Buying Routes

Maybe this should go into investing. Has anyone looked to purchasing a Fedex or other route as an owner/absentee? Some of these look pretty lucrative if you have the cash to put down. For example, the below line haul routes cost $1.4m + 350k in inventory and EBITDA $413k. Sure there are headaches involved, but these seem like a pretty great business to buy. Less cyclical and greater return that being a landlord.

www.bizquest.com/buy-a-business-for-sale/fedex-line-haul-route-recession-proof-huge-cash-flow/1190137.html?q=az1mZWRleCxidXNpbmVzc2VzJmthPTEma3dpZD02MiZsPVM2Jm89MQ==

I didn’t know you could franchise these routes. I thought it was like UPS where there is some big union of delivery guys.

What’s the deal with this anyway? Do you need to buy the trucks, short pants, and other stuff, or does FedEx lease this to you?

Per the link the purchase price includes the trucks, branded clothing, drivers, etc. I am not sure what the $350k in “inventory” is, though. I think one of the things that is attractive is that some of these can be pretty turnkey. Beats owning some food service BS.

Why would a person who has dedicated their lives to the knowledge of valuation or portfolio management enter the shipping and freight business?

You realize that if you buy one of these routes, you are the OWNER, right? You have to HIRE DRIVERS, or alternatively, drive the route yourself. It’s not like buying shares of Fedex, where you can buy it and forget about it for ten years.

And before I bought one of these, I’d want to look pretty hard that the financials and tax returns. EBITDA of $413k sounds pretty good, until you realize that it’s a fixed-asset intensive business with a lot of goodwill. In other words, once you subtract the I, D, and A, there may not be a lot of E.

Yes, for sure 35% return or whatever seems too high. However, I would not be surprised if this kind of business still returned 15% or even higher per year. I have no idea, really, so just pulling out numbers that might be plausible. Also, I’m sure the seller is willing to negotiate the price.

Most individual entrepreneurs probably don’t have the capital to buy businesses like this and diversify at the same time. However, I always fantasize that in a few years. maybe I quit finance and just own a series of blue collar kind of ventures…

its a pretty nice business, the cost seems a little high

Thanks for everyone’s opinions. I’ve looked at these a bit. In many cases you are the owner, but you have a business that already has drivers, a manager and a current owner willing to stay on for some period of time to work with you through the transition. Also, I don’t like to think that I’ve dedicated my life to valuation and portfolio management. It’s a job, hopefully one that helps me identify quality investments.

While the EBITDA margin is impressive, Greenie brings up a good point. Interest should be non-existent in these figures as I don’t believe there is any debt. I’d expect depreciation to be high, but as a non-cash expense I am not overly concerned about it. But, the high depreciation due to the capital intensity of the business means that you better get a few solid opinions on the quality and lifetime of the trucks, etc.

Let me ask the partners and see if we have any clients that are in this line of business, and I can get you some real numbers. Of course, John Doe’s route in West TExas wouldn’t necessarily be representative of a route in NYC, but maybe we can still glean some information from it.

edit - Sorry. No luck.

Random thought, i wonder if those drivers are union?

Anyone here in small/private business valuation? Could look up the databases like pratt stats/bizcomps and find some transaction comps.

Wait, what exactly did you ask them? “Hey, do we have any clients who operate a delivery truck business, and if so, can I go through all their tax information? Why? Oh, I want to give this information to some guy on the internet”.

hell i wouldnt mind delivering packages all day for 500k.

what happens if lets say ups or fedex cancels your contract, that is the biggest risk

UPS does not follow the Fedex model - and does not have contractors delivering packages. Good friend of mine started with one route using borrowed money way back. He now “owns” 4 routes and has drivers working for him. He still delivers packages on one route and I do sometimes envy him as this keeps him physically fit.

The main issue I found with this business was that the bargaining power of the customer (Fedex in this case) is very high. Fedex will not cancel the contract but the delivery rates per package are dictated by them.

The other risk is volume on a route - if you get double the packages, you get double the revenue with not a whole lot of extra costs (imagine delivering one overnight letter to an address for $1.35 flat vs. delivering 10 for $13.50). Another point to note is that Fedex bears the risk of fluctuating gas prices - you get subsized gas for “your” Fedex truck.

This is gold.

Angel investing is a way to GO! forget everything else :slight_smile:

i juss met some corporate UPS peepz at a bar last friday. lol