At eTruckBiz, our mission is simple- to help contractors run the easiest and most profitable business possible. Recently we’ve become aware of a potentially growing problem found within several contractors’ operating agreements. In each case, these were recently negotiated contracts done by popular brokers in the FXG space.
In our normal course of business, we have seen thousands of FedEx Ground contracts over the years. Our team has unmatched industry experience (over 400 years between us!) and we know the difference between a good contract and a bad contract. Within the past few months, a few have crossed our path which gave us immediate cause for concern.
A new contractor had his first contract negotiated by the brokerage firm he purchased the business through. The end result “put all the eggs in one basket” so to speak. The “basket” being the one that has seen significant volume decrease this year. Therefore, this contractor was losing a vast amount of revenue due to how this contract was so poorly negotiated.
Our COO, Carey Manders, estimates that the terms of this contract could be costing the contractor $40k plus per year. Upon discussion with the contractor, we learned that he had relied on a widely known brokerage to do all of the negotiations for him. In fact, they performed functions that only the Authorized Officer (AO) is supposed to do. The actual negotiating process should not have been available to this brokerage firm, only the Authorized Officer.
The operating agreement is vital to the success of any contractor and the way the elements of the agreement are negotiated are just as important! Our company handles each negotiation on an in-depth, personal basis using our extensive database to provide metrics for all types of service area definitions. We then deep dive into the individual company to make sure the elements of the contract are negotiated to provide the best possible opportunity for gross revenue maximization.
This particular contractor told us, “I feel like I was misled by my broker”. Until Carey discovered the unfavorable contract terms, he had no idea why his operating margins had been so low. This contractor believed that the brokerage firm he was working with had his best interests in mind. Our thoughts are the opposite - the brokerage firm was more interested in “closing the deal” instead of getting the contractor the BEST contract possible for their company!
When going through negotiations, it is important that contractors are familiar with the key components of the operating agreement, and if choosing to work with a firm that they educate themselves on the firm's ethics, business practices, and expertise in the space.
These poorly negotiated contracts are causing disastrous consequences for new contractors. We want to see every contractor have the best possibility to succeed, so we want to personally review any FedEx Ground Contract negotiated by any other brokerage firm within the last year - free of charge. If the problem appears to be more widespread, we will work with the community to help identify solutions.