Is FedEx legally obligated to negotiate in good faith with their contractors?

Discussion in 'FedEx Discussions' started by Frank Maikisch, Jul 17, 2019.

  1. fjm1235

    fjm1235 New Member

    New member here. A family member recently purchased a FedEx Ground business operating in North FL. The routes deliver into a rural area with many unpaved roads & are the furthest from the terminal. It took only 2 weeks for him to ascertain that the business wasn't making any money, he was in fact losing money as FedEx hadn't been adequately funding the business. Distance from the terminal & wear/tear on the vehicles being the primary factor. As is the current process, FedEx provided 3 offers for him to consider. None of them addressed the business's financial needs, namely to make a profit of any kind. Per the process he rejected all 3 offers & was supposed to go into negotiations. Before entering into ISP "negotiations" he had done quite a bit of analysis to support this funding problem. He provided that research to FedEx beforehand so that they would understand where he was coming from.

    Upon the start of talks it became very clear that the FedEx team hadn't looked at or considered his data. The numbers package they put forward were nothing more than what he had already rejected. After much back & forth, with terminal mgt. stringing him along, saying they would get him what he needed as it wasn't much more than FedEx was already offering, he finally got a straight answer from terminal mgt. That more money wouldn't be forthcoming. Having said that he informed FedEx of what he had stated previously, if you cant adequately fund these routes he would "close shop" in a few days as he couldn't continue absorbing losses. To that point his business was outperforming all other contractors in the terminal. Being contractors, isn't FedEx obligated to actually negotiate in good faith? This family member went into debt to the tune of $500K to buy this so called "business." Feels much more like a scam than an actual business opportunity. They never negotiated. Hoping for some answers/guidance from the community. Thanks....
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  2. floridays

    floridays Well-Known Member

    The final answer is no, Fedex is not compelled to any notion you seem to be seeking.
    Your family member is required to perform his own due diligence which should be a part of his offer in contract negotiations.
  3. Why on Earth would you spend that much money and not do some research on it first?
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  4. fjm1235

    fjm1235 New Member

    The short answer is the previous owner included numbers from other, profitable routes. I call that fraudulent, but that another issue. I am looking to learn about what FedEx is obligated to do in talks.
  5. rod

    rod #1 on Upstates "list"

    Tell your family member he has to work faster:

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  6. Ask @bbsam
  7. burrheadd

    burrheadd KING Of GIFS

  8. Ou812fu

    Ou812fu Polishing toilet bowls since 1966.

    These are the kind of people old x relies on. The ones that have little knowledge and big ambitious ions.
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  9. It will be fine

    It will be fine Well-Known Member

    First, change your screen name if that’s a real one.

    To your question, negotiating in good faith doesn’t mean you get all the money you feel you need. FedEx doesn’t consider servicing debt when they determine the value of the operation. The value is roughly determined by how many vehicles it would reasonably take to provide service in the area. The profitability of the contract isn’t their primary concern, covering costs to operate is. If you can’t make a profit with what they offer, they feel like they can find someone who can. Good faith only means they make a reasonable offer not that they make a good one.
  10. bbsam

    bbsam Moderator Staff Member

    And “reasonable” is a subjective term.
  11. dezguy

    dezguy Well-Known Member

    FedEx is beholden to its shareholders, not your family members pocket.

    It's pretty obvious your family member didn't do their due diligence and, as much as we complain about the way FedEx treats people, in this case, that isn't FedEx's problem to deal with.
  12. Fixxxer

    Fixxxer Member

    Companies don’t make their money from good faith
  13. It will be fine

    It will be fine Well-Known Member

    Yes and no. If they bought a partial area it’s hard to value based on current revenue. It does sound like they bought before or during the ISP transition. That’s very risky and wouldn’t be advised by me. They should have stayed away and FedEx is probably under valuing the area, both can be true. Either way they are SOL. Options are bankruptcy or try to ride it out until they find a buyer or the debt is cleared.
  14. bacha29

    bacha29 Well-Known Member

    " What A Fool Believes"......The Doobie Brothers. If the performance numbers provided to the purchaser were not independently audited and collaborated by the purchaser it's the purchaser's own dumb fault.
    Now look there's not one single term or condition in the XG unilaterally drafted and implemented contract that XG considers binding upon itself because there's no governing legal authority with the power to make it binding. Unfortunately you bought the contract believing that it's value and profitability would go up. Trouble is you bought it from someone who was equally convinced that it's going to go down.
    As for "negotiations" there's nothing to negotiate. XG has a pre established rate structure in place and there's no movement outside of that range. Not to mention the fact that as long as XG's DOT numbers are on the side of your bank financed truck and XG bar coded freight is the only freight going in it so what negotiating power do you have?
    What person in their right mind would put all this borrowed money at risk in exchange for a one year, one sided, transportation supply contract that can be terminated for any reason or no reason at all?
    God I hope this guy didn't put his retirement savings and or his house up as collateral . If he did he might as well start moving his furniture out because he's a dead man walking.
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  15. It will be fine

    It will be fine Well-Known Member

    It might not be all that bad. I’ve had contracts I thought would be not feasible and survived. We don’t know all the specifics. Maybe he’s running trucks 5 hours a day with everyone back by 14:00. Maybe the routes are designed poorly with tons of wasted miles. Maybe he has more extra drivers on payroll than he really needs. He might be able to trim all the fat and survive long enough to sell. Or he could trim everything he can and present that to FedEx as grounds to renegotiate if he’s still underwater.
  16. bacha29

    bacha29 Well-Known Member

    When he mentioned "rural area' I knew he was in trouble. When looking at zip or bundle of rural zips what XG never takes into consideration is the RD carrier miles. Like it said before, I had this one town that was 26 stem miles from the terminal but what was never factored in was the 480 rural mail carrier miles that went right along with that zip. The way they thought out things was that once I arrived inside the town proper I would be there all day. I can't help but believe that this service area also has the same miscalculation along with tons of unpaved township turkey paths that you can only do 15-20 MPH all day long because they're not constructed for a faster pace. The revenue stream is not a stream but a steady drip and you're lucky if you've got that.
    Nope, sounds to me like he's in one of those places where it's nothing but RD's and he's being consumed by them .
  17. It will be fine

    It will be fine Well-Known Member

    Fedex has a new system that will spit out route projections for you. It’s terrible, but he can run it and see what it tells him he should be running as far as routes. If it’s way off and he can demonstrate that with real time gps and time studies he can appeal for more money. If he just says, “I need more money” no one in PGH will give a rat’s. He’s dealing with engineers, they’ll only respect real data, especially data they can independently verify with scanner data.
  18. Star B

    Star B White Lightening

    And if it's the same engineers that express has, they won't consider reality even in the face of real data.
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  19. Cactus

    Cactus Just telling it like it is

    To put it simply but bluntly...your buddy is screwed.
  20. dmac1

    dmac1 Active Member

    The short answer is Yes, fedex by law is required to negotiate in good faith, but not ensure you make a profit. Your case may be against the seller for providing false info. I hope you can provide documentation of what the seller told you. I can't believe someone who was able to get $500k together wasn't smart enout to ensure they weren't throwing their money away.