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The Purple and Green Enterprise: The Inside Story of FedEx, Part 2

As I stated in my last article, FedEx Ground and FedEx Home Delivery do not hire drivers to deliver packages to homes and businesses. Instead, contractors are used to get the job done. This means that ordinary men and women have to purchase a vehicle and possibly purchase their own route if they want to start their own business. This can be quite costly, or quite profitable . . .

Once a potential contractor is approved for a loan, then they can purchase a vehicle. FedEx can help point the contractor in the right direction, but they can’t participate in the purchase or in the negotiation of the purchase. Once the contractor has acquired a vehicle, the company will give the contractor FedEx decals that must be strategically placed on the vehicle. The contractor must pay someone to install them. After the truck is decorated, a safety inspection is performed. If the inspection goes well, the vehicle will be cleared to start operating as a package delivery vehicle, but only after the contractor has also been able to get a commercial driver’s license.

Ed. note: The concluding entry of this three-part series will appear next Tuesday.

One the contractor has a CDL, proper insurance and a truck decorated with the company’s vesture, then a space for the vehicle is established at the loading dock of the local terminal. To support the contractor, the Pickup and Delivery Manager will assist the new contractor in setting up and mapping their route. They will also load the contractor’s vehicle with packages at no cost. Package Handlers load the trucks each morning, well before dawn. The manager might even ride along with the contractor to help them get the hang of the system. Hopefully, after some time, the contractor will become confident and run a successful business.

However, a lot of negative things often occur in the life of a contractor. Sometimes, a package gets damaged, and a claim is made by the customer. The claim is made against the contractor who delivered the package, and if the investigation proves that the damage was a result of negligence on the part of the contractor, then the contractor has to pay the claim. If it was damaged before it got to the contractor, then the company will pick up the tab.

I used to work for FedEx Ground, and I remember an issue came up when a customer complained that a contractor backed over part of her yard, tearing up some of the grass just off of her driveway. The contractor couldn’t dispute this, so he had to pay the lady’s landscaping bill.

One of the hardest realities of a contractor’s life is the lack of time available for a personal life. Most contractors don’t take vacations, and most work from six in the morning to five or six at night. In order to take a vacation, the contractor can either choose to pay the company to run their route in their absence, or the contractor can find their own driver to run the route. It costs way more for a contractor to pay FedEx to run their route, and all of the profits go to the company. If a contractor can find a reliable driver, they can pay their employee a wage (often $100 per day) to run the route. The good thing about this option is that the contractor can still collect a settlement check.

The term “settlement check” is used to make sure the IRS is aware that contractors aren’t employees. Contractors are paid a settlement for each package delivered and for each package picked up. Yearly settlements can exceed $100,000, but if you look at the truck payment, the cost of insurance (both vehicle and health), fuel costs, vehicle maintenance costs and taxes, the contractor’s net income is more likely to be between $30,000 and $50,000. Not too great, huh? Contractors don’t really start making a lot of money until they are multiple-route and multiple-vehicle owners, but that involves even more work.

I knew a contractor who owned six routes. He never delivered a package; instead, he employed six drivers to run his routes and he managed the business. He actually did quite well for himself, but he was constantly working. Sometimes he would have to train a new driver, other times he would have to meet with the managers to discuss his employee’s behavior and sometimes he would have to work on repairing his vehicles.

Some people want to own as many routes as possible, while others just like having one route. I once did a ride-along with a Home Delivery contractor who just liked having his one route. He drove a large cargo van and constantly had it full of packages. We started at 6:30 a.m. and got finished at 5 p.m. Most of the packages we delivered were small boxes and envelopes. We must have stopped over 120 times that day, and each one was different. Some customers were friendly, but some had large, angry dogs, others weren’t home and others would not come down to unlock the security gate, so we couldn’t deliver their packages. I asked him if he ever got hit on and he started laughing. He told me of several occasions when naked women opened the door for him and blatantly flirted with him. He was laughing when he said to me, “Look at me. I’m going bald, I’m overweight and not too attractive. Who would think that I could be somebody’s fantasy, but I am.” He said that he has always remained faithful to his wife, but he still likes knowing that he is a sex symbol to someone.

As I construct these articles, I now realize that I could write a book about this subject, but there isn’t time for that. There is so much that I could go into, but I only have one article left and I haven’t even touched on the subject that FedEx Ground hates to think about: unionization of their contractors. This is a very important topic, so stay tuned to learn why FedEx Ground hates unions.

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