Tips for Buying FedEx Delivery Routes
When you get a FedEx package, it’s delivered by small business owners who own the trucks and employ the delivery drivers.
Working within FedEx’s well-known delivery infrastructure is one way to launch a new business with the advantage of a strong, established brand name. Additionally, FedEx provides support for its delivery contractors.
Interested in buying a FedEx route? Here’s what you need to know.
How does owning a FedEx route work?
Each small business owner works under a contract with FedEx and must meet certain legal guidelines. This contract outlines the details of a particular route and includes an established book of business. FedEx route owners must purchase their own equipment and hire their own employees.
What other equipment will I need to buy for a FedEx route?
Besides the actual cost of the route, you’ll also need to invest in equipment—specifically delivery vehicles—and be prepared to manage the expenses associated with facilities (either rented or your own home), assets (vehicles, computers, technology, etc.) and business software (financial, route planning, etc.). Online routing software, like MyRouteOnline, can make a FedEx delivery route more efficient—and profitable.
How many stops are on a FedEx route?
Route owners have a list of customers. The number of stops vary by route, which can reach more than 220 packages per day. Some business owners may have more than one route.
How much can you make owning a FedEx route?
Each business has a unique contract with FedEx that outlines the terms of how they’ll be paid. While profits can vary, industry experts estimate that FedEx routes can generate about 10%-25% of revenue. So, for example, if a FedEx route generates approximately $500,000 in revenue, then an average profit margin of 15% is $75,000. The work is generally very stable.
What type of FedEx routes are for sale?
You have three options: Custom Critical owner-operator, independent contractor, or Home Delivery independent contractor.
Why are so many FedEx routes for sale?
FedEx routes are sold for the same reasons as other businesses. The most common reason is retirement. Additionally, FedEx may establish new routes in growing areas or locations where demand exceeds capacity.
How do I become a FedEx contractor?
To become a FedEx contractor, get in touch with FedEx Recruiting, either by calling 1-866-711-3599 or filling out the contact form on FedEx’s company website. You’ll get all the information you need. When you are all set, make sure to visit MyRouteOnline to plan your delivery route with us. This will save you time as well as fuel, both are worth money.
Plan your Route Today, Try it for Free!
Owning a FedEx Route
P&D (pick-up and delivery) Routes
P&D Routes cover local residential and business deliveries. Historically, these deliveries have been fulfilled by either “Ground” or “Home Delivery” contractors. By May 2020, FedEx1 will require operators to cover both types of routes within a given area.
FedEx Home Delivery Routes
These routes serve residential areas and generally operate Tuesday through Saturday. A FedEx Home Delivery Route will typically deliver online orders and personal deliveries.
FedEx Ground Routes
These routes serve commercial accounts and generally operate Monday through Friday. A FedEx Ground Route might service local businesses, hospitals, schools, etc. Unlike Home Delivery, Ground operators must also account for customer pick-ups during specific pick-up windows.
Benefits of Owning a FedEx P&D Route
Compared to Linehaul routes, P&D routes tend to be smaller and less expensive to purchase. The P&D trucks themselves are also smaller and require a smaller capital expenditure. The routes will generally cover fewer miles will have fewer driver requirements.
Linehaul Routes can run either intra- or inter-state, hauling trailers between FedEx hubs. Linehaul runs are serviced by semi-trucks, which may be more costly to maintain and carry a higher safety risk. These routes require drivers to hold a valid CDL license.
Linehaul routes consist of three types of runs:
These runs operate continually along the same route (for example, they might go from Asheville to St. Louis and back). The route and destination does not vary.
These routes will originate in the same place but the destination will vary as FedEx needs change.
Spot runs are a bit of a hybrid between P&D and linehaul runs. They utilize semi-trucks to service regional pickup and deliveries for large companies (such as Wal-Mart).
Benefits of Owning a FedEx Linehaul Route
Despite the larger price tag, Linehaul runs often offer larger revenues and cash flows over P&D routes. Because Linehaul contracts pay on a per-mile basis, a single linehaul run can generate up to five times more revenue than a P&D route.
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How to Buy A FedEx Route in 5 Easy Steps
Did you know that you can buy FedEx routes and make money off every delivery that is made in your territory?
It’s a business model that has been around for a long time now and there is a vibrant marketplace for FedEx delivery routes.
In this article, we will provide a guide to buying FedEx delivery routes in 5 easy steps:
Step 1: Know your budget and goals
- How large a FedEx business should you buy?
- Getting your financial house in order
- What type of FedEx route is best for you?
Step 2: Understand FedEx ISP requirements
- Understand FedEx eligibility requirements (we have a chart that lays it out)
Step 3: Find available FedEx routes
- Best places to find routes for sale
Step 4: Evaluate FedEx route listings
- How to conduct due diligence
Step 5: Contracting and financing
- Review contracts
- Financing options
- Down payment requirements
We will also cover the pros and cons of owning FedEx routes so you have a more complete picture of what’s really involved in operating this type of business.
Before we dive into all of this, let’s tackle some basic (but important) questions around FedEx routes in general.
If you want to skip the introductory stuff, you can jump ahead to the “Buying a FedEx Route in 5 Easy Steps” section by clicking on this link.
This post may contain affiliate links. If you click on a link and complete a transaction, I may make a small commission at no extra cost to you.
The information contained in this post is for informational purposes only. It is not a recommendation to buy or invest, and it is not financial, investment, legal, or tax advice. You should seek the advice of a qualified professional before making any investment or other decisions relating to the topics covered by this article.
What Is a FedEx Route?
A FedEx route is a FedEx Ground delivery route offered by FedEx to independent businesses. There are two types of FedEx routes: (i) a FedEx Ground Pickup and Delivery (P&D) route which delivers to homes and businesses within the designated area; and (ii) a FedEx Ground Linehaul route which provides long-distance transport.
The P&D route is localized and usually serviced by vans and box trucks. These routes cover dedicated territories that are determined by FedEx. The linehaul route spans many miles and is serviced using tractor trailers.
This article focuses on buying P&D routes, as they are the simpler to buy and manage. If you are interested in a FedEx linehaul route, they will entail a bit more risk, but also can provide stronger profits (more on that later). You should also bear in mind that these routes may be a bit more unpredictable and the risks may be greater, depending on the type of linehaul route you purchase.
How Profitable Are FedEx Routes?
FedEx routes have outstanding profit potential. Profit margins run between 10%-45% of gross revenue. Profit margins will be in the lower end of the range if you operate a FedEx P&D route and will increase if you operate FedEx Linehaul routes.
Here is a chart showing expected profit margins for various types of FedEx Routes:
Type of FedEx Route
FedEx Ground P&D Route
10%-25% of gross revenue
FedEx Linehaul Route (solo runs)
20%-30% of gross revenue
FedEx Linehaul Route (team runs)
40%-45% of gross revenue
Source: Route Consultant
In the chart above, I have notations for “solo” and “team” runs for FedEx Linehaul routes. Solo runs are shorter routes that involve a single driver. Team runs are much longer routes that involve multiple drivers.
Ok, so based on these figures, let’s go through an example of potential profitability.
If your gross revenue is $1,000,000 and you own a FedEx Ground P&D route, you can expect to make a profit of $100,000 to $250,000 per year. With the same gross revenue, you can expect to make a profit of $400,000 to $450,000 per year if you own a FedEx Linehaul route with team runs.
Of course, these numbers are based on averages or estimates (as are all of the figures in this article) – your actual results may vary.
How Much Can You Make Owning a FedEx Route?
According to FedEx, the average revenue for a FedEx route owner is $1.5 million. That figure represents the entire revenue for all routes owned by a single business owner, but does not reflect deductions for operating costs.
To determine profitability, you will need to deduct expenses from revenue.
Based on available data, the annual profit per route is between $30,000-$40,000 and the average cost of FedEx Route is around $100,000 according to Buyersmarketinc.
That translates to an average ROI of between 30% to 40%.
There is no information readily available on the average number of routes owned by FedEx independent contractors.
However, according to Routeadvisors, five routes is a manageable number for a single route owner. In fact, based on ISP changes implemented by FedEx in 2020, FedEx route owners must now own a minimum of five routes and meet certain other requirements. More on that later.
How Many FedEx Routes Can You Own?
Five routes may be a manageable number, but there are plenty of route owners that own way more than 5 routes.
There is no set limit on how many FedEx routes you can own. A route owner is limited only by their resources and their level of determination to grow their business.
How Much Are FedEx Routes Worth?
On average, a FedEx route is worth between 2.5 times and 3 times the free cash flow that it generates. The annual profit per route is between $30,000 and $40,000 per year, so if you multiply that amount by the industry multiple, you get a range between $75,000 and $120,000 per route.
As we discussed earlier, the average cost of a FedEx route is $100,000, so our calculation lines up pretty well with that figure.
Of course, the actual worth of a route or package of routes will be determined by market demand, but these estimates should provide a useful barometer of what you can expect to pay when buying a FedEx route.
Buying A FedEx Route in 5 Easy Steps
Ok, so we’ve covered off on the introductory stuff. Now let’s dive into the step-by-step guide to buying your FedEx Route.
Step 1: Know Your Budget and Goals
Before you start looking for FedEx routes, you should know the answer to some key questions:
How large of a FedEx route business do I want to buy?
Perhaps the most important question to answer. You can’t start an effective search until you know you how large a business you want to buy and how much you want to pay for that business.
Is my financial house in order for down payment and financing purposes?
Basically, you need to know how much cash you have (and want) to invest in this business and ensure that you are prepared to obtain financing for the purchase (have your records in order and make sure your credit is in good shape).
What type of FedEx route do I want to buy?
As we covered already, there are two types of FedEx routes you can buy: P&D routes and Linehaul routes. You need to understand the trade-offs when choosing one over the other and be comfortable with that decision.
For P&D routes, you will have less profits, but will also have less complications and risks. If you are just starting out, this may be the safer option for you.
Linehaul routes, in contrast, allow you to potentially make more money, but your trucks will be more expensive to buy and maintain and your drivers will need to be more specialized (will need commercial driver's licenses or CDLs, for short). Reliable and safe CDL drivers may be hard to find and keep. And, of course, the possibility of catastrophic accidents is much greater when hauling packages via tractor trailer.
Step 2: Understand FedEx ISP Requirements
If you want to own a FedEx route business, you will need to sign their Independent Service Provider (ISP) agreement. That agreement has specific requirements around various aspects of the route delivery business that you need to evaluate and follow.
This chart shows key requirements under the FedEx ISP Agreement:
|Must be a non-profit corporation||No LLCs, LLPs, sole proprietorships, partnerships or limited partnerships allowed|
|Must employ all personnel||Must have responsibility for the following:|
-Ensuring employees are legally allowed to work in US
|Must follow agreement terms||General contractual obligations include:|
-Maintain a safety and compliance program
-Corporation in good standing
-Maintain image of FedEx
-Remain committed to FedEx business
|Must comply with route requirements||ISP Agreement requires:|
-Minimum ownership of 5 routes or 500 stops per day
-Cannot hold more than 15% of routes in a given termination (subject to certain exceptions)
-Must provide both business and home deliveries within territory
Sources: FedEx and KR Capital
Obviously, if you are serious about pursuing this, you will eventually need to set up a corporation that will sign the ISP agreement. A qualified lawyer should be able to help you do that.
You will also need to comply with all of the other requirements under the ISP, including maintaining a safety program and having all other employee-related processes in place.
So with that important background information covered, let’s move on to the fun part: finding the perfect route for you!
Step 3: Find Available FedEx Routes
Now that you have a clear picture of your financial situation and the type of FedEx route you want to buy, you can start looking for routes that meet your criteria.
The simplest way to find and buy a FedEx route is to go online and check out the various sites offering them for sale.
Let’s start with the most obvious place: FedEx itself. They have routes available for sale on their website at buildagroundbiz.com.
There are third-party sites you can explore as well.
Here is a list of sites that offer FedEx routes for sale:
Step 4: Evaluate FedEx Route Listings
As you look through the various listings, you should be getting a pretty good picture of what types of numbers a FedEx route business should have. If you find one that looks promising, you should begin the due diligence process for that listing.
Conducting Due Diligence
Before buying a FedEx route business, you must conduct thorough due diligence. This includes evaluating the numbers, looking at employee information (check turnover rates, length of employment, and other signs of stability), and examining the age and condition of the vehicles in the fleet.
You also want to sanity-check the numbers provided by the seller by comparing them against what is standard in the industry. If the numbers looks meaningfully better than the rest of the industry and the seller is basing the purchase price on those numbers, you should be cautious and get to the bottom of what's going on.
Route Consultant offers a helpful summary of what the numbers should be based on industry averages.
This can all be a bit confusing if you are new to this. If you want help understanding the numbers or any other aspect of the purchase, you can hire a due diligence expert to assist you. When I searched online, there seemed to be a number of them specializing in this space.
Step 5: Contracting and Financing
Once you have settled on a FedEx route that you would like to buy, you will need to enter into a contract to buy that route and review and sign all other required legal documentation associated with the purchase.
You should not be winging this. Engage a qualified lawyer to help you navigate this process.
How Do You Finance a FedEx Route?
For most people, buying a FedEx business will require some form of financing. What types of financing are available? The usual suspects are SBA loans and conventional loans, but you may be able to secure seller financing if the seller is willing to offer it.
If you prefer to operate online, you may want to check out Fundera. They are affiliated with Nerdwallet and offer small business financing options from a variety of potential lenders. You fill out one application and they provide you with a list of lenders suited for your situation.
So how much money will you need to buy a FedEx route with financing?
That is going to be governed by three things: (i) the final negotiated purchase price; (ii) the amount of down payment needed; and (iii) the amount of working capital needed.
How much down payment do I need to buy a FedEx route?
To minimize the amount of your down payment (and your overall costs), you should negotiate down the purchase price of your FedEx route business.
Once you have settled on the final purchase price, you will need between a 10%-25% down payment on that purchase price to buy a FedEx route. For smaller purchases, that translates to approximately $60,000-$100,000 for a down payment.
Source: Route Consultant
You also want to keep some cash reserves on hand for working capital. Route Consultant recommends $75,000.
So even for a relatively small purchase, the starting costs are significant. It’s certainly something to keep in mind in determining whether this business is right for you.
Once you have signed the paperwork and completed the financing, you are well on your way to becoming a successful FedEx route owner. Of course, this is just the beginning. You are buying a real business and will need to make sure that it runs smoothly.
On that note, let’s examine some of the pros and cons of owning a FedEx route business.
Pros and Cons of Owning a FedEx Route
Before you complete the purchase of a FedEx route, you should evaluate the pros and cons of owning a FedEx route business. We'll cover all of them in detail, but here's a table that provides a topical summary of the pros and cons.
Pros of Owning a FedEx Route
Cons of Owning a FedEx Route
You are partnering with FedEx
FedEx route business is expensive
Strong profit potential
Hiring, training and keeping employees
Passive income potential
Robust resale market for FedEx routes
Must follow FedEx rules
Pros of Owning a FedEx Route
You Are Partnering With FedEx
FedEx is a massive company with incredible brand recognition. They have established processes and procedures that have been tested and proved. This means that all of the infrastructure is in place, except for your little piece, which is a very targeted operational one.
You do not need to build a business from scratch. You do not have to worry about marketing, acquiring customers, or competition. You simply need to focus on making your promised deliveries on time.
That is a tremendous business advantage. It also allows you to focus completely on optimizing a very discrete set of operational tasks. By partnering with FedEx you become part of a multi-billion dollar enterprise that is a proven winner and not likely to go away.
Strong Profit Potential
We have covered the profit potential of FedEx routes in detail already, so I won’t go into it again.
Bottom line, you have the potential to generate exceptional profits from running FedEx routes.
Passive Income Potential
One of the amazing benefits of owning a FedEx route is that it can be mostly passive once you have a reliable team of drivers and managers. Passive income is the dream, isn't it?
But mostly passive doesn't mean completely passive.
You still need your hand on the steering wheel of your business. Your trucks will need servicing and may sometimes need repairs. Your employees may not show up or may quit. There may be unexpectedly high volume on a given day that you will need to accommodate.
In short, your operations need to be structured and maintained in such a way that the packages get delivered no matter what happens. Maybe that means that your manager should be ready to drive if needed. Maybe that means that you will need to drive if needed. Maybe you need an extra truck on stand-by in case one of your trucks breaks down.
It can be stressful and will require your attention at times, but if have a reliable and competent team to do the actual deliveries for you and take care of the normal day-to-day activities, and your contingency planning is well-thought out and effective, your FedEx routes can be a terrific source of mostly passive income.
Robust Resale Market For FedEx Routes
FedEx routes have undeniable market value and a robust marketplace (as we discussed before). This means that you can generally sell your routes when you are ready to move on.
When selling, having the FedEx name behind you only helps. Buyers will be more likely to trust a business model that is tied to the FedEx brand. This will make your FedEx route far easier to sell than an unknown business with comparable earnings.
Owning a FedEx route business can be liberating, especially if you feel trapped by a 9-5 job. This is an obvious point, but can't be ignored. You need to make sure your operations are running smoothly, but as the owner of the business, you do not need to answer to anyone. Hard to put a price on that.
Cons of Owning a FedEx Route
A FedEx Route is Expensive
A FedEx Route business is expensive to start. If you add up the down payment to buy the FedEx routes and the cash reserves you will need as working capital, the cost of starting a FedEx route business can be very high.
Even buying a small FedEx route business can cost you over $100,000. If you want to buy an average-sized FedEx route business, you will pay much more.
According to Route Consultant an average priced FedEx ground route requires a down payment of approximately $150,000-$200,000, plus $75,000 in working capital.
That’s a lot of money any way you look at it.
Related reading: Interested in a passive income business that is more affordable to start? You may want to check out my articles on these other passive income businesses that have a much lower cost of entry:
Or if you don’t want to spend any money to start earning passive income, here are 15 truly passive income ideas that require no money to start.
Hiring, Training and Keeping Employees
Running a FedEx route business is going to require dealing with drivers (and managers if you use them).
Whenever you manage employees, there is always risk. Your drivers may quit right before the winter holidays when you are getting crushed with package volume. Your manager may move on to bigger and better opportunities. All sorts of problems can arise when dealing with people.
And finding qualified and reliable drivers is no easy task. In addition to FedEx’s requirements for drivers, you will need someone who can figure out the routes, interact with recipients, and most importantly, show up on time and do the job reliably.
You will also need to make sure they are trained, which can take some time. Your manager can be a big help here, but as the owner, you need to ensure it gets done properly.
Note: All of this is just for a normal P&D route. If you are operating a linehaul route, the task of finding qualified and reliable drivers is much harder.
If one of your trucks breaks down, you will need to fix it asap. Or you will need another truck to step in. That's because the packages must get delivered, even when the unexpected happens.
And to be honest, trucks breaking down is not an unexpected occurrence. They will break down at some point given how much they are used.
Of course, these repairs and maintenance issues will impact your bottom line. So it is important to find a good mechanic that will take care of your repairs promptly and at a fair price.
Note: Again, this is for normal P&D routes. If you are operating a linehaul route, the costs of maintenance are going to be much higher.
Must Follow FedEx Rules
As we discussed, there are many advantages to partnering with FedEx. But there are some drawbacks as well.
Most notably, you must follow FedEx’s rules outlined in your agreement with them. They call the shots in this area.
And rules relating to FedEx Ground can evolve over time. A perfect example is the route-related ISP changes that FedEx implemented in May of 2020. We covered these requirements in the FedEx ISP requirements chart already, but here's a recap.
Under these rules, FedEx route owners must have at least 5 routes or 500 stops per day. They also must run both business and residential routes within their territory. These were significant changes and caused a lot of disruption for FedEx route owners, with many combining routes with other owners to meet the new requirements or selling their routes altogether to avoid having to comply.
Source: KR Capital
The bottom line is that FedEx exercises a lot of control over their processes and programs. Changes that they make in the future may not always work to your benefit. It’s a real risk and something you should carefully consider.
Owning a FedEx route can be a terrific way to earn great income and get out of the rat race.
But as you can see by now, it’s not as simple as buying a route and waiting for the money to roll in.
If you want to succeed as a FedEx route owner, you need to (i) buy the right route, (ii) hire, train, and retain a competent and reliable team, (iii) have effective contingency plans when it gets busy or your trucks break down, and (iv) thoroughly understand and remediate other key risks involved in operating this business.
How to Buy a FedEx Route
August 27, 2020|FedEx Route Financing & Loan Articles & Information
Last updated on August 9, 2021
Most people who use FedEx ground delivery services or see FedEx trucks on the road don’t realize it’s possible to buy FedEx routes as a business investment. In reality, most FedEx routes are run by owner-operators, known as independent service providers (ISPs). These owner-operators own their FedEx delivery routes. Some are driving and delivering packages themselves, while others hire employees to do the driving and delivering.
You can find FedEx routes for sale through a FedEx route marketplace or contact an existing ISP directly. Once you acquire a FedEx route, you’ll need to purchase or lease vehicles and equipment and hire employees to help run the business. In addition, all drivers must meet FedEx’s driving safety rules, and owner-operators are required to set up the company as a corporation. Besides, owning a FedEx route is similar to running an independent business encompassing all the responsibilities business owners perform.
Why Are So Many FedEx Routes for Sale?
Because FedEx routes involve all the obligations and liabilities of owning any business, after buying their routes, some ISPs discover they aren’t cut out for entrepreneurship. Even though it’s a proven concept and boasts a legendary brand name, buying FedEx routes doesn’t guarantee business success. Running a business is hard work, involving long hours, and in a stressful competitive environment. For those reasons, finding FedEx ground routes for sale may be easier than you think.
How to Buy a FedEx Route
Buying a FedEx route is just like buying any other business. You must ask a lot of questions.
Here are some good starter questions to ask an existing FedEx Ground route owner who is interested in selling their route/s:
- How many FedEx routes do you have now?
- How many FedEx deliveries are you doing now?
- How many drivers do you have?
- What do you do if a driver is out sick?
- How did you get into this business?
- How has the business changed over the years?
- Have you received any citations from FedEx?
- Why do you want to sell?
- What do you think the future of FedEx Ground is?
- Are you willing to offer owner-financing?
- What type of qualification process do you think I’ll have to go through so FedEx will allow me to purchase your business?
- What type of cash reserves will I need for the business?
- Can I review a recent business tax return and balance sheet?
- Do you have an operations manager?
- What is your workday like?
While finding a FedEx route for sale may be easy, finding the money to buy a route may not be as simple.
Who Offers FedEx Route Financing?
As of the writing of this article, there is no specific lender to turn to for FedEx route financing. However, there are two options for purchasing FedEx routes that are used most often by buyers.
Buyers can offer existing route owners a sizeable down payment and then pay the remaining amount due in monthly installments. In this scenario, typically, the buyer will pay the owner more than the original “asking price” for accepting financing.
In the second financing option, the buyer turns to financial institutions to apply for a term loan. Keep in mind that bank loans require the borrower to put up some form of collateral (i.e., your home) to back up the term loan. Banks also require a solid personal credit score (680 or higher).
Most financing institutions may be reluctant to finance new FedEx route purchases because there is no collateral in a FedEx Ground business. Also, if the FedEx route owner fails to perform appropriately under FedEx Corp’s requirements, FedEx has the right to assign the rights of their routes to another company.
Financing Solutions Line of Credit Program for FedEx Ground Companies
Once you buy a FedEx route, like most business owners, you’ll find your company experiencing cash flow ups and downs. At these times, having access to a line of credit would come in handy. Financing Solutions is the leading provider of Lines of Credit to EXISTING FedEx route owners, and we also understand the needs of FedEx Ground route owners.
Financing Solutions, an A+ and 5-stars-rated BBB company, has provided small business credit lines since 2012. And specifically, FedEx Ground companies use Financing Solution’s credit line because it’s easy, fast, and inexpensive.
To qualify, you must already be a FedEx route owner and have a 630 or greater personal credit score. There are no collateral or personal guarantees required, and it only takes two minutes to apply.
The Line of Credit costs nothing to set up and nothing until you use it. Even when you do tap your lie, it’s inexpensive. The majority of FedEx Ground Owners use the credit line for:
- Emergency maintenance of trucks
- Purchasing used trucks
- Hiring additional employees
- Getting personal money out of business
- Putting down payments on new routes
- As a cash backup plan for in case of emergencies or emerging opportunities
If you would like to apply for a line of credit or get additional information, click here.
Financing Solutions LLC is not endorsed by and is not recommended by Federal Express Corporation and FedEx Ground. Financing Solutions LLC is not sponsored by, is not approved by, is not associated with, and has no connection whatsoever with Federal Express Corporation or FedEx Ground.
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FedEx Routes for Sale: The Ultimate Guide
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 jump-start 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
FedEx routes for sale can be found a number of different ways. One common method is through word-of-mouth. Prospective route owners that have contacts in the shipping or logistics industries can tap their network to determine what routes are for sale that might be of interest to them.
While FedEx lists routes for sale at its website, BuildaGroundBiz.com, at the time of writing this article only a dozen or so routes were listed. Another common method for finding a FedEx route for prospective owners that don’t have existing industry experience or contacts is through business brokerage sites. Brokers like KR Capital 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:
- KR Capital: Broker that lists nationwide FedEx routes for sale, with about two dozen at the time of this writing. Maintains a targeted buyer’s list with nearly 10,000 buyers that are notified when specific routes come up for sale.
- BizBuySell: Business listings website listing nationwide FedEx routes for sale, search “FedEx” using advanced search feature.
- BizQuest: Business listings website listing nationwide FedEx routes for sale, with about 300 at the time of this writing.
- Routes to Success: Broker that lists FedEx routes for sale in NY, GA, NJ, PA, SC, TX, VT, with about a dozen listings at the time of this writing.
- Capital Route Sales: Broker that lists FedEx routes with about a dozen listings at the time of this writing.
Although finding the right route may prove challenging, it’s important to do due diligence when a route that meets your criteria does become available. 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
Contrary to what you might think, most people who buy FedEx routes don’t have driving or trucking experience, and that is OK. 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 plan, or other benefits from FedEx. Additionally, FedEx requires that your business is set up as a Corporation.
Some of the logistics a FedEx contractor is responsible for are:
- Equipment: Contractors are responsible for buying or leasing equipment such as vehicles, as well as maintaining that equipment.
- HR: All hiring, training, and employee retention is the responsibility of the route owner.
- Benefits: Route owners will be responsible for offering insurance and retirement plans (if applicable).
- Accounting: Accounting and bookkeeping responsibilities such as payroll and business taxes are managed by the contractor.
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. You should see your contract for any additional requirements.
The minimum standards that must be passed by an owner-operators are:
- 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 one to three years, and it renews automatically unless the contractor wants to get out of the business or if FedEx can demonstrate that the contractor is not meeting the terms of 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. There are two types of business opportunities available to contractors; FedEx Ground, which is the most common type of route, and Custom Critical. The FedEx Ground routes are further separated into pickup and Delivery (P&D), and Linehaul routes.
The two main types of FedEx independent contractor opportunities are:
- FedEx Ground: These consist of routes with residential and/or commercial customers. These are dedicated routes with set schedules. You own the route and can drive the route or can hire employees to do the driving.
- 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 two different types of FedEx Ground routes are:
- Pickup 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 more expensive compared to P&D.
Independent Service Provider (ISP) Model
In May 2020, FedEx will finish transitioning to an independent service provider (ISP) model. With this transition comes some changes to route ownership requirements, and ISPs will be required to own at least five routes or 500 stops per day under the new model.
According to Kyle Rohner, CEO of KR Capital: “With the transition to the ISP model, there’s a route overlap component: historically you would have ground contractors—commercial accounts and businesses—and home delivery contracts, you might have one contractor that owned the ground routes in a certain ZIP code and a home deliver contractor sending his truck into that same area, which is not terribly efficient.”
Contractors that are unable to meet these upcoming requirements will be required to enter negotiations with FedEx to expand their routes, sell their routes, or merge with another contractor to satisfy the minimum requirements. Existing and prospective contractors should ensure they fully understand FedEx’s shift to the ISP model which becomes fully active in 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
The three ways FedEx contractors are typically paid are:
- Annual rate: FedEx contractors are paid a flat annual rate based on the size and other characteristics of the route.
- Delivery and pickup payments: Contractors receive a payment for each delivery and pickup, for example $1 and $2 respectively.
- Bonuses: Contractors can earn bonuses for things like customer service and safety achievements.
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. Actual profits will vary based on where your route is located, how many employees you have, the number of loads you handle, and other factors.
The three biggest expenses of owning a FedEx route that may impact revenues are:
- 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% of packages are handled by contractors with multiple routes.
The average number of people employed by a FedEx Ground contractor is seven. 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, you’ll need to purchase equipment.
Some examples of the type of equipment you’ll need to purchase are:
- 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.
Benefits of Owning a FedEx Route
There are several distinct advantages to buying a FedEx route, and these routes are highly sought after for a number of reasons. Among these benefits, route owners will not be required to make any sales or marketing efforts, can expect to be paid on time, on a weekly basis, and may choose to manage remote routes that are not in close proximity to their residence or place of business.
Some of the primary benefits of owning a FedEx Route are:
No Sales or Marketing Required
FedEx handles all of the required sales and marketing efforts involved 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 that are not interested in managing the development of routes, and would prefer to focus on transportation logistics instead.
A key concern prospective owners will want to be aware of is that routes may experience diminished performance over time, and there is very little control an owner can exercise over this. While the package delivery industry itself continues to grow, as does FedEx’s market share, some routes may be subject to heavy competition. Would-be FedEx route owners should consider diversifying routes to avoid an outsized impact to revenues from any one route.
Reliable, Quick Payments
FedEx pays its route contractors on a weekly basis, for the previous week’s package deliveries. Pay is executed by direct deposit, and is generally reliable. Revenue for routes is generally considered to be consistent week-over-week. However, pay can be impacted by both peak delivery periods, as well as dips in shipping activity. Contractors will want to plan accordingly, and ensure that they are managing logistics efficiently during seasonal changes.
May be Managed Remotely
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. Prospective owners looking for an absentee-owner route may find that the logistics of managing one or more routes requires more effort than they planned for, and in general FedEx does not encourage absentee ownership.
Excellent Growth Potential
“FedEx is growing very rapidly, organically. So based on the growth that FedEx is experiencing you might benefit from that directly. There are growth opportunities that become available to existing contractors at no charge. So, as FedEx opens up a new territory, or gains new customers, those new customers need to be serviced, and those opportunities are awarded to contractors that demonstrate an ability to be successful and serve customers well.
“The way that works is FedEx will make an announcement that a new opportunity has become available, and existing contractors will put together an RFI making a case for why they should receive the new opportunity, creating additional upside for growth.”
—Kyle Rohner, CEO of KR Capital LLC
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.
Some of the typical requirements to qualify for an SBA loan are:
- Credit score: At least 680
- Cash flow: Existing route should be cash flow positive
- Collateral: Primary personal residence may need to be put up as collateral, as well as FedEx vehicles and other equipment related to the business, up to 100% of the loan, or to the greatest extent possible
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.
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.
Should You Consider Buying a FedEx Route?
If you’re interested in a way to generate more income, you might consider buying a FedEx route. You can buy a FedEx route on a FedEx route marketplace, or from an independent owner; once you do, you’ll gain access to a fleet of trucks, employees, and equipment necessary to deliver packages all over the country.
FedEx routes function as a business and can be a great way to make money. But are they worth buying?
The Advantages of a FedEx Route
There are several advantages to consider when buying a FedEx route, including:
- Access to existing infrastructure. If you were to start a business of your own, you’d need to invest time and money to research and buy all-new equipment and infrastructure. But with a FedEx route, all that infrastructure already exists. You can simply step in and take over as a new owner.
- A reliable business model. FedEx routes operate profitably all over the country. They’ve been in existence for decades, and since home deliveries are only increasing, we can expect FedEx deliveries to be relevant for decades to come. This is a reliable business model that doesn’t rely on timing, luck, or strict innovation—making it appealing to a wide range of would-be entrepreneurs.
- Semi-passive income. Passive income is all the rage these days, enabling entrepreneurs to make money with little to no effort. Because FedEx routes operate almost autonomously, they’re almost a passive source of income. You will have to step in and manage at least a few hours per week, but this is mostly a hands-off system.
- Potential for future sale. If you decide to retire, or if you decide to pursue other ventures, you can always sell your FedEx route to someone else. Depending on the timing of the sale, you can probably make back most of your initial capital as well.
The Disadvantages of a FedEx Route
However, there are also some disadvantages to consider, including:
- Demand for initial capital. Buying a FedEx route can be expensive, with most routes going for at least $1 million. If you don’t have the cash, or if you aren’t able to qualify for a loan, this could be prohibitive. Still, you could always purchase with a partner to increase accessibility.
- Decision pressure. FedEx routes aren’t a “true” passive income source. If you want to remain profitable, you’ll need to keep your route effectively managed. That means you’ll be responsible for ongoing analysis, major business decisions, and occasional upgrades and improvements. It can be a lot of stress to manage.
- Inconsistent cash flow. While many FedEx routes benefit from consistent cash flow, this is far from a guarantee. You may see your profits ebb and flow with the seasons, or you may encounter dry spells that interfere with your ability to operate the business profitably.
- Potential profitability. FedEx routes can be highly profitable, but they may not offer the full potential profitability of starting a business from scratch. If you invent something new or capitalize on a new market, you could conceivably make more money that way.
- Because these routes are designed to work with FedEx, they often must follow strict rules. That means you won’t have much flexibility to innovate or experiment with new approaches. For some entrepreneurs, this is limiting.
How to Make Your Route Successful
If you decide to purchase a FedEx route, there are a number of steps you should take to make your route as profitable as possible.
- Choose the right kind of route. Pickup and delivery (P&D) routes are designed for local and business deliveries. These tend to be smaller and less expensive; they’re also easier to manage because they cover fewer miles and don’t have as many driver requirements. Linehaul runs, by contrast, tend to cover a lot of ground since they ship between FedEx hubs. They tend to be bigger and more expensive, as well as harder to manage, but they offer superior returns.
- Be prepared to actively manage. Though somewhat passive at generating income, you’ll still need to make management decisions on the fly. Be ready to look at financial reports, buy new equipment, make cuts where appropriate, and gradually optimize your business.
- Know when to sell. You probably won’t want to hold onto your FedEx route forever. Knowing when to sell can help you make an even greater profit—or avoid a major loss. Time your sale for the market, as well as for your own personal priorities (such as retirement).
Buying a FedEx route isn’t the right investment for every aspiring entrepreneur, but it could be the best way to utilize your existing capital and management experience. If you decide to move forward, consider talking to existing route owners to get their perspective, and do your research before finalizing any decisions.
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How much can you make with FedEx Routes?
When you own a FedEx route and work as a contractor, you have income in various forms. This variation level helps you because it ensures that if the market downfalls or skyrockets, you can remain on your feet. What you can expect is:
- Money earned from a flat annual rate.
- Payments for services (whether it is picking up or delivery).
- Bonuses based on performance (like customer service).
The yearly average profit for a FedEx route has been reported at between $30,000 – $40,000. While this might not seem like you are going to be a millionaire, the best part of owning a FedEx route owner is that you don’t have to own just one.
Renowned business tycoons own multiple FedEx routes. If you have different locations, different routes, with various employees, you can continually earn profit from this business in a different region. All of a sudden, $40,000 can start to look a lot like $400,000.