Buying a FedEx Route? Understand Why Contractors Sell

routes for sale texas.jpg

FedEx Ground contractors cite many reasons for selling their FedEx Ground routes: they are ready to retire, spend more time with family, or simply get a change of pace.

At the current moment, however, there is another reason so many contractors are selling their FedEx Ground routes: FedEx Ground is currently undergoing major changes to make the business more efficient and profitable.

Many contractors aren't able or willing to make the changes required by FedEx Ground, thus their selling their FedEx Ground routes as an alternative to change. Some contractors are selling only a portion of their business in order to meet new requirements.

If you are going to jump into the industry, you’ll be learning everything for the first time and these changes will have minimal impact on you since you'll start Day 1 with them in place.

Understand Industry Changes When Looking at FedEx Routes for Sale

You should be aware of these industry changes when you are considering buying a FedEx Ground route. Here are the three big changes you need to know as a new (or potentially new) contractor. 

Route Scale

Recently, FedEx Ground put into place new scale requirements for contractors. Each business must have a minimum of five routes or 500 stops per day. On the flip side, a single contractor cannot own more than 15% of the routes out of a terminal. (Note: FedEx Ground does allow exceptions to this 15% rule.)

At times you will see that sellers sell a portion of their routes in order to rebalance their portfolio. This may be in order to come in line with new scale requirements; perhaps they had more than 15% of the routes in a terminal.

FedEx Ground Overlap Requirements

Similarly, some owners may sell routes or a portion of their routes to meet overlap requirements.

Until Spring 2020, different contractors may operate home delivery and ground routes in the same territory. However, this changes as of May 2020. FedEx Ground mandates that by the deadline a single contractor must run both the home delivery and ground routes for a single territory.

We see this as a positive change! In our experience it makes routes more efficient. 

IC vs. ISP

Historically, FedEx Ground contractors operated under the Independent Contractor model (the IC model).

In 2016 FedEx Ground announced they will transition all contractors to an Independent Service Provider model (ISP model) by May 2020. These changes will incentivize (and at times require) ISPs to follow similar guidelines. 

The explosive growth of e-commerce and the demands of customers for differentiated service have created a mandate for increased service capacity and operational flexibility to serve both commercial and residential markets. Experience shows that businesses operating under an ISP Agreement can better adapt to these dynamic market conditions and customer expectations.
— FedEx Ground press release, January 2016

With the new system, contractors negotiate a contract that pays per stop and package. The ISP model offers incentives to comply with FedEx Ground’s objectives rather than mandating requirements.

In present day, some existing contractors continue to operate under the IC model, but the FedEx Ground base of contractors will fully transition over the next couple of years.

A portion of existing contractors, particularly those already near the end of their careers, are unwilling to adopt the new ISP model and instead prefer to sell their businesses during this transition. 

This makes it an excellent time to purchase routes! The changes help contractors operate more efficiently and earn more profit for their routes. 

What's Next If You’re Looking at FedEx Routes for Sale?

If you are interested in buying a FedEx Ground route, check out our listing page for operations currently on the market.

If you are feeling like a fish out of water and appreciate the expertise of industry insiders, contact us for consulting. We can walk you through pieces of the puzzle for buying a FedEx Ground route, such as:

  • IC vs. ISP Business Models

  • Overlap Requirements

  • Understanding Contract Terms

  • Optimizing Operations

  • Fleet Management

  • Business Valuation

  • Terminal Relationship Management

  • Driver Recruitment/Training