Forums: Discussions for entrepreneurs and small business.

What we have:

Hi Doug,

 

If you don`t have enough money to start a large company, it may be within your best interest to go with a franchise model such as FedEx routes.  This is definitely comparable to a franchise.  A few items that I would look into include: the transparency of the current delivery patterns within the proposed routes, the cost of capital necessary for each estimated delivery over the next 3 years, and your current network of possible clients that would use your services exclusively.  These three areas seem to be most important to your success.  Fed Ex should be able to offer you complete data regarding all deliveries for the past 8 years in your route.  If not, I would pass....  FedEx should also price according to the net present value of the future cash flows for the next 3 years with a risk premium of about 8% and a growth rate of less than 5% per year.  Anything more than this calculation is not worth going into.  Also, keep in mind that you will essentially be working for free for the first year.  Lastly, do you have a network of local business owners that will make this deal more lucrative for you to own this franchise?  The local network of customers makes the franchise better for somebody in such a situation.  Please answer these questions for yourself and for me, and I may be able to help you answer your question more completely than most people who may lead you to drink the kool aid served in most franchise models.

 

Aaron

 

Capital West Advisors

 

 

briones77 - FedEx doesn`t directly manage their local delivery routes, rather they let people purchase them and get paid by the deliveries.