Buyer FAQ
Below Is A List Of Common Questions We Often Receive From Prospective Route Owners:
What is the timeline for buying a route?
-30 days due diligence
-AIM meeting with Senior Station manager
-Upon approval, 30-60 days to close
-Cash deals close the fastest, in as little as 30-60 days. SBA deals can take longer than 90 days or longer
What is required for a new Contractor?
- New entities must be S-Corp or C-Corp. LLCs are not allowed.
- Certificate of Incorporation and good standing certificate from your local Secretary of State.
- W-9
- State Employer Tax number
- State Unemployment Tax Number
- E-verify Company Information Page
- RFI
How do I finance a route?
Our network of lenders understands the FedEx model and has worked with us for years on financing other FedEx transactions. We will ask you if you need an introduction to them and set you up with them. Buyers should start working on the financing portion right away to avoid delays on the back end of the transaction.
Do I need prior experience?
No, most new owners have backgrounds in prior small business ownership, general management, etc. All new contractors go through an approval process with the local station management team. During this time, they review your RFI, demonstrating how you will run and operate the company and handle contingency situations. FedEx recently started a new class for new contractors. You will have to travel to a regional terminal for a week’s training.
How and when do Contractors get paid?
FedEx Contractors are paid every Friday by direct deposit. There are no account receivables! Buyers can verify the contractor’s settlements from the previous week. FedEx Ground issues contractors 1099.
How profitable are routes?
This solely depends on the route operator. However, the industry average shows a typical 10% to 20% margin.
Are there any franchises or royalties paid to FedEx?
FedEx Ground is not a franchise, and no fees or royalties are paid to FedEx.
How do Contractors grow, and how large can my business get?
- Organic growth is 5% to 10% YoY
- New growth opportunities as new stations open in your district
- Acquiring routes from other contractors
- FedEx limits growth depending on the size of the station. They do not want to be dependent upon any given contractor. For example, you could own 5% of the terminal growth in one station and buy additional routes up to the scale limit at another station. Some Contractors own a few hundred routes.
How do I learn to run the business?
During the transition period, the Seller will stay on board for a negotiated period (30-90 days is typical) to train the new Buyer on the business. 99% of the time, these operations are set up to be turn-key operated with trucks and employees in place. Owners do not need a CDL or special license to run the business.
How are routes valued?
Routes are valued based on their free cash flow. P&D multiples float between 3x to 3.5x free cash flow, and line haul deals float between 3.5x to 4x free cash flow.
Where are the trucks kept?
P&D trucks are stored inside the building on the loading docks. Any extra trucks are stored in a spare lot or nearby storage parking area. Line haul trucks are kept on the line haul lot when not running.
Are employees W-2 or 1099?
Per the FedEx Contract, you must pay your employees by W-2. Most contractors pay their drivers every Friday by direct deposit. Contractors are not required to provide any employee benefits.
How do you verify the weekly revenue?
FedEx Ground pays its contractors a weekly settlement from the prior week each week. Within a FedEx settlement, it will show activity based on all your drivers and how many stops and pickups were done. At the end of each year, the Contractors receive a 1099 that matches the settlements.
When is the best time to buy a route business?
The best time is between January and October. However, due to peak season, there is a blackout period for route transfers during November and December.