Value evaluation of Fedex Route

Discussion in 'FedEx Discussions' started by tickz, Jul 19, 2019.

  1. tickz

    tickz New Member

    Looking at buying a Route business (southwest region, ISP compliant, 100% overlap, 16 routes in total), would very appreciate any feedback on questions below: (understand every ISP is different and difficult to give specific number, just look for your personal input as a data point for me)

    Revenue side:
    - Due to lack of historic data, has to rely on limited data for assessment, does May/June reflect average business? or above/below?
    - Reasonable to assume 6 weeks of holiday peak? and average 50% of revenue plus during peak?
    - What is the reasonable incentive/bonus on average from customer service/safety? $2500 a month easy to achievable?

    Cost side:
    - w/ ISP & 100% overlap, mandatory to serve 7days/week in future? It seems the payroll will jump ... What is a reasonable average hrs/route? Assuming suburban residential setting ...
    - What is a reasonable fuel cost/route? Assuming suburban residential setting ...
    - What is a reasonable maintenance cost/truck? average $5000/truck annually? Assuming 1:1:1 composition of young(<5yr), mid(5~10yr), old(10yr+) fleet
    - What is a reasonable insurance cost? Assuming work-comp + supplement non-trucking coverage

    You input is much appreciated! Drop me a private note if you don't like to put it in public ...
  2. It will be fine

    It will be fine Well-Known Member

    May/June is probably on the slow side of average. See if you can find historical growth for the CSA, the current ISP can get that from FedEx engineers if he doesn’t have it, that’ll help you forecast.

    Full blown peak is normally 4 weeks, closer to 35% increase in weekly revenue. I’m spitballing, not checking my actual data. This will be very area specific, again get engineering data for volume.

    Incentives are gone in any agreement negotiated since June ish.

    7 day is a giant black hole of information. No one knows Sunday volume projections so it’s anyone’s guess what staffing will need to be.

    Fuel/Maintenance will depend on the fleet. Sprinters, step vans, straight trucks, gas or diesel. Lots of factors.

    Truck insurance is cheap. Work Comp depends a lot on the state. Without a history you’ll probably have to use Protective, I’m sure Marsh can quote you a rate for a new contractor.
  3. Operational needs

    Operational needs Virescit Vulnere Virtus

    You might want to read through some of the old threads of route owner man who were screwed over by Fedex before you do anything.

    Start with this one.
    Is FedEx legally obligated to negotiate in good faith with their contractors?
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  4. bacha29

    bacha29 Well-Known Member

    In the end your success will depend heavily on your ability to find people willing to go out there every day in any kind of weather and match and exceed the daily production of the average UPS driver for about 60% of the wages and zero benefits. The money stream will not allow for much more.
    Keep in mind something here. As a contractor you're not doing anything XG can't do for themselves except in two key areas. Provide XG with trucking and labor that's even cheaper than they can get it themselves and JOB ONE will to be to keep the Teamster's out. Your employees will be under Taft Hartley/National Labor Relations Act and can go union on a union local by local basis.
    At the core of the matter you'll be putting an awful lot of money at risk in exchange for a one sided one year contract that is not binding upon XG because there's no governing legal authority in place that can make it binding upon them.
    So don't spend too much time crunching the numbers. Instead look more closely at the ulterior motives behind this so called "independent contractor" model. Most importantly don't just assume that you'll always have an inexhaustible supply of cheap fast food zero benefit labor walking through that door every day and don't be surprised that in the end you'll have to give that driver just about everything the route makes just to get him to climb in that cab.
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  5. bbsam

    bbsam Moderator Staff Member

  6. bacha29

    bacha29 Well-Known Member

    You paying $38 an hour OT after 8 hr's employer funded healthcare disability and a defined benefit pension that will pay $4,000 a month after 30 years?
  7. Jkloc420

    Jkloc420 Well-Known Member

    the value of a fedex route is zero
  8. bacha29

    bacha29 Well-Known Member

    In one sense you're right you are dealing with 2 classes of assets. Tangible and intangible.
  9. It will be fine

    It will be fine Well-Known Member

    Yet it somehow pays my mortgage while I played Nintendo Switch all day. Funny how that works.
  10. Jkloc420

    Jkloc420 Well-Known Member

    you need to get an x-box
  11. dezguy

    dezguy Well-Known Member

    PC master race.
  12. bbsam

    bbsam Moderator Staff Member

    Do my drivers even come close to what a UPS driver does all day?

    Not even close.
  13. tickz

    tickz New Member

    Thanks a lot for the detailed reference info. Transition to 100% overlap going from 5 to 6 days, do you see daily volume increase or just adding one more day?
  14. tickz

    tickz New Member

    Thanks for the reminder. I do understand the limitation here. Thus want to get an solid understanding of the business and do proper risk assessment. I will look at this from investment angle.
  15. It will be fine

    It will be fine Well-Known Member

    We saw a noticeable increase in total weekly volume when they started running HD on Mondays. Enough that its made staffing a problem. I used to be able to run fewer routes on Monday but we really can't anymore. Tuesdays are lighter. I think the full transition to 7 day will smooth volume out but who knows. They say there's plenty of volume out there for us to get, it's just a matter of how we handle it. Lots of changes right now. It's as risky a time to get in as ever, but the possible reward is there in the right area.
  16. tickz

    tickz New Member

    Is it hard pressed to achieve 20% cash flow / EBITA, assuming a operation manager / back up driver getting $1000 a week?
  17. tickz

    tickz New Member

    Thanks! do you mind I ask what state you are in?
  18. bacha29

    bacha29 Well-Known Member

    If you looking at from the perspective of an absentee, investor class contract flipping speculator I would say that you're better off flipping houses. Why? As long as XG's DOT numbers are on the side of the truck and the only thing that's going in them is XG branded freight you have no other choice but to allow yourself to be totally subjugated to the absolute will and power of that company. If you can't make it on what they willing to pay which will be the cheapest rate they can get away with or your drivers tired of working for nothing decide to vote in the Teamsters then be prepared to find your trucks pushed outside with a termination notice slapped on the windshields....then what are you going to do? I don't care what you do but if you think that all you have to do is to buy up a bunch of routes then just sit back and count up the money oh boy are you in for a surprise.
    As IWBF pointed out you can expect to be jumped all the time with these operational change surprises that come right out of nowhere with little to no advance notice of preparation time. Does XG care about that? Of course not. it's a contractor problem that requires a contractor solution. And if you can't come up with one over.
  19. It will be fine

    It will be fine Well-Known Member

    I'd say 10-15% is more realistic. 16 routes will require a couple back up drivers and a solid HR process to have new hires ready to go. It'll come down to peak and how your crew handles it. I've always paid my regular guys more to handle everything but some areas may require additional people and trucks and seasonal help won't be very productive.
  20. OrioN

    OrioN double tap o da horn dooshbag

    Lemme guess.... TX???

    FedEx Ground Vans For Sale In Texas

    My contractor group is struggling to find supplement drivers when amazon dsps are paying hourly rate.

    I'm covering a more rural area over the summer while they use my bid area split in half as training routes. They're not staying on board for the upcoming peak.

    I may transfer to a close terminal if these local BCs can't effectively manage the routes
    Last edited: Jul 19, 2019