The Worst Case: FedEx Ground Contract Termination

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Note we use “agreement” and “contract” interchangeably in this post; we also use “ISPs” and “contractor” interchangeably. Contact us if you want to learn more about the ISP transition.

Before we jump into how you could lose your FedEx Ground contract, let’s be clear: FedEx Ground does not want to terminate an Independent Service Provider (ISP) agreement or contract.

Terminating a contract can provide serious service interruptions for FedEx Ground customers and is a critical issue. FedEx Ground aims to provide seamless delivery service for all areas of operation.

This being said, it is rare for a contractor to lose their FedEx Ground contract. Further, contractors almost always receive opportunities to resolve issues in advance of a contract termination.

You may have heard, though, about a contractor losing their contract or you may be interested in buying a route from a contractor who is at risk of losing their contract.

Let’s look carefully at why a contractor may be at risk of losing their FedEx Ground contract. We’ll also look at the communication process with FedEx Ground.

How FedEx Ground Escalates Issues with ISPs

The surest way to lose your ISP agreement is to operate a team that struggles with safety.

Contractors may lose their FedEx Ground contract due to safety concerns or repeat customer service issues.

The surest way to lose your ISP agreement is to operate a team that struggles with safety. If you have members of your delivery team repeatedly engaged in vehicle or property accidents, your contract is at risk. The risk is even greater if one or more of those safety accidents is severe.

FedEx Ground monitors safety results closely using a Safety Results Indicator (SRI). The SRI gives FedEx Ground a mathematical way to evaluate your safety record. Contractors receive a report with their SRI number every quarter and can ask to see it at any other time to understand if they are within acceptable boundaries.

Your contract with FedEx Ground may also be at risk if you and/or your team has recurring customer service complaints. These day-to-day operational blunders may include poor vehicle appearance or failure to obtain package signatures. Your ISP agreement outlines service expectations and you can contact our team to understand those expectations better or to learn more about creating a service-oriented team.

If FedEx Ground wishes to address issues, there are levels of escalation for their concerns.

Business Discussion: As an ISP you will have many officially logged business discussions with FedEx Ground. You may have a business discussion with any FedEx employee, but most often you will find yourself conversing with the P&D terminal manager or with the senior manager directly. These are the primary way FedEx Ground will communicate with you and your team and the conversations will review both large and small issues. If there are safety or customer service concerns, this is likely the first way you will hear about them. All communications in a business discussion are part of your permanent record.

Letter of Assurance: When FedEx Ground needs to escalate an issue beyond a business discussion the senior terminal manager may ask ISPs to generate a Letter of Assurance. This letter will cover areas of concern to FedEx Ground and will be your attempt to put concerns at ease by letting them know you are handling issues appropriately. FedEx Ground may skip this step entirely if the issue is more serious or requires more immediate action.

Opportunity to Cure Letter: When FedEx Ground believes you are in serious breach of your ISP agreement the senior terminal manager writes you an Opportunity to Cure letter that gives you 7 to 30 days (FedEx Ground sets the time frame) to resolve the breach of contract. You will write back outlining your action steps towards a resolution. FedEx Ground will evaluate your response and close out the issue if they believe you did, in fact, cure the breach. If FedEx Ground feels your actions are insufficient, they further escalate the issue.

Contract Termination Review: The senior manager of every US-based FedEx Ground terminal has the power to recommend contracts for termination to a review board. This recommendation will come if you did not cure a breach of your contract or if the manager believes you did something illegal and/or violated your integrity clause.

The recommendation from the senior terminal manager goes to a district manager who then decides whether or not to send it to a legal review at FedEx Ground’s corporate offices. The legal review generates a recommendation and the district manager makes the final decision about whether or not to terminate a contract.

If FedEx Ground elects to terminate a contract they will give the contractor 30 days to sell the business. They are likely to extend this time frame if the contractor makes good faith efforts to reassign the routes.

The upside here is that nearly every contractor has an opportunity to recover their investment even if they face contract termination.

Exceptions to The Process

Contractors who commit integrity violations or illegal activities within their business practices will immediately face contract termination without escalating through the other steps.

Integrity violations may include owners allowing drivers not approved by FedEx Ground to drive your routes or instructing drivers to forge package signatures. Illegal activities may include anything that breaks state or federal laws, such as tax fraud or drug smuggling.

What’s Next?

In general, you should be aware that it is rare for FedEx Ground to proceed to contract termination and contractors have many ways to resolve issues before reaching that point. We would characterize an Opportunity to Cure Letter as something that results from sustained failure. This is not something most FedEx Ground route businesses face.

That being said, it’s also important to know that if you do face contract termination there is an opportunity to recover your investment. This is one of the many reasons we feel confident in these businesses.

If you have more questions about this topic or have other FedEx routes for sale questions, connect with our team for one-on-one support.