Are There Requirements or Restrictions for Scaling My Route Business?
Since purchasing your first FedEx route, you’ve worked hard to optimize your FedEx operations. Now, you may be thinking about scaling your route business and seeking new growth opportunities. But before you initiate the process, it’s wise to understand the requirements and restrictions established by FedEx.
What does scaling mean?
In business terms, scaling your business is having the capacity to grow and handle more routes in a sustainable, cost-effective manner. It means you can successfully operate additional routes while reducing the cost of standard expenses.
One example is your drivers’ uniforms. If you only have one route, you’ll pay a certain amount for each batch. You may also receive a bulk discount, but it will likely be modest. However, if you add more routes to your business, you’ll need to place bigger orders. In turn, you’ll likely receive bigger discounts, and your uniform cost per employee will decrease.
Your cost per unit for other expenses may be lower after scaling, too. Examples include insurance, vehicle maintenance, and office equipment.
Needless to say, scaling a FedEx route is an ambition of many contractors. Your first FedEx route purchase is a big investment, so it’s natural to want to grow and scale.
FedEx Scale Requirements and Restrictions
Before scaling your route business, you need to meet certain minimum requirements. These guidelines are established by FedEx.
According to new ISP requirements, most contractors must have at least five routes or 500 daily stops. This minimum is enforced in a majority of FedEx terminals.
There are also restrictions for how large each contractor can scale up to. In a given terminal, the scale cap may be 15%, which means a single contractor should not account for more than 15% of the deliveries in that terminal. And while there are some exceptions, FedEx is generally strict about this rule.
These restrictions are crucial for preventing region-wide failures and over-reliance on excessively large contractors. If a contractor handles too much volume in a given terminal—and subsequently fails due to operational issues—a disproportionately large number of customers in the area will be affected due to the failure of a single contractor.
Scale Your Business with KR Capital
If you’re ready to scale your route business, contact KR Capital. Our knowledgeable FedEx brokers can help you find FedEx routes for sale. We can also help you determine if you meet scale requirements and restrictions and provide guidance for growing your business.