Question: Is now a good time to buy a FedEx Ground Route?

Discussion in 'FedEx Discussions' started by cahammo, Jul 23, 2009.

  1. cahammo

    cahammo New Member

    I am a newbie, both to this board, and potentially to this profession. I have the opportunity to purchase a FedEx Ground Route in town with a population of 30K. The price on it is $75K. The current contractor uses two trucks and two drivers (the contractor is not one of the drivers).

    I know there are lots of legal battles going on at FedEx trying to decide if the ground contractors and drivers will eventually become employees or not. Will someone break this down for me. I would assume it would be advantageous for me to be an employee rather than a contractor, but how long is this expected to drag on in the courts?

    Bottom line... based on the sketchy info I have provided, is this route a buy or a pass? Thanks in advance.
  2. In my opinion it is definetely a pass.Whatever they told you,you should get in writing.75 k for the route,lease costs to Fedex for the vehicles,fuel,maintenance and insurance costs for the vehicles and your employees.NOT TO MENTION UNIFORM COSTS AND FEDEX POWERPAD RENTALS.You are also responsible for lost packages.You will also need a good accountant.When Fedex loses the multi district litigation lawsuit the end of Fedex Ground and Fedex Home is greatly possible.Dont believe anything they tell you and talk to a good accountant before you buy the route.
  3. FedEX 4 Life

    FedEX 4 Life New Member

    I agree.I wouldnt make a move until the future of FedEx Ground is certain.
  4. barnyard

    barnyard KTM rider Staff Member

    I would ask, "Why are these routes available??"

    In the latest financial news, Fed Ex posted a loss. I know there were special charges and all that, but it's a loss none the less. Right now, times are tough. What is the plan for tough times???

    You say the $75,000 includes 2 trucks. What happens if volume were to fall to where it is really only 1.5 or 1.25 routes (meaning that one route is full time, the other can easily be done in 3-4 hours or less.)??? I am not just talking about what to do with the driver, but less packages delivered, means less money paid to you from FedEx. Will you be able to pay our loans and meet operating expenses if that happens???

    Are you protected when fuel prices go up???

    I would be interested to know how many contractors file for bankruptcy. Some do, just because they are terrible business managers, some do because they have a horrible territory. What are other reasons???

    To me, it seems like you would be taking all the down-side risk.

  5. bbsam

    bbsam Moderator Staff Member

  6. gysmmk

    gysmmk New Member

    If it's anything like ground where im at, the trucks are stuffed to the max and box trucks are packed from the floor to the ceiling, what recession? :wink2:
  7. cahammo

    cahammo New Member

    Thanks for the replies, guys. I definitely wanted some unbiased opinions from some industry insiders as part of my research. I now have that. Thanks again and go Brown! :happy2:
  8. bbsam

    bbsam Moderator Staff Member

    Actually, the question posed here is awfully sparse of specifics. As a Ground contractor, I would recommend getting copies of several months of settlement statements as well as viewing expense accounts for the route. Also obtain a copy of the operating agreement and have it carefully explained by an attorney. In my own experience however, $75000 is dirt cheap (depending on age and relative condition of the vehicles). I would guess that the contractor selling at this price has found that the route will not support two employees and still return a profit and does not (for whatever reason) want to drive.

    As far as Ground goes, I don't think the lawsuits are going to be an issue. Many may think I'm just biased in this opinion. But the fact remains that in no instance has a court or the IRS forced Fedex to abandon the contractor model. They have had to revise the model in several cases, but it seems that the law is written so vaguely as to the classification of worker (contractor/employee) and Fedex is so committed to continuing the contractor model that I doubt there will ever be a reclassification of contractors as employees.

    The other thing that suggests to me that Ground isn't going to change anytime soon is Jim Cramer. He seems to remain bullish on Fedex and I keep listening for some kind of caveat having to do with legal woes and I have yet to hear one.
  9. Ricochet1a

    Ricochet1a New Member

    Looks like a SVC possibly tried to add another route when FedEx started pushing SVC's out, and he decided it wasn't worth the effort, so he wants to get out.

    You didn't specify if it was Ground or Home Delivery. A town with 30K residents would have about 10K physical addresses to deliver to. That equates to about 1.5 full time Express routes (5x8) with mixed residential and commercial ($50k average household income). Only having 1.5 to 2 FTE Ground routes covering this area seems a bit light, but if the average household income was less than $50k/yr, it would make sense.

    Given the administrative overhead of "owning" an Ground route, I'd imagine that you'd need at least 4-5 routes to get enough economy of scale to justify the administrative burden of all the paperwork to be able to make any sort of profit. bbsam can give specifics on this.
  10. bbsam

    bbsam Moderator Staff Member

    It really depends on the individual. If I were in the position of buying this route with the two trucks i would also recommend riding on several routes and seeing what is really possible using efficient methods. It could easily turn out that the current owner simply does not understand productivity as it relates to income. I had the privilege of being trained as driver by UPS years ago and though I don't even pretend to follow those methods to the letter, they do give me an idea of what should be doable in a given area. But as Ricochet suggested, to simply be an administrator would require 4-5 routes. If you are still interested and you are capable of handling the job, it could be a profitable venture if you were to buy and do the entire route yourself. And finally, don't kid yourself into thinking that this is unbiased information from either myself or anyone else on this site. I like the opportunity that Ground affords me while others despise the existence of Fedex and still others long for the Fedex of 15 years ago. We all have opinions that's all.
  11. FedExer267

    FedExer267 Member

    I would say if your up for it ride with your drivers and see whats doable. However you need to take into to consideration that what you think is doable and what a ground driver thinks is doable are two diffrent things. Why would a ground driver who makes 650.00 a week with no benefits, no vacation pay, no sick pay, and no overtime actually work as hard as you want. As long as the packages get delivered then the job is being done. Work 45 hours one week and then work 65 hours the next because you have Kinkos and make the same as you did when you worked 45 hours. Ground drivers are working their because its a job in this economy but given the chance if we could we would be union tomorrow. So definately do your homework because if we ever get classified employees you will lose out on your investment because we will go union in a heartbeat...
  12. Ricochet1a

    Ricochet1a New Member

    This is the best summation of the situation of Ground drivers/helpers I've read yet. The Ground drivers have no "loyalty" to the job they are doing. They are doing it because their personal "desperation factor" is high enough to perform the job function until they can find something else to do. Sadly, many don't have any other options, so they are left to be exploited by a system that is stacked against them.

    This also illustrates my point as to why the charade of the independent contractor of Ground. It exists SOLELY to prevent the actual drivers from unionizing to get better compensation for the work they are performing. There is no other logical explanation to attribute to the use of the independent contractor model.

    This also illustrates (again) why Wall Street types (Cramer) don't necessarily have the full scoop on how a company is being run and its future prospects. The financial reports may be favorable for FedEx, but they don't reveal the discontent that exists at the employee level. As many posters have stated, if FedEx was so confident that its employees wouldn't vote in a union, it wouldn't care about maintaining its labor classification under the RLA. FedEx's frantic attempts to do anything to prevent a change in its labor status is indicative of one thing and one thing only; it is deathly afraid that its employees would unionize if given half a chance and unionizing would affect compensation levels for senior executives.

    All of this is important to consider for anyone contemplating buying Ground routes. If FedEx ever does get defeated in court and has to recognize Ground drivers as employees, the "owners" of the routes are going to take it in the shorts. FedEx will have no compunction about selling out the IC's to minimize its loss. After all, every Express employee below executive level was sold out last year when the pension was gutted and compensation levels either reduced or frozen for wage employees. In the situation of FedEx losing its ability to use the IC model, every owner of a route will end up being compensated for a fraction of their investment if they are lucky. If FedEx wanted to play hardball (as it is so fond of doing) it would merely tell the independent contractors to "have a nice day" and they are free to take their business elsewhere with no compensation. After all, they are "independent" contractors... They would be told to remove the FedEx logo from all their trucks since they aren't "representing" FedEx anymore. I don't think Cramer has thought about this angle.
  13. Brown287

    Brown287 Im not the Mail Man!

    This is a very interesting thread that has begun here. Its obvious to most that its not a matter of if, but of when Fed-Ex Ground will have the rug pulled out from under them. Even if they win in the courts and the congress they will lose from with in. Employees will only work for so long in an invironment that does not properly compensate them for thier labor. Drivers like my brother will finally have enough and start looking for other employement. Thier morale and production will fall so low that customers will not want to deal with Fed-Ex and profitability will no longer be achievable. Union or no union you need to properly compensate people for thier labor, adventually Fed-Ex will be picking up day labors at Home Depot, if they havent already started. Theres a saying that has been around for a long time "you get what you pay for".
  14. FedExer267

    FedExer267 Member

    Exactly right you get what you pay for. When I started at ground there was talks of raises and bonuses since I do drive a bonus route. We have all heard the saying dont bite the hand that feeds you but you need to feed those hands so they wont bite. If Fed Ex was smart they would set guidelines for the IC on how to pay their employees. Its pretty sad when we bust our butts on a daily basis and or pay dosent even come close to those at express. Just my opinion here but maybe thats why turn over is so high..
  15. bbsam

    bbsam Moderator Staff Member

    So, Ricochet, are you suggesting that Cramer and others do not take legal matters into consideration when making recommendations? That would seem odd. And the real point is that no one outside BC is really pushing the idea that the contractor model would be doing anything but becoming more and more independent. I forget which state is using the ISP model, but no way is that moving toward employee status. In fact, I'm looking forward to being able to negotiate "face to face" with Fedex on settlement issues.

    One last point, and I will not even try to be gentle. I am sorry for the desperate situation that people find themselves in. But I don't accept the notion that Fedex, myself, or any other contractor locks them into that position. That is narrow minded and foolish. There are opportunities everywhere. Challenging and grinding, but they do exist. For example, unionize Fedex. Lay it all out on the line consequences be damned. For many it seems like Fedex isn't worth working for anyway so what's the difference if they end up fired on a trumped up charge. Why wait for the RLA legislation? Do you really have faith in Congress? This is what I mean by opportunity. It requires risk of the individual and guarantees nothing. If you drive for a contractor inquire about buying a route in the terminal. Is that too scary? Too risky? Really, what do you have to lose? Personally I can say that failure only hurts until the next opportunity is realized.
  16. MrFedEx

    MrFedEx Engorged Member

    Cramer is never wrong, is he? Anyone here remember how he got slammed on The Daily Show for a long string of inaccuracies and for trying to pump-up selected stocks?

    Anyone even thinking of buying into Ground needs to sit down and study all of the legal issues surrounding the defective contractor model. In my opinion, Fred will eventually lose and have to pull something new out of his hat.

    Hey bbsam, is there any language in your contract that gives FedEx the right to buy you out at any time? Fred always leaves himself an out. What happens when the Ground model gets tossed by the courts and Fred has to make everyone employees? Will he pay "market value" for your routes and vehicles? And who would determine such a value? Why, that would be Mr Fred Smith, who always acts fairly and ethically in his dealings with "employees". Get your lawyer now.
  17. FedExer267

    FedExer267 Member

    Bbsam no you dont lock us into that position however you dont make it any better for the drivers. If we want more you replace us for people that will do the job for cheaper. Is that fair to a driver who is trying to pay bills and raise a family? I think not. Bottom line is you get what you pay for which is why we are not going to look for more pick up accounts to pad your pockets when we get nothing in return. A earlier post said we had no loyalty but I ask you where is the loyalty to your frontlines the ones who are making the money for you? Could you raise a family and pay all your bills for 650.00 a week. This is why ground drivers not contractors would vote union in a heartbeat. Its nothing personal its business.
  18. bbsam

    bbsam Moderator Staff Member

    Yes, it's business. Should you care to do a search on every post I have ever written on this board, nowhere would you see me suggest that being a ground driver is a great position. It isn't. I would not even want to try to raise a family on $650.00 a week. But where do you get the idea that every job in the USA is a job for raising a family? Over the Road drivers make good money, but I would not want to raise a family being gone 5-6 days a week. Wouldn't want to be a coal miner either though I hear they make good money.

    Now, here's the situation as I see it. If somebody likes driving for a contractor but thinks he/she deserves more money, ask for it. If the contractor says "no" start looking for a way to become a contractor. Believe it or not, that money is pretty good. Also I can remember a time when everyone felt sorry for the terrible deal the contractor had at Ground. Well that's changed. Now it's the drivers everyone feels sorry for. That can change as well. But why would a driver after seeing how things at Ground are run want to remain a driver and not a contractor? You want more money but not more responsibility? Time to man up.
  19. MrFedEx

    MrFedEx Engorged Member

    Once again, the basic plan is to run someone's ass off for $650 per week or so,and not pay any OT or benefits. It's an exploitative system by design. On one hand, I blame you because you benefit from the system, but nowhere near as much as FedEx management, who know exactly what they are doing and have from the very start.

    There's nothing wrong with being a businessman and making a profit. In my mind, that profit needs to be made ethically. That's where you and I (and Fred) differ. If your drivers got OT and decent wages and benefits, there would be no problem.
  20. bbsam

    bbsam Moderator Staff Member

    You may of course blame whomever you would like. You do seem to leave the individual driver out of any blame. No responsibility there. Look, being a driver for me is not a job for everyone. I have never said that it is. Some of my drivers are young and single and for them the money's not bad. Some are have spouses that work and driving for me provides a second income. Maybe some are trying to raise a family on $650 per week. Ground is what it is. Whether that is unethical or not is a subjective matter that will differ widely from one individual to another. Want proof? A couple clicks of the mouse should bring you to posts by 705red and others blasting UPS for unethical treatment. That's right. Union, contract, stewards. Still the ethics charges come. If I were to have you write a contract between myself and my drivers, how long do you think it would be before the crying and complaining would begin?

    Psychological tidbit of the day: The best way to keep from being victimized is not to be a victim.