Since that thread is locked, I was hoping I could get it reopend. Can anyone tell me what the fair and reasonably price is to pay for these FedEx Home Routes?..is it based off a multiple, if so whats the multiple?..Thanks in advance
Avi, I don't have the answer to your question, but I also was trying to pursue questions from the previous thread. One was your question, another bigger one for me was the issue of whether there is any way to get around the requirement of school and 6 mo - 1 yr driving experience in order to buy non-driving, manage-only routes. Anyone have a workaround?
I am a FedEx Ground Contractor and have been sense 2002. In answer to your question about drivers the requirements are as follows:
Finding drivers is not hard. We use craigs list.
Hope this helped
Larry, thanks very much for the reply. Question: your answer addresses driver requirements, how about requirements for owners who are not going to drive? I have gotten conflicting information about whether the driver requirement applies if you're not actually driving. Also, do you have a contact at FedEx who would answer similar contractor questions? I'm getting the runaround. Thanks.
I've met with the owner of multiple routes recently and he says they can set me up to attend a 3 day Fedex driving school where I take a series of driving tests - this seems to be the work around for non-driver business owners/contractors; however, I am not totally sure that this is correct. I've asked Fedex and they say 6 months of driving is necessary - I find that a little hard to believe because routes have surely been acquired by absentee owners or those who never drive the routes. So let's keep this dialogue going....
Also, may I ask if you own or are looking to purchase routes today>
You do not need to drive to own. The pit falls are if you have an employee out what are you going to do with the route. It CAN NOT SIT, IT MUST BE DELIVERED. You need a firm business plan and the extra employee whom can manage and drive for you it the need arrises. Short of that you will lose your contract, if the route is not serviced.
I have 8 routes 12 trucks and gross over $1,200.000 annually.
Thanks. I am looking to buy multiple routes with a driver/manager already in place and will start negotiating with the seller over the next few weeks.
Do you know where I can get a firm evaluation? Employees and the driver are all W2 so I am mainly interested in the truck valuation and route valuation (which is where all the goodwill lies)
I have my own price but would like to get an expert to value the business (audit of settlement statements, expenses, etc)
Fedex has a separate contract for an "Absentee Owner". You can literally own routes in other states, etc. So there is no need to be eligible to drive. As previously stated however, you do have to service the routes.
Your question involves (in my opinion) the "odd" side of acquiring routes. On average routes sell at about 1 years gross revenue. Multiples usually a little less, per route. ex: 1 year revenue of $80k equates to a sale price of 70-80k providing the truck is in good mechanical condition. 5 routes each generating 80k annually (400k) could be purchased for 300-350k on average. Contractors in distress can be pushed lower. As for my "odd" comment. Contractors sell the routes based on ownership + potential future income. However, the contractors do NOT actually own the routes. FedEx will GIVE a route when/as needed. Therefore, when valuing the business, route "ownership" (in my opinion) should not be a factor.
Other things to consider:
- A driver rear ends another vehicle..6 month suspension with re-certification requirement.
-Certain driving infractions on ones license can result in suspensions, up to and including permanent disqualification.
Also- FedEx only allows a single contractor to own a maximum amount of routes at any 1 facility. This number is roughly 10% of total routes at the facility.
Now, if someone can tell me how to get the start-up capital for 10 routes..I'll have 100 within 5 years.
Thanks for the comments. Some follow-up questions:
1. When you say routes sell for 1 x gross, I've seen different usages of the term "gross." Do you mean FedEx Settlement Gross (before FedEx mandatory deductions) or Settlement Net (what the owner-drivers sometimes call gross, the amount that goes into their checking accounts before paying out-of-pocket expenses like gas, truck maintenance, etc)?
2. When you say FedEx sometimes GIVES a route, what do you mean?
1) Routes typically sell for roughly the total gross revenue earned. Mandatory deductions really aren't enough to sway the price enough to worry about. Supply & Demand, the current status of the contractor (taking best offer, losing their contract, lost driving certification, just wanting out or looking to profit) all change the offer more than the deductions. Plus, the deductions are written off on taxes, so you may as well count them. The contractor's 1099 is a starting point.
2) FedEx opens and closes routes as needed. If you have a route and it reduces enough to not be profitable, FedEx may add it to another route and remove the original completely. Conversely, if a route is growing (which they usually do) FedEx may split it into 2 separate routes. Lastly, if a contractor loses a route and can no longer service it, FedEx has full right to offer it to another qualified contractor ( new or current) at no cost to the new owner. FedEx does not sell routes, they offer them.
Hope this helps..