Anyone have experience with Fedex Ground Independent Contractors?

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November 14, 2023

by a searcher from University of Toronto - Joseph L. Rotman School of Management in Toronto, ON, Canada

Looking to chat with searchers who've ran or looked at deals for small, independent contractor companies for Fedex Ground or other similar large couriers in the space? I've got a bunch of experience competing with these big guys in the tech space, but am curious to know what it's like running one of their small 3P subcontractors.

Please DM me if you've ran or looked at acquiring one of these small businesses.


Thanks!

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Reply by a searcher
from University of Nebraska in Denver, CO, USA
I gave up looking at FedEx Ground contractors after attending a conference last year organized by Spencer Patton, the then-largest contractor in the U.S. and owner of a brokerage that continues to sell these companies (Route Consultant).

Patton called on all contractors to stop delivering on Black Friday if FedEx didn't improve compensation and end costly Sunday deliveries.

FedEx canceled all of his routes and sued him (Patton won, see article below).

While at the conference, I talked to many contractors. The struggles Patton called out were real.

After America's pandemic-induced online shopping spree, many contractors posted extraordinary results. But as online shopping declined, FedEx struggled to remain competitive with UPS. FedEx corporate tightened its belt and squeezed contractors – while fuel and labor costs increased.

I was skeptical of these businesses before attending the conference, too. I had looked at buying around a dozen FedEx contractors. I'm glad I didn't.

That one year of high profits vanished. But brokers were still demanding outsized valuations. At the conference, I met a guy who had bought some Pickup & Delivery (P&D) routes nine months earlier and was going broke.

In the last year, FedEx has moved to address some of the concerns Patton raised, including reducing costly Sunday P&D deliveries.

FedEx Ground "linehaul" routes, their contracted semi-trailer truck routes, typically have higher returns.

But I don't like owning a business that has just one client. Especially one that can dramatically affect my company's financials based on its internal pressures and whims, things that I have no control over.

Happy to connect if you'd like to talk, or brainstorm other types of companies to get into. ;-)

WSJ (gifted): FedEx Sues Ground Contractor, Cancels His Routes https://www.wsj.com/articles/fedex-sues-ground-contractor-that-has-agitated-for-change###-###-#### ?st=b1ssh2pdseqmpop&reflink=desktopwebshare_permalink
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Reply by a searcher
from Massachusetts Institute of Technology in New York, NY, USA
I looked at a number of these for CF play and was self-financing. Never crossed the finish line b/c the seller attempted to pull a bait and switch on the fleet. There are some gems out there, but there appears to be more duds than gems (and the gems are often a result of extenuating circumstances). Easier to diligence than other types of businesses. Factors to consider - fleet age, route type, station management, commercial v. residential route.... Also, two other interesting factors###-###-#### mandatory corporate structure by FedEx impacts after-tax CFs, and (2) FedEx Ground is being merged w/ FedEx Express (a business that has never been profitable), so that will impact contractors, but folks are not sure which way it will go.
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