FedEx Routes For Sale
Discovering the FedEx Business Model
You can buy FedEx routes? That was most likely the question you asked which motivated you to understand further how FedEx P&D and Linehaul businesses are bought and sold. Furthermore, this is probably what has you interested in searching current FedEx routes for sale in your area.
The reality is, there are thousands of independent service providers who have entered into agreements and own protected territories which service FedEx delivery and pick up customers. These independent companies are set up as corporations, hire and train personnel, own and maintain vehicles, and oversee general operations. Each company will choose an Authorized Officer (AO) and a number of Business Contacts (BC) to deal directly with FedEx corporate, working closely with local management to ensure customers are well serviced and businesses are run efficiently and safely. Companies contracting with FedEx have access to local terminals and hubs. These are facilities where packages are loaded and unloaded, trucks are housed, drivers and managers coordinate and plan, company AO’s and BC’s meet with FedEx corporate employees, and hiring & training of new employees takes place. These are the companies we partner with when listing FedEx routes for sale.
Types of FedEx Routes for Sale
There are 2 main divisions of FedEx Ground that are independently contracted.
* FedEx P&D routes (formally Ground & Home Delivery) – This is a sector also known as last mile delivery. These businesses service residential and commercial FedEx customers by delivering and picking up packages to and from their doorstep. On the residential side, you are focused on delivering packages to private residences. On the commercial side, you divide your time between delivering and picking up packages from business locations. FedEx P&D routes are dedicated to a certain territory with set schedules.
* Linehaul routes – You own and operate long haul tractors, driving long distances and cross state lines to deliver loads to and from designated FedEx hubs. Within the Linehaul sector, their are different business compositions. You will hear terms such as AM local, solos, team runs, and dedicated versus non-dedicated. Our expert route brokers can explain all of these details to you.
Business Size Requirement
A requirement FedEx made in recent years to the P&D sector is what is called “scale”. Scale is set as a percentage of stop volume of a single FedEx terminal. A scale threshold will vary by terminal size but, on average, is between 7-15% of the total terminal stop volume. This essentially means that a FedEx ISP cannot service above the scale threshold of the terminal or they will possibly be asked by FedEx management to downsize their operation to get back under the scale threshold. There is also a minimum scale threshold, which is at least 500 daily stops for most terminals. This initiative requires entities under scale to either purchase more routes or merge with fellow contractors in their area in order to stay compliant. There are some exceptions as smaller terminals may have lower scale thresholds.
A related requirement which was initiated in recent years is what is called “overlap”. Essentially this is combining residential or Home Delivery routes with commercial or Ground routes to create an overlapping service area. All contracted entities will now be responsible for all customers, commercial or residential, within their contracted service areas. This overlap model has created economies of scale by increasing volume density and eliminating the need for additional resources. When purchasing a FedEx route group, it is helpful to know the ratio of residential vs commercial stops.
Qualifications Required to Purchase FedEx Routes
- * Creating a corporation to run your FedEx business (no LLC)
- * Purchasing or leasing vehicles for service use
- * Setting up workers comp, vehicle, and liability insurance policies
- * Hiring and training drivers and managers, classified as employees of your corporation
By entering into an agreement with FedEx, you are signing a contract that gives you access to an exclusive territory called a Contracted Service Area (CSA). Terms are typically between 1-2 years in length. At term end, you will enter into a negotiation process with FedEx to renew your contract. In exchange for entering into this agreement, FedEx pays certain rates to the contracted entity including per stop, per package, and certain service charges. We can explain in detail the different rate “buckets” FedEx pays for services rendered. A major benefit of this business model is that you are paid the first week you are in business, no ramp up period required. Each week, FedEx provides a settlement statement that shows the total payment amount the business is due along with key metrics of the past week of service.
Bottom Line
FedEx route businesses can be a very exciting and profitable venture. There are many opportunities to enter the market within the P&D and Linehaul sectors. However, not all FedEx routes for sale are the same. There are many factors involved that will determine profitability and overall operational strength. Let Premier Route Consulting assist you in your search for FedEx route sales. We are experts on both the buyer and seller side of the transaction process, as well as former FedEx contractors that have operated routes first hand. We look forward to the opportunity to speak with you.