Much of FedEx’s success is due to the over 12,000 independent business owners who own the routes and deliver and pick up packages, keeping 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 operations on their route.
If you don’t have the means to buy your own FedEx route, why not consider using your retirement funds to jumpstart your company? Guidant will help you invest your retirement funds into your business without paying early withdrawal penalties. Set up a free, no-obligation consultation today.
Where to Find FedEx Routes for Sale
You can find FedEx Routes for sale through FedEx and business brokerage sites, but probably the easiest way is by word of mouth. If you have contacts in the logistics or shipping industries, put out some feelers and find out if there are routes for sale in locations that are of interest to you. This is how most current owners came to know of the opportunity.
FedEx lists routes for sale at its website BuildaGroundBiz.com. However, when we checked this site, there were only a dozen or so routes listed. A better option is to go to business brokerage sites which lists routes that existing owners are selling. These are some of the top sites that list FedEx routes for sale:
- KR Capital (nationwide FedEx routes for sale)
- BizBuySell (nationwide FedEx routes for sale, do a keyword search for “FedEx”)
- BizQuest (nationwide FedEx routes for sale)
- Routes to Success (includes FedEx routes for sale in NY, GA, NJ, PA, SC, TX, VT)
- Capital Route Sales (FedEx route broker)
Wherever you find a route, one thing we learned from our research is, Don’t buy a route without riding it! There may be problems that arise in the field, such as unhappy employees or poorly maintained vehicles, that you wouldn’t know just by talking to the current owner.
Minimum Eligibility to Own a FedEx Route
Contrary to what you might think, most people who buy FedEx routes don’t have driving or trucking experience, and that is okay. You don’t need such experience to own a FedEx route. However, most usually become interested in the opportunity because of a background in logistics, shipping, or management.
To own a route with FedEx, you will have to sign a contract with FedEx and become an independent contractor. This means you are not an employee of FedEx and will not receive health insurance, a retirement plans, or other benefits from FedEx.
The main requirement for working with FedEx is that you will need to set up your business as a Corporation, and you will be responsible for the following:
- Leasing or buying your own vehicles and other equipment and associated costs like maintenance
- Hiring, paying, training, and retaining your own employees
- Setting up your own insurance and retirement plan (if applicable)
- Paying your own business taxes.
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.
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, which include at a minimum (see your contract for additional driving requirements):
- No more than 3 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)
The contractor agreement that you sign with FedEx lasts for 1-3 years, and it renews automatically unless the contractor wants to get out of the business or if FedEx feels the contractor is not doing his or her job according to the contract.
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. First, there are 2 main types of FedEx independent contractor opportunities:
- FedEx Ground – This covers delivery to residential or commercial customers. These are dedicated routes with set schedules. You own the route and can hire employees to do the driving (you can drive as well if you want).
- FedEx Custom Critical – This covers deliveries that require special handling, such as temperature control. There’s no dedicated route and no set schedule, and you must be an owner-operator to participate (i.e. you own and drive the route).
The majority of people who buy FedEx routes buy FedEx Ground routes, of which there are two types:
- Pick up and delivery (P&D) routes – You drive a van or truck and drop off and pick up packages to and from residential or commercial addresses (or a combination of both residential and commercial).
- Linehaul routes – You drive a tractor trailer and cross state lines to deliver loads to and from designated FedEx hubs. These routes are usually costlier to buy.
Many people choose to buy and own multiple FedEx routes. Kyle Rohner says this will be the new norm by 2020. In order to be a contractor with FedEx, he says, you will eventually have to grow to the point where you can own at least 5 routes or 500 stops per day. There may be exceptions to this rule depending upon the terminal size and special circumstances, but this will be the new norm starting in 2020. Those contractors who own less than the minimum will need to 1) buy more routes; 2) sell their routes; or 3) merge with another contractor in order to meet the minimums. Click this link to read more about new FedEx contractor requirements for 2020.
Expected Costs & Earnings of a FedEx Route
In many ways, says Rohner, being a FedEx contractor is a “double edged sword.” On the one hand, you don’t have to spend time or money on sales and marketing, customer acquisition, rent, or utilities. However, the hours can be long, you have to work on some holidays, and most importantly, you must follow pay schedules and other rules set by FedEx in your contractor agreement.
Revenues & Profits
Rohner says that FedEx contractors typically get paid in three ways:
Flat annual rate + Payments per load (e.g. $1 per delivery, $2 per pick up) + Bonuses for things like excellent customer service and safety
When you add all this up, the average annual profit for a FedEx route is around $30,000-$40,000 per route. Keep in mind that this multiplies with every additional route that you own. In addition, profits will vary based on where your route is located, how many employees you have, the number of loads you handle, and other factors.
These are probably the three biggest expenses of owning a FedEx route that will eat into your revenues:
- Buying the route itself
- Paying and retaining employees
- Vehicles and other equipment (as well as fuel, maintenance costs, etc.)
While the cost of a route varies widely based on its location, number of employees, and other factors, the average price is about $100,000 per route, says Rohner. Several routes often come bunched together if you are buying linehaul routes. In fact, FedEx estimates that 92 percent of packages are handled by contractors with multiple routes.
The average number of people employed by a FedEx Ground contractor is 7. In addition to paying their salary, you will have to take into consideration employee benefits (should you choose to provide them) like health insurance and retirement plans.
Apart from the route and employees, here are examples of the type of equipment you’ll need to purchase:
- Vans, trucks, and (depending on your route) planes
- Uniforms for yourself and employees
- Decals for vehicle
- FedEx scanners and software
There’s no particular dealer that you need to go through to purchase this equipment as long as it meets the specifications laid out in your contract. FedExTrucksforSale.com has several options for vehicles. Rohner says that most contractors use FedEx terminals where packages are stored to park their vehicles, so you most likely won’t have to pay for vehicle storage.
Adding all these expenses up, it’s apparent that owning a FedEx route can be a costly endeavor. That being said, if you can provide great service and build on your customers’ loyalty to their “FedEx guy” or “FedEx girl,” then you can potentially go very far in this business.
Financing Options to Buy FedEx Routes
Most borrowers need some kind of financing to purchase a business such as a FedEx route. There are a variety of options for obtaining financing. Generally speaking, you will need a loan to cover the cost of equipment and working capital to hire and pay employees, storage fees, etc.
The least expensive source of financing for most people who buy a FedEx route will be an SBA loan, which can be for working capital and to buy equipment. In order to qualify for an SBA loan, you will typically need to meet the following requirements:
- 660+ credit score (check your’s here)
- Existing route should be cashflow positive
- Collateral (e.g. personal real estate, FedEx vehicles, etc.)
If you meet these requirements, we recommend South End Capital for SBA loans when buying a business. They excel at relatively quick turnarounds on SBA loans and offer free consultations. As with all SBA loans, borrowers should expect to bring up to a 30% down payment.
ROBS financing is an option for both SBA loan down payments and complete funding. Through a ROBS, aka ‘Rollover as Business Startup’, you can finance a business using your retirement account. You can learn more in our Ultimate Guide to ROBS Financing, or speak with our recommend ROBS provider, Guidant Financial.
For more lending options, see our Ultimate Guide on How to Get a Small Business Loan.
Buying FedEx routes for sale can be a lucrative and flexible way to get into business with fewer costs than traditional brick and mortar businesses. There are multiple opportunities to find a FedEx route of interest to you, and when you’re ready to purchase, there are multiple financing options to get you going.
Need financing to get started? Guidant Financial is an experienced ROBS provider which can help you convert your retirement funds into working capital today. They also offer free outside counsel throughout the entire process. Set up a free consultation with an agent today.