Routes 101 – The fundamentals of buying a route
If you’ve just discovered routes, consider yourself lucky and also part of a quickly disappearing minority. It used to be that even 10 years ago, very few people had heard of routes. Today, people for the most part still haven’t heard of what routes are but word is spreading rapidly to change that.
The word is getting out on what’s considered by many to be the best hybrid of a franchise and an established business ever.
That business model is under the umbrella term “routes.” At this point in time, almost all the routes that you see out there for sale are well established routes that have been around for years.
The traditional types of route businesses that are for sale:
FEDEX ROUTES –
FedEx Ground, FedEx Home Delivery, FedEx Freight
BREAD AND SNACKS ROUTES –
Pepperidge Farm, Mission Tortilla, Snyders-Lance, Flowers (Natures Own, Tastycake), Bimbo (Sara Lee, Arnold, Orowheat).
With each of the aforementioned routes, they’re usually established, profitable, and sold by brokers or the owners themselves. When owners want to sell, many use a broker since the statistics prove that sellers will typically get more even after commission than if they didn’t use a broker (this isn’t always the case, as explained in why your broker sucks). You can see what brokers there are and where they post routes for sale on my page regarding how to find a route for sale.
Bread and FedEx routes are basically allowing you to represent a corporations established brand image.
In the case of FedEx, you could think of it like a franchise almost in the idea that you’re buying a territory that FedEx allows you to service. You buy the trucks, put the FedEx logos on the side of the truck, hire whomever you wish, and FedEx pays you for servicing the area.
In the case of bread routes, it helps to think of a grocery store as basically a consignment store. They never fully own the merchandise of many products on their shelves. Major grocery store chains like HEB, Randalls, Safeway, Albertsons, Target, Walmart, etc. all pay a premium to have bread companies deliver bread and stock it on their shelves. But the bread companies don’t want to have the hassle of employees and managers, therefore they contract out the work to be done by some other company. That company is you when you buy a bread route territory.
Routes provide a high value service that is critical to the business operations of these corporate giants.
The good thing about the business model of routes is that you’ve got a huge corporation that has done all the leg work of establishing brand names and paying clients. All you’re doing is making sure they’re serviced, either on your own or with an employee that you’ve picked. Both FedEx routes and bread routes have their own unique sets of pros and cons and are compared here, but both share similar numerous positive qualities such as:
Routes don’t depend on sales skills –
The products sell themselves. You don’t need someone to sell you on the idea why goldfish crackers taste good any more than you need to know that FedEx is a great alternative to UPS. All the sales efforts for routes are performed by their own corporate advertising departments and have corporate sales reps to establish new large clients.
Routes usually have stable income –
You’ll make money the day the take over the route. Routes are generally very stable and don’t vary much in weekly income, unlike many other types of businesses. Usually after seeing only a few recent paychecks from the company, you can realize that there’s probably not too much variation beyond those checks. Getting a 4-8 week average of paychecks is what you’re looking for.
Routes are simplistic –
The accounting is usually exceedingly simple since many route companies take care of all your expenses for you before you’re paid out and you’re usually only taking care of 3 expenses after you get paid. Those 3 expenses are your truck maintenance, gas, and employee (if applicable). Looking over convoluted balance sheets, trying to understand GAAP accounting, and examining tax returns isn’t even applicable in routes. If you insisted for a balance sheet, you’d probably just get some gas receipts and a note of how much an employee is paid each week. Pretty simple stuff.
Routes are easy to run in terms of complexity –
Most routes become exceedingly repetitive after only a few weeks. For FedEx, it’s the same packages being delivered to the same major customers. For bread routes, it’s the same loaf of bread being delivered to the same grocery store.
Working a FedEx route is the same everyday – it’s a matter of just coming in to the terminal, looking at the packages that should be delivered for the day and driving around dropping them all off. For bread routes, you’re placing orders to the bread company for the grocery stores based on the demand of the stores, picking that order up from the terminal, and then delivering it to the stores and putting it on the shelves. Some people feel like there should be more to it, but it’s really that simple.
Routes are established and stable –
FedEx has had an overall trend of growth for several years now. Bread routes remain stable and people have been buying bread for quite some time and will continue to do so as well.
A good rule of thumb is your route’s profitability will likely increase or decrease about the same as the population growth or decline of an area.
Routes are governed by huge billion dollar reputable companies –
With a traditional business, you might be duped by reading fraudulent tax returns, not know the future of a business product you don’t fully understand, and so on. Contracts with independent businesses can be drafted up craftily to favor the seller if you’re not careful. Lawyers are recommended for any traditional business acquisition. However, routes already have contracts that have been used by hundreds or even thousands of contractors across the entire nation. These companies like FedEx or Pepperidge Farm just care about making sure their customers are getting served and don’t have ulterior motives. Each contract is different depending on the company, but all of them are the same in that they protect you fully and ensure the seller isn’t trying to pull a fast one on you.
Routes are an excellent first step into business ownership –
A franchise has an established brand image and formula for success, but when you set up a new location, you’re rolling the dice on how profitable it will be. With typical established businesses for sale you can see historical income which makes it less risky. However, the complexity and headaches can be tremendous. An example is a convenience store where things can be overwhelming with supplier relationships, negotiation on terms and pricing, overhead, rent, utilities, advertising policies, etc.
With a route, you have the recipe for success and corporate backing just like a franchise and also have the historical income that a traditional established business provides.
Routes do this with less headache than a typical business and less risk than a franchise.
Other types of routes for sale:
Now if you’ve been doing research, you’ve also heard of other types of independent and non-protected routes for sale such as:
Independent bakery routes
We don’t cover these types of routes at RouteTycoon because these routes resemble a traditional business more than a FedEx or a protected bread route. They have no protected territory, are prone to competition, usually have a large amount of untraceable cash flow through them, and have often no corporate parent to back up any of the revenue claims the sellers may have. Since contracts and agreements on routes like these are strictly between you and the seller, you’ll be going through all the headaches (and risks) of typical business acquisition. However, many routes of this type (and other business models) can be very lucrative for new owners, but they simply don’t carry the same tremendous benefits of traditional routes.
To summarize, traditional routes provide a simplistic, profitable, and lower risk business model than many other traditional avenues of business ownership can provide. If you need help getting started, I have dedicated one-on-one consulting options to get you fully up to speed in this highly lucrative industry.