How to Buy FedEx Routes
How to Buy FedEx Routes
Owning a FedEx route is a fantastic business opportunity. Not only will you enjoy a steady stream of delivery revenue, your business will also be backed by one of the largest logistics companies in the world. However, the process of buying a FedEx route isn’t exactly straightforward. That’s because the unique nature of the company’s independent service provider (ISP) program creates certain nuances that don’t exist with traditional business purchases.
Over the years, KR Capital has brokered hundreds of FedEx route sales. Through that experience, we’ve developed a process to make buying these businesses as easy as possible. If you’d like to explore a future as a FedEx route owners, here’s how to get started:
Find a FedEx Route for Sale
Before you get too far, it’s important to become familiarized with the FedEx Ground operation. You can begin your research on the KR Capital blog. There you’ll find lots of helpful content with information on route contracts, potential revenue, answers to common questions, and more. Once you’ve decided that this is the right opportunity for you, the next step in your buying journey is to find a FedEx Route for sale. Owners sell their businesses for any number of reasons, so available routes won’t be hard to find.
Owners often list their routes on business for sale websites like bizbuysell.com. KR Capital also maintains a list of FedEx routes for sale on our website. Once you’ve identified a route that interests you, it’s time to do your due diligence.
Perform Due Diligence
Before purchasing a business, you need a clear understanding of the operation as well as it’s true earning potential. This process is called due diligence, and it’s a critical component of any business purchase. When KR Capital helps people buy or sell FedEx routes, we break this first step into two parts.
Financial Information Review
Once a potential buyer has inquired about an available route, they sign a non-disclosure agreement and then gain access to the businesses’ financial information. One of our jobs as a business broker is to collect relevant documentation that supports revenue, expenses, and net income statements. These documents might include a YTD profit and loss statement (P&L), previous year’s P&Ls, W2s for business employees, 1099 statements from FedEx, tax filings and more.
These documents don’t always tell the full story, however. P&Ls often contain non-recurring or personal expenses. Sometimes owners employ family members or other people who aren’t necessary for running the business. As part of the brokering process, we collect additional documentation that identifies unnecessary expenses and presents a clearer picture of the business profitability once we remove these unnecessary expenses. Our goal is to provide buyers with a clear packet of information containing transparent earnings information so they can make an informed decision.
While financial information plays a crucial role in determining the health of a business, understanding the operation itself is also important. As a proactive part of the transaction, KR Capital sends sellers a questionnaire to collect information that doesn’t always show up in the financials.
Owners answer questions like: does the business have a manager in place? How tenured are the employees? Does the business meet FedEx Ground contractor requirements? What is the year, condition, and mileage of the delivery trucks? This process anticipates questions the buyers will undoubtedly ask and paints a complete picture of the business itself.
The financial and operations review almost always generates more questions. So, the next step is to schedule an introductory call between the buyer and seller. This allows the owner to speak to the nuances of the business that we might not otherwise be aware of.
It’s common for FedEx routes to sell for a million dollars or more. Even smaller routes sell for several hundred thousand dollars. So, the vast majority of buyers use some form of financing to complete the purchase. Because the ISP relationship is so unique, not every bank is willing to make a loan to buy FedEx routes.
As specialists in this type of business, KR Capital has developed a shortlist of lenders who understand the FedEx Ground model and will work with potential buyers. As we make our way through the due diligence process, our prospective buyers also work with lenders to get qualified at a high level. This process includes a formal appraisal, credit check, and documentation. By completing these steps in tandem, we ensure that when we receive an offer, the bank is on board to do funding.
After a buyer has finished reviewing financial documents and business operations and obtained lender approval, they make a formal offer that’s contingent on an in-person tour of the operation. This step is akin to conducting a home inspection after making an offer on a house.
During this phase, the buyer visits the terminal to see the trucks and operation in person. Barring any surprises during the in-person visit, buyers move on to a formal purchase agreement. This is the binding legal document that will transact the sale. Once both parties sign the purchase and sale agreement, the new buyer moves on for FedEx approval.
Obtain FedEx Approval
The process of buying a FedEx route culminates with the new buyer obtaining approval from FedEx itself. This process helps the company ensure its new buyer will provide excellent service for their customers while fulfilling all FedEx Ground contractor requirements.
The approval process resembles a job interview, where a FedEx representative asks contingency questions about safety and operations. New owners must bring a business plan to these meetings, which FedEx calls a Request for Information or “RFI”. To obtain approval, now owners must also form a C corp or an S corp and bring supporting corporation documents.
We recommend that all new buyers meet with the seller before their FedEx meeting, so they’re prepared for the interview and can answer questions intelligently. Once the new buyer gets their approval, the seller identifies a date to transfer the routes to the buyer. Funding then occurs in coordination with the transfer date.
FedEx doesn’t offer new buyers any formal training, so the seller usually provides training for a predetermined period after the sale. Once that time is up, the new owner is up-and-running on their own and the proud new owner of a prosperous business.
KR Capital Brokers Delivery Routes for Sale
If you’re interested in owning a business of your own backed by one of the largest logistics companies in the world, KR Capital can help. Our blog features several resources on owning, buying, and selling FedEx routes. You can also view a complete list of our FedEx routes for sale.
If you find a route you’re interested in purchasing, contact us by phone at (503) 664-0753 or by filling out the contact form on our website. We’ll help you through every stage of the process.