FedEx Route Sales Prices on the Rise
Over the years, we’ve kept a close eye on the trends associated with FedEx route sales, FedEx route prices, and the factors affecting each. As brokers of FedEx routes, our clients depend on us to provide sage advice when it comes to route pricing, initiatives to increase value, identifying the right time to sell, etc.
This month, we decided to take inventory of all the FedEx route transactions we could get our hands on. We analyzed sales data from over 400 FedEx route sales to give us a better understanding of where we’ve been in the past, and help project what FedEx route prices will do in the future.
As we’ve discussed previously, FedEx routes are generally valued based on a multiple of discretionary cash flow. For a refresher on that process, please click here. The FedEx route sales data available allowed us to see the location of the transaction, cash flow, gross revenue, and date of sale. From this, we were able to derive the resulting sales multiples for each transaction in a given year. It should be noted that the data analyzed did not differentiate between FedEx ground, FedEx home delivery, or FedEx linehaul routes. As such, the data included in this study is a mix of all FedEx routes. Despite the data below, our experience suggests that FedEx linehaul multiples generally range between 3-3.5x, while FedEx P&D multiples hover around a 3x.
The FedEx route sales multiples were averaged for each year and plotted on the graph below. As with most data sets, we expected there to be outliers on either side: some FedEx route “fire sales” yielding very low multiples, and other transactions which yielded much higher multiples (perhaps due to location, fleet dynamics, certain payroll considerations, etc.)
When everything was finally calculated, we observed the average FedEx route sales multiple rose from 1.59x in 2009 to 3.05 in 2017; an average increase of 15% per year. As we approach the upcoming peak season and contemplate sales plans for 2018, this certainly provides FedEx contractors something to look forward to.