Route business opportunity

[iamstone]

Hello everyone! I'm a noob on this thread but found this to be an extremely helpful community with valuable information. Thank you everyone for their contribution.

Here's my situation. I'm looking to purchase a FedEx Home Delivery route. Is anyone familiar with the business model or is currently an owner of a FedEx route. With that being said, the route is asking for $140k which gross about $190k. The yearly operating expenses is anywhere between $30k to $35k. The expenses will vary depending on cost of maintenance to the truck, payroll, and etc. The net is roughly $150k. My partner will run the route ourselves and we will be on the payroll. Does anyone on this forum knows anything about FedEx route? I've done a lot of research but would like to hear from those who had experience in the business or is currently in the business. Please advise.

Thank you very much!

[MyITGuy]

Hello everyone! I'm a noob on this thread but found this to be an extremely helpful community with valuable information. Thank you everyone for their contribution.

Here's my situation. I'm looking to purchase a FedEx Home Delivery route. Is anyone familiar with the business model or is currently an owner of a FedEx route. With that being said, the route is asking for $140k which gross about $190k. The yearly operating expenses is anywhere between $30k to $35k. The expenses will vary depending on cost of maintenance to the truck, payroll, and etc. The net is roughly $150k. My partner will run the route ourselves and we will be on the payroll. Does anyone on this forum knows anything about FedEx route? I've done a lot of research but would like to hear from those who had experience in the business or is currently in the business. Please advise.

Thank you very much!

I've looked into them as my brother in law is in the delivery/courier business and is looking to venture out on his own.

First, take a look at the vehicle(s) that are being provided and take note of the age, type of vehicle and mileage. You will most likely find that the vehicles are approaching their end of life where maintenance costs outweigh a new purchase/lease.

Second, I believe your expectations on NET are high. Most routes I've seen are the opposite with expenses/payroll being about 3/4 of the gross revenue...in this case your probably looking at 30-40K net, assuming you pay $10-$12/hour for your drivers without benefits

Third, if you or your partner are going to be doing the route yourselve(s), then be prepared for long hours/hard work. From my understanding, a driver makes 200 deliveries on average and have work days that can be up to 12 hours long.

Last - Look at other routes in the area. I came across Routes For Sale | Route Sales | Route Distributorships For Sale (http://www.routesforsale.net/) during my search.

[iamstone]

MyITguy, thanks for your response.

Yea the vehicle is in good condition although being finance at this time with 24 months remaining. The truck is a P700 which holds a good amount of packages.

My partner and I are running the routes ourselves. The entire route is 25 miles/day, 5 days a week (Tuesday to Saturday). From a route perspective, what are the expenses aside from maintenance to the truck and gas? I'm trying to connect with a few FedEx IC (Independent Contractor) to see what they have to say about the business. It's hard to find an IC who's willing to discuss their business as they do not want any competition. :( (We have a conspiracy that they don't want outsider to buy a FedEx routes because most IC wants to buy more routes)

Thanks for the heads up, my partner and I are looking at working long hours which we don't mind if is profitable and the potential for growth is more important than anything else. We are looking to take on a management role as we grow and purchase more routes.

[dave@businessecon.org]

iamstone:

I'm a former CPA and I understand this situation well. Let's get some basics knocked out of the way first. 1) Why is the driver selling? 2) Have you confirmed the route owner's information via a) tax returns, b) FedEx checks to him or reports to him on earnings c) 25 miles a day seems short for a route; is this city, rural, or country? 3) Have you talked with a mechanic about the life expectancy in miles for the truck? What is normal and what type of costs can you expect? 4) $140k for a route seems a bit pricey to me. It goes against the basic discretionary income formula.

If I were you, I would evaluate several issues. 1) What is the agreement between the current route owner and FedEx? look for signs of termination or read the termination clause 2) To me there is too much risk associated with no guarantee of route continuity; can you confirm that the route will still be there in 4 years? 3) there has to be more costs than just the $35k he mentions. To me, that's gas and maintenance but what about the revenue tax, personal property tax, insurance issues on the truck and business, what is the penalty fee for failure to deliver product in case of illness, weather, road conditions, geographical issues such as road cancellations and licensing? What happens if you lose your license for an accident?

3) Other costs to me include training, uniforms, and required bonding? 4) Can you get bonded? Your partner? 5) Who pays for damaged goods? 6) Who loads the truck in the morning, does FedEx or do you load the truck at their warehouse? 7) I would imagine there is a lot of time sensitive delivery needs since FedEx does that before 10 or 2 stuff? Who pays the penalty for failure to get there on time? Its one thing to pay for the free pizza as a driver, its another to pay for a lost contract?

Let us know this stuff first or as much as possible. My gut feeling is that this is too much money for a route.

Dave

[MyITGuy]

From a route perspective, what are the expenses aside from maintenance to the truck and gas?

Lease payment for the truck
Insurance (Personal/Property/Liability) on the truck
Insurance (Property/Loss) for the packages your carrying
Insurance (General/Liability) for yourself/company in the event you cause damage or etc to property that your entering/leaving.
State Taxes on Income/Profit
State Taxes for Unemployment
Federal Taxes on Income/Profit
Federal Taxes for Unemployment
Taxes for Medicaid/Social Security and/or Self-Employement

[iamstone]

Thank you all for your reply! Much appreciated.

Agreed that $140k is pricey. We are not inclined to pay that much money for it. That's what he's asking price but our offer will be substantially lower due to the risk factor of losing the contract with FedEx. He's selling half of his FedEx route business to venture off into something else to diversified his portfolio so to speak. Yes we have confirmed his earnings - 1099 from FedEx as well as going over his weekly settlement with FedEx. I have not consulted with a mechanic but that will be one of the agenda. The route is located in the city with approximately 50,000 residents in the area of delivery.

Absolutely, thanks for this important aspect of due diligence. We will carefully evaluate the agreement between the current owner and FedEx. There's no contract guarantee and contract is renew on an annual basis. Per seller, he said there's no contract signing at the end of your term as FedEx will automatically renew the contract. It is a business after all so I don't foresee any reasons for FedEx to terminate our business partnership agreement unless there's a major screw up. The bottom line is FedEx concern is they want someone to service the zip code and wants the packages to be deliver as promptly as possible.

Frankly speaking, most of the operating expenses are covered by FedEx which comes out of our pay check. And as an IC, we are responsible for gas, maintenance of the truck, and payroll (In our case, it would be my partner and I). I'll check into the agreement to see who's responsible for "lost packages". As we progress through the process, we will get clarity on each and every aspect of the business. And not the mention, my partner and I will need to meet the Corporate as well as part of the screening process. They will also be a good reliable source of information.

Thank you all again for your input.