Author Topic: Purchasing Delivery Route  (Read 1875 times)

Texas82

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Purchasing Delivery Route
« on: April 26, 2017, 10:58:59 AM »
Looking for someone who has experience in purchasing/operating a delivery route, I have a high interest in this and have many questions.  Thanks!

SeattleCPA

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Re: Purchasing Delivery Route
« Reply #1 on: May 04, 2017, 07:59:19 PM »
Looking for someone who has experience in purchasing/operating a delivery route, I have a high interest in this and have many questions.  Thanks!

I have no clients who have a delivery route, sorry... but because no one has responded, I'll say you want to make sure your purchase's financial structure works. I.e., you want to make sure you get paid enough for your time, to make any payments required by the purchase and so you have some cushion. More info and more tips here:

http://evergreensmallbusiness.com/buying-a-small-business-tips/
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CowboyAndIndian

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Re: Purchasing Delivery Route
« Reply #2 on: May 05, 2017, 06:05:03 AM »
Looking for someone who has experience in purchasing/operating a delivery route, I have a high interest in this and have many questions.  Thanks!

I know someone who bought a couple of FedEx delivery routes.  He had his ass handed to him on a platter.


He got stuck with a couple of unprofitable routes, I think seller conned him here with the amount he would make on the route.He also bought the vehicles from the guy selling the route and he got major vehicle issues in a couple of months.

Yes, he did not do his due diligence.


He had issues with employees who would go and deliver. If one did not come in, he had to fill in for that person. He could not take vacations etc. Just be aware that there are very strict guidelines, and if you do not perform, FedEx can and will take the route away from you. This is what happened to him.

SeattleCPA

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Re: Purchasing Delivery Route
« Reply #3 on: May 05, 2017, 04:58:00 PM »
Looking for someone who has experience in purchasing/operating a delivery route, I have a high interest in this and have many questions.  Thanks!

I know someone who bought a couple of FedEx delivery routes.  He had his ass handed to him on a platter.


He got stuck with a couple of unprofitable routes, I think seller conned him here with the amount he would make on the route.He also bought the vehicles from the guy selling the route and he got major vehicle issues in a couple of months.

Yes, he did not do his due diligence.


He had issues with employees who would go and deliver. If one did not come in, he had to fill in for that person. He could not take vacations etc. Just be aware that there are very strict guidelines, and if you do not perform, FedEx can and will take the route away from you. This is what happened to him.

Again, I have no professional experience with clients working in this category. But CowboyAndIndian's story sounds like a really common outcome based on what I see with other sort of similar ventures. Sorry.

I think you can make money in a small business. Actually, that's not right. I know you can. But you got to be careful and not overpay. And you got to do your financial engineering right.

Good luck Texas82!
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craiglepaige

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Re: Purchasing Delivery Route
« Reply #4 on: May 06, 2017, 10:28:52 AM »
My FIL owns a Pepperidge Farm route and has had it for over 30yrs. Ever since I've known him (13 years now) he has complained about how little money he makes after all is said and done.

Between paying for the truck, fuel and repairs. Paying for people to run the route when he's on vacation. Paying for insurance. Paying for products(not sure how this works), etc. He supposedly brings in about $35k a year after all is paid for.

He wakes up at 3am everyday and works till about 1pm. He's off on Wednesdays only. Holiday seasons get more hectic and he works more hours. My MIL usually helps him during the holidays and sometimes my BIL. It depends on the orders I guess.

At first I thought about maybe buying the route off him once he's ready to retire but the more I think about it, the less appealing it becomes.
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SeattleCPA

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Re: Purchasing Delivery Route
« Reply #5 on: May 06, 2017, 12:17:30 PM »
My FIL owns a Pepperidge Farm route and has had it for over 30yrs. Ever since I've known him (13 years now) he has complained about how little money he makes after all is said and done.

Between paying for the truck, fuel and repairs. Paying for people to run the route when he's on vacation. Paying for insurance. Paying for products(not sure how this works), etc. He supposedly brings in about $35k a year after all is paid for.

He wakes up at 3am everyday and works till about 1pm. He's off on Wednesdays only. Holiday seasons get more hectic and he works more hours. My MIL usually helps him during the holidays and sometimes my BIL. It depends on the orders I guess.

At first I thought about maybe buying the route off him once he's ready to retire but the more I think about it, the less appealing it becomes.

I've said this here before, but I observe in my own industry that many small business owners don't really make a true entrepreneurial profit. They work a job... and they work hard.

Some people (maybe the top 20% or so) do great. A few do fantastic.

This situation leads me to throw out the idea that it's okay if there are people in the category who "merely" make a living... but if you want to do better than that, you maybe want to confirm there's possibility to earn an entrepreneurial profit. And then you want to figure out what you need to figure out in order to someday make sure you're getting an entrepreneurial profit.

BTW, I don't think it makes sense to merely make a wage-like profit in a small business. You got to earn some return on your capital. And you got to have some cushioning for the speedbumps you'll encounter.
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craiglepaige

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Re: Purchasing Delivery Route
« Reply #6 on: May 06, 2017, 01:21:53 PM »
You're completely correct.  For my FIL, it would be extremely difficult to make extra money unless he's willing to work longer hours. He has told me of some coworkers who go from 4am - 4pm - EVERYDAY.  Fuck that.

I hate to say it but he's really just a glorified middleman without benefits. He buys the product at a lowered rate and resells it, and its responsible for everything. He doesn't own the product. He doesn't own the resell location. He doesn't control the price, cost, profits, and orders etc.

When you think about it, the company has it easy. They sell the drivers this "Be your own boss" bullshit and they get screwed. 

My brother is a driver for Pepsi and all he does is show up, driver, unload and go back. And he makes about $44k a year.  Truck breaks, who cares. Vacation paid and doesn't have to worry about finding a driver to sub in. Insurance for the truck covered, along with fuel and such.  Yeah, my FIL is kind of getting shafted.
-The conqueror will always become a slave to his conquest.

- Eres Un Esclavo Financiero
https://youtu.be/GO1Fsp4cUTQ

Texas82

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Re: Purchasing Delivery Route
« Reply #7 on: May 06, 2017, 02:37:58 PM »
Thanks everyone for your input.  I was looking into a bread route, not so much anymore.  After further research and everyone's input to backup what I've researched, it's not as appealing anymore.  I have kids, the lack of vacation and/or being stressed about someone running your routes for you while on vacation is just not worth it.  I currently work in the mortgage finance industry, just looking for something outside of the office environment...burnt!  Again, thanks everyone for  your input!

Ocinfo

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Re: Purchasing Delivery Route
« Reply #8 on: May 06, 2017, 02:52:55 PM »
Thanks everyone for your input.  I was looking into a bread route, not so much anymore.  After further research and everyone's input to backup what I've researched, it's not as appealing anymore.  I have kids, the lack of vacation and/or being stressed about someone running your routes for you while on vacation is just not worth it.  I currently work in the mortgage finance industry, just looking for something outside of the office environment...burnt!  Again, thanks everyone for  your input!

Good choice! I know a guy with a bread route and it sucks. He's out delivering by 4AM every day, wife has to help at times, had to rent a truck when his broke down, just endless issues. He was at least making some money but definitely not worth it.


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Guy Ensenada

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Re: Purchasing Delivery Route
« Reply #9 on: May 07, 2017, 07:30:01 AM »
Thanks everyone for your input.  I was looking into a bread route, not so much anymore.  After further research and everyone's input to backup what I've researched, it's not as appealing anymore.  I have kids, the lack of vacation and/or being stressed about someone running your routes for you while on vacation is just not worth it.  I currently work in the mortgage finance industry, just looking for something outside of the office environment...burnt!  Again, thanks everyone for  your input!

Probably a good choice. My friend runs a bread route here in the great north east. Up at 3:30 or 4 to drive over an hour to the depot. In the snow belt of lake effect snow, that's no fun, and it's another hour drive back fully loaded before he gets to his territory. Gets Sunday and Wednesday off. He's home in time to get his kids from school, and if he takes vacation he swaps with a driver in the region who has different stores or his father or brother cover for him. That gets old for all involved and eliminates the family beach vacations.

Another does similar work for a potato chip/salty snack company. They bring the product to him, which helps, but he goes non-stop from the week before Memorial day right through the Super Bowl.

Both can make a decent wage for our area, but it is a tough grind.

Raeon

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Re: Purchasing Delivery Route
« Reply #10 on: May 30, 2017, 11:43:20 PM »
Wish I had seen this sooner.  I am currently a bread man.  It's honestly much the same as any investment or small business; due diligence is key.  Fuel, depot rent, part-time employees to cover your store stocking on your non-delivery days, insurance, and equipment all cut into profits.  So long as you really get down into the details before making a decision it doesn't have to end badly.

Bread routes are a dream job for MMM minded folks.  You can have a lot of fun optimizing your income by finding ways to cut fuel,equipment,labor, rent, and shrink costs.  If you're frugal and start at 20 you could be retired by 35 or 40... if you operate it like a McJob... you'll be miserable and broke. (In mind, body, and wallet)


That said, it's not a terrible path for someone who chooses to not attend college.  I asked my dad for advice before doing so and he put it to me this way, "When you are done with the route, you can sell it and get your money back.  You can't do that with a diploma."   

I'll put down some hypothetical numbers that are pretty accurate for most of these routes.

Asking price: 15x weekly sales. Average sales $9000/wk x15= 135000. 
Loan payment: Assuming 20% down and 8%apr = ~1300/month.
Depot rent: usually free or you are paid a touch more in commissions to compensate.  Most guys run out of storage units for 300-500 a month.
Fuel: varies greatly based on route.  I'll go with a 500/month figure here, but I pay over 1000/month due to being more rural.
Truck+trailer or box truck:  Used... you can get by with 10-20k.  New, you're looking at 75k+. I''ll go with 350/month as a middle ground.
Accountant, insurance, miscellaneous: 400/month.

Income: Usually about 18% of sales... 9k/wk*.18* 4.3wks/month= 6966 or ~7k/month.

7k-fuel,vehicle,insurance,misc = 5750/month gross.

70k a year is quite decent for little education. However, you have to take out your route loan payment from this (-1300/month) and since most of the guys insist on getting nice trucks, the vehicle expense goes up a bit too. On the plus side, the loan payment acts as a sort of forced savings account.  The interest gets expensive, but it's the most optimistic way to look at it. 

Downsides:
Early hours, no vacations, rarely a true day off.  You almost always have to be at a store somewhere on the route to touch up your displays and make your shelf look pretty for the day, even if it's not a regular delivery day. Lots of stupid store employees... like REALLY stupid.  Their minimum wage jobs are the peak of their careers;little intelligence and even less common sense.

Upsides: 
Good money if you know how to manage money, early hours if you are into that, no boss breathing down your neck all day (not directly anyways; instead you have mini-bosses at every account who can really get under your skin.  Alternatively, some of them are wonderful. You really need to have some people skills to enjoy this work)

My personal situation has gone from something similar to the generic Joe Route above to much more complicated.  I have 2 huge routes with 4 employees (2FT+ 2PT).  I work roughly 2am-6pm 2 days a week, 6am-6pm 2 days a week, and have 3 "days off" where I work about 2-4hrs each.  I have paid off my 1st route and only have 1 year left to pay off the 2nd.  It's long hard work, but my net worth has gone from 5k at age 20, to about 400k at 31.  This is without being crazy frugal in my day-to-day life.   My goal is to sell the routes in another year or 2 and freelance vacation relief while tending my nest egg until the 1M mark.

This brings me to the last perk of the routes.  Once you know how to do these routes and people know you are capable of doing them, you can run other people's routes for them while they go on a much needed vacation.  These guys are desperate for time off.  $300 cash under the table/day is not unheard of if they know they can trust you to do a good job. Once word gets out, they'll be knocking down your door begging for you to cover for them. There are some potential headaches but ultimately when I sell my routes I plan on doing this as my main hustle.  I will get to write my own schedule and not have to worry about the long-term logistics of the routes or the costs of equipment/overhead.  The previous owner of my route did this after selling to me and did quite well for himself.  He has since mostly stopped due to being nearly 70 years old and there's a gap waiting to be filled!

Long story short:  If you're not afraid of work that consumes your everyday life for a decade or two, it CAN be decent.  It's just not a job for the average person though.  It's definitely one of those careers that requires "the right stuff".  I view it as an athlete job for the common man.  Get your money while you're young and time is on your side (compound interest).  Do NOT try to take it on in a mid-life crisis.

PS: There are 2 other "optimal" endings I've seen for route owners.  1 guy has 3 big stores, and nothing else on his route.  He sold off the rest.  He can work less than 30 hours a week and make over 50k/year.  The other bought a route in a growing city and kept splitting off territory as the city grew.  His 150k route split 6 times at 150k/split.  He finished and retired with over 1M in equity alone, not to mention all the checks along the way.
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Texas82

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Re: Purchasing Delivery Route
« Reply #11 on: May 31, 2017, 10:19:43 AM »
I would have to agree with starting this fresh out of High School as an alternative to college instead of later in life.  Me being 35, 1 child (twins on the way), time is not on my side as much as it use to be.  I was sold by the 'get off by noon' schedule with a bread route as a way to gain more awake time at home, I currently work the normal grind of 8-5, get home at 6. 

I'll continue my search for an alternative to my current line of work.

Thanks again for everyone's input!


CowboyAndIndian

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Re: Purchasing Delivery Route
« Reply #12 on: May 31, 2017, 08:29:46 PM »
Wish I had seen this sooner.  I am currently a bread man.  It's honestly much the same as any investment or small business; due diligence is key.  Fuel, depot rent, part-time employees to cover your store stocking on your non-delivery days, insurance, and equipment all cut into profits.  So long as you really get down into the details before making a decision it doesn't have to end badly.

.....

Raeon, awesome post!

I can see why you are successful: you are a numbers guy and have broken down the business into very understandable pieces.

CowboyAndIndian

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Re: Purchasing Delivery Route
« Reply #13 on: May 31, 2017, 08:31:30 PM »
I would have to agree with starting this fresh out of High School as an alternative to college instead of later in life.  Me being 35, 1 child (twins on the way), time is not on my side as much as it use to be.  I was sold by the 'get off by noon' schedule with a bread route as a way to gain more awake time at home, I currently work the normal grind of 8-5, get home at 6. 

I'll continue my search for an alternative to my current line of work.

Thanks again for everyone's input!

Glad we could be of help. Best of luck on your trip to FIRE!

FIREby35

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Re: Purchasing Delivery Route
« Reply #14 on: June 02, 2017, 06:36:42 AM »
My FIL owns a Pepperidge Farm route and has had it for over 30yrs. Ever since I've known him (13 years now) he has complained about how little money he makes after all is said and done.

Between paying for the truck, fuel and repairs. Paying for people to run the route when he's on vacation. Paying for insurance. Paying for products(not sure how this works), etc. He supposedly brings in about $35k a year after all is paid for.

He wakes up at 3am everyday and works till about 1pm. He's off on Wednesdays only. Holiday seasons get more hectic and he works more hours. My MIL usually helps him during the holidays and sometimes my BIL. It depends on the orders I guess.

At first I thought about maybe buying the route off him once he's ready to retire but the more I think about it, the less appealing it becomes.

I've said this here before, but I observe in my own industry that many small business owners don't really make a true entrepreneurial profit. They work a job... and they work hard.

Some people (maybe the top 20% or so) do great. A few do fantastic.

This situation leads me to throw out the idea that it's okay if there are people in the category who "merely" make a living... but if you want to do better than that, you maybe want to confirm there's possibility to earn an entrepreneurial profit. And then you want to figure out what you need to figure out in order to someday make sure you're getting an entrepreneurial profit.

BTW, I don't think it makes sense to merely make a wage-like profit in a small business. You got to earn some return on your capital. And you got to have some cushioning for the speedbumps you'll encounter.

Seattle CPA -

I read books that helped me make the leap from being an employee to "self-employed" to "owning a business" to "investor." I put them in quotes because there is no agreed upon definition for those terms but I'm imputing a meaning that relates to your comment: to go from just getting by, to being in the top 20% to being really, really, successful.

Anyway, for you, your clients or anyone who wants to know how to move along that path I recommend:

The E-myth - Michael Gerber
Cashflow Quadrant by Robert Kiyosaki
 
I haven't read Cashflow Quadrant for a decade and I've learned lots of unflatternig things about Kiyosaki in the meantime. But, that book and the simple concepts it presented stuck with me for a long time.

Goldielocks

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Re: Purchasing Delivery Route
« Reply #15 on: June 04, 2017, 10:15:09 PM »
Another alternative --

Work as an employee on a route where you also act as sales man, with retention bonuses and commission.  For example, Cintas Laundry / Linen service and other linen service companies have reps (drivers) that can make decent money with a bit of service, bright attitude, and hustle.


I know someone with a breadroute, and he liked it a couple of years in, except for no vacations.