Top Seven Reasons FedEx Contractors Sell their Routes
Top Seven Reasons FedEx Contractors Sell their Routes
The FedEx Ground delivery system is a unique animal. Rather than employing and managing a large team of drivers, the company instead contracts with independent service providers (ISPs) who handle deliveries on routes they own. Each ISP manages a fleet of their own vehicles and employs a team of drivers who handle residential and commercial deliveries within an assigned customer service area. This arrangement creates a thriving market for people who are interested in buying and selling FedEx routes.
For nearly ten years, KR Capital has been at the center of this market. As the nation’s leading FedEx brokerage firm, we help route buyers and sellers get the most value out of their transactions. Over the years, we’ve managed more than $150 million in route sales. All that experience gives us unique insight into why these routes change hands.
Why do FedEx Contractors Sell their Routes?
The start of every year is the busiest time for these transactions. During the holiday season, package volume nearly doubles for most owners. In response, owners are renting additional trucks and hiring temporary workers to keep up with demand. When the dust settles in January, some owners have had enough and decide it’s time to move onto other endeavors. But there are several other reasons why contractors decide to sell. Here are a few of the most common:
1. An ISP Wants to Retire
Retirement is the most common reason prompting a FedEx ISP to sell their route. The FedEx Ground brand officially launched in 2000, so many contractors have delivered packages for more than twenty years. Now, they’re ready to pass their route on to someone with more energy for the day-in and day-out demands of running a business. By selling their routes, retiring owners can also add a nice boost to their nest egg.
2. Recent FedEx Changes
Over the past few years, FedEx has made a series of significant changes to its ground operation as the company adapts to evolving customer expectations. To maximize efficiency, ISPs must now have 100% overlap between all commercial and residential stops within their customer service area. In some cases, however, two or more ISPs had separate customer service areas that overlapped, forcing them to trade stops in order to meet these new requirements.
Other changes, like expanding to a seven-day delivery schedule and the company’s SmartPost partnership with the U.S. Postal Service, place heavier demands on ISPs. Some of the owners nearing retirement don’t want to go through those motions and decide it’s the right time to sell.
3. Overwhelming Rapid Growth
Back in the old days, the FedEx delivery business was less fast-paced. An owner might have started in the industry owning a single truck. But as FedEx grew into the powerhouse it is today, ISPs have had to scale alongside. Now, they’re managing million-dollar companies and buying more trucks and hiring more people to keep up with all the growth. That’s more than some owners want to take on. So, they decide to sell their routes to someone more eager to accept those business challenges.
4. Their Business is Struggling
Of course, not every ISP is a great business owner. In some cases, a contractor is struggling to make their business work, or comes to the realization that they’re not cut out for management, and decides they want out. These situations present unique opportunities for buyers. Because FedEx serves as a guaranteed source for ongoing business, the risk of buying a struggling route is relatively low. A savvy buyer could purchase one of these routes at a value, make a few smart improvements, and then reap significant returns down the road.
5. A Contractor Wants to Relocate
FedEx Ground delivers nationwide. As a result, some owners sell their routes in one area, intending to purchase a new route in the place where they’re relocating. Because KR Capital maintains a nationwide network of qualified FedEx buyers and sellers, we can provide valuable assistance for relocating ISPs. Not only can we find a buyer for their existing route, but we also know which routes are available in other parts of the country.
6. Different than Contractors Imagined
When you own a FedEx route, you’re really in the trucking business. That means you’re working with and managing truckers and doing a lot of vehicle maintenance. Some buyers purchase these routes with the assumption they’ll be doing white-collar work. Then, they’re surprised to learn that the environment is very different than what they were looking for. In these instances, some owners decide to put their routes up for sale.
7. FedEx Scale Cap Requirements
FedEx doesn’t want any single ISP to own too much of a specific delivery terminal. For example, the company might place a 10% scale cap on the Portland, Oregon delivery terminal. If one of the ISPs within that terminal exceeds that 10% threshold, the owner may be required to sell a portion of their routes to satisfy the FedEx scale requirement. While these owners might divest in one area to accommodate the cap, they might turn around and grow in another. Or, the owner might take the proceeds from the sale and reinvest them in the business.
Our FedEx Route Portfolio is Second-to-None
If you’re interested in buying or selling FedEx routes, KR Capital should be your first call. If you’re a buyer, our current portfolio includes linehaul and pickup and delivery routes for sale throughout the country. If you’d like to sell a route you currently own, KR Capital can assist in valuing your business and marketing it to qualified buyers.
For nearly ten years, we have sold more than 1,300 FedEx routes. The expertise we’ve gained through those transactions will help you maximize your purchase or sale and will also help both parties navigate the FedEx approval process. If you’d like to learn more, contact us by phone at (503) 664-0753 or by filling out the contact page on our website.