Buying a ROUTE - ideas, info, advice

S

saxon22

My brother and I are thinking of buying a ROUTE. For those unfamiliar with the concept here is a quick synopsis: You basically purchase the right to sell a given product within a specific territory. In smaller, less populated parts of the US it could be a county or two. In th cities it is usually a zip code or two. Some of the companies that participate in this scheme are:
Tropicana and other OJs, bakeries (small and big),soft drinks, and potato chip corporations (wise, UTZ). Most of their routes are independently owned and the operators have the right to sell them. The most extensive firm that deals with buying/selling are these folks:
http://www.routebrokers.com/routesforsale/

My questions are:
1. What do you guys think aout the whole scheme?
2. What should i watch out for when buying one of those?
3. Which types of routes have the best reputation?
4. Have any of the ET regulars ever head, dealt, or had one of those roues?
5. Where can I find more info about this kind of investment?

BTW. My brother has 200K and my investment/loan would be 100K.

So what is the deal guys?
 
If you are commited to purchase the product from a certain wholesaler, make sure he is well capitalized, If you are limited in how much you can buy or if the wholesaler runs out of best sellers. Not good.

If the product you purchase from the wholesaler, you can buy cheaper at BJ's and you are not allowed to, this is not good.

When do you load your truck? If the guy ahead of you takes the stock for his truck and leaves you short, then what?

If you have to wait in line at the warehouse to load, time is money.

Is there a set time you need to return to warehouse.

Some customers may have a preferred delivery time, if you get new customers where will they fit in? Sometimes you can't add a customer because of time constraints.

These points may limit your growth and getting new customers.
 
I wouldn't trust those profit numbers posted on the website. Some routes are being priced at 2x yearly profit, which imo is too good to be true. 5x is more reasonable. I would insist on seeing full financial documentation for at least the past 3 years before doing anything. And don't forget that any business is susceptible to an economic downturn.
 
So far we were looking at OJ routes since people have to buy food/liquids to survive. Also Snapple has been on the favorite list. Question is, how reliable are those numbers? Has anybody bought/sold or have any experience with this type of business?

So far we like:

1. Snapple Route - 400K to buy, 190K net profit. Truck + helper included. Owner willing to take a note for 270K @ 10% for 5 years.

2. Minute Maid OJ - 150K to buy 120K net. Truck + helper incl. Owner willing to take a note for 60K.

3. Fed Ex - 130K to buy, 105K net. Truck + helper incl. Must be all cash.

Obviously assuming all figures are honest the first deal is the best from the cash flow side, but the rest are also attractive.
 
Im not a big fan....instead of buying a business, youre buying a job....plus lets say snapple get a new competitor, these routes are priced on multiples, so if sales fall off 30%, youre out 30% of that 400K....
 
Quote from jdkgroup:

Im not a big fan....instead of buying a business, youre buying a job....plus lets say snapple get a new competitor, these routes are priced on multiples, so if sales fall off 30%, youre out 30% of that 400K....
More...


You are rght, it s buying a job. It is basically investing 400K to get paid 190K a year, which assuming the #s are correct the price will be recouped in 2 1/2 years and then that 190K is yours ... year after year. (more or less).

As for the competition, I think people will always buy Snapple, OJ ect. Those are established brands and should continue to sell. As for losing 30% of business, that will still leave 190K less 30% to take home. I might take a hit when selling the route but that is a risk one takes in these kinds of ventures.
 
Its not a bad investment, much better then the quizno/franchise thing.

It is buying a job, but a high hard working paying job with a guarranted stable NET , if your brother is hard working, its great.


1) If you buy in NYC routes, do understand you have
a) parking tickets to deal with
b) congestion fees that might appear
c) no parking.


2) probably long island/ queens/ NJ better place to do routes..


3) you can bargain these prices down to a good multiple, cause theres very little market for it.
I mean people got to work for their money!
So if you are a motivated buyer, you can keep bargaining them down to a 1.3 or whatever multiple.
This market ain't liquid.


4) you do have to maintain your vehicle

5) vacation days, figure it out if they supply a driver for you so you can take a break once inawhile or you got to find your own replacement?


Overall: its not bad. I would do it if I had nothing to do.
 
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