Questions and Answers for Buyers of FedEx Ground Routes

 Prospective buyers of FedEx P&D routes have numerous questions about the routes, financing, and analyzing potential purchases among other things. Most of the questions probably cover one of those three topics. This post adds to some of the frequently asked questions (FAQs) that potential buyers of FedEx ground routes might want to answer.

 How is Package Delivery Volume Changing?

It looks like demand will grow, or stay high. In 2022 retail e-commerce sales are likely to top $1 trillion in 2022, a substantial increase over 2021, for example. Many of the sales will be digital products, but most of that money will go to physical products, which will drive very strong demand for package deliveries into 2023. In 2021, FedEx delivered 3.13 billion packages, a substantial increase from 2.54 billion in 2020 (based on figures from Statista.com). So, if volume grows as expected we’re looking at almost 3.5 billion delivered in 2022 and at least as many in 2023.


What About Payments to Owners of FedEx Routes?

FedEx Corporate pays for each package delivered. In the past, they have offered holiday bonuses for P&D contractors who hit certain delivery targets. For 2020, some contractors felt the delivery targets were unrealistically high because many owners didn’t hit them despite surging demand for package deliveries. So, yes, FedEx does offer performance bonuses and that offers another source of revenue. They may pay a bonus or exceptional customer service too.

How Do I Evaluate the Profit Potential of a Route?

As part of your due diligence, you’ll naturally want to review some documents that speak to the route’s profitability, the owner’s business practices, and so on. One of the most common questions that prospective route buyers ask, is “How do I know if a route is a good investment?” One way to answer this question is to compare their profits to their revenue. Look for a margin of 10% to 25% of gross revenue. Of course past performance is no guarantee of future performance. But, a route business that’s been earning a respectable gross and seems to be well-run indicates a route that is probably a good investment.


Why Do So Many Route Owners Seem to Be Selling?

Firstly, realize that good route owners sell all the time. FedEx has increased the amount of “busy work” they expect of contractors. FedEx HQ also changes its rules and business processes for reasons that might be opaque to the average contractor or route buyer. These changes along probably haven’t pushed anyone into selling, but that may be one reason. Other good reasons why a seller wants to give up a profitable business include:


  •       Looking to retire
  •      Wanting to invest more time in other priorities, like family time
  •      Needing capital to pursue a new business venture
  •       Losing their contract (rare but can happen)


None of those factors are truly a reflection of problems with FedEx or with the package and delivery market.

Make sure you understand what FedEx requires of a contractor in terms of administrative work, performance, and so on. When you have that knowledge, you will be better able to evaluate a potential purchase.

Due Diligence is Easier with the Right Broker

Package and delivery routes can be great investments for the prepared buyer. Before you buy a route, you need to learn some of the details of evaluating potential purchases.  If you are interested in information on how to buy a route, we have listings and resources you need at Capital Route Sales. Visit our Buyers page to see how we help buyers of FedEx ground routes for sale across the United States. You don’t have to do all of your homework when much of the buyer information you need to make a smart decision about purchasing FedEx routes for sale may be found at Capital Route Sales.


 
 
 

Location: Woodstock, GA 30188, USA

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