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

[MrFedEx]

MrFedex wrote: If these routes are so profitable, why would the seller get rid of them?

Answer: You need to read and better comprehend the anology made with the commercial real estate example.

Mr. Fedex wrote: Second, have you also done your research on the legal issues surrounding FedEx Ground? Funny, you don't even mention it and I'll bet FedEx(or the seller) didn't either.

Answer: Absolutely and have openly discussed this issue with both the multi route seller and others. Perhaps I know a little more than others about this situation. There are reasons why I want to get to three routes and anyone who truly understands this situation will understand why.

Mr. Fedex Wrote: Expenses are very straightforward?"

Answer: Yes they are and as with any business, there can always be incidentals.

Mr. Fedex Wrote: What happens when your vehicle needs a new diesel engine

Answer: Thats an incidental. What happens if you owned a pizzeria and your pizza oven stopped working? What happens if you owned an printing business and your printing machine burns out and needs replacement? What happens if you are a stock broker and instead of selling 10,000 shares of stock for your client you buy 10,000 shares and by the time you realize it and make and correct your error you are out $25,000? Want more?

There are risks to every business and every business owner understands both the risks involved and the rewards and makes the appropriate decision.

Mr. Fedex wrote: and then one of your fresh off the boat drivers T-bones a car ($$$$) or whacks the roof at a 10 ft dock with his 10 ft 6inch tall truck? Want more?

Answer: The two additional routes I plan on purchasing will come with drivers that have 4 - 5 years experience on the route(s). Every driver's record is on file at the terminal and those files are available to be viewed by any potential buyer.

Thanks for the well wishes and concerns !!

Finally, as a multi business owner who in the past has built a business from $100,000 per year to over $7,000,000 per year in revenues in 8 years, I understand how to conduct due diligence on various business models.

Good answers. I think you'll find the package delivery industry a bit "different" though. I've seen some very successful multiple IC's in my area, but caveat emptor, OK?

 

[Wariour1]

Thanks bbsam and upstatenyupser !!!!

Hi Mark,

I have been looking to contact you? How has it been going?

 

[mlshadek]

Mark111 - I would like to discuss your FedEx business with you. I have read you thread on BAC Small Business Online community as well. I am seeking advice in the business. I am from NNJ and have a similar background. Lets chat, please. Email me: [email protected]. Thanks

 

[drwheat]

Hello All- I am a newbie here (with no driving experience) & found the site while trying to do some research on FedEx Ground. I am currently a small business owner & have found a contractor who is looking to retire & sell 9 routes. ( He currently has 9 drivers & either owns outright or leases 10 trucks. ) I am currently gathering information on the routes (settlement statements, stops, miles driven daily etc) & am looking for any feedback positive or negative from either Drivers or Contractors on getting invloved with Fedex Ground now. I do know that the Independent Service Provider model is going into effect this Fall which is somewhat different to the current Contractor / Fedex relationship today.

I have read the posts in this thread from Drivers on the low wages & minimal (or no) benefits, so I have learned a little on how they feel.

Question for the Drivers.... if you had the $$ (or could borrow it) would you take the chance & buy a route ?? (I know that 3 is the min under the ISP model).
Question for Contractors.... IS the ISP change a positive or negative & if you had it to do over again would you "buy in" & become a Contractor today.

Thanks

 

[bbsam]

What's the price? If you can swing it, and have business experience with a good lawyer and accountant, I'd jump all over it. I am currently a contractor and the ISP change is so far looking great. They announced it here in Illinois last August (?) and it looks to be very promising for the contractor and I believe that should translate also to the drivers. I'm surprised there is a contractor looking to get out at this point, but then again it isn't for everyone. Get all the information from him that you can on historical revenue for the routes and look into the area for potential growth. Keep in mind that a business that large can have serious responsibilities at any given time and the company is going to look straight at you to take care of them.

 

[drwheat]

With the information I have so far the package is priced at approx 2x net income (after all expenses including driver). In your experience what have routes been selling for as a multiple of net income ? The current owner is willing to stay on as a salaried manager/flex driver for at least a year.

Question for you on how can I figure out "potential growth" on a route ? My 1st guess would be figuring out the numbers & types of businesses on the route but would appreciate your feedback on that. My concern with this type of business is not having control in the growth opportunities (just managing the bottom line by watching expenses)

If I was to move ahead I would need to get involved with the ISP negotiations ASAP. Once that is over my initial instinct is to spend 6 months as a helper on the routes to start at the bottom, get to know the drivers & routes as well as try & get experience to be able to drive any/all of the routes in a pinch in the future if needed. I do know that having a backup truck & driver avail at all times is important with 9 routes.

Thanks

 

[bbsam]

With the information I have so far the package is priced at approx 2x net income (after all expenses including driver). In your experience what have routes been selling for as a multiple of net income ? The current owner is willing to stay on as a salaried manager/flex driver for at least a year.

Question for you on how can I figure out "potential growth" on a route ? My 1st guess would be figuring out the numbers & types of businesses on the route but would appreciate your feedback on that. My concern with this type of business is not having control in the growth opportunities (just managing the bottom line by watching expenses)

If I was to move ahead I would need to get involved with the ISP negotiations ASAP. Once that is over my initial instinct is to spend 6 months as a helper on the routes to start at the bottom, get to know the drivers & routes as well as try & get experience to be able to drive any/all of the routes in a pinch in the future if needed. I do know that having a backup truck & driver avail at all times is important with 9 routes.

Thanks

You have a real "roll of the dice" situation staring you in the face here. The upside is huge but the risk is considerable. For potential growth I would look into settlement payments for the last two years just to get a feel for historical monetary payment. Look for general overall trends in the settlement payment whether it is sharply up over time, down, or relatively flat. Are the routes rural, city, a mix? Are the areas in high growth business areas, alot of residential? As an ISP candidate, the company at some point will give you alot of that data for the defined area, but you will need to look extensively at the contractors expenses possibly along with a financial advisor and or lawyer. You need to be able to come up with a fair market price to service that area taking into account all expenses (including owner profit) and determine how that is to be paid within certain parameters. In short, treat it like any business venture. My only warning would be in the having to get right into negotiation and whether you have enough time to really feel comfortable with the business model you are buying into. Good luck.

 

[drwheat]

You have a real "roll of the dice" situation staring you in the face here. The upside is huge but the risk is considerable. For potential growth I would look into settlement payments for the last two years just to get a feel for historical monetary payment. Look for general overall trends in the settlement payment whether it is sharply up over time, down, or relatively flat. Are the routes rural, city, a mix? Are the areas in high growth business areas, alot of residential? As an ISP candidate, the company at some point will give you alot of that data for the defined area, but you will need to look extensively at the contractors expenses possibly along with a financial advisor and or lawyer. You need to be able to come up with a fair market price to service that area taking into account all expenses (including owner profit) and determine how that is to be paid within certain parameters. In short, treat it like any business venture. My only warning would be in the having to get right into negotiation and whether you have enough time to really feel comfortable with the business model you are buying into. Good luck.

Thanks for the info & feedback bbsam. I will keep you posted on how things turn out

 

[packageguy]

Never a good time to buy fdx. Good ole Fred looking for people like you.

 

[ATLFedEx]

bbsam and drwheat -
I would love to hear your thoughts. We are currently under contract (but have several viable "contract terminations" within the offer) for 3 Home routes and 1 Supplemental which is supposed to be transferred to a dedicated soon (we have a clause in the contract to escrow the difference until the route is converted). They show net ~ $2,500 per week with the current configuration, but claim net will be $3,800 with the conversion of the supplemental to a dedicated - we are finding it hard to believe this.
We are not drivers, so we would be non-driving contractors. We have started and run other businesses before, so this is a new venture for us. Our backgrounds are also in banking, so we have a good understanding of how to underwrite a deal. Would you email me at [email protected]? I am interested in hearing your thoughts about this purchase. Thanks.

 

[bbsam]

Hi ATL. Currently our terminal is undergoing a change to ISP (independent service provider) and therefore my commentarty on these situations is muted by a non-disclosure agreement. As with any venture, ask questions, get documentation and stop a couple drivers on the street and get their input. Numbers tell alot, people speak volumes.

 

[SmithBarney]

bbsam, have you seen anything where multiple single route owner/operators are teaming up to become "one company" in order to fall under the new ISP rules? I talked to a ground owner/driver where him and others will be forced to do this. they will just become "share" owners in the larger company. Its a shame...that people have to work around such stupid rules...

BTW he thought our(Express) insurance was paid for... LOL I pay out the equivalent of what it would cost me if I contracted insurance for myself...

 

[bbsam]

bbsam, have you seen anything where multiple single route owner/operators are teaming up to become "one company" in order to fall under the new ISP rules? I talked to a ground owner/driver where him and others will be forced to do this. they will just become "share" owners in the larger company. Its a shame...that people have to work around such stupid rules...

BTW he thought our(Express) insurance was paid for... LOL I pay out the equivalent of what it would cost me if I contracted insurance for myself...

Yeah. We just finished our transition on July 2nd. There are a few contractors that teamed up like that, but more often one buys the other out. They are stupid rules but consider the history that brought us to this point; This is a way for the company to fit the contractor model into different state laws. Would this have happened without the law suits attempting to force Fedex into using an employer/employee frame work? Hard to say.

 

[whosurpopi]

I am talking to a guy that is selling what he calls two and a half routes. One route has two trucks and two drivers, and the second route is a vacation cover route that he works. Is this 2 route sale going to be a problem to own as far as new fedex rules? He never said anything about a 3 route minimum, but he did stress that the one route was just about ready to be split into two.

 

[HomeDelivery]

well if he can guarantee that you'll have 3 routes for that ISP conversion, go for it; otherwise, he's being smart to sell out now before the ISP comes to that terminal

 

[whosurpopi]

Is there any way around the one year driving experience requirement to buys the routes? I drove a police car for 15 years, but never a box truck.

 

[bbsam]

Well - we run into this often ... All that complicated "insurance" stuff isnt fun discussions with guys who just want to get paid for their hard work owning and driving truck and delivering the goods. Thats why the boys at Marsh get to prey on you guys and rob you blind with the insurance deductions on your weekly settlements. If you guys knew what they were doing to you over there at the Fedex annoited insurance agency Marsh - on the workers comp - you'd have their heads on a stick!

Just letting you know - there IS now an insurance program alternative that will put $2,000 - $10,000 of profits BACK into your Fedex IC/ISP business - and is completely legit and compliant with Fedex guidelines. We're kicking ass in Mass. / Connnecticut - getting rockin' in California / Az / NV now.

Yeah, Marsh pretty much sucks, but we can't really blame that on Fedex. Mostly that's because we are too lazy to look else where. But you have my attention.

 

[dvalleyjim]

bbsam, have you seen anything where multiple single route owner/operators are teaming up to become "one company" in order to fall under the new ISP rules? I talked to a ground owner/driver where him and others will be forced to do this. they will just become "share" owners in the larger company. Its a shame...that people have to work around such stupid rules...

I had 3 ground routes, I sold 2 a few months ago for $150,000 cash! I now run my own under someone else's PSA. They pay my driver a paycheck, and me a minimal paycheck and then write a check to my corporation for the difference after payroll expenses. This is risky for me because my route is under another contractor's name. I currently have 3 cash offer's for my last route. I think I can get $100,000. I need to leave the state because of family matters. Since I am in a severely depressed housing market in this state I need to do something about my home. So for me this situation is temporary. But it can be done. I expect though FedEx will be cracking down on this arrangement soon (they always through wrenches at your business) so you should look toward becoming an ISP as soon as possible.

I think I'll look into another business were I control matters. I won't have the safety net of the big corporation and the weekly, steady paycheck but spending 75-90 grand apiece on on 3 ground routes in another state sounds like I will go broke.

 

[Nick9075]

I am currently looking at two ground routes in the NYC area. Thru the first week of April both have earned over $90,000 gross. Packages average between 280-300 -- all the numbers are easy to verify from the settlement sheets & the contractor website http://extend.fedex.com. These are less expensive than the CT routes I was looking but net would only be between $1200 - $1500 a week. I think a fair price is 2 - 2.25 times annual net income

 

[Nick9075]

bbsam, have you seen anything where multiple single route owner/operators are teaming up to become "one company" in order to fall under the new ISP rules? I talked to a ground owner/driver where him and others will be forced to do this. they will just become "share" owners in the larger company. Its a shame...that people have to work around such stupid rules...

I had 3 ground routes, I sold 2 a few months ago for $150,000 cash! I now run my own under someone else's PSA. They pay my driver a paycheck, and me a minimal paycheck and then write a check to my corporation for the difference after payroll expenses. This is risky for me because my route is under another contractor's name. I currently have 3 cash offer's for my last route. I think I can get $100,000. I need to leave the state because of family matters. Since I am in a severely depressed housing market in this state I need to do something about my home. So for me this situation is temporary. But it can be done. I expect though FedEx will be cracking down on this arrangement soon (they always through wrenches at your business) so you should look toward becoming an ISP as soon as possible.

I think I'll look into another business were I control matters. I won't have the safety net of the big corporation and the weekly, steady paycheck but spending 75-90 grand apiece on on 3 ground routes in another state sounds like I will go broke.

Where are you located?? Is it possible to run these routes absentee??