What You Need to Know Before Buying a FedEx Linehaul Route
There are two distinct types of FedEx Ground businesses: pick-up and delivery (P&D) routes or a linehaul runs.
Linehaul operations 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.
Dedicated runs are highly desirable for both owners and drivers. These are guaranteed runs that allow route owners to forecast revenue. Further, drivers prefer the consistency of dedicated runs—they know when they’ll be leaving, where they’ll be going, and when they’ll be home.
Conversely, securing and paying drivers for unassigned runs can be difficult as the revenue on the unassigned runs is inconsistent and varies run to run. We always advise operations guarantee a minimum number of miles per week for their drivers (including those that drive unassigned runs).
Spot runs do not always require additional trucks and drivers. FedEx operations may be able to assign linehaul drivers to complete spot runs before or after their longer runs—this increases efficiency in the overall business.
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.
Linehaul operations may have profit margins between 20 and 45% of Total Revenue. Linehaul businesses with more solo runs will have margins closer to 20-30% and those with mostly team runs may have margins upwards of 45%.
Team linehaul runs have the highest profit margins in all of the FedEx Ground portfolio.
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 Ground P&D routes and then level up to linehaul runs. Owning and operating FedEx Ground 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 Ground business with lower risk.
Additionally, linehaul runs are a great way to scale an existing business.
Businesses of all types benefit the increases in efficiency as they scale. For example: each truck you add to your operation decreases per truck costs since you’re able to share maintenance plans, insurance, and tools between trucks.
Many FedEx route business expenses benefit from scale such as advertising, insurance, equipment rentals, uniforms and laundry, legal, office supplies, and maintenance.
Our own team of FedEx contractors is one of the largest Independent FedEx Ground Contractors in the country because we took advantage of scale.
If you already own a FedEx Ground 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 Ground Linehaul Operation
Our team can walk you through pieces of the puzzle for buying a FedEx linehaul runs, such as:
Terminal Relationship Management
Current Linehaul Listings
If you are interested in buying a FedEx Ground linehaul operation, check out our FedEx routes for sale.