FAQ

FedEx¹ does not require new contractors to have any prior background or experience in the logistics industry. New contractors are approved on a case-by-case basis. As part of the approval process, new contractors will be required to submit an “RFI” or business plan. This RFI will include information such as work experience, safety plan, plans for meeting customer needs, employee recruitment, etc. More information on the FedEx approval process can be found here (link to FedEx approval process page).

FedEx requires its contractors to be incorporated as either a C-Corp or S-Corp. FedEx will not allow LLC’s. A contractor’s decision to pursue a C-Corp vs. S-Corp should be made in consultation with both legal and tax counsel.

There are a number of steps involved in the FedEx approval process. A new contractor’s approval is evaluated (and ultimately approved) by FedEx on a local and corporate level. The approval will require numerous documents to be processed by multiple different parties. In general, the approval process will take a minimum of 30 days. Our experience suggests the approval should take on average 30-60 days.

FedEx contractors are paid weekly by FedEx via direct deposit. The compensation is calculated based on the activity from the prior week and involves a number of different variables. Such variables include: # of stops, # of packages, # of miles, etc. In addition to the weekly compensation received, contractors receive bonuses for things such as customer service and safety. All FedEx contractors are paid as 1099 independent contractors.

No. There are no franchise or royalty fees that independent contractors pay to FedEx.

There are several ways to grow your FedEx business. The first way is to simply allow your business to grow organically as FedEx grows. FedEx has been on a very steady growth trend and ultimately the independent contractors are responsible for the fulfillment of this growth. As FedEx grows, opportunities for new routes and service areas will ultimately be awarded to contractors at FedEx’s discretion. These growth opportunities are not purchased by the independent contractor, but rather awarded by FedEx at no cost.

A second way to grow your FedEx business is by acquisition. As a FedEx contractor, you will be stationed in a terminal with many other FedEx contractors such as yourself. Growth-minded contractors will often purchase routes from other contractors who are looking to sell.

In short, FedEx routes are valued based on a multiple of the business’ free cash flow. This valuation will be inclusive of the operating business itself, as well as any vehicles (and related assets) utilized by the business. FedEx routes are typically valued on a cash-free/debt-free basis. This means that any retained earnings accumulated in the business’ checking/savings account will remain with the seller. On the flip side, it will often be the seller’s responsibility to pay-off all vehicle debt as part of the purchase price. Note: there are several circumstances in which vehicle debt/leases are assumed by the new buyer. These variables are accounted for in our valuation process and done on a case-by-case basis.

Yes, financing options are available for the purchase of FedEx routes. An SBA 7a loan is the most common type of route financing available. If you are seeking financing for the purchase of a FedEx route, it is very important that you work with a lender who intimately understands the FedEx business model. Because FedEx businesses are traditionally very asset-light and goodwill-heavy, a lender will need to be very comfortable with the business model due to the lack of physical collateral available in the business.

FedEx does not have a formal contractor training program. While new contractors will receive support and assistance from FedEx management at the terminal, the majority of the training will need to come from the selling owner. In a typical sale, we often see a transition period of 2-4 weeks. During this period, the selling contractor will train the new owner on the daily operations of the business, provide introductions to any service providers (repair shop, truck rental, etc.) and more.

In general, the FedEx vehicles are stored at the FedEx terminal at no charge to the contractor. On occasion, FedEx contractors will allow drivers to store the vehicles at their respective homes.

No, it is not required that a FedEx contractor provides any employee benefits.

A strict requirement of FedEx ground is that all employees and drivers are paid as W-2 employees. Contractors often opt to pay employees weekly in conjunction with the settlements received on a weekly basis. The payment schedule is made at the discretion of the FedEx contractor.

The revenue received by FedEx is extremely easy to verify and calculate. FedEx contractors are paid every week for the prior week’s activity. The revenue received is accompanied by a weekly settlement statement which details all of the activity and calculations supporting the weekly amount paid. In addition to the weekly settlements received, FedEx issues a 1099 at the end of the year which validates the yearly revenue received by the contractor.

There is no FedEx requirement that an owner be a qualified driver or obtain a CDL. In many cases, FedEx contractors will require their manager(s) to become qualified drivers (and obtain a CDL if required) so that they can fill-in for any driver absence.

The “peak” season is the busiest time of year for most FedEx contractors. It is generally described as the late November – December time period. During this time, the FedEx business greatly ramps up to account for holiday spending. In preparation for peak season, many contractors start hiring seasonal drivers and arranging rental vehicles weeks (and sometimes months) in advance.

There is no limit to how many work areas you may own as an independent contractor. There are numerous contractors across the country with upwards of 50-100 routes and beyond. However, FedEx will implement certain restrictions on how large a given contractor can become in a given terminal. These limits vary by terminal and exceptions to the rule can be made. FedEx implements these limitations to guard against being overly reliant on any given contractor in any given terminal.