Buy a FedEx Route

FedEx Ground Routes for Sale

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Interested in FedEx Ground Routes for Sale?

Get The Details On FedEx Ground Routes

In case this is your first stop on the research train, let’s start with an overview of FedEx Ground.

FedEx Ground routes run Monday through Friday. Ground routes deliver primarily to commercial businesses and the packages tend to be heavier than residential packages and require larger trucks. Because deliveries occur to commercial locations, there is less seasonal variability in FedEx Ground routes and that can make planning your staff and resources simpler.

Historically, contractors could purchase just FedEx Ground routes. That’s no longer the case. FedEx Ground routes are now only one side of the FedEx pick-up and delivery (P&D) operation and FedEx requires Independent Service Providers (ISPs) to hold both FedEx Ground routes and Home Delivery routes in a designated territory. This is known as overlap.

The FedEx home delivery routes deliver to residential households and operate Tuesday through Saturday. These routes often have smaller to medium trucks and boxes. Additionally, you can expect high seasonal variability (with the holiday rush in November and December—known as Peak Season—accounting for a larger percentage of annual revenue).

If you are considering FedEx P&D operations, you will want to know more about the move to six-day-per-week schedules.

Although you may hear of some contractors who still hold only FedEx Ground routes, FedEx requires all contractors to complete the transition to ISP (and have overlap in their territories) by Summer 2020.

Need to know more about FedEx P&D Routes and ISP Requirements?

Talk with our team of consultants! Our team has actual FedEx contracting experience in Home Delivery, Ground, and Linehaul.  We have experience across the United States managing a fleet of over 250 trucks and a staff of over 200 drivers.

We successfully negotiate many lucrative contracts with FedEx and we work with countless vendors and lending institutions that assist FedEx contractors.

How to Buy a FedEx Route for Sale

Photo by Nathan Anderson

Photo by Nathan Anderson

As an investor, you have many options for maximizing your time and capital. One of the strongest opportunities investors have today, however, is FedEx routes for sale.

You can buy, operate, and sell the routes that move FedEx packages from one location to the next. FedEx routes have a long history of solid profit margins and FedEx as a company continues to outpace performance expectations. There’s much to love about this type of investment!

If you’re just dipping your toes in the waters, here are your next steps:

Do Your Research

Identify whether you want to purchase pickup and delivery (P&D) routes or linehaul routes (or both!).

Decide where you want to buy a route and get the details on how geography impacts FedEx routes for sale.

Understand what good profit margins in the industry look like: how much money can you make if you buy a FedEx route?

Narrow in on the right purchase price for your route and know ahead of time whether you will pay cash for your route or will plan to finance the route.

Know how to distinguish yourself as a buyer for the most competitive routes.

Think ahead to recruiting and retaining your best FedEx route managers and drivers.

Evaluate your route options

Every listing on our website is exclusive. This means we’re the only business to hold this listing and we’ve done initial due diligence with the seller. We work extensively with each seller to prepare their business for sale, getting the financials ready for you (the buyer) to dig into. We also help sellers understand how to appropriately price their route and we advise them on their sale price.

Our breadth and depth of experience allows us to steer potential buyers to the best listings for them: the routes that will meet their geographic, involvement, and financial preferences.

Additionally, because we’ve guided many new contractors, we understand exactly what FedEx is looking for in a new contractor. We have a 100% FedEx approval rate for our buyers.

Talk to a Real Person

If you’ve done thorough research online, it’s time to start talking with someone who can help you take your search to the next level.

Our team can guide you through your next step questions, help you evaluate our listings and which route may be the right fit for you, and she can help you get a to-do list together as you consider financing, establishing the business, and transitioning into a new business.

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New FedEx Contractor Step-By-Step Instruction Manual

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It’s finally here! Our New FedEx Contractor Checklist has been a hit for some time now, and the complementary manual is now ready for download.

The PDF is a step-by-step instruction manual that goes hand-in-hand with the startup checklist to break down each step of the startup process. This instruction manual not only explains what is required to satisfy each step of the registration process in greater detail, but also shows examples of the documents you need to complete and tips on where to find them.

We’ve packed A LOT into this 20 page manual. Check out our Table of Contents:

  • Establishing Your FedEx Business

    • Step 1: Government Incorporation

    • Step 2: Complete FedEx Request for Vendor Information (RFI)

    • Step 3: Senior Manager Email

    • Step 4: Safety Plan

    • Step 5: Terminal Visit

  • Completing Your Business Set-Up with FedEx

  • Back Office Set-Up

  • Stand-Up Week

  • Appendix: Sample Safety Plan

Spend less time on paperwork and more time learning about being an efficient operator! You can hop on over to our Resources to see the full range of downloads/help we offer.

Or, download the new manual below ↓

Why You Should Buy FedEx Routes for Sale from Route Consultant

Photo by Lance Asper

Photo by Lance Asper

In this series we’ve talked about Why You Should Invest in FedEx Routes, How to Find FedEx Routes for Sale, and How to Distinguish Yourself as a Buyer.

We want to conclude with a plug for ourselves!

We hope you’ll consider using Route Consultant as your consultant or broker in the process.

We are FedEx brokers and consultants with actual FedEx contracting experience. We have experience in Home Delivery, Ground, and Linehaul routes. And our team has worked across the United States managing a fleet of over 250 trucks and a staff of over 200 drivers!

We are invested in this business day in and day out and our advice to you comes from many hard learned lessons.

As a result of our experiences, our team has successfully negotiated many lucrative contracts with FedEx. Furthermore, we work with countless vendors and lending institutions that assist FedEx contractors. We can answer questions from someone brand new to FedEx routes and we can also assist experienced contractors looking to level up.

What do our consulting services look like?

We can walk a new buyer through every step of the process. We provide a startup checklist for free (and that’s absolutely something you should check out!); additionally our consulting packages give you someone to call or email with for all of the small and big questions that will come along in the process—you can start with a free introductory consult.

Our guidance includes things like understanding contract terms, optimizing your operations and fleet management. We also help buyers complete a business valuation. How do you look at a sale price and determine if the operation is worth that investment? We can complete the valuation and walk you through the logic.

Finally, in this day and age where driver recruitment and retention is critical to business success, we can offer consulting in recruitment and retention. We can also advise you on finding and retaining a qualified manager for your operation.

What does it mean to buy a FedEx route with us?

Every listing on our website is exclusive. This means we’re the only business to hold this listing and we’ve done initial due diligence with the seller. We work extensively with each seller to prepare their business for sale, getting the financials ready for you (the buyer) to dig into. We also help sellers understand how to appropriately price their route and we advise them on their sale price.

Our breadth and depth of experience allows us to steer potential buyers to the best listings for them: the routes that will meet their geographic, involvement, and financial preferences.

Additionally, because we’ve guided many new contractors, we understand exactly what FedEx is looking for in a new contractor. We have a 100% FedEx approval rate for our buyers.

Route Consultant FedEx Routes for Sale

How to Distinguish Yourself as a Buyer: Secure the Best FedEx Routes for Sale

Photo by Jeremy Bishop

Photo by Jeremy Bishop

Note: This is Part 3 of a four-part series. The series includes Why You Should Invest in FedEx Routes for Sale, How to Find FedEx Routes for Sale, and How to Leverage Route Consultant’s Services.

Are you having trouble getting a response from a route broker? Or, are you finding that every listing that peaks your interest is under contract before you ever even make contact with the broker?

In this industry, there are 20 prospective buyers for every FedEx route for sale listing you see. As we noted previously, the market is hot!

As an investor, then, what can you do to be more competitive?

Follow These Tips to Have a Chance at the Best FedEx Routes for Sale

Do your research ahead of time. Hire a consultant, read online articles, and educate yourself on how FedEx works.

Just as you will evaluate a listing and a seller, a broker will be evaluating potential buyers. Does this investor understand what they want and how this investment works? Many investors are kicking the tires on FedEx investments these days and brokers are inundated with basic inquiries. Once you establish yourself as an educated and serious investor, brokers will be more likely to reach out to you when a strong opportunity becomes available.

Tip: test your broker on their knowledge of the FedEx. After doing your own research on FedEx, engage potential brokers in quality FedEx conversations. If a broker doesn’t know much about FedEx or has inaccurate information, this is an indicator that you should evaluate the listing cautiously. They may be misrepresenting information without even knowing it!

Create your corporation. FedEx requires an S Corp or C Corp; if you have an LLC it will not be useful in the purchase of a FedEx route. Establishing a corporation and holding a Federal Employer Identification Number (FEIN) will allow you to move forward with an application more quickly.

Prepare your Request for Information (RFI) ahead of time. FedEx requires that each prospective contractor submit a standard business plan that outlines their core competencies while addressing a variety of FedEx-related subject matter. Preparing one in advance of a potential purchase shows you understand FedEx and are ready to take action.

Have a Purchase Contract already reviewed by your attorney and ready to go. This will give you a significant timeline advantage when you are interested in the most appealing routes.

The most important thing you can do to distinguish yourself as a buyer is have your funding sourced and ready. If you are purchasing a route with cash, consolidate your purchase funds and be prepared to provide proof of funds.

If you are not paying with cash, you need to identify a lender. Ideally, you should find a lender who has FedEx experience. This lender experience will save you time and headaches in the process. Route Consultant clients receive access to a variety of qualified lenders based on their search criteria and eligibility.

As you evaluate listings, be sure to shop in the appropriate price range based on your funding source. Small Business Association (SBA) loans ask borrowers to have a down payment that is 10-20% of the route purchase price. The SBA does make exceptions to that figure, but borrowers chances of approval are significantly higher if they meet this criteria. If you plan to use conventional financing through a local or national bank, you will likely need to have a down payment that is 20-50% of the route purchase price.

As you evaluate listings, be sure to shop in the right location for your funding. Some loans will restrict buyers to their state of residence. If you are securing an SBA loan and wish to purchase a route that is out out of state, you must hire a manager with equity in the route or give an equity stake to the existing manager.

If you intend to purchase your route with a 401K rollover, please know that this process usually takes 30 days or more. Start the rollover early to avoid delays in a deposit or closing.

Need more help standing out?

If you need more help distinguishing yourself as a buyer, contact us for consulting.

We can help you get pieces of the puzzle in place so you can jump on the best opportunity as it arises. We can also help you with a full range of FedEx contractor pieces, such as:

  • IC vs. ISP Business Models

  • Overlap Requirements

  • Understanding Contract Terms

  • Optimizing Operations

  • Fleet Management

  • Business Valuation

  • Terminal Relationship Management

  • Driver Recruitment/Training

How to Find FedEx Routes for Sale

Photo by Jesse Bowser

Photo by Jesse Bowser

Note: This is Part 2 of a four-part series. Look for our other posts on Why You Should Invest in FedEx Routes for Sale, How to Distinguish Yourself as a Buyer, and How to Leverage Route Consultant’s Services.

Now that you know why you should invest in FedEx routes, let’s consider how to best find FedEx routes for sale.

Not All Listings Are Created Equal

It should come as no surprise to you that the best and easiest way to find FedEx routes for sale is online. However, not all online listings are created equal.

Some times you will find FedEx routes for sale via a route broker. Respected brokers in the FedEx space list routes after having done initial due diligence. Here at Route Consultant, we work extensively with our sellers and potential sellers to ensure that they represent the breadth and depth of their business accurately. We also help them understand their responsibilities as a seller and encourage them to get their financials in order for a buyer to conduct their own due diligence. Finally, we work with sellers to price their routes so that they reflect accurate market value.

Other times, you may find a massive number of route listings in one location and you will notice the information from one route to another is inconsistent. These large listing sites are simply billboards on the web. The listings are not verified by industry insiders and the quality of the routes varies dramatically. It can feel helpful to see so many listings in one space, but more often than not it’s stressful trying to pick out the stronger listings from the heap.

Our advice for you as you evaluate online listings:

We highly recommend using established brokers to buy a route.

Further, we think there’s incredible value in working with a broker that specializes in the type of route you are interested in and has actual contracting experience. This type of deep industry knowledge is invaluable to you as you navigate a new investment.

Another way you can leverage brokers’ experiences is by hiring them on a consulting basis. Helping new investors navigate the field is one of our strongest service offerings.

How can we help you as a new buyer?

We can start by helping our clients understand how FedEx operates as a whole and what to expect as you get started as a new contractor. We can also help you evaluate routes for sale: we can use our experience to do a “sniff” test and see if the listing appears viable, the seller is representing their business accurately, the financials are strong, and whether or not the operation is priced appropriately. As contractors with operations across the country, we also know a lot of other current contractors. In many cases, we can seek out opportunities in markets you are interested in, before they ever even make it online via brokers.

Once you are in the purchasing process or operating as a new contractor, our consultants can help you think of ways to make your business more efficient (and more profitable!). We can also talk you through vehicle maintenance and acquisition strategies. And we can help you think through opportunities for business growth.

Why You Should Invest in FedEx Routes for Sale

Photo by Jonas Von Werne

Photo by Jonas Von Werne

Note: This is Part 1 of a four-part series. Look for our other posts on How to Find FedEx Routes for Sale, How to Distinguish Yourself as a Buyer, and How to Leverage Route Consultant’s Services.

If you are an investor ready to chart your own business path, we think you should give investing in FedEx routes serious consideration.

You will be poised for success in the route industry if you bring a few of these traits and know-hows along to the investment:

Some type of business background

  • Past ownership or operation of a company with employees

  • Experience making payroll

  • Knowledge of customer management and addressing customer issues/concerns

  • An understanding of business financials and the basics of investment

  • A sense for how you will fund or finance a FedEx route investment

So, why do we think FedEx routes are great opportunity for this type of investor?

FedEx route businesses are straight-forward investments. Unlike product-based businesses, you do not have to manage supply chains, production, inventory, and sales. Rather, you are an Independent Service Provider (ISP) providing your business’s time and manpower to another company.

Sales are a nearly nonexistent piece of your business experience. FedEx corporate takes care of the company’s overall growth. And it is growing! FedEx leadership targets approximately 10% to 15% earnings growth each year moving forward. As an operator, your sole focus lies around expense management.

You don’t need to worry about Amazon. While the buzz in 2018 circled around Amazon’s potential delivery service, the business from Amazon makes up less than three percent of FedEx’s customer base. And, instead of worrying about Amazon, FedEx is busting into the Chinese market at a faster than expected pace. Industry experts predict continued year-over-year growth for FedEx.

This is also one reason why now is the right time to buy. Companies like Amazon are driving publicity and investor traffic to the delivery industry. As demand for FedEX routes continues to climb, so will the sales price of these operations. There are currently many opportunities to generate a larger return on investment (ROI) than just the net operating income (NOI) you secure from operating the business. Our team can guide you through the proper path to a successful investment.

FedEx routes are not part of a franchise. Corporations that own franchises often own the capital involved with your franchise. Or, corporations may collect franchise fees (you pay them) to use their branding and proprietary information. All franchise owners do the same thing, owe the same fees, and receive the same benefits. Fedex ISPs are the masters of their own universe in many ways. As a FedEx route owner/operator you will select your routes and negotiate your contract, independently of other ISPs.

FedEx routes are transferable. If you decide to move on from your investment, you can sell your routes (or a portion of your routes).

Well-run, efficient P&D routes will make a net income of about 15-25% of total revenue. (Anything advertised as higher than that is likely exaggerated.) This means, if you purchase a FedEx route with approximately $800,000 in revenue per year, you can expect to pull in approximately $120,000 in profit (or 15%).

While you will own vehicles as part of your FedEx business, you do not need to hold real estate. All FedEx ISPs operate out of FedEx terminals in their area. This significantly reduces your overhead and risk.

 

Current FedEx Routes for Sale

Understand How Geography Impacts FedEx Routes for Sale

Photo by Tom Zittergruen

Photo by Tom Zittergruen

As you evaluate potential FedEx routes for sale as an investment, you need to consider the financial implications of each route’s geography. Routes that are more rural or more urban have specific challenges and benefits. 

Planning for the geographic impact of a route in advance will better position you to maximize revenue.

Rural FedEx Routes for Sale

In rural route districts, each stop is typically further apart than in more urban routes. A driver’s daily route will cover more miles. 

Vehicle Purchasing and Maintenance 

If your team covers more miles per day, you should adjust your vehicle purchasing and maintenance strategy accordingly.

Many rural contractors feel it’s better to operate used vehicles in rural routes because the extensive daily mileage increases wear and tear on the vehicles. However, while purchasing used vehicles reduces your upfront costs, you should expect higher and more frequent maintenance costs.

Additionally, consider the proximity of tow-shops, mechanics, and rental companies in rural areas. Some rural contractors need to drive 100+ miles for more significant repair work. This factors in to your overall maintenance costs. 

Fuel Costs

As your fleet travels more miles in a rural route, your team’s fuel costs will be higher than in other routes. 

 To maximize your profits, you will want to consider purchasing smaller and/or lighter weight fleet vehicles for better fuel economy. Gas vehicles may be preferable to diesel when available. 

Urban FedEx Routes for Sale

Routes in urban areas will cover less mileage per day. However, drivers in your fleet will stop more often. Your team will contend with urban congestion and difficulty navigating and parking in some areas. 

Vehicle Purchasing and Maintenance 

Because urban routes cover fewer daily miles than rural routes, many contractors in urban areas purchase a new or almost new fleet of trucks.

This strategy has a higher upfront cost, but saves contractors time and money in vehicle maintenance and repair. There is also greater depreciation capture with this strategy. 

Further, fleets servicing urban routes are closer to terminals for support if one of their trucks breaks down or is involved in an accident. 

If your route covers dense communities—downtown areas like Chicago, Indianapolis, and Nashville, for example—you should consider smaller vehicles (cargo vans, P700’s, etc.) for ease of use.

Customer Service and Period Safety Incidents

In urban areas your fleet will interact with more customers. They will come into contact with more commercial and residential spaces. And, they will encounter more traffic on the roads. 

This is a recipe for increased accidents. 

The Independent Service Provider (ISP) contractor model incorporates two types of bonuses: Customer Service Incentives (CSI) and Period Safety Incentives (PSI). You will negotiate these bonuses as part of your FedEx contract.

Each of the bonuses pays out at regular intervals and the bonuses decrease each period if violations or issues occur. For example, your CSI bonus may decrease if there were customer complaints against your team or if you had late or missed deliveries.

The PSI bonus may decrease for safety issues such as vehicle accidents, property damage, and individuals injured on the job. 

Consider the increased opportunities for incidents when you select an urban route (and, particularly, when you negotiate contracts for urban routes). 

What’s Next?

Potential buyers sometimes believe that urban routes are better because they can complete more stops in fewer miles. However, urban routes have their own challenges (as we highlighted above). 

Additionally, FedEx awards higher bonuses to rural routes to compensate for the fewer stops and increased mileage. Thus, there are compelling reasons to consider urban and rural routes as you plan your purchase.

We have FedEx routes for sale across a range of geographies. Evaluate our listings and talk with us about the type of business investment you are considering.

As you evaluate potential FedEx routes for sale as an investment, you need to consider the financial implications of each route’s geography. Routes that are more rural or more urban have specific challenges and benefits. 

Route Consultant Listings

Interested in a FedEx Franchise? What You Need to Know Before You Buy a FedEx Route

Photo by Aleksandr Kozlovskii

Photo by Aleksandr Kozlovskii

FedEx businesses are not, actually, franchises at all

Investors who buy FedEx routes provides services as Independent Contractors (ICs) or as Independent Service Providers (ISPs). Route owners do not operate franchises.

Traditional franchises do a number of things to control branding and ensure success. They provide franchise training and franchise rules/regulations. Corporations that own franchises often own the capital involved with your franchise. Or, corporations may collect franchise fees (you pay them) to use their branding and proprietary information. 

Franchises are often standardized. All franchise owners do the same thing, owe the same fees, and receive the same benefits. 

What Buying/Owning a FedEx Route Is All About

Fedex ISPs are the masters of their own universe in many ways.

As a FedEx route owner/operator you will select your routes and negotiate your contract, independently of other ISPs. 

You are responsible for your fleet of trucks. Plus, you have full control as a business to hire and train your drivers. 

Additionally, you have the space as a business owner to creatively solve problems and maximize your profit margins. Healthy FedEx P&D businesses have profit margins between 15 and 25 percent—you can look to trend upward when you buy a new business.

And FedEx Routes are transferable. If you decide to move on from your investment, you can sell your routes (or a portion of your routes).

If you’re thinking of buying a FedEx route, we recommend you ask yourself these questions:

  • Do I understand business financials and the basics of investment? Do I know how these standard metrics apply to a FedEx operation? 

  • Have I previously owned or operated a company with employees in a high-turnover industry?

  • Do I understand the important of choosing the correct fleet strategy for my business?


Types of FedEx Contracts

Independent Contractor (IC)

Historically, FedEx contractors operated under the Independent Contractor (IC) model. The IC model had standard payouts to contractors. 

Monthly IC bonuses award contractors $970 per ground Primary Service Area (PSA) and $600 per home delivery PSA. These are given 12 times a year. The percentage of the incentive received goes down with every complaint, missed delivery, accident, etc. 

Contractors received quarterly bonuses four times per year and the amount is based on the number of PSAs in the contractor’s territory.

Some existing contractors continue to operate under the IC model, but the FedEx base of contractors will fully transition to the ISP model over the next couple of years.

Independent Service Provider (ISP)

In January 2016, FedEx announced that all Fedex P&D contractors will transition to the  Independent Service Provider (ISP) model by May 2020. 

As part of your ISP contract, owners negotiate charges with FedEx. These are charges from you the contractor to FedEx the company. These charges reflect real cash flowing into your business. 

The charges you outline in your ISP agreement include,

  • Service Charge

  • Stop Charge

  • Surge Stop Charge

  • Per Stop Fuel Surcharge

  • Package Charge

  • New Account Startup Charge

  • Apparel Brand Promo Charge

  • Vehicle Brand Charge

The ISP model also incorporates two types of bonuses: Customer Service Incentives (CSI) and Period Safety Incentives (PSI). 

Each of the bonuses pays out regularly at an amount negotiated in your contract. The bonuses decrease each period if violations or issues occur. For example, your CSI bonus may decrease if there were customer complaints against your team or if you had late or missed deliveries.

The PSI bonus may decrease for safety issues such as vehicle accidents, property damage, or individuals injured on the job. 

Both the CSI and PSI bonuses are ways in which FedEx influences contractor team behaviors without mandating behaviors. 

Linehaul 

It’s worth somehow noting that linehaul is, and likely always will, most closely resemble the IC model. 

Linehaul contracts pay owners based on miles traveled. Similarly, linehaul bonuses pay out based on miles traveled. As with ISP bonuses, linehaul bonuses decrease when there are service or safety incidents. 

These contracts are evergreen—they have no expiration. Annual revenue rates increase every year on September 1st. There is no annual negotiation or review per contractor.

Linehaul runs are a lucrative and risky business due to their size. Some contractors say linehaul runs are 90% boredom and 10% terror. But they can be an incredibly profitable investment for the right contractor. 

What’s Next?

If you’re just starting out, looking at FedEx routes for sale, we recommend you do your research. We have topics including,

If you need to talk to a real person to ask your questions and get a deeper level of understanding, connect with Annalee

And, if you’re ready to look at individual listings, give our exclusive listings a review and reach out with follow-up questions.
 

Looking at FedEx Routes for Sale? Here's How to Finance Your FedEx Route

MYTH: Investors can't use financing to buy a fedex route

FACT: you need to find the right route and the right financial institution

Potential buyers often turn to bank financing to purchase FedEx routes. If you are considering financing a FedEx route, the two most common types of loans are a Small Business Association (SBA) loan and a conventional loan.

How to Negotiate the Strongest Contract for Your FedEx Business

You are charging FedEx for your services. You will negotiate each of the following ten charges with FedEx. All of these charges combined account for money flowing into your business. It’s critical you understand how and when those charges occur. And how you can increase your cash flow! Following is a quick overview of the charges you will negotiate as part of your Independent Service Provider (ISP) contract.

What You Need to Know About P&D FedEx Routes for Sale

Photo by Paul Hanaoka

Photo by Paul Hanaoka

Get the Skinny on Buying FedEx Ground Routes and FedEx Home Delivery Routes

If you are considering investing in a FedEx route for the first time we recommend starting with a pickup and delivery (P&D) FedEx business. A Fedex P&D route business is easy to learn and simple to operate.

The Structure of a FedEx P&D Route

FedEx P&D operations deliver to local homes and businesses in a designated territory, outlined in your Independent Contractor (IC) or Independent Service Provider (ISP) contract

There are two sides to the P&D coin: home delivery routes and ground routes. 

Historically, contractors could have either home delivery routes, grounds routes, or both.

Along with the FedEx transition to all ISPs, FedEx will require a contractor to operate both home delivery routes and ground routes within a given area by May 2020. 

The FedEx home delivery routes:

  • Primarily deliver to residential households.

  • Operate Tuesday through Saturday.

  • Have smaller to medium trucks and boxes.

  • Have high seasonal variability (with businesses often making a large part of annual revenue in the four weeks leading up to Christmas).

Ground routes are the other side of P&D routes.

FedEx ground routes feature:

  • Delivers primarily to commercial businesses.

  • Heavier packages and larger trucks.

  • Routes that run Monday through Friday.

  • Less seasonal variability than home delivery routes.

The Pros and Cons of a FedEx P&D Route

Pros:

  • Easier to hire drivers

  • Smaller trucks

  • Concentrated geographic territory

  • Lower risk than linehaul runs

  • Ability to increase business size and ramp up operations

Cons:

  • Lower gross profit than linehaul runs

  • You must own both ground routes and home delivery routes in your territory (this can also be a pro: overlap may be a pain, but it also increases the efficiency of the operation and can increase the profit)

  • Intense seasonal variability within home delivery routes

Are you the right investor for a FedEx P&D Route?

While the average investor in a FedEx route varies widely, we do notice a number of similarities among those who buy a FedEx route:

You might be the right investor to buy a Fedex route if you:

  • Have some type of business background

  • Previously owned or operated a company with employees

  • Have experience making payroll

  • Know how to manage customers and customer issues/concerns

  • Understand business financials and the basics of investment

  • Have a sense for how you will fund or finance a FedEx route investment

We’d love to talk with you more about FedEx P&D routes and how to evaluate the routes for sale. 
 

Looking at FedEx Routes for Sale? Ask These Questions

Photo by Martin Sanchez

Photo by Martin Sanchez

Questions that will help ensure Success when you buy a FedEx route

 

Do I have business experience? 

Operating a FedEx business requires you to manage all aspects of an independent business: payroll, taxes, maintenance, hiring/firing, insurance, customer service, etc. This is a detailed operation that will require strong problem solving skills and experience helps.

 

Have I previously owned or operated a company with employees?

A significant chunk of your business time will be spent managing employees. You will need to hire drivers and linehaul drivers will be more difficult to find. Once hired, you will need to onboard and train all news employees. You'll also need familiarity with making payroll, addressing employee issues or concerns, and handing employee disputes.

Productive, happy employees makes a sizable impact on your bottom line.

 

Am I comfortable managing customer questions, issues, or concerns?

FedEx uses (customer service incentives) CSIs to ensure high quality service among contractors.

All contractors receive CSIs on a regular schedule (based on a negotiated rate in their contract). The CSI bonus decreases in a given period if there were CSI complaints against that contractor. Your FedEx business profits when customers are happy and suffers when they aren't.

Being comfortable serving customers and addressing their issues (and training your employees to do so as well) is a must for FedEx business owners.

 

Do I understand business financials and the basics of investment?

Buying a FedEx route is more than creating a job for yourself. It's a serious investment with real profit potential.

Have a sense for how you will fund or finance a FedEx route investment. What's your best strategy? How will you pay off any funding or financing? Can you pay off financing sooner than expected?

Think short and long term about your capital costs and your profit margins. How can you improve that margin and bring real, additional cash into your pocket?

WHAT'S NEXT IF YOU WANT TO LEARN MORE?

If you need more help with the details and navigating contract negotiations, contact us for consulting.

We can walk you through pieces of the puzzle for buying a FedEx route, such as:

  • IC vs. ISP Business Models

  • Overlap Requirements

  • Understanding Contract Terms

  • Optimizing Operations

  • Fleet Management

  • Business Valuation

  • Terminal Relationship Management

  • Driver Recruitment/Training

And, as always, give us a call and we can help point you in the right direction. 

If you are interested in buying a FedEx route, check out our FedEx routes for sale.

How Much Money Can You Make if You Buy a FedEx Route?

While a very profitable business, FedEx route businesses do not generate profit margins of 30% or more. As you look to buy a FedEx route, look for P&D businesses with profit margins between 15 and 20% of revenue. These are healthy businesses!

Before You Buy a FedEx Linehaul Route: Get the Details and Understand the Pros and Cons

Photo by Sid Verma

Photo by Sid Verma

What You Need to Know Before Buying a FedEx Linehaul Route

There are two distinct types of FedEx businesses: pick-up and delivery (P&D) routes or a linehaul run.

Linehaul runs are a lucrative and risky business. Some contractors say linehaul runs are 90% boredom and 10% terror. But they can be an incredibly profitable investment for the right contractor. 

Are you the right contractor for a linehaul run?

The basics of a linehaul run

While P&D runs exclusively during the day, linehaul often operates at night. Because linehaul routes are not tied to business or residential delivery, linehaul operators have the flexibility to drive during lower traffic time and in 24 hour team setups.

Runs are long distance, ranging from several hundred to several thousand miles. Some linehaul runs will have specified start and end locations while others will have a known start location, but varying destinations.

Linehaul drivers must hold a valid CDL license and, unfortunately, there is a shortage of CDL licensed drivers in the United States. 

Linehaul runs require semi-trucks in your fleet. These 18-wheelers are expensive to buy and expensive to repair. It’s critical that new contractors budget for the purchase of new trucks or significant repairs to existing semi-trucks. 

Additionally, linehaul run contractors must consider the known risks of operating such large vehicles: semi-truck accidents may result in injuries or fatalities. 

The structure of a linehaul run

A linehaul run structures their drivers as either solo drivers or team drivers. 

Solo drivers cover shorter distances between each point and, typically, the driver returns to home base at the end of each shift. Driving teams usually consist of two drivers on cross-country runs, rotating behind the wheel. These drivers may be away from the home base for days at a time.

Linehaul runs encompass three types of runs: dedicated, unassigned, and spots. 

  • Dedicated runs have the same starting and stopping destination on each trip. For example, Nashville to Dallas. Your run remains Nashville to Dallas and back.

  • Unassigned runs have a defined starting location, but do not have a regularly assigned destination. They travel to varied destinations on an as-needed basis. Your driver may always start in Nashville, but he/she may travel to Denver, Los Angeles, New York, or Chicago (based on the business requirements).

  • Spot runs mimic P&D routes. Drivers have a small, designated coverage area and travel out of home base daily. Unlike P&D routes, however, drivers operate semi-trucks with larger packages.

The risks and rewards of a linehaul route

The risks of linehaul runs relate to the size of everything. 

The cost of linehaul routes is higher per run (as compared with a single P&D route). Your trucks are larger, and you inherit the known risks of a large vehicle on the road. Plus, these trucks are expensive to buy and expensive to repair. You need to have a healthy budget for capital projects.

You also have higher costs of business: insurance costs, employee salaries, maintenance costs, etc. And the penalties for late runs/deliveries are higher. 

There's also a severe shortage of CDL drivers in the United States. Which means you might have difficulty putting drivers in the driver seat of your trucks.

All of that being said, the money is also bigger. Linehaul contracts operate based on miles. Thus, a run from New Jersey to California could bring in $10,000 of revenue for the week. One linehaul tractor trailer may generate 5X the revenue that a P&D truck generates.

Are you the right contractor for a linehaul run?

So, how do you know if you’re ready for the size of a linehaul route? 

For many new contractors, it can be easier to begin with FedEx P&D routes and then level up to linehaul runs. Owning and operating FedEx P&D routes does not prevent you from adding linehaul runs later on. Rather, it’s a great way to learn the ins and outs of a FedEx business with lower risk. 

If you already own a FedEx P&D route OR you think you can take on the larger risk and reward immediately, here are ways to know you are a right fit contractor for a linehaul route:

  • You have the ability to finance or purchase a linehaul run AND you have the ability to finance or cover high cost operations

  • You have logistics experience and know how to navigate serious risk in the industry

  • You have experience planning and executing for contingencies

  • You understand that you or an appointed manager will need to be available 24/7 to help solve problems

How to Buy a FedEx Linehaul Run

Our team can walk you through pieces of the puzzle for buying a FedEx linehaul run, such as:

  • Optimizing Operations

  • Fleet Management

  • Business Valuation

  • Terminal Relationship Management

  • Driver Recruitment/Training

 

Current Linehaul Listings

If you are interested in buying a FedEx linehaul run, check out our FedEx routes for sale.

Buying a FedEx Route? Here's the Details on FedEx Bonuses

Photo by Adam Grabek

Photo by Adam Grabek

How does FedEx use bonuses to incentivize customer service and safety among contractors?

For Independent Service Providers (ISPs), Independent Contractors (ICs), and linehaul operations, FedEx offers bonuses to contractors that go above and beyond. 

Bonuses can add a substantial amount to your overall revenue each year. Whether you are an existing FedEx contractor or looking to buy a FedEx route, obtaining contractor bonuses should absolutely be part of your financial goals and strategies. 

ISP Bonuses

FedEx established an Independent Service Provider (ISP) model for all FedEx P&D routes and the transition to this ISP model will complete by May 2020. 

The ISP model incorporates two types of bonuses: Customer Service Incentives (CSI) and Period Safety Incentives (PSI). 

FedEx uses CSIs to incentivize above high quality service among contractors. All contractors receive CSIs on a regular schedule (based on a negotiated rate in their contract). The CSI bonus decreases in a given period if there were CSI complaints against that contractor. For example, late deliveries or customer complaints. 

PSIs recognize contractors that operate their routes without safety violations or incidents in a specific period of time. Similar to CSIs, contractors negotiate a rate for regular PSI payments. These payouts decrease for every safety violation within the payout period. Safety violations may include accidents with the FedEx truck, a delivery person injured on the job, or damage to a customer’s property. 

Both the CSI and PSI bonuses are ways in which FedEx influences contractor team behaviors without mandating behaviors. 

More about ISP bonuses:

  • CSIs and PSIs pay out every 4 weeks, or 13 times a year.

  • Contractors negotiate incentive rates with their contracts and these rates may change from year to year.

  • FedEx calculates incentives at 100% minus deductions. Deductions indicate CSI or PSI violations. If there are no deductions, a contractor will retain the full incentive. If there is one deduction, the percentage goes down an increment; with two deductions, another increment. So on and so forth.

IC Bonuses

The Independent Contractor (IC) model* also has a bonus structure: monthly and quarterly. 

Monthly bonuses award contractors $970 per ground Primary Service Area (PSA) and $600 per home delivery PSA. These are given 12 times a year.

Similar to ISP bonuses, the percentage of the incentive received goes down with every complaint, missed delivery, etc. 

Contractors receive quarterly bonuses four times per year and the amount is based on the number of PSAs in the contractor’s territory.

*Note: FedEx plans to transition all IC model businesses to ISP business by May 2020. 

Linehaul Bonuses

Linehaul contractors receive a monthly bonus 12 times per year. They receive a  $0.037 per mile bonus unless there is a safety or service incident. If there are a safety or service incidents, the bonus amount per mile decreases per incident. 

When we talked about big risks and big rewards in linehaul runs, these bonuses per mile are a large part of that puzzle. 

WHAT'S NEXT IF YOU WANT TO LEARN MORE?

If you need more help with the details and navigating contract negotiations, contact us for consulting.

We can walk you through pieces of the puzzle for buying a FedEx route, such as:

  • IC vs. ISP Business Models

  • Overlap Requirements

  • Understanding Contract Terms

  • Optimizing Operations

  • Fleet Management

  • Business Valuation

  • Terminal Relationship Management

  • Driver Recruitment/Training

And, as always, give us a call and we can help point you in the right direction. 

If you are interested in buying a FedEx route, check out our listing page for operations currently on the market.

What's the Difference Between a Buying a FedEx P&D Route and a Linehaul Run?

Photo by Jake Blucker

Photo by Jake Blucker

Understand the Pros and Cons of FedEx Route Types and Find the Right Business for You

There are two distinct types of FedEx routes, and if you are considering buying a FedEx route, it’s important to figure out if you want to purchase pick-up and delivery (P&D) routes or a linehaul run.

There are important and significant difference between FedEx P&D routes and FedEx linehaul runs. 

What is a FedEx P&D route?

In our experience as contractors, pickup and delivery is a great place to enter the FedEx space for the first time. As a routine business, P&D is easy to learn and simple to operate.

P&D operations deliver to local homes and businesses in a designated territory. 

There are two sides to the P&D coin: home delivery routes and ground routes. Historically, contractors could have either home delivery routes, grounds routes, or both. Along with the FedEx transition to all Independent Service Providers (ISPs), FedEx will require a contractor to operate both home delivery routes and ground routes within a given area by May 2020. 

The P&D home delivery routes:

  • Primarily deliver to residential households.

  • Operate Tuesday through Saturday.

  • Have smaller to medium trucks and boxes.

  • Have high seasonal variability (with businesses often making a large part of annual revenue in the four weeks leading up to Christmas).

Ground routes are the other side of P&D routes.

Ground routes feature:

  • Deliveries primarily to commercial businesses.

  • Heavier packages and larger trucks.

  • Routes that run Monday through Friday.

  • Less seasonal variability than home delivery routes.

What is a FedEx linehaul run?

You can think of FedEx P&D routes as the box trucks you see out and about in your community. Conversely, you can think of the FedEx linehaul runs as the semi-trucks you see on the highway.

Linehaul runs feature:

  • Long distance transport, ranging from several hundred to several thousand miles.

  • Strenuous driver requirements, including a valid CDL license.

  • Semi-trucks: 18-wheelers that are expensive to buy and expensive to repair.

  • Varied types of linehaul runs, including solo, team, designated, and unassigned.

  • Known risks: semi-truck accidents in linehaul runs may result in significant injuries or fatalities.

What's the right FedEx business for you?

For many new contractors, it can be easier to begin with FedEx P&D routes and then level up to linehaul runs.

Linehaul is both a lucrative and risky business. Some contractors say linehaul runs are 90% boredom and 10% terror. But they can be an incredibly profitable investment for the right contractor. 

If you want to talk to contractors who run both P&D routes and linehaul runs about which type of FedEx business is right for you contact us and we are happy to help. 

Maybe you have a pretty good handle on all this, but an extra check wouldn't hurt? Download our free New Contractor Startup Checklist.

Check out our listing page for both P&D routes and linehaul runs currently on the market.

Buying a FedEx Route? Understand Why Contractors Sell FedEx Routes

Photo by Nick Fewings

Photo by Nick Fewings

FedEx contractors cite many reasons for selling their FedEx routes: they are ready to retire, spend more time with family, or simply get a change of pace.

At the current moment, however, there is another reason so many contractors are selling their FedEx routes: FedEx is currently undergoing major changes to make the business more efficient and profitable.

Many contractors aren't able or willing to make the changes required by FedEx, thus their selling their FedEx routes as an alternative to change.

If you are going to jump into the industry, you’ll be learning everything for the first time and these changes will have minimal impact on you since you'll start Day 1 with them in place.

Understand Industry Changes WheN Looking at FedEx Routes for Sale

You should be aware of these industry changes when you are considering buying a FedEx route. Here are the three big changes you need to know as a new (or potentially new) contractor. 

Route Scale

Recently, FedEx put into place new scale requirements for contractors. Each business must have a minimum of five routes or 500 stops per day. On the flip side, a single contractor cannot own more than 15% of the routes out of a terminal. (Note: FedEx does allow exceptions to this 15% rule.)

FedEx Overlap Requirements

Presently, different contractors may operate home delivery and ground routes in the same territory. However, this changes as of June 2020. FedEx will mandate that a single contractor runs both the home delivery and ground routes for a single territory.

We see this as a positive change! In our experience it makes routes more efficient. 

IC vs. ISP

Historically, FedEx contractors operated under the Independent Contractor model (the IC model).

In 2016 FedEx announced they will transition all contractors to an Independent Service Provider model (ISP model) by May 2020. These changes will incentivize (and at times require) ISPs to follow similar guidelines. 

The explosive growth of e-commerce and the demands of customers for differentiated service have created a mandate for increased service capacity and operational flexibility to serve both commercial and residential markets. Experience shows that businesses operating under an ISP Agreement can better adapt to these dynamic market conditions and customer expectations.
— FedEx press release, January 2016

With the new system, contractors negotiate a contract that pays per stop and package. The ISP model offers incentives to comply with FedEx’s objectives rather than mandating requirements. Some existing contractors continue to operate under the IC model, but the FedEx base of contractors will fully transition over the next couple of years.

Some existing contractors, particularly those already near the end of their careers, are unwilling to adopt the new ISP model and instead prefer to sell their businesses during this transition. 

This makes it an excellent time to purchase routes! The changes help contractors operate more efficiently and earn more profit for their routes. 

What's Next If You Want to Buy a FedEx Route?

If you are interested in buying a FedEx route, check out our listing page for operations currently on the market.

If you are feeling like a fish out of water and appreciate the expertise of industry insiders, contact us for consulting. We can walk you through pieces of the puzzle for buying a FedEx route, such as:

  • IC vs. ISP Business Models

  • Overlap Requirements

  • Understanding Contract Terms

  • Optimizing Operations

  • Fleet Management

  • Business Valuation

  • Terminal Relationship Management

  • Driver Recruitment/Training

Maybe you have a pretty good handle on all this, but an extra check wouldn't hurt? Download our free New Contractor Startup Checklist.

And, as always, give us a call and we can help point you in the right direction.