Looking to buy FedEx routes Need Advice from owners

12yearsaslave

Well-Known Member
We have sort of an internal market within FedEx contractor world which determines the route pricing. So a lot of times prices will be based off what routes are sold for between contractors. And those go up because if you need the area that is next to your area you would pay more. We had stable growth for 15 years now. Every contractor with half a brain made money. So when they sell, the prices reflect that, and not the bitching that bacha does. Whatever financials that the contractor provides are pretty irrelevant since you can run this business a hundred different ways. You can show 30% profit margins if you do your own maintenance, jump in the truck every time somebody calls off, or do a route yourself every other day, half your family works for you etc...
 

bacha29

Well-Known Member
We have sort of an internal market within FedEx contractor world which determines the route pricing. So a lot of times prices will be based off what routes are sold for between contractors. And those go up because if you need the area that is next to your area you would pay more. We had stable growth for 15 years now. Every contractor with half a brain made money. So when they sell, the prices reflect that, and not the bitching that bacha does. Whatever financials that the contractor provides are pretty irrelevant since you can run this business a hundred different ways. You can show 30% profit margins if you do your own maintenance, jump in the truck every time somebody calls off, or do a route yourself every other day, half your family works for you etc...
Notice the key sentence here "We HAD stable growth or 15 years." Sooner or later that growth will level off and could quite possibly go down. Nevertheless you are only as good as the economy of the area you serve. If you are in a prosperous metro area with a growing population and increasing per capita consumption and remember it is a purely consumption based business you might be able to create some equity despite G's plainly stated mission of obtaining very low cost trucking and labor not the creation of contractor equity. Likewise as you pointed out finding somebody willing to meet or exceed the production of your average UPS driver and do it for a fraction of the wage and no benefits is paramount and finding qualified individuals willing to do that will not get any easier as time goes by. So it all comes down to two inescapable realities. As long as the numbers on the side of the truck are Ground's not yours and the freight coming down the belt belong's to Ground not you the fate of the wealth accumulation and the hope for which you cling to will always be in the hands of someone other than yourself.
 

dvalleyjim

Well-Known Member
dvalleyjim, thank you for your comment. Yes I would not be able to drive due to both knees being replace(contact sports). I could last maybe a day or two LOL. Push come to shove I will drive. But I do plan to ride along with all the drivers to learn their routes and the processes. I would have to hire good manager(driving manager) if one is not already on payroll to offset my incapacity.

If you know the route you can hire a helper to run the packages. not problem on one route. If you have to cover more than one?
 

BigJohn

Member
Hello All again,

Sorry I have been silent for a while. I am looking at some routes now and have another question: What is the the average stop per hour for Ground and HD? The routes I am looking at one of the ground routes has a primary and 3 supplementals. Pick ups averages 11 stops and 67 packages per day and Deliveries average 169 stops and 370 packages per day. The HD route runs 2 to 4 supplementals and Delivery averages 361 stops and 424 packages per day.
 

It will be fine

Well-Known Member
Hello All again,

Sorry I have been silent for a while. I am looking at some routes now and have another question: What is the the average stop per hour for Ground and HD? The routes I am looking at one of the ground routes has a primary and 3 supplementals. Pick ups averages 11 stops and 67 packages per day and Deliveries average 169 stops and 370 packages per day. The HD route runs 2 to 4 supplementals and Delivery averages 361 stops and 424 packages per day.
It completely dependent on geography. Are you looking at overlapped area? Only buy if you're getting both HD and Ground in the same geographic area.
 

Fred's Myth

Nonhyphenated American
Just one point

Depending on how many vehicles, and their current value, unless revenue goes up, the value of your business is dropping basically every day as the vehicles depreciate. If you need to sell in 5 years, and haven't replaced the vehicles, you won't be able to sell for as much as you paid. Even with perfect maintenance, a 10 year old vehicle with double the miles is worth a lot less than a 5 year old vehicle.

And some of the cash flow reports I used to see don't take into account any reserve to cancel out that depreciation. Unless you are able to put aside cash reserves to counter the depreciation before counting cash flow, or net income, those numbers mean nothing. I imagine that some sellers who have business experience, or a good accountant actually do take these factors into account. Just watch it. Do you honestly believe that you are going to net $350,000 per year on a million dollar ISP investment???? And if you finance the debt, how much will you have after payments? A 35% return is a lie. Maybe 35% of the cash you invest if you finance most of it. If you put $100,000 down, you might be buying a $35,000 a year income, less if you hire a manager.

Yes, depreciation saves you on taxes, but it negatively affects the value of your business. In fact, the tax savings don't make up for most of the depreciation.

My advice is to calculate all your own figures for expenses, including replacement reserves, and value the business separately from any 'assets' included in the purchase. That's the only way to get the real picture of ROI.

I had a few routes years ago, and have over 30 years in 'investment' real estate, and I found real estate to be more lucrative and easier to deal with from a management perspective. I only had to rely on my own skills, and not trust that others would keep my assets covered. I both flipped and rehabbed for long term and short term, and didn't have to rely on any contract with someone else to make money. I'm sure there are other business investments with less risk, and less work for the same or better return than you will get from Fedex, especially if you are going to have debt servicing costs to aquire the so-called business. If fedex was such a great deal, Trump would be buying routes instead of real estate.

In real estate, if you put 10% down, and rent pays the mortgage, you double your money when the value goes up less than 10%. IF you buy smart, at a minimum you have someone else buying real estate for you when they pay your mortgage. You are going to have to manage about 1.3 drivers for each route you own, including peak planning, meaning permanent employees. You won't be able to afford to keep great employees since great employees will be able to find better jobs whenever they want, not even to mention other ISPs poaching your drivers. No similar issue in real estate since you are not dependent on employees, and can take a day off almost whenever you want.

At least with real estate, the underlying value of the asset generally increases. Unless net income increases over time, the value of the 'business' isn't going to increase despite other inflation. Remember that there is no real asset, and you aren't buying a real business, in my opinion. What you are buying is the right to service a contract, and fedex reserves the right to cancel that contract unilaterally, with your right to challenge cancellation limited.
That was "one point"?
 

bacha29

Well-Known Member
Hello All again,

Sorry I have been silent for a while. I am looking at some routes now and have another question: What is the the average stop per hour for Ground and HD? The routes I am looking at one of the ground routes has a primary and 3 supplementals. Pick ups averages 11 stops and 67 packages per day and Deliveries average 169 stops and 370 packages per day. The HD route runs 2 to 4 supplementals and Delivery averages 361 stops and 424 packages per day.
Look, clearly you won't rest until you buy a contract and you won't rest after you get one. it's that simple. No two contracts are the same. They can vary widely and that's why nobody can give you consistent numbers because they aren't any. However STFXG is right. That's an awful lot of assets being deployed relative to the production. At the same time, if the people working for you are getting paid a fraction of what the average UPS driver is getting they're not going to kill themselves out there for you no matter how much you cuff them around and if a better job comes along they'll be out of there so fast you won't know what hit you. We'll all you wish you the best if you buy the contract however we made the trappings quite clear to you. Nothing more can be done for you from this point going forward because X won't give you one cent more than what they think your PSA is worth to them. Therefore if your margins gauge starts bouncing off empty, that's no concern of theirs.
 

STFXG

Well-Known Member
Also, this sounds like you are buying area from a contractor who is selling off a chunk. Are you buying his entire business in that terminal? Sounds like someone is dumping enough so it is ISP compliant but keeping all the PSA's.
 

bacha29

Well-Known Member
Also, this sounds like you are buying area from a contractor who is selling off a chunk. Are you buying his entire business in that terminal? Sounds like someone is dumping enough so it is ISP compliant but keeping all the PSA's.
I think you're right. This does sound like a guy who like many are doing and that is to be just barely ISP compliant but the routes he does have are the only ones that have the best chance to remain profitable. Big John clearly wants somebody to hold his hand and assure him that this venture will provide him with the income guarantees he seeks . If that is the case then this is not for him because the overriding question still remains. Will he be able to compete in his local labor market with the limited revenues an increasingly stingy X affords him?
 

BigJohn

Member
Hi All,

First, The current contractor does not own any other PSA's. He has 5 PSA's, 4 ground + 1 Supplemental, 1 HD + 3 Supplementals. His payroll is running at 51% of Gross revenue, Payroll consists 1 manager $1050/wk, 9 drivers with avg Driver pay of $689 per week(based on data provided). However payroll is variable by week. He bought the business in the beginning of 2017.

It is my opinion he overpaid for the routes and he is realizing net income is just not there and he is looking to get out. Based on settlement sheets and expenses provided and my analysis his forecasted net profit is way off(by 47%).

Bacha29, I am not looking for any anyone to hold my hand. In any business you look toward the experts(you) and ask questions and draw conclusions based on all available data and inputs and whether or not the conclusions are reasonable. Just seems prudent and good business to do so. There are risks in every business. That is why I am so appreciative of all the experts opinions and inputs on the forum.

Thank you all for your input, hopefully you will be willing to respond to further questions.
 

bacha29

Well-Known Member
Hi All,

First, The current contractor does not own any other PSA's. He has 5 PSA's, 4 ground + 1 Supplemental, 1 HD + 3 Supplementals. His payroll is running at 51% of Gross revenue, Payroll consists 1 manager $1050/wk, 9 drivers with avg Driver pay of $689 per week(based on data provided). However payroll is variable by week. He bought the business in the beginning of 2017.

It is my opinion he overpaid for the routes and he is realizing net income is just not there and he is looking to get out. Based on settlement sheets and expenses provided and my analysis his forecasted net profit is way off(by 47%).

Bacha29, I am not looking for any anyone to hold my hand. In any business you look toward the experts(you) and ask questions and draw conclusions based on all available data and inputs and whether or not the conclusions are reasonable. Just seems prudent and good business to do so. There are risks in every business. That is why I am so appreciative of all the experts opinions and inputs on the forum.

Thank you all for your input, hopefully you will be willing to respond to further questions.
The long standing general rule seems to continue to apply. The truck gets half the gross. the operator gets the other half of the gross. Then again if it's an employee you have your share of Social Security along with the absolute killer and that's workman's comp. Given that the average driver workday is around 10 hours in length and given your numbers then it looks guy the driver pay converted to a wage is about $13.50 per hour and probably as is in most cases with X contractors all straight time and no benefits. That compares to the $34 an hour and full benefits including paid OT that the average UPS person gets doing the same type of work.It therefore makes it quite clear that your survival is 100% dependent on your ability to somehow establish and maintain a very high productivity , very low turnover ,cheap labor operation . If you are confident that you can then have at it. At the same time the last I looked a leading business brokerage had 159 FXG multi route contacts on it's listings owned by people who believed the same.
 

dmac1

Well-Known Member
You shouldn't need a full-time manager for just 9 drivers. You do however need at least two, preferably three, backup drivers, since at some point you are going to have a situation where one driver quits, another is sick, and another has a family problem. One or two of your drivers should be managing the other drivers, and get reduced hours or extra pay, or manage it yourself. You will need drivers to know multiple routes. A payroll company would be cheap help for you in keeping records. A couple of backup vehicles would help, and at some point you need to do the math where you might have more drivers, more vans, but pay no overtime. If your drivers aren't maxed out daily, when you have a driver or two out for whatever reason, then you can flex the extra work to the rest of your drivers, giving them a little overtime for a while. If you are able to manage, and drive a couple hours a day, your expenses go waaaaaay down.
 

bacha29

Well-Known Member
You shouldn't need a full-time manager for just 9 drivers. You do however need at least two, preferably three, backup drivers, since at some point you are going to have a situation where one driver quits, another is sick, and another has a family problem. One or two of your drivers should be managing the other drivers, and get reduced hours or extra pay, or manage it yourself. You will need drivers to know multiple routes. A payroll company would be cheap help for you in keeping records. A couple of backup vehicles would help, and at some point you need to do the math where you might have more drivers, more vans, but pay no overtime. If your drivers aren't maxed out daily, when you have a driver or two out for whatever reason, then you can flex the extra work to the rest of your drivers, giving them a little overtime for a while. If you are able to manage, and drive a couple hours a day, your expenses go waaaaaay down.
I couldn't agree more. Despite how costly it is under ISP he has to have 3 or 4 tiers of redundancy so that those boxes in his sector get hauled out and delivered. Trying to skimp on redundancy in an effort to service debt means then he will not last even for the same short length of time as did his predecessor . No question it would simply kill his margins but this is what he will have to do if he wants to better insure his survival.
 

It will be fine

Well-Known Member
More info on the routes, only one PSA is overlapped with Ground and HD . The HD supplements do overlap some of the ground PSA's.
I would recommend at least a conversation with the other owners in the station that own what would overlap what you're buying. I wouldn't buy in without at least a plan on how overlap will play out. There's only a 4 year window to figure it out, you're better off doing it all at once and creating a new work area with 100% overlap.
 

bacha29

Well-Known Member
I would recommend at least a conversation with the other owners in the station that own what would overlap what you're buying. I wouldn't buy in without at least a plan on how overlap will play out. There's only a 4 year window to figure it out, you're better off doing it all at once and creating a new work area with 100% overlap.
When the dust settles on this the next little FXG game there will no doubt be few winners and a lot of very big losers. Being around for as long as you have you no doubt are well versed on one simple reality. You don't know from one damn day to the next just what little surprise lies in store for you when it comes to dealing with that company.
 

12yearsaslave

Well-Known Member
The owners of other routes would obviously love for the current owner to fail and they would get this stuff for free/very cheap. You need to ask if this guy still has exclusive rights.
 

bacha29

Well-Known Member
A basic summary:
1. You're buying a contract from someone believing that it's value will go up. Trouble is you're buying it from someone who is equally convinced that it's going to go down.
2. You're signing your name to a unilaterally drafted and implemented contract containing terms that XGround freely states are no way shape or form binding upon them.
3. You're being called upon to put ever increasing amounts of money at risk. An investment that will not be represented when it comes to shaping the market strategies and the direction of the company going forward which means that the fate of your invested money is in the hands of someone else but remember you're an "independent contractor"
4. The type of trucks you will use and the people who will man them are decisions XGround not you the employer will make. In reality you're little more than a 21st century Edwin Epps.
5. You will have 3 people assigned to every truck. One coming, one driving, and one leaving. That truck will be driven all week and worked on all weekend either by a mechanic who is willing to work on weekends or YOU will be spending your weekend working on it.
6. You will be the owner of a collection of some of the fastest depreciating pieces of equipment known to the US economy.
7. As long as XGround's DOT/ICC numbers are on the side of the truck they will always be calling the shots and hopefully you will have a limber neck because it's always going to be "yes sir, right away sir. Please sir , may I have some more".
8. Finally your success will depend entire on the HOPE that there will always be somebody walking in the door physically able and psychically willing to deliver top of the scale performance for bottom of the scale money and do it on a continuous daily basis for an extended period of time.
9. If you think you can just assume that step 8 will be easy then look at the nationwide job boards. Contractors crying nationwide for people. Trouble is their posts contain job demands half a mile long and at pay so low some are too embarrassed to post it.
 

dvalleyjim

Well-Known Member
Once again. What do you own? Let's say you buy an ISP/CSA (or whatever Ex calls it at the moment due to what lawsuit their in). They own the customers, they own the boxes, they own your route. You only have trucks and a year to year contract. Soooooo, You pay 500,000.00 for an ISP. You make 10% a year. 10 years you've made your original investment back, if they haven't changed their business model or terminated you. 10 years you've only made back you investment. How do you get your original investment back? It's not an easy walk away business. You need to not put your own money into it unless you got gambling money laying around.
 
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