We talked previously about how geography has a significant impact on your route business. In rural route districts, each stop is typically further apart than in more urban routes. A driver’s daily route will cover more miles.
Routes in urban areas will cover less mileage per day. However, drivers in your fleet will stop more often and your team will contend with urban congestion and difficulty navigating and parking in some areas.
FedEx Ground refers to your territory as Customer Service Areas (CSAs). As you investigate routes for your business, it is critical you think through the ways CSA geography impacts your business expenses and contingency plans. Here we deep dive into planning for metropolitan areas.
If you serve a metropolitan CSA you have unique factors to consider. To start, we find that in a strong economy it is more difficult to hire drivers in cities where there are many employers and unemployment rates tend to be low.
Another challenge of large cities: parking tickets. It’s not unusual for a contractor serving downtown areas of a major city to have between $10,000 and $40,000 in expenses from parking and traffic violations per year.
You need to also be aware that training a driver for a metropolitan route takes approximately three times longer than training a driver in a suburban or rural route. Why?
Properties within a city have complex requirements for where and how deliveries occur. Your drivers will have to learn not just the front door, but also the delivery dock in some locations. Further, some buildings will require drivers to deliver packages at specific times or to know a series of door codes.
To complicate matters, some cities (such as Chicago) have underground networks with access doors and delivery bays that are unmarked or poorly lit. This is an intensive learning process for a new driver and your business will need to invest in training new drivers the backhand code of the city.
Because of all of these factors and more, driving in a downtown environment is a high stress environment and you will need to train and compensate drivers accordingly.
One of the great aspects of metropolitan CSAs is you will find operating expenses are materially less in these areas.
Your annual fuel costs will be less since your fleet has a lower miles per day average. You will also wear your fleet vehicles down at a slower rate resulting in fewer repair and maintenance expenses. We also find that covering a dense territory results in fewer injuries to our drivers.
In these CSAs we use the operating savings to pay our drivers higher wages. These higher wages help offset the challenges of a tight labor market and higher stress environment.
Because of the higher wages and deeper pool of talent, route businesses in metropolitan areas have the opportunity to secure smarter, highly capable employees.
When the Challenges Outweigh Opportunities
Our advice to fellow contractors searching out new routes is to find a financially sound business with room for growth. Beyond helping investors understand how geography impacts business, we tend to be location agnostic.
That being said, there are some route locations we caution against except in rare circumstances. We typically recommend contractors not buy routes in uber-popular cities undergoing unusually rapid growth. For example, Austin, Texas, Portland, Oregon, and Boulder, Colorado fell into this category in recent years.
Cities experiencing cultural popularity tend to experience wage pressure at the same time. In these cities employers will find near 0% unemployment rates where it’s incredibly difficult to hire new drivers. Moreover, the demand for more employees makes it easier for individuals to jump between jobs and secure higher wages. This unpredictable climate can be extremely challenging for most business owners.
Helping investors identify new business opportunities is one of our team’s core competencies. We love to help individuals think strategically about growth in the logistics marketplace. Connect with our team to work one-on-one with us and identify your next move.