Ollie Mercade used to get in trouble with his union when the Metuchen, N.J., delivery truck driver hustled to do a day's work in six hours rather than eight.
Mercade put his ambition to better use when he signed on as an independent contractor in 1986 with Roadway Package System in Florida. He made a down payment on a truck and earned his pay through performance, rather than an hourly rate.
Today, Mercade operates six trucks in Tampa as an independent contractor with the FedEx Ground division of FedEx, which bought RPS in 1998. He's one of 13,000 independent FedEx contractors nationwide, including 183 who operate in the Tampa Bay area.
As the holiday season approaches, residents may be surprised to learn the blue-uniformed delivery person ringing their doorbell is really the product of small business resiliency, and the times. Despite the foundering economy, packages still need to be shipped, and the growth in the industry means these independent contractors are willing to buy and sell routes to expand. The FedEx business model of independent contractors appears to be a little-known business segment that continues to grow.
FedEx Ground revenue grew 8.8 percent to $1.8 billion in the quarter ended Aug. 31, while income rose 3.2 percent to $196 million. The average daily volume of boxes increased from 1.38 million in 1999 to 3.13 million in 2007, while revenue increased from $1.9 billion to $6 billion over the same period.
More Local Business Available
With DHL earlier this month announcing it would trim 9,500 U.S. employees to focus on international deliveries rather than compete with FedEx and UPS, even more local business could be available for the two dominant U.S. carriers. DHL said its daily package volume would fall from as much as 1.5 million parcels to 100,000. UPS, the largest delivery service, is a Teamsters union company and does not utilize independent contractors. Unlike FedEx, UPS uses the same truck drivers on air shipments, home deliveries and other ground services.
Mercade, meanwhile, is expanding his independent business.
"I owned four trucks, just purchased a fifth and am renting a sixth," said Mercade, whose crews operate from a FedEx distribution center off Waters Avenue in Tampa west of Interstate 275. "I've also got six people on the payroll plus a helper."
His crews generally pick up retail merchandise trucked from a FedEx Ground hub in Orlando to the Waters terminal, and deliver to outlets including International Plaza, and the Citrus Park Town Center.
Unlike FedEx Ground and FedEx Home Delivery, which focuses on residential services, FedEx Express uses employee drivers for pickup and delivery service of air freight and packages because of the need for flexibility to manage time-sensitive operations.
Independent contractors are paid by results, not by the hour, said Robert Boulware, manager of corporate communications at FedEx Ground in Moon Township, Pa., near Pittsburgh International Airport. Gross income for contractors ranges from $60,000 to more than $1 million for some owners of multiple routes.
"We believe that a contractor has a flexibility, drive and efficiency not often found in a traditional employee driver workforce," Boulware said. "As independent business people, contractors earn in proportion to how well they produce results and how well they satisfy their customers."
Job Can Be 'Stressful'
Clearly, running a business entails difficult times and is not for everyone.
"It is a somewhat stressful job to handle multiple drivers," said Mercade, who spends a couple hours on paperwork before he leaves the terminal where his trucks are loaded in the morning. He might get home by 9:30 a.m, but then he must handle phone calls and attend to situations that develop on the routes.
"I'm the type of personality who feeds off stress," said Mercade, 51, who is married and has three grown children. "I seem to get off on it. I enjoy the challenge to not have a mundane day-to-day job."
Shane McNichols, who got involved in the trucking business a dozen years ago when he was a loader for RPS, returned eight years ago to become an independent contractor after investing $20,000 for an older truck. Now he has six trucks and six full-time drivers to serve routes in Pinellas County out of Largo, mostly in industrial areas.
"Not everyone is cut out for this because you really have to have a knack for the job," said McNichols, 30. "I started pretty young and from the ground up. You get a lot of help from the company, but you have to be pretty smart and willing to work."
Today's economy has not affected McNichols as much as might be expected. "It's still pretty steady," he said. "The economy has hurt, but people still need to ship things from A to B."
Fuel prices have soared from $2.30 a gallon a year ago to as high as $4.06 in the past year, but the company has imposed a fuel surcharge. A new truck with 1,000 cubic feet of space can cost upwards of $50,000.
The economy also has had an impact on a sidelight of the independent contractor business: buying and selling routes.
FedEx Ground does not sell routes to individuals; it assigns them to individuals who meet state and federal requirements and agree to a FedEx Ground contract.
That means independent contractors may sell their routes to others, provided the buyers meet the company and government requirements.
"The asking price for routes for sale in the Tampa area range from $30,000 to nearly $500,000," Boulware said. "If I were to note a trend, it would be the number of multiple route-owners is increasing."
Not unlike any other business opportunity, independent contractors enter and leave for a variety of reasons.
These days, that could include people who want to leave for business reasons and those who might want to change careers, based on the economy's impact on their employment sectors.
A recent Central Florida route for sale on the Web site bizbuysell.com costs $410,000 for a route with four trucks and five drivers. Gross annual revenue was listed at $401,000.
BY THE NUMBERS
FedEx Ground contractors who gross more than $1 million annually
FedEx Ground contractors who gross more than $100,000 annually
FedEx Ground independent contractors nationwide
Additional FedEx Ground employees
Number of packages handled daily
Source: FedEx Ground