Comprehensive Guide to Purchasing FedEx Linehaul Routes

When thinking of purchasing and running FedEx Routes, people often think of pick-up and delivery or FedEx Ground routes. However, there is another side to the FedEx business model: FedEx Linehaul routes. This involves independent contractors moving trailers filled with packages from location to location using semi-trucks.

This side of the business can be very profitable, and the owners of FedEx Ground routes often expand their business by adding line haul routes as well. However, this type of route does have some specific requirements and equipment not often used in Ground routes.

Here is your comprehensive guide to purchasing and running a FedEx Line Haul route.

Understanding FedEx Linehaul Routes

FedEx linehaul routes can be broken into a few different categories.

  • Dedicated runs these routes have the same destination and departure station on each trip. For example, on a Boise to Salt Lake City dedicated run, the truck will depart from Boise, travel to Salt Lake, and return to Boise on each run.
  • Unassigned runs start at the same FedEx station but do not have a regularly assigned destination. Your driver might start in Boise every time but may travel to Portland, Los Angeles, or a destination even further away based on the needs of FedEx.
  • Spot runs are shorter runs that are local, within a designated area, and drivers travel out of their home base daily. But they drive semi-trucks and carry larger packages or even pallets. Sometimes an entire trailer will go to a single business like a Walmart or an industrial complex. While these routes can be somewhat consistent and predictable, a regular volume is not guaranteed.

Dedicated runs are the most stable and often coveted by drivers. The route, package volume, hours driven, and other factors remain pretty constant. However, unassigned runs can be very profitable, as the distance and time vary, and drivers may be away from home in an unpredictable way.

Spot runs are similar but may vary a bit more than either of the other types of run. A FedEx Linehaul route business might take on one or more of this type of run, and ideally, for the route owner, a variety of runs will mean more stability and greater profits.

Because they use semi trucks and haul trailers, there are more requirements for drivers and equipment than with ground routes. Also, longer routes often require drivers to be on the road for extended periods of time, while pick-up and delivery drivers are home every evening.

Once you understand the nature of FedEx linehaul routes and you discover you are still interested, you’re now ready to start doing some additional research.

Research and Due Diligence

The first step you need to take is to determine if there are routes available in your desired location. This is the “base” where you will operate from, and it should ideally be near where you live. If you also own FedEx Ground routes and are looking at expanding your business into FedEx Linehaul Routes, this can be especially important. You don’t want to manage FedEx routes in a variety of locations, as you may spend a lot of time running back and forth.

Once you find a suitable route, you will want to look at the route production historically. How has it performed? Are things consistent or up and down? Is the route consistently profitable? Even early in the purchase process, you will want to at least have a general idea of the route finances and costs like fuel, insurance, maintenance, and more. You’ll get more details on this through the due diligence process once you decide to make an offer.

Lastly, you will want to determine the growth potential of the route. Is it simply stable, or is there a chance that volume will increase along with profits? Will more types of runs become available in this area over time? In short, can you grow and expand this business over time?

When going through this process, even early on, it is a good idea to bring on a route broker. They know what routes are available in various locations and can help you gather the financial data you need.

Determining the Purchase Price

How much will you pay for FedEx Linehaul routes? Well, that depends on a lot of elements:

  • Is equipment included in the route purchase? What is that equipment worth?
  • How profitable is the route right now? Historically, how profitable has it been? How do maintenance and fuel costs affect your ROI?
  • Is there growth potential with this route? While you looked at that in the last step, at this point, you are using that information to determine route value.

As with the previous step, a route broker can often help you at this point. They can help you with a solid business valuation, looking at all the factors involved, so you can make an informed offer.

They can also help with the next step when you negotiate the price and terms with the seller. Use the data you have, the age of the equipment, and an understanding of the current market to determine how much “wiggle room” the seller has on price. At the same time, determine the maximum you are willing to pay, and stick with it.

This number comes from due diligence, the act of examining the numbers the seller has shared with you in detail. Look at profit and loss, real costs, and any debts or obligations tied to the route or the business. The profit margin of FedEx linehaul routes can be a generous one, but that can be narrowed by a number of factors. Be sure to thoroughly vet the route at this point.

This is another area where a route broker comes in handy, as they know all the steps to due diligence and can help ensure your financial analysis is accurate and complete.

Legal and Regulatory Considerations for FedEx Linehaul Routes

Before you jump in with both feet, understand the legal requirements both from FedEx and from state and federal agencies. You and any drivers you hire will need a valid CDL. You will also need a Motor Carrier number and all the things that come with it. FedEx will have to approve your application and the training and safety records of any drivers.

Once you know you are qualified and have the licenses you need, you’ll want to go over the legal aspects of the purchase agreement, including the purchase price, timing, and whether or not the previous owner will stay on for transitional training. This last step is highly recommended to ensure your transition is as smooth as possible.

Financing Options

You will also have to determine how you will pay for your route. FedEx Linehaul routes are like any other service business, and purchasing them is as well. You’ll have some of the same options:

  • SBA Loans: These loans can help you purchase a FedEx Linehaul route, but you usually need excellent credit and some money down.
  • Leveraging Assets You Already Own: Everything from Home Equity to leveraging the equity you have in other property, stocks, and bonds, and savings are all ways you can finance your FedEx Line Haul route.
  • Borrowing from friends and family: This can create issues, so be sure to put contracts in place just as you would with any other lender. This can help you make up the difference if other financing is not enough to cover the entire cost of the route.

Keep in mind that your interest rates and monthly payments on any amount financed will impact your overall profit margin. Be sure to consider this before undertaking any financing options.

Also, rates are often negotiable, or payments can be reduced by putting more money down, extending the term of the loan, and more. Be sure to get more than one quote and approval, and speak with your lender about how to maximize your financing advantage.

Conclusion

Owning and operating FedEx Linehaul routes is one of the most profitable types of business in the last-mile industry. However, there are a lot of things to consider. When you are ready to purchase a route, look at location, history, and the future to see which route will work best for you in your situation.

And if you need help, at Route Advisors, we are with you every single step of the way. We’ll help you find the route that best suits you, walk you through due diligence, assist with closing paperwork, and more. Contact us today for more information. We’d love to talk with you about being your business broker.

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