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<blockquote data-quote="dmac1" data-source="post: 4316708" data-attributes="member: 60252"><p>You wouldn't be buying routes. You would be buying the right to service a contract only until the expiration date of that contract, plus any assets- like the trucks. Once that contract expires, you need to renegotiate if fedex still want to use your services. And there are terms in the contract that allows fedex to simply cancel the contract if they decide to, with no recourse for you, and no right to any money back from whatever you paid for the 'routes' you think you are buying. Fedex could easily offer you a new contract servicing a smaller area, and give the rest to someone else, leaving you with a lower than projected profit which you based the purchase price on.</p><p></p><p>Most business contracts requiring frequent renewal would have some form of reason required for not renewing as a protection. But fedex doesn't need ANY reason to not offer you a new contract. Maybe the managers son-in-law needs a job, or maybe just doesn't like your accent. </p><p></p><p>They would need to make up some reason to cancel the contract before it expired or you would be able to go to arbitration to get the earnings you lost from termination through expiration date. You would be owed NOTHING for what you paid to run the routes for some amount of time- just the lost profit. And if you used taxes to decreas your tax liability, and had no or little taxable income, you would be awarded very little or nothing as lost 'profit' in an arbitration case.</p><p></p><p> The value of the 'contract' should have some relation to the value of the assets. Real estate is a better investment, because you have a real assets, and in the case of rental property, someone else buying you a property. That is leverage- using some of your money to control an asset worth many times your cash investment. Fedex routes are the opposite- paying full cash value and hoping for enough return over time to recoup your investment.</p><p></p><p> If you want to know how it really works, get a job as a driver for a few months, and tell no one you are interested in buying. And if you buy 'routes' where the vehicles have been fully depreciated on the taxes, you lose out on some of the money savings that can make 'routes' look more profitable than they really are. Depreciation is a real expense- not just some tax write-off, so pay attention when you buy. If you have vehicles worth $300k when new, and they have just had their last year of depreciation, you may pay an extra $12000 in taxes this year, out of your pocket, compared to what the prior contractor paid the previous year, even if all income and other costs are exactly the same.</p></blockquote><p></p>
[QUOTE="dmac1, post: 4316708, member: 60252"] You wouldn't be buying routes. You would be buying the right to service a contract only until the expiration date of that contract, plus any assets- like the trucks. Once that contract expires, you need to renegotiate if fedex still want to use your services. And there are terms in the contract that allows fedex to simply cancel the contract if they decide to, with no recourse for you, and no right to any money back from whatever you paid for the 'routes' you think you are buying. Fedex could easily offer you a new contract servicing a smaller area, and give the rest to someone else, leaving you with a lower than projected profit which you based the purchase price on. Most business contracts requiring frequent renewal would have some form of reason required for not renewing as a protection. But fedex doesn't need ANY reason to not offer you a new contract. Maybe the managers son-in-law needs a job, or maybe just doesn't like your accent. They would need to make up some reason to cancel the contract before it expired or you would be able to go to arbitration to get the earnings you lost from termination through expiration date. You would be owed NOTHING for what you paid to run the routes for some amount of time- just the lost profit. And if you used taxes to decreas your tax liability, and had no or little taxable income, you would be awarded very little or nothing as lost 'profit' in an arbitration case. The value of the 'contract' should have some relation to the value of the assets. Real estate is a better investment, because you have a real assets, and in the case of rental property, someone else buying you a property. That is leverage- using some of your money to control an asset worth many times your cash investment. Fedex routes are the opposite- paying full cash value and hoping for enough return over time to recoup your investment. If you want to know how it really works, get a job as a driver for a few months, and tell no one you are interested in buying. And if you buy 'routes' where the vehicles have been fully depreciated on the taxes, you lose out on some of the money savings that can make 'routes' look more profitable than they really are. Depreciation is a real expense- not just some tax write-off, so pay attention when you buy. If you have vehicles worth $300k when new, and they have just had their last year of depreciation, you may pay an extra $12000 in taxes this year, out of your pocket, compared to what the prior contractor paid the previous year, even if all income and other costs are exactly the same. [/QUOTE]
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