FedEx was founded in Little Rock, Arkansas by Frederick Smith in 1971, focusing on express delivery. Smith ran the company till 2022 with Raj Subramaniam stepping in as CEO. As of 2021, FedEx was bringing in $83 billion in revenue, up 21% from 2020’s $69 billion. FedEx operates in 220 countries offering services in the shipping industry, moving anything from sensitive documents on the same day to dangerous materials around the world.
The Packing and Shipping Industry connects businesses offering products with consumers in a wide range of locations. And will continue to be an extremely important aspect of the economy. Small companies and individuals use packing and shipping franchises across America to satisfy all their commercial needs ranging from shipping products to printing advertisements to notarising documents.
As the need for traditional mailbox services has declined significantly, the expansion of e-commerce has called on shipping and packing outlets. Small businesses use third parties to send out their products and connect their products to a nationwide (or global) delivery network. Currently, in revenues, the size of the market is $2.1 billion.
FedEx is one of the biggest players in the industry, competing against UPS, nationalized postal services, DHL, etc. They acquired TNT in 2016, expanding their network further.
There are two types of FedEx routes that you can buy:
For both kinds of operation, you use your own or leased vehicles and operate your business, hiring and training drivers; and planning the day-to-day of your business. Both of these types of routes are discussed in more detail below.
At any time, there are approximately $670 million worth of FedEx routes for sale. This represents around 5% of the total value of all the FedEx routes combined. While this might seem like a high number to some, it is the average turnover rate in that industry.
FedEx contracts with your independent business when you buy a route so some of your responsibilities are:
Usually, you either get in touch with FedEx for a new route or with existing route owners to get started.
FedEx P&D routes deliver to local businesses and homes in a designated territory. This territory is usually defined in the Independent Service Provider (ISP) contract. These types of routes have two types of operations: Delivery routes and Ground routes.
Delivery routes primarily service homes and households with small to medium package sizes but a huge seasonal variation with business really picking up around Christmas. Ground routes usually operate between the FedEx location and businesses with medium to large packages but much less seasonal variation. In 2022, most P&D routes do both kinds of deliveries.
As with everything, there are some pros and cons to P&D routes. While the advantages are that the trucks are smaller and the geographic territory is more concentrated, making it easier to find drivers amid the long-haul driver shortage in the country, P&D routes generally make less money than linehaul runs and depending on the mix of delivery/ground in your region, there might be intense seasonal variability. However, P&D operations do not require 18-wheeler trucks that are hard and expensive to maintain.
FedEx Linehaul routes involve transporting a FedEx trailer between locations. While P&D operates usually during the day, linehaul operations are more flexible with times, allowing operations in low-traffic time. Runs for this kind of route are long-distance from hundreds to thousands of miles long. Linehaul operators need semis in their fleet. These are expensive to buy/lease and maintain. They are also much more prone to liabilities arising from accidents.
A linehaul run might be solo or be done by a team. While solo runs might be shorter, with the driver returning to home base at the end of the run, driving teams of two might be away from home for even a week, going thousands of miles transcontinental.
This operation is also divided into subtypes of contracts: dedicated, unassigned and spot.
Dedicated runs have assigned start and end points. So your truck will be moving between the same point A and point B every time. Unassigned runs always originate in one spot but have no regular endpoint; they are called in to fill extra capacity needed by routes that dedicated runs could not serve. Spot runs are like P&D routes where you travel in your territory daily with semis, hauling larger cargo than do P&D runs. Dedicated routes are more desirable for owners as they allow for an easy projection of revenue and costs.
The cost of linehaul routes is higher (as compared to a P&D route) because the trucks are larger, and a large vehicle on the road presents inherent risks. Additionally, these trucks are expensive to buy, maintain, and repair. However, revenue is also bigger and with FedEx having to buy more one-time-purchased power to haul their trucks across the country, linehaul routes might be worth considering strongly.
There are tons of websites available online that sell routes as well as FedEx, offering new routes so let’s first focus on what to look at.
While buying, look for the price of the route as a percentage of the annual revenue. We recommend this because revenue is more or less going to remain stable but profits will vary depending on how efficiently you are able to run your business. Also, the owner might be running expenses through the business that are not essential to its operations.
Also, look for FedEx route profit margins. FedEx P&D routes generally do not operate at margins of higher than 25% with 15-25% being more typical.
Linehaul runs might bring in 10% higher than P&D routes with solo routes in the 20-30% range and team runs in the 40-45% range. Higher figures usually mean some financial manipulation has been done in the figures. There is also more information provided by FedEx here.
A few different broker and listing sites offering FedEx Routes For Sale include:
If you want to start with FedEx and not buy an existing route, get in touch with FedEx to see what opportunities are available.
As noted above, the profit margins for different kinds of routes vary differently, but FedEx claims that the average business owner makes $1.5 million in revenue. When you buy a route, look at the financials from the old owner or other owners in the area to figure out how much you will be able to make if you contract with FedEx on a given route.
FedEx is in a strong position financially, posting $5.2 billion in profits in 2021, up a staggering 307% from $1.28 billion in 2020. Volume growth, reflecting increased e-commerce demand accelerated by the coronavirus pandemic drove strong revenue and operating income growth in 2021.
|Operating income (loss):|
|FedEx Express segment||2,810||996||182|
|FedEx Ground segment||3,193||2,014||59|
|FedEx Freight segment||1,005||580||73|
|Corporate, other and eliminations||(1,151)||(1,173)||2|
|Consolidated operating income||5,857||2,417||142|
|FedEx Express segment||6.7%||2.8%||390 bp|
|FedEx Ground segment||10.5%||8.9%||160 bp|
|FedEx Freight segment||12.8%||8.2%||460 bp|
|Consolidated operating margin||7.0%||3.5%||350 bp|
|Consolidated net income||$5,231||$1,286||307|
Investing in a FedEx route can be an attractive opportunity, especially for individuals who carry a business background and have former logistics work experience. The Packing and Shipping Services industry is generally a safe investment as there’s always room for expansion, especially seeing their ultimate goal is to merge and make cities, countries, and families closer to each other!
While this may be the business for you, make sure also to check out other businesses analyzed on Vetted Biz like UPS and Amazon DSP.
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