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I got an email from a friend asking if FedEx routes were a good investment. It's one of those businesses that sounds amazing. Big brand, great cash flow, no marketing, no sales process. So is this a lucrative investment that you've been sleeping on or something that you should avoid at all costs? I'm going to break down some real numbers and give you my honest take. If I'd buy one. First, let's just talk about how FedEx routes work. What they've done is kind of franchise the business, but that's not technically a franchise. Basically, they've taken the whole country into all these different routes and they've cut them up and then they've sell routes to individual owner operators. These people are the ones who are responsible for hiring the drivers, buying the trucks, you know, delivering the packages, maintaining service standards, all that. And they break it into two different parts. There's the last mile, which is like, you know, the people who deliver the package to your house. And then they have Linehaul, which is like the very long distance tractor trailer trucks. They do the same model for both Linehaul and pick up a delivery. I'm primarily going to talk about pick' em delivery because there's way more of those and they're pretty popular. But you have to keep in mind they are not a franchise. They kind of act like a franchise, they kind of smell like a franchise, but they're actually an independent business. So first let's go into some real life examples to show you exactly what I mean. So if you want to go and try this for yourself, go to Biz by Sell right now and hit search. I'm in Pennsylvania where I live and go to filters and here, see it says FedEx. Like they already know you're searching for FedEx. And then normally I'll say like hide price about listing, hide new franchise opportunities, hit apply and you will find a ton of options. Here we have a pickup and delivery runs northeast Philly. Here we have a line haul. So this is like the long haul business. I'm going to ignore that. Line haul, ignore that. But here we go. Here's one in Franklin, Penn. The heck that is $200,000 for cash flow, 600K they're selling it for. Here's 28 locations, 28 routes that they're selling, you know, 670, 170. So let's break a couple of these down. But that's how you go and find it. So here's the first one, Allentown, Penn. Which is about an hour north of me 30 routes that they are selling, $950,000 of cash flow, that they're selling for $1.3 million. And that seems like I was like a pretty good deal. They're selling to basically the business for 3.3, six times the cash flow. So a lot of times when you value a business, you'll say like, how much money is it making? And you divide it by the asking price. So in this case it's about 3.5 times. They have 30 routes, they have three managers. The guy's been in business since 2015. He's got 32 vehicles. So I guess he's got, you know, two on backups and pretty good numbers. He makes about, with 30 routes, 950 cattle of profit. He makes about $30,000 per route. Here's another one in King of Prussia, Montgomery County. This one, what do we got here? 14 routes, about half the size. He's doing about 430 of cash flow on 1.4 million. He's asking 1.4 million. So about 3.3 times. About the same. He's also making about $30,000 of profit per route. Here's a smaller one up wherever this is. Eight routes asking three times, you know, it's 600 divided by 200K. So he's asking me three times multiple. And he's making about $25,000 per route. And so they've got pretty strong financials. I mean, honestly, to buy a business that's making that much money for like three times earnings is pretty good. You have a built in customer base where, you know, FedEx is the one who provides all the packages. Like there's no marketing, there's no sales. Like essentially you are going to their warehouses and just like get paid for every package that you deliver. And they pay you every week based on how many you made that week. And you can grow. Like you can see people start with 8, they could probably buy 14, may they can buy another 30. Like people have the ability to grow to buy more routes. And at the end of the day, you have no rent, you have no storefront. Like you operate out of the FedEx terminals, which is like pretty appealing, right? So like, what's the bad? Like, why are so many of these for sale? And like, is this something that you should really look at? Well, a couple things. One of them is my biggest concern on all this is you have one customer and it is FedEx. FedEx dictates literally everything you do. They tell you how many packages you are to deliver, what are they Gonna pay? How are they gonna pay you? Like, you have zero control of your customers. And so is that something that you're comfortable with? Like, are you comfortable with literally having no control of what it is? For me, Like, I don't know if I want that. Right. I wanna be able to wake up every day and, like, make my business better. And to grow my sales and improve my margins. And with a FedEx business, you are extremely limited. Based off whatever FedEx is doing in order to drive your profits. Another thing is banks don't like lending to these businesses. Like, some of them, you can get a good deal on these because they're hard to sell, right? Otherwise, they'd be getting way more money. But the problem is what you are buying are trucks. And trucks are a depreciating asset. Which means every single year they gain miles and they lose values. And in. Generally, banks do not like to lend a ton of money on depreciating assets like trucks. And so often they will offer seller financing. You'll see a number of listings. We'll talk about seller financing. Or, like, they just have to go out and pay cash, leverage, equity, home equity. And, like, other things in their business to get it done. So that's like, one of the big downsides is it's really hard to get financing on these things. Which is why they trade at better prices. And here's the other thing. And this is the thing that honestly worries me the most. Is that you have very strict contracts. Like, you have to deliver the packages on time. If you don't, you could lose the business. You could get payments delayed. You can get payments reduced. There's a ton of penalties. And so what could happen is, at the end of the day, if drivers call out, if other people fail, like, you are going to be the one delivering packages. I had a good friend who's very close to buying a FedEx route. Like, he went down this whole rabbit hole. And he. And he decided this thing was for me. I really wanted to do it. And he was going to buy it. And then one Saturday morning, near Christmas time, he was out and about, and he saw the FedEx car go by. And guess who was driving it? The owner was driving the vehicle. And he had all these employees and he had all this stuff, but the owner's driving it. And the question is, well, well, why was he doing it? It's because he had to. Nobody wants to drive a FedEx truck on a Sunday morning around Christmas. But they were so busy with packages, he had no other choice but to do it. And. And at that point, he was like, wait a minute. Like, I don't want to do that. I'm trying to build a business that gets me out of that, and then I could build a big team. And this guy had a big team, but he was still in it. And so I think that's a huge problem is there is, like, a ton of turnover with drivers. And at the end of the day, it all falls back on you as the owner. Like any other business, right? But in other businesses, you know, if things fall apart or things go down a little bit, like, you still can, like, recover, but in this, like, you have contracts, like, you have to maintain their service standards, otherwise, like, you could lose the whole business. So imagine you just paid $3.5 million, and you could potentially lose the business because you didn't run it up to the standard that is expected. And so that is a huge concern for me. That is a big one, honestly, of why I would not buy this. Like, I don't like the idea of being handcuffed by having one person, one company that dictates my pricing, dictates everything that I can do holds me to a very strict standard. I can't get financing on it. And it's just, like, a lot of headaches to operate. Now, you may be in a different situation. You may say, listen, I don't care about any of that. Like, I just want to make money. I can buy this thing for cheap. I have a rich uncle or somebody who will help me financing it. Like, all I care about is cash flow, cash flow, cash flow, which I get. Like, I totally get that. And then maybe you're like, hey, I'll just start with one. I'll build it up. I'll eventually buy more. And then if I want to get out, I'll just sell or finance it to the next guy. Like, I'm totally okay with that. And that may be for you, and that may be totally fine. I think the main thing is just, like, know what you're getting into, what the challenges are going to be. Because whatever challenges current owners are facing in this business, like, you are going to face the exact same things. And it's not a matter of, like, are this, like, good challenges or not? It's just, are you ready to do that? Is this the type of thing that you want to do? All businesses are hard. You just got to pick your heart. And so if FedEx is something that you're interested in, I would love to hear about it. Put in the comments below. Have you ever looked at buying a FedEx? Would you buy one? Or do you think you'd rather go the franchise route or independent business route where you have a lot more flexibility, you can sell to different people, you have a lot more control. So, anyway, I hope you enjoyed this. I'll see you in the next one. Cheers.