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There are nearly 12,000 individual company owners who control the routes and deliver and pick up packages, keeping the FedEx machine operating smoothly. They are responsible for much of FedEx’s success. These business owners employ and train delivery people, buy and maintain trucks and other equipment, and manage their route’s day-to-day operations.
If you don’t have the finances to purchase your own FedEx route, consider leveraging your retirement assets to get your business off the ground.
FedEx Routes for Sale: Where Can You Find Them?
FedEx routes for sale may be available in a variety of places. Prospective route owners with connections in the shipping or logistics sectors might use their network to find out what routes are available for sale that they might be interested in.
Business brokerage sites are another typical way for potential FedEx route owners who don’t have any prior industry knowledge or connections to get a FedEx route.
Brokers like KR Capital keep targeted buyer lists and may alert purchasers when new routes that suit their requirements become available for sale.
The following are some of the most popular sites that sell FedEx routes:
- KR Capital: A broker that sells FedEx routes around the country, with roughly two dozen available at the time of writing. Maintains a targeted buyer’s list of almost 10,000 people who are alerted when certain routes become available for purchase.
- BizBuySell: A business listings website that lists countrywide FedEx routes for sale; use the advanced search option to find “FedEx.”
- BizQuest: A business listings website that has roughly 300 FedEx routes for sale at the time of this writing.
- Routes to Success: A broker that provides FedEx routes for sale in New York, Georgia, New Jersey, Pennsylvania, South Carolina, Texas, and Vermont, with roughly a dozen postings as of this writing.
- Capital Route: A FedEx route broker having a few dozen listings at the time of writing.
Although finding the proper route might be difficult, it’s critical to do your homework when one that suits your requirements becomes available. Most industry professionals advise against purchasing a route without actually riding it. This will provide you with significant information about potential difficulties in the field, such as disgruntled personnel, badly maintained cars, and other logistics that are unlikely to be discussed with the seller.
Minimum Qualifications for Owning a FedEx Route
Contrary to popular belief, the majority of individuals who purchase FedEx routes have no prior driving or trucking expertise, which is perfectly acceptable. To own a FedEx route, you don’t need much expertise. Most people are drawn to the opportunity because they have experience in logistics, shipping, or management.
To own a FedEx route, you must first sign a contract with the company and become an independent contractor. This implies you are not a FedEx employee and will not be eligible for health insurance, a retirement plan, or any other benefits. Furthermore, FedEx mandates that your company be organized as a corporation.
A FedEx contractor is in charge of the following logistics:
- Contractors are in charge of purchasing or leasing equipment, such as automobiles, as well as keeping it in good working order.
- HR: The route owner is responsible for all recruiting, training, and staff retention.
- Route owners will be responsible for providing benefits like insurance and retirement programs (if applicable).
- Accounting: The contractor is in charge of accounting and bookkeeping duties such as payroll and company taxes.
Despite the fact that you are an independent company owner who will be in charge of the route’s day-to-day operations, you must follow some FedEx guidelines. You and your staff, for example, will be required to wear FedEx uniforms, and the drivers you hire will be required to follow FedEx’s driving safety guidelines.
Owner-operators make up the majority of FedEx route owners. They not only own the route, but they also drive and deliver items on a regular basis or when their staff is ill or unavailable. If you want to drive, you must adhere to FedEx’s driving safety guidelines. Any further criteria should be found in your contract.
The following are the minimal requirements for an owner-operator:
- In the previous three years, no more than three moving violations were committed, and no more than once in the previous 12 months.
- Able to pass a medical and drug test administered by the Department of Transportation
- A valid CDL (Commercial Driver’s License) is required (CDL)
The contract you sign with FedEx is for one to three years, and it automatically renews unless the contractor wishes to leave the firm or if FedEx can show that the contractor is not following the contract’s requirements.
Routes You Can Purchase
Before beginning the search for a FedEx route, you should narrow down the type of route you would like to purchase. There are two types of business opportunities available to contractors; FedEx Ground, which is the most common type of route, and Custom Critical. The FedEx Ground routes are further separated into pickup and Delivery (P&D), and Linehaul routes.
FedEx offers two kinds of independent contractor opportunities:
- FedEx Ground: These are routes that serve both residential and business clients. These are specific routes with established timetables. You own the route and may either drive it yourself or pay someone to do it for you.
- FedEx Custom Critical: This service is for deliveries that need particular treatment, such as temperature control. There is no predetermined route or timetable, and to participate, you must be an owner-operator (i.e., you own and drive the route).
FedEx Ground routes are divided into two categories:
- Pickup and delivery (P&D) route: You drive a van or truck and drop off and pick up packages to and from residential or commercial addresses (or a combination of both residential and commercial).
- Linehaul routes: You drive a tractor-trailer and cross state lines to deliver loads to and from designated FedEx hubs. These routes are usually more expensive compared to P&D.
Model of Independent Service Provider (ISP)
In May 2020, FedEx will finish transitioning to a Model of Independent Service Provider (ISP). With this transition comes some changes to route ownership requirements, and ISPs will be required to own at least five routes or 500 stops per day under the new model.
“With the transition to the ISP model, there’s a route overlap component,” says Kyle Rohner, CEO of KR Capital. “Historically, you’d have ground contractors—commercial accounts and businesses—and home delivery contracts, and you might have one contractor owning the ground routes in a certain ZIP code and a home deliver contractor sending his truck into that same area, which isn’t terribly efficient.”
Contractors that fail to fulfill these impending standards will be forced to negotiate with FedEx to extend their routes, sell their routes, or combine with another contractor in order to achieve the minimum requirements. Existing and potential contractors should familiarize themselves with FedEx’s transition to the ISP model, which will be fully operational in 2020.
Expected Costs & Earnings of a FedEx Route
Being a FedEx contractor is a “double-edged sword” in many respects, according to Rohner. On the one hand, you save time and money by not having to worry about sales and marketing, client acquisition, rent, or utilities. However, the hours may be long, you will be required to work on certain holidays, and most importantly, you will be required to adhere to FedEx’s pay schedules and other conditions as outlined in your contractor agreement.
Revenues & Profits
FedEx contractors are generally compensated in three ways:
- FedEx contractors are paid an annual fixed fee depending on the route’s size and other parameters.
- Payments for delivery and pickup: Contractors are paid $1 and $2 for each delivery and pickup, accordingly.
- Contractors may receive incentives for things like customer service and safety accomplishments, among other things.
When you sum it all together, a FedEx route’s average yearly profit is roughly $30,000-$40,000 per route. Keep in mind that the value of each new route you possess increases. The amount of money you make depends on where your route is, how many staff you have, how many loads you manage, and other criteria.
Expenses
The following are the three most significant costs associated with operating a FedEx route that may have an influence on revenue:
- Purchasing the route
- Retaining and paying staff
- Vehicles and other vehicles and equipment (as well as fuel, maintenance costs, etc.)
While the cost of a route varies greatly depending on its location, the number of personnel, and other considerations, Rohner estimates that the typical route costs about $100,000. When purchasing linehaul routes, many routes are often bundled together. In reality, FedEx estimates that contractors with numerous routes handle 92 percent of parcels.
A FedEx Ground contractor typically employs seven workers on average. In addition to paying their salary, you’ll need to consider employee perks like health insurance and retirement plans (if you want to give them).
You’ll need to buy equipment in addition to the route and staff.
The following are some examples of the types of equipment you’ll need to buy:
- Vans, trucks, and aircraft (depending on your trip) are all options.
- Uniforms for you and your coworkers
- Automobile decals
- Scanners and software from FedEx
There is no need for you to acquire this equipment from a specific vendor as long as it fits the contract’s criteria. Vehicles are available on FedExTrucksforSale.com in a variety of sizes. According to Rohner, most contractors park their cars at FedEx facilities where packages are housed, so you won’t have to pay for vehicle storage.
When you add up all of these costs, it’s clear that having a FedEx route is a pricey effort. That said, if you can give excellent service and capitalize on your clients’ devotion to their “FedEx man” or “FedEx lady,” you can go a long way in this industry.
The Advantages of Running a FedEx Route
Purchasing a FedEx route has numerous unique benefits, and these routes are in great demand for a variety of reasons. Route owners will not be expected to make any sales or marketing efforts, may expect to be paid on a weekly basis, and may opt to manage distant routes that are not near to their house or place of work, among other advantages.
Some of the primary advantages of Running a FedEx Route are:
There is no need for sales or marketing
FedEx is in charge of all sales and marketing initiatives related to route development. The practicalities of picking up and delivering items on predetermined routes are all that is required of owners. This may be a big advantage for owners who don’t want to deal with route building and would rather concentrate on transportation logistics.
A fundamental issue for potential owners is that routes may degrade in performance over time, and there is virtually nothing an owner can do about it. While the package transportation sector as a whole, as well as FedEx’s market share, continues to increase, particular routes may face stiff competition. Potential FedEx route owners should consider diversifying their routes to prevent having a single route having a large influence on income.
Payments that are dependable and timely
FedEx pays its route contractors on a weekly basis for package deliveries made the preceding week. Direct deposit is used to make payments, and it is typically trustworthy. Route revenue is often thought to be steady week to week. However, both peak delivery times and periods of low shipping activity may have an influence on pay. Contractors will need to prepare ahead of time and ensure that logistics are managed effectively as the seasons change.
It’s possible to manage it from afar.
While FedEx does not advertise its routes as absentee owner compatible, FedEx routes It’s possible to manage it from afar, and many route owners do not perform any package delivery, but instead focus on the management of route logistics. Prospective owners looking for an absentee-owner route may find that the logistics of managing one or more routes require more effort than they planned for, and in general, FedEx does not encourage absentee ownership.
Excellent Potential for Growth
“FedEx is naturally developing at a tremendous pace. So, depending on FedEx’s current growth, you may be able to directly profit from it. Existing contractors may take advantage of expansion prospects at no cost to them. As a result, when FedEx expands its region or adds new customers, those new customers must be served, and those chances are given to contractors who have shown their capacity to be profitable and provide excellent customer care.
“How it works is that FedEx will announce that a new opportunity has become available, and current contractors will put together an RFI explaining why they should be considered for the new opportunity, resulting in more growth opportunities.”
—Kyle Rohner, KR Capital LLC’s CEO
Financing Options for FedEx Route Purchases
To buy a company, such as a FedEx route, most borrowers need some kind of financing. Financing may be obtained in a number of ways. In general, you’ll need a loan to cover the cost of equipment as well as operating capital for things like hiring and paying personnel, storage costs, and so on.
An SBA loan, which may be used for working capital or to purchase equipment, is the most cost-effective option for most individuals who want to acquire a FedEx route.
The following are some of the most common prerequisites for an SBA loan:
- At least a 680 credit score is required.
- Cash Flow: The existing route should have a positive cash flow.
- Collateral: Up to 100% of the loan, or to the fullest extent feasible, the primary personal house, as well as FedEx cars and other company equipment, may be required as collateral.
If you match these criteria, South End Capital is a good option for SBA loans when purchasing a company. They specialize in SBA loan turnaround times and provide free consultations. Borrowers could plan to put down up to 30% on an SBA loan, as with other SBA loans.
ROBS financing is available for both down payments and full funding on SBA loans. You may use your retirement savings to fund a company via a ROBS, or “Rollover as Business Startup.”
Conclusion
Purchasing FedEx routes for sale may be a profitable and flexible method to enter the business world for a fraction of the expense of a typical brick-and-mortar operation. There are a variety of ways to identify a FedEx route that interests you, and when you’re ready to buy, there are a variety of financing choices to help you get started.
Do you need funding to get started? Guidant Financial is a seasoned ROBS provider that can assist you in turning your retirement money into working cash right now. They also provide free outside legal advice during the procedure. Make an appointment with a real estate professional for a free consultation now.
