What You Need to Know Before Buying FedEx Routes for Sale
Maybe you saw a forum post about absentee ownership? Or, maybe you saw one of our FedEx routes for sale note that absentee ownership was a possibility. Whatever the reason, you found your way here and you have questions about investing in a FedEx route as an absentee owner.
We have answers!
What is absentee ownership?
When an investor chooses to purchase FedEx routes for sale at a terminal that is not close to the investor’s primary residence or place of business, we call the arrangement absentee ownership.
How common is absentee ownership?
The number of contractors operating a remote business is larger than you might think and increasing rapidly. Logistics companies like ours have discovered there are many factors that make up a successful operation and most of those factors exclude proximity to the owner.
I know FedEx Ground must approve all new owners. Are they open to absentee owners?
First things first, you should never use the word absentee with FedEx Ground. It has a negative connotation. This business is not designed to provide “mailbox money.” Absentee makes it sound like you are missing, unfulfilled, and not responsive.
Consider referring to this type of business structure as remote ownership or business interests out of state.
FedEx Ground is open to absentee owners or investors, and their openness appears to be increasing with time. However, in order to receive approval in the purchase process they are going to want to see that—despite your location—you intend to be an engaged owner.
What type of questions can a prospective absentee owner expect during the FedEx Ground terminal interview?
If you are proceeding into the interview process for a route business as an absentee owner, be sure to talk specifically about your communication style and availability. Respond quickly during the interview process and emphasize how you will respond quickly as an owner.
If you are exploring absentee ownership, prepare for these types of questions:
Will the terminal be able to contact you easily? How?
Are you willing to commute to the terminal on occasion?
Will you be involved in this business on a day-to-day basis?
Is this going to be your primary business interest?
If I want to be an absentee owner should I search for P&D operations or linehaul runs?
We see both P&D businesses and linehaul operations run by absentee owners.
That being said, there is less industry stigma to being an absentee owner with linehaul operations. Linehaul conducts heavier periods of operation at night: in the 8pm to 5am timeframe. Because FedEx Ground terminal managers are rarely at the terminal within those hours your absence is less noticeable.
Conversely, P&D businesses operate almost entirely during daytime hours. A P&D business owner may appear disengaged when they run the business from a remote location.
Why might absentee ownership be the right business arrangement for me?
An openness to absentee ownership allows you to cast a wider net.
It sounds like fun to own the package delivery rights in your own town. However, the business in your immediate vicinity may not be the best investment opportunity.
Evaluating a larger radius around you allows you to find better businesses with stronger valuations and cash flow.
How far is too far to run a FedEx route business absentee?
We counsel prospective owners to evaluate business opportunities within a 5.5 hour driving radius of where they live. This time frame allows you to wake up at 4am and be at your terminal by 9:30am.
If you prefer to fly, we advise no more than a 1.5 hour flight. When you are starting out you need to be able to get to the terminal fairly quickly when necessary. It also minimizes your costs so you can visit regularly in the beginning.
Once you get your feet wet in absentee ownership and contingency planning, you can widen that radius and consider opportunities further away.
How often does an absentee owner need to visit their terminal?
In the early days of ownership you should visit every other week. After three to six months, you can adjust to monthly visits. If after your first year of business you feel established with your team and the business runs smoothly, you can plan to visit quarterly.
This consistent pattern of visits will help you deeply understand the business and establish relationships.
What will my day-to-day involvement look like with an absentee FedEx route business?
Absentee owners with effective managers in place may spend only one or two hours per day on business tasks for their route business. These tasks include recruiting, processing payroll, renewing licenses and tags, completing paperwork, and other administrative must-dos.
However, unexpected events may monopolize large chunks of your time: for example, if a truck breaks down or if an employee quits. We counsel clients interested in absentee ownership to become master contingency planners.
Have a plan for what will happen if a truck breaks down. Have a plan for what happens if a driver quits. Have a plan for if a truck breaks down, a driver quits, and your manager is on vacation (all in the same day).
Contingency planning is a make or break for absentee owners.
How do I make the day-to-day business operations run smoothly as an absentee owner?
If you are considering an absentee business opportunity, think through the logistics of running a business from a distance.
There will be times in your business where you need to replace credit cards or fuel cards for employees. You may have to write manual checks. You will need a mailing address for your business within the state of operation. You will receive legal documents in one location and work in another.
How are you going to work through these frequent logistical challenges? Are you comfortable with giving your manager power of attorney?
These items are important to think about before you jump in as an absentee owner. We frequently conduct consulting sessions to focus specifically on this type of planning.
What is the greatest risk to me as an absentee owner?
Without a doubt, the greatest risk you face as an absentee owner is your manager leaving his/her position. The most damaging scenario would be a manager walking off the job without notice. This is a serious challenge to overcome and something that requires detailed contingency planning.
In our route businesses, we require managers to appoint one driver as a Lead Driver. This Lead Driver trains underneath the manager and is able to complete approximately 80% of the manager’s tasks. This multi-layered structure helps prevent significant loss to our business in the event of a manager leaving or walking off the job.
How can I maintain a positive relationship with FedEx senior management as an absentee owner?
Once you are an absentee owner of a route business, it’s critical that FedEx senior management feel your involvement around the terminal.
Go work with your team in the terminal regularly. And when you are present at the terminal, make your presence felt: host a cookout for employees, conduct safety meetings, introduce yourself wherever possible.
Once you establish positive working relationships and open lines of communication, you will not need to visit as frequently.
These are the high-level notes on absentee ownership. If you are serious about taking the next step we recommend working with a buyer’s consultant to fully plan for this remote arrangement.