If you want to become a business owner and are looking for the right opportunity, purchasing a FedEx route may be an option. Owning and operating a FedEx route enables thousands of independent business owners to keep the FedEx machine running smoothly. These entrepreneurs hire and train delivery personnel, purchase and maintain vehicles and other equipment, and oversee the day-to-day pick-up and delivery operations on their route.
How to Purchase a FedEx Route
Buying a FedEx route typically involves researching and finding route opportunities available to your location and budget. Owning and operating a FedEx route entails being an Independent Service Provider (ISP), for which you’ll need to meet the eligibility criteria outlined by FedEx and sign an ISP agreement. This agreement will require you to meet minimum route requirements, maintain safety standards, and manage the delivery business utilizing your own employees and equipment.
Essentially, you’ll need to find an available route for sale, enter into an ISP agreement with FedEx, and operate delivery services according to the guidelines set by FedEx.
Where to Find FedEx Routes for Sale
You can find available FedEx routes for sale from a few different resources. This could include word-of-mouth—in which prospective route owners with contacts in shipping or logistics industries can utilize their network—or by finding routes for sale online through a business brokerage or marketplace. These sites typically maintain targeted buyer lists and can notify buyers when new routes come up for sale that meet their criteria.
Some of the top sites that list FedEx routes for sale are:
- BuildaGroundBiz.com: This site is provided by FedEx and lists routes as they become available. You can create an account to be notified when new opportunities are published.
- KR Capital: This broker lists nationwide FedEx routes for sale. It maintains a targeted buyer’s list, which is notified when specific routes come up for sale.
- BizBuySell: This business listing website lists nationwide FedEx routes for sale. You’ll need to use the advanced search to search the keyword “FedEx Routes” for applicable listings.
- BizQuest: This is another business listing website that can provide listings of nationwide FedEx routes for sale.
- Routes to Success: This broker lists various routes for sale, including FedEx route opportunities.
- Capital Route Sales: This broker lists FedEx routes for both sellers and buyers. It specializes in FedEx routes and lists nationwide opportunities.
- Route Consultant: This is a route listing website that allows you to search FedEx routes by region, along with access to private listings.
Finding a route that meets your needs, both geographically and financially, can be challenging. It’s important to practice due diligence when searching for available routes and ensure that your criteria are met before investing in a route acquisition. Most industry experts recommend not buying a route without riding it first. This will give you valuable insight into problems that may arise in the field, such as unhappy employees, poorly maintained vehicles, and other logistics that likely won’t be covered in conversations with the seller.
Minimum Eligibility to Own a FedEx Route
Buying a FedEx route requires that you meet certain eligibility criteria. While you don’t need delivery or trucking experience, it’s likely suitable for business owners interested in the opportunity because of a background in logistics, shipping, or management.
Although you are an independent business owner and will oversee the day-to-day operations of the route, you must also comply with certain FedEx rules. For example, you and your employees will have to wear FedEx uniforms, and the drivers you hire will need to satisfy FedEx’s driving safety rules.
Owner-operator Minimum Requirements
Most owners of FedEx routes are owner-operators. Not only do they own the route, but they also drive and deliver packages regularly or from time to time when their employees call out sick or are unavailable. If you plan on driving, you will have to meet FedEx’s driving safety rules.
These are the minimum requirements for owner-operators:
- No more than three moving violations in the last three years, and a maximum of one in the last 12 months
- Able to pass a Department of Transportation physical and drug test
- A valid Commercial Driver’s License (CDL)
- Unrestricted access to and from Canada (for Custom Critical routes)
You should see your contract for any additional requirements.
Independent Service Provider (ISP) Responsibilities
FedEx operates using an ISP model. Some of the logistics a FedEx ISP is responsible for are:
- Business structure: You must make sure that your business is structured as a corporation to be considered eligible, and secure any licenses necessary to operate.
- Route requirements: You’ll be expected to meet minimum route requirements, which include at least five routes or 500 stops per day.
- Vehicle management and maintenance: You are responsible for buying or leasing equipment, such as vehicles, as well as maintaining that equipment.
- Operational costs: You’ll be responsible for employee wages and other operational costs, such as fuel, maintenance, and insurance.
- Employment management: All hiring, training, and employee retention is the responsibility of the route owner. Route owners will also be responsible for offering insurance and retirement plans (if applicable).
- Key performance indicators (KPIs): You’ll need to meet KPIs outlined by FedEx, which include on-time delivery and customer satisfaction standards.
- Safety and compliance standards: You’ll have to ensure that your business meets all safety requirements and operational guidelines set by FedEx.
- Managing finances: Accounting and bookkeeping responsibilities, such as payroll and business taxes, are managed by the route owner.
Types of Routes You Can Buy
Before beginning the search for a FedEx route, you should narrow down the type of route you would like to purchase. Two types of business opportunities are available: FedEx Ground, which is the most common type of route, and Custom Critical.
FedEx Ground Routes
These consist of routes with residential and/or commercial customers. They are dedicated routes with set schedules. You own the route and can drive it or hire employees to do the driving.
The FedEx Ground routes are further separated into Pick-up and Delivery (P&D), and Linehaul routes.
FedEx Custom Critical Routes
FedEx Custom Critical covers deliveries that require special handling, such as temperature control, time-sensitive deliveries, or other specialized shipments. There’s no dedicated route or set schedule, and you must be an owner-operator to participate (i.e. you own and drive the route).
Expected Costs & Earnings of a FedEx Route
It’s important to plan for the costs associated with owning and operating a FedEx route and to manage your expectations around potential earnings. In terms of what to expect, consider the following:
Revenues & Profits
The three ways FedEx contractors are typically paid are:
- Annual Fixed Fee: FedEx contractors are paid a flat annual rate based on the location, size, and other characteristics of the route.
- Delivery and pick-up payments (payment per service): Contractors receive a payment for each delivery and pick-up, for example, $1 and $2, respectively.
- Bonuses: Contractors can earn bonuses for things like customer service and safety achievements.
Keep in mind that actual profits will vary based on your route location, number of employees, amount of loads you operate, and other important factors. Profit margins typically range between 10% to 25%, or about $30,000 to $40,000 in annual revenue on average. Keep in mind that these values can multiply with every additional route you own.
Expenses
Business expenses are an important consideration when pursuing the purchase of a FedEx route. You’ll want to ensure your budget meets the needs of the business and consider whether or not you may need to apply for some form of financing.
The three biggest expenses of owning a FedEx route that may impact revenues are:
- Buying the route itself: Total FedEx route costs can vary based on location, number of employees, number of deliveries, and more, but the average cost is generally around $100,000.
- Paying and retaining employees: You’ll also have to factor in employee expenses. The average number of people employed by a FedEx Ground contractor is between 10 and 20. In addition to paying their salary, you will have to consider employee benefits (should you choose to provide them) like health insurance and retirement plans. In some states, you can choose to work with drivers who are independent contractors, which eliminates the costs of employee benefits and workers’ compensation insurance.
- Vehicles and other equipment (including fuel, maintenance costs, etc.): In addition to acquisition and employment expenses, you’ll also have to factor in equipment costs. This is a vital aspect of the business and should be thoroughly evaluated before purchasing a route. Some examples you’ll need to purchase are vehicles (vans, trucks, planes, etc.), uniforms for yourself and employees, vehicle decals, and FedEx scanners and software.
- Insurance: FedEx insures the packages themselves, but you will need to insure your business, your vehicles, and your employees (if you use employee-drivers rather than independent contractors). You’ll typically need general liability insurance, commercial vehicle insurance, and inland marine coverage (which insures cargo in transit).
Benefits & Opportunities of Owning a FedEx Route
When choosing a business to start, it’s important to weigh the pros and cons of your options. Owning a FedEx route can reap many benefits and be a worthwhile investment for the right business owner. Some of the primary benefits of owning a FedEx route are:
- No sales or marketing required: FedEx handles all sales and marketing efforts required in developing routes. Owners only need to handle the logistics of picking up and delivering packages on scheduled routes. This can be a huge benefit for owners who are not interested in managing the development of routes and prefer to focus on transportation logistics instead.
- Reliable, quick payments: FedEx pays its route contractors via direct deposit for the previous week’s package deliveries. Route revenue is generally considered to be consistent week over week. However, pay can be impacted by peak delivery periods and dips in shipping activity. Contractors will want to plan accordingly and ensure that they are managing logistics efficiently during seasonal changes.
- Remote management: While FedEx does not advertise its routes as absentee-owner-compatible, FedEx routes may be managed remotely, and many route owners do not perform any package delivery, instead focusing on the management of route logistics.
- Opportunity for growth: You can purchase as many routes as you like. Over time, if you find that your current operations are thriving, you may be able to scale your operations and purchase more routes as you grow and more route opportunities become available.
Risks & Challenges of Owning a FedEx Route
While there are many benefits to purchasing a FedEx route, it’s important to be mindful of the potential risks and challenges as well. Consider the following before entering into an agreement:
- Upfront costs: Acquiring a FedEx route often requires a rather large investment, so it’s important to ensure that your budget can meet the initial acquisition costs. This includes the purchase of the route, trucks, and associated equipment, insurance, and licenses. These costs can add up quickly if you’re not adequately prepared financially.
- Financing options: While you can pursue multiple financing options, not all lenders may be comfortable with new business owners or with financing this type of endeavor. You’ll likely need to have strong qualifications and present a detailed business plan to be considered.
- Compliance and regulations: Navigating the various compliance and regulations set by FedEx can be tricky if you’re investing for the first time. You’ll also need to be mindful of state and federal trucking laws, and make sure you have the necessary licenses and permits required to operate. Overall, this can be a time-consuming process.
- Operations and employee management: As a business owner, you’ll have to stay on top of managing the logistics of the route, managing deliveries, handling customer service, and more. You’ll also be responsible for hiring and training drivers and other employees. This can be a lot to take on if you’re not an experienced business owner.
Financing Options to Buy FedEx Routes
If you’re planning on purchasing a FedEx route, you’ll likely need to source funds to cover various business expenses, such as acquiring equipment, payroll, storage fees, etc., in addition to covering the purchase price of the route. If you need to finance the acquisition, there are a variety of options to consider, such as:
Business Loans
Business loans are a common funding source that is widely available depending on your business needs and qualifications. You can typically get one through a bank, online lender, or through one of the Small Business Administration (SBA)’s loan programs.
When seeking financing via a business loan, some common criteria will be factored into your eligibility as a borrower. These include:
- Credit score: Most lenders will want to see a credit score of 650 and above.
- Revenue: The existing revenue of the route you’re planning to purchase may be taken into account to ensure a return on investment.
- Collateral: To help mitigate risk, a lender may request that you secure the loan with collateral so they are covered in the event of default.
- Business plan: You may need to draft a business plan to demonstrate your plans and to help set expectations with the lender.
- Personal finances: If this is your first business venture, it’s likely the lender will weigh heavily on the qualifications of your personal finances to ensure that you’re not a high-risk borrower.
- Industry experience: It may be favorable to some lenders if you have prior industry experience to back up your abilities as a potential business owner.
Seller Financing
You may be presented with the option to finance the purchase of a FedEx route via seller financing. Essentially, this means that you will finance the route through the seller, and pay equal installments or principal and interest until the acquisition is repaid in full.
Rollover for Business Startups (ROBS)
You can utilize a ROBS if you’re looking to avoid debt-based financing options. With a ROBS, you can access funds in your retirement account to use for business purposes tax- and penalty-free.
It is a rather complicated transaction, as you’ll need to properly navigate various tax rules and regulations. We recommend speaking with an experienced ROBS provider such as Guidant Financial to walk you through the process.
Frequently Asked Questions (FAQs)
Buying a FedEx Route can be a complex but rewarding process. These are the most common questions we hear from potential FedEx route owners:
Various factors can impact the earnings of a FedEx route, including the type of route, the location, demand, and employee operations. Generally, a FedEx route business can generate about 10% to 25% profit on average, which roughly estimates a profit of $30,000 to $40,000 annually for each route.
Yes. In fact, you can continually grow your business if you decide to purchase and operate multiple routes. While there is typically more risk involved, you can operate as many routes as you’d like within your capabilities.
FedEx routes are commonly valued based on various factors, including geographical location, cash flow, market conditions, customer base, and route density. Getting a professional business appraisal is a good idea before committing to the purchase. Many financial services providers offer business appraisal services, or independent appraisers can be found via various appraiser networks.
Bottom Line
Overall, buying a FedEx route can be a great option if you’re looking to partake in a lucrative and flexible opportunity to start your own business. It’s important to practice due diligence to make sure this is the right opportunity for you, and that you can invest the necessary time, effort, and financing.
