why that's the case?
  13. STFXG

    STFXG Well-Known Member

    I know exactly why that's the case. I run both. And they don't pay the same rates per package/mileage as they do for Ground. Different pay structures.

    You also own less with an HD route. You have a "primary zip code" If you are servicing more than 1 zip code then you only own that 1 that is your primary. They can give the rest away to another contractor if an open PSA becomes available. Anyone can bid and they can give it to who they want to (though it usually goes to the one servicing the area).

    HD is just a headache. Not worth it in my opinion. I would dump my HD route, but it gives me flexibility with the Ground route I have for the same area. Total pay is about 2/3 of what my Ground route pays doing the exact same area.
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  14. chris hamachi

    chris hamachi New Member

    Gotcha, thanks, that's something I should keep in mind ... essentially you're paying the same for driver and truck but Fedex pays you less for it.

    Any thoughts on supplemental routes, how do you tell whether a route is supplemental route or a full route? And are they worth it or not ... my thoughts are that they are not since you're paying a full driver and truck but not a full delivery worth?
  15. gixxer squid

    gixxer squid Member

  16. chris hamachi

    chris hamachi New Member

    Thanks for the reply gixxer squid;

    Regarding # of drivers, starting out, my plan is to get 2 drivers, I'm new to the business so I'm not looking to make any record profits, just want to get the business running smoothly as I get use the how things are.

    Will keep the 0.6 and 0.7 # in mind when looking at the settlements, right now it seems to be slight higher.

    How many routes do you have right now, any other things I should pay attention to or ask when talking with the route broker?
  17. It will be fine

    It will be fine Well-Known Member

    1. Drivers are important, pay them as well as you can, but have plenty of backup plans. The job is tough and they will leave.

    2. Truck costs will vary a lot based on age of vehicle and skill of the mechanic. Check out multiple mechanics and negotiate better pricing with the best one. A fleet of 7+ trucks is enough to get a break from a shop. Don't just go with the guy who happens to work at the terminal.

    1. ISP contract gives you more control over the business. Read and absorb the agreement. Know it backwards and forwards, it will protect you from management abuse.

    A. $ is worse in ISP. I'd guess 7-10% unless PGH figured out that doesn't work out too well, doubtful. They expect you to be more efficient.

    B. "Routes" go away in ISP. You just have a CSA, service area. Put on as many trucks as you want, but your compensation will remain the same.


    2. Depends on the geography and the driver. I try to keep them under 120 on their heavy spike days. Volume goes up and down through the week. Budget for the slow days, contingency plan for the heavy.

    3. 6 routes, you can survive with 1 extra truck. I'd recommend 2. Depends on the age of vehicles. If they're older then plan on one at a time being in the shop half the year so you'll need a backup when your spare is on a route. It's hard to scramble a rental in the middle of the day.
    Good rule of thumb is one extra driver for every 5 regular ones. If you budget well this will give your guys plenty of vacation, which helps with burnout.

    PM if you want more info.
  18. chris hamachi

    chris hamachi New Member

    Thanks for the detailed reply, this is good info. Will send PM for compare some #'s. thanks in adv!
  19. yadig

    yadig Member

    "I sold my soul to the company store!" You better expect alot more changes down the pike. Just remember why the scam keeps changing!! One day they will run out of clever ideas on how to screw people, and pay little or no taxes!! Just a matter of time..