Looking to buy FedEx routes Need Advice from owners

[BigJohn]

Hi All,

I am looking into buying FedEx routes and would appreciate honest feedback. I have read through some of the previous threads and my eyes are wide open. My background includes 5 years as a project manger for warehouse operations travelling the country performing project managing start ups, moves, shut downs, process re-engineering etc... I have worked every aspect in the warehouse from receiving to picking to loading. I know the employee pit falls and I have intimate knowledge of all process and associated costs.

I have seen many FedEx routes for sale on BizBuySell.com and BizQuest.com I see the top-line revenue and supposedly Cashflows, EBITDA and asking prices. I will have to finance the purchase because I simply don't have a million or more lying around. I am focusing on ISP compliant only.

My questions center around the cashflows and EBITDA I see. Are they realistic. Some of the comments on the other threads state operating profit (after all expenses is only 7-10%). Also, if the ISP model is reducing gross revenue 15-20% that is a huge factor in negotiating the price for the routes.

 

[bacha29]

Hi All,

I am looking into buying FedEx routes and would appreciate honest feedback. I have read through some of the previous threads and my eyes are wide open. My background includes 5 years as a project manger for warehouse operations travelling the country performing project managing start ups, moves, shut downs, process re-engineering etc... I have worked every aspect in the warehouse from receiving to picking to loading. I know the employee pit falls and I have intimate knowledge of all process and associated costs.

I have seen many FedEx routes for sale on BizBuySell.com and BizQuest.com I see the top-line revenue and supposedly Cashflows, EBITDA and asking prices. I will have to finance the purchase because I simply don't have a million or more lying around. I am focusing on ISP compliant only.

My questions center around the cashflows and EBITDA I see. Are they realistic. Some of the comments on the other threads state operating profit (after all expenses is only 7-10%). Also, if the ISP model is reducing gross revenue 15-20% that is a huge factor in negotiating the price for the routes.

 

[bacha29]

I'm not a purveyor of gloom and doom but your final comment explains why they are being put up for sale. Downward pressure on settlements combined with increased difficulty when it comes to finding people willing to replicate what a UPS driver does in a day and do it for a fraction of the wage and in most cases no benefits of any kind. Personnel headaches combined with mechanical headaches and you could find yourself spending as much time IN the truck or UNDER the truck as you are doing something else. What do you expect when you take a reservoir full of borrowed money buy a bunch of smelter bait with dubious road worthiness then just assume that you'll always find some poor unsuspecting slug willing to work his damn fool head off for nothing ?

 

[STFXG]

You're going to get rich.

 

[Southwest]

Don't read any of bachas posts. They all say the same thing. Blah blah blah day one contractor. Barn. Quigly. 45 zip codes. I have tight in city routes and 30-35% profit margin is the norm in my area. In my opinion your over qualified. Don't skimp on trucks or payroll and FedEx does the rest. It's pretty easy

 

[dvalleyjim]

The problem is not the return on your investment. It's "can you get your initial investment back?" How do you get it out if you want to leave? This is an operation that is controlled by FedEx. You don't own anything but the trucks. So if you can't do a route yourself and just want to be an Entrepreneur, have very good drivers and managers. Even then FX can change the deal at their whim, you are powerless! Just make sure you can get your initial investment back before you put it down!

 

[bacha29]

Don't read any of bachas posts. They all say the same thing. Blah blah blah day one contractor. Barn. Quigly. 45 zip codes. I have tight in city routes and 30-35% profit margin is the norm in my area. In my opinion your over qualified. Don't skimp on trucks or payroll and FedEx does the rest. It's pretty easy

I was a day one contractor. Can you say the same? In addition you said everything that needs to be said. You're city .I'm depressed rural. Where you are you're tires never come in contact with an unpaved surface. Here most of the mileage is unpaved poorly maintained township turkey paths. Nevertheless, It's a NATIONWIDE carrier and the bad parts of the country go right along with those easy suburban and metropolitan areas.

 

[It will be fine]

Hi All,

I am looking into buying FedEx routes and would appreciate honest feedback. I have read through some of the previous threads and my eyes are wide open. My background includes 5 years as a project manger for warehouse operations travelling the country performing project managing start ups, moves, shut downs, process re-engineering etc... I have worked every aspect in the warehouse from receiving to picking to loading. I know the employee pit falls and I have intimate knowledge of all process and associated costs.

I have seen many FedEx routes for sale on BizBuySell.com and BizQuest.com I see the top-line revenue and supposedly Cashflows, EBITDA and asking prices. I will have to finance the purchase because I simply don't have a million or more lying around. I am focusing on ISP compliant only.

My questions center around the cashflows and EBITDA I see. Are they realistic. Some of the comments on the other threads state operating profit (after all expenses is only 7-10%). Also, if the ISP model is reducing gross revenue 15-20% that is a huge factor in negotiating the price for the routes.

As far ISP compliant are you including the new 100% HD/Ground overlap? That drives the revenue down even further. I wouldn't buy anything that isn't overlapped already right now. You'll want to see at least a year of books with overlap to make a good judgement on value. Have the engineers pull a year of historical data too, then you can see what the growth in the area looks like.

 

[bacha29]

The problem is not the return on your investment. It's "can you get your initial investment back?" How do you get it out if you want to leave? This is an operation that is controlled by FedEx. You don't own anything but the trucks. So if you can't do a route yourself and just want to be an Entrepreneur, have very good drivers and managers. Even then FX can change the deal at their whim, you are powerless! Just make sure you can get your initial investment back before you put it down!

Good point DVJ. The trucks are the only tangible asset he has to borrow against. The routes are intangible assets that are under the complete control of X and can be cancelled at any time for any reason.As we both know X makes it perfectly clear that it does not consider any term or condition set forth in that unilaterally drafted and implemented contract to be binding upon itself.Likewise X decides who will drive the the truck the ISP owns and if the iSP's employees decide to vote in a union there's nothing the ISP can do about it but wait for the termination notices to be stamped on his trucks. It all comes down to the question of who's DOT number is on the side of the truck. That party and that party alone decides the fate of that ISP

 

[SmithBarney]

You're going to get rich.

"So rich, amazingly rich, incredibly rich..." -Donald Trump

 

[FedGT]

There are big pros and cons with FedEx. You have to do almost nothing for almost a guaranteed 10-20% annual growth, which is the biggest positive there was for me. I only did it for 3 years but was fortunate to be in great areas that grew gross revenue 92% over that short amount of time. 5 drivers (including myself) turned to 13 including a manager and a swing driver. We typically averaged about 25% cash flow. In regards to getting your money back out, I don't really understand that. I was very fortunate but sold for 2x what I bought mine for and technically almost brought in 3x of what my actual investment was without the financing.

Unfortunately we got a new terminal manager that was a prick so even though the money was good for me I decided it wasn't worth it. If he would have never showed up I would still be doing it.

 

[dvalleyjim]

As far ISP compliant are you including the new 100% HD/Ground overlap? That drives the revenue down even further. I wouldn't buy anything that isn't overlapped already right now. You'll want to see at least a year of books with overlap to make a good judgement on value. Have the engineers pull a year of historical data too, then you can see what the growth in the area looks like.

and be weary of guys trying to dump routes only for you to realize in 2021 you will have to have that combined area or you will experience the shortest entrepreneurship in history!

 

[It will be fine]

There are big pros and cons with FedEx. You have to do almost nothing for almost a guaranteed 10-20% annual growth, which is the biggest positive there was for me. I only did it for 3 years but was fortunate to be in great areas that grew gross revenue 92% over that short amount of time. 5 drivers (including myself) turned to 13 including a manager and a swing driver. We typically averaged about 25% cash flow. In regards to getting your money back out, I don't really understand that. I was very fortunate but sold for 2x what I bought mine for and technically almost brought in 3x of what my actual investment was without the financing.

Unfortunately we got a new terminal manager that was a prick so even though the money was good for me I decided it wasn't worth it. If he would have never showed up I would still be doing it.

Local management is short lived, I wouldn't base any decisions on them. The problem is the good ones move up much faster than the bad ones leave. If you're around long enough you get to know all the district managers and can always go to them if the bad managers get out of line. If you keep your nose clean there's not too much damage a bad manager can do.

 

[It will be fine]

and be weary of guys trying to dump routes only for you to realize in 2021 you will have to have that combined area or you will experience the shortest entrepreneurship in history!

It could be pretty bad if you bought in now without overlap. It takes time to build up relationships and if you don't have a pile of cash on hand you could get screwed.

 

[bbsam]

Overlap is simple.

 

[FedGT]

Local management is short lived, I wouldn't base any decisions on them. The problem is the good ones move up much faster than the bad ones leave. If you're around long enough you get to know all the district managers and can always go to them if the bad managers get out of line. If you keep your nose clean there's not too much damage a bad manager can do.

Within 6 months he DQd a contractor of 23 years and 6 drivers I know at least 3 of them were a single client complaint that most would managers would have done a simple warning for 2 for scanning pickup outside of window hypocritical "integrity" issue and 2 for signing for packages (one with proof and one client call in and they took the clients word for it).
So that along with weekly contract threats if we don't go above and beyond was plenty of damage for me to see.

 

[BigJohn]

bacha29 thank you for your input. Yes I already reviewed one route for sale which had 6 trucks, 4 of the trucks had over 400K+ miles on them, the other two had 250K+ miles on them. I discounted the truck value to 0. Also EBITDA would have to be reduced for purchase of new trucks. So EBITDA would have to subtract the CAPEX to replace the trucks. This was from a current owner who was consolidating territories so he was trying to pass off his old high maintenance trucks.

 

[BigJohn]

STFXG Thank you for the comment. But I am not trying to get rich. I am tired of making a lot of money for other people. I am looking for a job for myself and build equity in a business( maybe 10 - 12 years down the road).

 

[BigJohn]

Don't read any of bachas posts. They all say the same thing. Blah blah blah day one contractor. Barn. Quigly. 45 zip codes. I have tight in city routes and 30-35% profit margin is the norm in my area. In my opinion your over qualified. Don't skimp on trucks or payroll and FedEx does the rest. It's pretty easy

Southwest sounds like you are a great source of information owning 45 zip codes. Yes I would have to factor competitive or near competitive driver wages and truck maintenance costs. Is there a standard mileage you use to determine when a truck is past its prime or do you base it on yearly maintenance costs vs purchase monthly payment?

 

[BigJohn]

The problem is not the return on your investment. It's "can you get your initial investment back?" How do you get it out if you want to leave? This is an operation that is controlled by FedEx. You don't own anything but the trucks. So if you can't do a route yourself and just want to be an Entrepreneur, have very good drivers and managers. Even then FX can change the deal at their whim, you are powerless! Just make sure you can get your initial investment back before you put it down!

dvalleyjim, thank you for your comment. Yes I would not be able to drive due to both knees being replace(contact sports). I could last maybe a day or two LOL. Push come to shove I will drive. But I do plan to ride along with all the drivers to learn their routes and the processes. I would have to hire good manager(driving manager) if one is not already on payroll to offset my incapacity.