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 listings 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. 

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