Purchasing Line Haul Routes (FedEx or other)

by a searcher from Texas A&M University

2 years ago

Hello,
I wanted to see if anyone has experience acquiring or taking a deep look at contracted line haul trucking. You can acquire these routes similar to a FedEx delivery route, but usually a higher barrier to entry (price of truck). Returns seem consistent and good, but not exponential. Finding and keeping drivers seems to be the biggest challenge, but line haul should come with better retention than delivery. Other companies also contract these types of routes as well - not just asking about FedEx.


Thanks for any input.

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searcher from University of Nebraska - Lincoln

I gave up looking at FedEx Ground contractors after attending a conference 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

1 year ago | like reply | 3 likes

searcher from Northwestern University - Kellogg School of Management

Hi Clayton, are you still pursuing this opportunity? I'm looking at it myself and would be curious to hear about any learnings you've had.

2 years ago | like reply | 0 likes

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