This article, written by Molly Klein, Benetrends Marketing Associate, discusses the basics of delivery routes.
If you are like me, you may have never thought of delivery routes as a business option, but they are, in fact, a hidden treasure in the franchising world. Delivery routes (known simply as “routes”) are profitable investments, with many advantages.
In most instances, you are not only buying the route, with an established book of business, but you also purchase the equipment needed to do the work. This means you have income generating from day one. Many of the expenses incurred can be written off, such as vehicle expenses, interest from payments made to the seller of the route, even your home, should it be used as your base of operation. A well-established, high volume route will go for top dollar, but routes are available at all price levels. Many route owners will start small, and either add more customers, and therefore sales, on a specific route, or may choose to own multiple routes.
Routes are as diverse as the roads traveled to make those deliveries:
- Courier – FedEx & UPS
- Food Delivery – Arnold & Bimbo Bread, Pepperidge Farm, Snapple, Herr’s, Tropicana, Snapple, Mr. Softee – even local favorites (i.e. TastyKake!)
- ATM Machines
- Vending – Healthy Snack Vending, Healthier4U Vending, Snacks & Sodas
- Personal Services – Pool & Spa, Landscape & Yard, Mobile Pet Grooming
Types of Routes
There are two main types of routes, referred to as protected and independent routes. You can have a protected route, or protected stops. A protected route will ensure that no one else enters a geographic area assigned to another. A protected stop, however, only guarantee specific locations, rather than an area. In this instance, several route owners can have accounts in the same geographic region.
If choosing a brand name business, although you are an independent operator, you are a representative of the brand and, therefore, required to maintain standards. Maintaining company standards in hiring, policies, even dress codes are several of the additional requirements. In return, the company provides brand marketing and most companies simplify the paperwork, taking out expenses for all but truck maintenance, gas, and employees (if applicable).
An independent route provides more flexibility, as the route can service more than one supplier. This allows for the ability to provide the best prices and product lines with more diversity. They come with an established book of business, but since there is no protection of areas, there is more competition. Independent routes are usually less expensive to purchase, allowing for a higher net, and there is less regulation on how to operate an independent route.
How to Find a Route
When searching for a route, there are several options. Many broker sites will offer information on all types of available routes, either nationally or geographically. There are also specialized websites that provide leads for a type of business route. And, if you know the exact route you’d like to own, you can purchase directly from the company.
According to the Bureau of Labor Statistics, it is expected that there will be little or no increase in delivery businesses between 2008 and 2018, but the industry has well established routes that have been in operation for years. So, there will always be a need for delivery companies.
Route Funding Options
You know which route you’d like to own, so now it’s time to fund the new business. If this is your first route, your credit is shaky or if you’ve been in the business for less than two years, obtaining a loan may be difficult. If you have retirement funds, the solution may be a ROBS (Rollover as Business Startups). This option allows you to access your retirement funds, tax-deferred and penalty-free, providing you with the capital needed to fund your business, sometimes in as little as 10 business days.
Once a route has been established and showing profits, many owners choose to expand into new territories. Routes become available all the time, and some of the opportunities are quick to sell. Therefore, it is important to have access to funds quickly to be able to take advantage of new routes as they become available. With a ROBS, you can inject more cash into the plan, either through a rollover or a personal cash injection, and quickly obtain more funds for your expanding business.
Benetrends is the pioneer of ROBS, known as the Rainmaker Plan®. Benetrends also offer SBA Loans, Securities Backed Line of Credit, Equipment Leasing and more! We have funded more than 15,000 entrepreneurs in our 35-plus years. If you are interested in finding out more, schedule a consultation.