Buying a FedEx Route? Understand Why Contractors Sell FedEx Routes

Photo by Nick Fewings

Photo by Nick Fewings

FedEx contractors cite many reasons for selling their FedEx 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 routes: FedEx 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, thus their selling their FedEx routes as an alternative to change.

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 route. Here are the three big changes you need to know as a new (or potentially new) contractor. 

Route Scale

Recently, FedEx 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 does allow exceptions to this 15% rule.)

FedEx Overlap Requirements

Presently, different contractors may operate home delivery and ground routes in the same territory. However, this changes as of June 2020. FedEx will mandate that a single contractor runs 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 contractors operated under the Independent Contractor model (the IC model).

In 2016 FedEx 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 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’s objectives rather than mandating requirements. Some existing contractors continue to operate under the IC model, but the FedEx base of contractors will fully transition over the next couple of years.

Some 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 Want to Buy a FedEx Route?

If you are interested in buying a FedEx 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 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

Maybe you have a pretty good handle on all this, but an extra check wouldn't hurt? Download our free New Contractor Startup Checklist.

And, as always, give us a call and we can help point you in the right direction.