4 Pillars of a Successful Linehaul Contractor
Join us this week on Industry Insights with Route Consultant as we sit down with Alex Frum, owner of Alpha Kilo Logistics, to explore key strategies for being a successful FedEx Linehaul contractor. We delve into the four crucial pillars: safety, financial stability, service, and availability. Alex shares his expert insights and practical advice on managing safety protocols, understanding financial metrics, maintaining service standards, and ensuring availability. This episode is packed with valuable information for both new and experienced logistics professionals looking to optimize their business operations.
About Alex Frum
Alex is the owner of Alpha Kilo Logistics, a Transportation Service Provider (TSP) for FedEx Ground with operations in Memphis, TN, Olive Branch, MS and Independence, KY. In addition to his Linehaul activities, he is a co-founder of the Linehaul Summit & Expo and provides consulting services to potential and existing Linehaul Contractors. Prior to becoming a FedEx contractor, Alex spent 15 years on Wall Street managing a fixed income trading desk and serving as a regional branch manager. Alex is a former Army officer and a graduate of the United States Military Academy. He is happily married to his wife of 18 years and has 4 beautiful kids.
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Josh Gregory: [00:00:00] Welcome to Industry Insights with Route Consultant, your front row seat to the fast moving world of logistics and beyond. Each week, we bring you game changing insights, real world strategies and fresh perspectives to fuel smarter investments and build stronger businesses. Join us as we sit down with expert guests to explore emerging trends and pressing topics across a wide range of industries.
This is industry insights. Welcome back to the studio, Alex. Thank you, Josh. It is a pleasure to have you here. But, uh, I know we've talked about a couple of things, but I think this time I wanna really focus on a question that I get often, which is, you know, I found Linehaul, I've decided I wanna be successful, but I.
How, like what are the main things I need to worry about if I actually wanna be successful in this space? So I know I've heard you talk about four different things that you focus on that you think are crucial for success here. So if you want to kind of just go through those.
Alex Frum: Yeah. So I mean, it's been kind of like a journey for me to figure out what I really think is the [00:01:00] right way to look at a business and how to run it.
Yeah. Um, you know, I've read a lot of self-help books about how to be a better small business owner. Um, and I thought maybe those were. The different keys, but at the end of the day, it all boils back down to, oh, so what is FedEx evaluating you on?
Mm-hmm.
Alex Frum: As a TSP, as a transportation service provider. And so those four, those three metrics that they evaluate you on are three of your four.
You know, I think route consultants consider it as pillars. I consider 'em columns that supports the line haul business. I'm kind of into that Gothic or Greek architecture. So like, if you think about, um, your business as the Parthenon. Mm-hmm. So you have the, the roof is your line haul business. So for me it's alpha kilo logistics and it has four different columns that support it.
So under the FedEx side is. Safety service and availability. So that's what they evaluate you on a daily, weekly, monthly business. And that's supposedly what's supposed to go into metals, which we can have another conversation about whether, what metals is and uhhuh, how they [00:02:00] evaluate you. And then the, the fourth column or pillar that I think is important is your financial stability.
Um, and to me the two most important are safety and then financials. So safety. Is important because if you have too many accidents or if you're not a safe operator, or you're having too many CSA violations
mm-hmm.
Alex Frum: Um, or you just can't get your safety to work right, FedEx is gonna get rid of you. It's one of the pure fear, uh, few areas within the TSPA, the transportation service provider agreement that allows FedEx to terminate your contract very, very quickly.
The other area is financials. Okay? If you go into bankruptcy because you're not managing your business correctly, uh, FedEx also has the right to terminate your business very quickly. Mm-hmm. Those are the two areas, you know, the last one is in the TSPA, that they can terminate your businesses if you lie to them.
If you are negligent as a business owner is a, is a partner with them, they can terminate your business. So, um, always tell the truth. [00:03:00] Um, don't be criminally negligent, you know, so that goes into that whole area. But otherwise, be a safe operator and focus on your financials
Josh Gregory: now and in the last two areas before, yeah.
Before we go too far on those first off columns in the Parthenon, you're in Nashville. Have you, have you gone to see our Parthenon yet? I've not. I, I probably should.
Alex Frum: Yeah. Um, you know, I haven't, you know, I've done, uh. My trips to Nashville have always been either to, um, go on to, uh, go to Bourbon or not Bourbon Street.
Go to, um, Broadway. Broadway, yeah. Um, I've been to Vanderbilt University. Okay. Um, and then, uh, I've been to, was it the Gaylord? I.
Mm-hmm. Yep.
Alex Frum: You know, for a rock consultants expo and that's about it. Okay. That's the extent of my visiting.
Josh Gregory: Well, it's very close to Vanderbilt. So you were almost to the Parthenon.
Okay. So is it
Alex Frum: actually like a true looking Parthenon? Yeah,
Josh Gregory: it is. I mean, so I, I was, I went to Greece last year and I actually saw the real Parthenon and it was disappointing compared to our Parthenon. So, really? Yeah, because, well, 'cause ours is, you know, only like 50 years old, so everything is still [00:04:00] intact.
Um, is it an,
Alex Frum: is it an exact replica? Replica? Uh, it
Josh Gregory: is. I can't. I think it might be slightly, I think it's smaller. Mm-hmm. But it's not by much. If anything, it's still, I mean, it's pretty impressive. It's just in the middle of a park and you can go inside. Why did they, why did they build it? It was for, um, I think one of the world's fairs or something.
Okay. That was, there was a, there was a real reason that they built it, but,
Alex Frum: oh, I was trying to figure out, like, Nashville doesn't sound like it has a, a
Josh Gregory: lot of, no, I don't have a ton of Greek ties. Yeah. But we do have the Parson, so, so if you get a chance, it, it is worth saying is there a mono Olympus with it too?
Uh, no, no, we don't have too many mountains, but yeah. Uh, yeah. Vanderbilt is the closest Mount Olympus right there. Yeah. Yeah. That's where I went. So you chose took place. So when you have kids,
Alex Frum: uh, you'll start reading the Percy Jackson books and the movie
Josh Gregory: goes to the Parthenon in Nashville. Oh, does it really?
It does, yes. Oh, okay. So perfect. Yeah. Um, but yeah, yeah, I know those books. Um. Okay, but to, to actually to safety. So I, you know, one of the things you said is that, you know, that's one of the main reasons that FedEx can, can Yeah. [00:05:00] Kick you out. What's the reason for it? There's a really good justification.
Alex Frum: Yeah. So the reason why safety, I mean, one is, you know, just from a marking perspective, I. FedEx doesn't want, you know, the FedEx brand. Mm-hmm. To be negatively connotated through accidents, through anything. You know, they want all the media and all the free marketing that they get on CNN News or Fox or whatever they want the stories of.
You know, hey, this FedEx personnel dragged a, you know, a woman out of a accident or provided CPR to somebody or saved a child's life, or, mm-hmm. You know, a couple years ago I actually had two drivers who came upon. Um, they were both driving down the highway. They came upon a, a horrific accident. Mm-hmm.
They were the first two trucks. Um, actually to come up, up upon this accident, they actually blocked the highway. Oh wow. Rendered first aid pulled, you know, um, a mom and three kids from the wreckage, uh, rendered first aid, called the paramedics and blocked the highway off until [00:06:00] everybody showed up and took care and, and, and got these people to safety.
Uh, and FedEx was really appreciative of that situation, and my drivers got a humanitarian award. Um, they got written up in the press, so it's a great, you know, so FedEx loves that kind of thing. What they don't want to see is, you know, FedEx driver falls asleep at the wheel and plows into a school bus worth of children.
Yeah. They
Alex Frum: don't want that negative media. They want the positive stuff.
Yeah.
Alex Frum: So they're gonna harp on you about safety. They want you to have safe trucks on the road, so you're taking care of your vehicles, you're maintaining them. They have all the safety equipment that they're required to have. Mm-hmm.
Your drivers are properly trained to drive a big rig down the road, um, and they are following proper procedures while operating those vehicles. FedEx has, um, a whole long l laundry list of DO nots.
Mm-hmm.
Alex Frum: That, um, can disqualify a driver and they want you as a contractor to, to adhere to those and to follow those.
So all those do nots, you know, [00:07:00] no drinking, no, you know, no drugs, no weapons on the vehicle, um, you know, making sure to wear a seatbelt, no handheld usage. All those kind of things are in my SOP 'cause. So I follow exactly what FedEx says to do. Um, and then, you know, you can never reduce or minimize or go.
Less than what the minimum standard is from FedEx. What they want to see you is going above and beyond. Mm-hmm. And so I'm always working on those kind of procedures. So, um, you know, so simple things like my drivers are required to wear closed toes, shoes, they have a non-slip surface, so no flip flops in my company.
Uh, there's a lot of different reasons for that. One, I don't want any of my drivers getting injured, moving around a 300 pound dolly, hooking it up and having it drop on their foot. But two, it's just I want my drivers to have a non-sick surface so that when they're entering in and, and exiting the vehicle, they're safe.
But also when they're driving down the road, they're wearing shoes so that you [00:08:00] don't have the potential for a flip flop to slip off or get caught underneath the. The brake or the, uh, the accelerator. Yeah. So,
Josh Gregory: yeah. And I think the other side one, you're a hundred percent right. Safety's so important because you're a giant billboard.
Mm-hmm. For FedEx. Yeah. And they don't want anything bad. They want that billboard to only be good things. I think the other side of the coin is also the insurance side. Yes. Yeah. So yeah,
Alex Frum: so there's, the other big issue is the. So FedEx is self-insured. Mm-hmm. Um, so when you're operating as a Linehaul contractor and you're under a load, you're operating under FedEx's DOT Authority and they provide the insurance and the indemnification for you in these accidents.
Now you do have a, a small financial contribution to these. So if it's a normal accident and your drivers are, you followed all the requirements to meet the minimum requirements, then you owe $2,500. Okay. If you have a rear end collision, you have, you owe, you can owe up to $35,000. Um, but in general, [00:09:00] um, FedEx looks at it and says, if you, if you have all the safety equipment that you're required to have on your vehicle and your drivers are following all proper procedures, then there shouldn't be a tremendous amount of reasons for you to be getting in an accident.
Yeah.
Alex Frum: But if you do get into an accident. You know, FedEx is gonna indemnify you of those situations and it's gonna cover your insurance costs. So it's not you getting hit with a hundred million dollars judgment for, you know, something occurring. Mm-hmm. It's FedEx. Now that being said, I mean, you do have accidents and you will do damage.
So like if you have an accident where you tear up, um, a bunch of the roadway. Like, say you size swipe a guardrail. Well, guess what? That guardrail doesn't cost $2,500 to replace. Yeah. It probably costs, you know, 50, a hundred thousand dollars to get all the man hours and get all the equipment and get all the, um, the guardrail to, to reinstall it and dispose of the old one.
You know that FedEx is paying all those bills for you, so that's why you know they're gonna look at you as a [00:10:00] money losing proposition and they're gonna want to cut bait with you as fast as possible. Yeah. If you're causing too many accidents.
Josh Gregory: Yeah. It's, it's something we see all the time where, you know, it feels like that's the most punitive that FedEx ever is, is on a safety incident, but it's because they have to be.
Yeah. Insurance is extremely expensive for them. Right. And they, they just can't have a bunch of bad publicity. It's just a, it's a huge part of their overarching expenses and, and branding. I would say that I would bet that
Alex Frum: insurance is probably their number one expense after obviously payroll. But yeah.
Um. Because, I mean, think about it, you know, from the FedEx ground perspective, they don't own the tractors. Mm-hmm. Um, and a lot of, in a lot of instances, they don't even own the facilities. Yeah. They lease them. So, um, outside of paying package handlers and staff to mo, you know, move packages into load and unload trailers and just run the business, you know, their biggest expense is probably, um.
I mean, I would bet you it's even [00:11:00] more than fuel is probably insurance.
Yeah. Yeah.
Alex Frum: Um, yeah. Or they, they, uh, set aside a significant amount of cash to protect themselves is an unearned asset on their books mm-hmm. To, for insurance claims. Yeah. And they generally have to set it aside probably for three years, I would imagine, given the cycle of how insurance
Josh Gregory: works.
Yeah, yeah. Yeah. So, I mean, it's. It, it just has to be something that FedEx is always worried about. Um, so that's why we talk about it as the first pillar, the first column here. It's the most important thing. Yeah.
Alex Frum: I mean, FedEx is, I mean, when you go in for your limb meeting mm-hmm. Or when you do an RFI for a growth opportunity, they're gonna wanna understand your safety culture.
Yeah. So, as a new contractor coming in, they want to know how are you gonna communicate safety? How are you gonna train your drivers? To be safe and how are you going to continue to stay on top of safety technology and safety methods? Mm-hmm. To run your business efficiently. Yeah. So they're gonna ask you those questions.
You fill it out in your limb, you fill it [00:12:00] out in your business plan, you fill it out in your RFI and then they're gonna want to talk to you. They're not just gonna play lip service. Safety is the most important component of FedEx, I mean. You look at the communication from any of their safety managers, it's safety above all.
Mm-hmm.
Alex Frum: That is the priority. Okay. Yeah. So, and it's really important. It's really, really important for new contractors to understand this. Okay. Do not ever dispatch out in bad weather. Do not ever dispatch out when you have considerations that there's gonna be snow on your route. If there is snow or inclement weather on your route, tell your drivers to stop what they're doing and wait till the roads get cleared.
Mm-hmm.
Alex Frum: Okay. FedEx is always gonna turn around and say to you, if you get into an accident in those situations, why were you on the road? Well, I thought you wanted me to dispatch. No, we don't. We we provide the load to you. You have the right. As a DOT driver to de [00:13:00] uh, to decline that run. Mm-hmm. Because it's unsafe and FedEx expects you to do that.
Now, you might get pa, you might get pressure from some dispatcher because they don't know any better.
Josh Gregory: Yeah.
Alex Frum: You might get pressure from some planner because they don't know any better, but senior FedEx officials want you sitting if you are concerned that there might be inclement weather on.
Josh Gregory: Yeah, because dispatching in those conditions, it's not just a potential financial impact.
It's like contractual impact. Yeah. So it's just never worth it. If there's any risk, it's wor, it's far better to take a, a, a revenue hit on not dispatching the run that day than it is to, to, you know, risk losing your contract. I always tell my drivers,
Alex Frum: and, and I think they really appreciate this, my goal.
It's for you to get home to mama. Yeah. Whether it's your mother, your actual mother, or if it's your wife. My goal is for you to always get home to mama. I don't ever want to be the guy calling up your wife, your mother, or your children, and saying, you know. Yeah, Josh Gregory was in an accident last night.
Yeah. And he's not coming home. Yeah. I don't wanna be that [00:14:00] person. Yeah. So at my priority is for you to get home it, your safety is more important than those packages getting into Chicago or Woodbridge and FedEx feels the same way. They don't want those packages getting to a location if it's gonna cause you to take a risk that might generate an accident.
Mm-hmm. Yeah,
Alex Frum: and that's something that's really important to understand. You have the right to decline or run for weather. Yep. If you feel it's too unsafe to be on the road.
Josh Gregory: Yeah. Yeah. I, I think that's always
Alex Frum: worth doubling down on
Josh Gregory: that message, making sure that you're coming in and it goes
Alex Frum: back into financials then, right?
Yep. Because the last thing you wanna do is have a catastrophic accident, and then now you're out of truck, you're losing revenue, and then you have to go replace that truck. And that has a big expense that hits your bottom line. Yeah. So at the end of the day, like your two primary pillars that we talked about is safety.
Mm-hmm. Or FedEx because you can lose your business that way and financials because if you can't run a profitable business, you can lose your business.
Josh Gregory: Yeah. When, when you think about financial, I know we [00:15:00] touched on it, but what are kind of the, the key things that you track on a daily, weekly basis? So, I
Alex Frum: mean, I mean, obviously.
Every Tuesday night we get our settlement statements. Mm-hmm. And every Tuesday night, I immediately, you know, at, what is it, SE 7 0 7 Mountain Time. You know, more often than not, I am walking into my office and I'm downloading my settlement statement and taking a look at it. You know, I just take a look at it.
Yeah. I don't do anything with it. I don't start processing payroll until Wednesday.
Mm-hmm.
Alex Frum: But you know, I'm making sure that my estimate was I was gonna do 50,000 miles. Oh, I did 51,000. You know, I know from there that I'm gonna do about a hundred thousand dollars in revenue for the week. I know that my margins, all things being equal, I should make around $20,000.
Mm-hmm.
For that week.
Alex Frum: Mm-hmm. Um, but I look at the metrics. So when you look at what you're running your business as you should be doing about, you know, somewhere between 33 and 37% of your revenue. Should go to payroll.
Mm-hmm.
Alex Frum: Okay. Roughly 25, you know, 20 to 26% should go to, [00:16:00] um, to fuel. Okay. So right there, you know, you're looking at somewhere between, you know, 55 to 60% of your payroll going to or going, your total revenue.
Going to those two metrics. Mm-hmm. And then your last big bucket is maintenance. Mm-hmm. Okay. Or your other bucket could be, um, amortization of your debt. Yeah. Um,
Josh Gregory: yeah. It just depends
Alex Frum: on, it depends on what it is, but I mean, it, it that the debt amortization is a, is is, um, is different though. Yeah. So I, we're looking at operating expenses.
Mm-hmm. Right. So your operating expenses are payroll. Fuel and maintenance. Those are the three biggest ones. Mm-hmm. After that, then you have workers' comp and federal income taxes and software and you know, whatever, all those other ancillaries, but those three that you have to get under control. Yep. Um, and the maintenance depends on how you're gonna structure your business.
Are you gonna run new trucks or are you gonna run used trucks? Each of 'em have pluses [00:17:00] and minus you buy a new truck, it's expensive. You're gonna have to finance it through a bank more than likely. And you're, you're looking at an asset that you're gonna keep on your books for a long period of time, so you're amortizing that debt.
Mm-hmm.
Alex Frum: But your maintenance cost should be relatively light. You're looking at something that's gonna be two to 3 cents per mile for the first couple years until the warranty runs out. And then one, after the warranty runs out, you're still having pretty reasonable maintenance costs until you get to the point that the truck is close to 800, probably seven 50 to 800,000 miles, and then you're starting to run into bigger maintenance issues.
Yeah. And then you have to make the decision. Do you want to continue, you know, sticking bandaids on it or do you wanna retire the vehicle and go out and replace it? Otherwise, you can buy the used truck market so you can get an asset that's much cheaper. You can still finance it if you want. You can use, um, non-bank financial firms like AP Finance, um, or you can go out and.
Uh, get loans from the big money center banks like a Bank of America or JP Morgan Chase. Or you can find regional banks that are big into what they call [00:18:00] rolling stock financing like a bank of Montreal or a Wells. Um, uh, bank of Montreal is the one that you know pops up at the top of my head right now.
Um. And then you can, you can do that that way. So you have a, a cheaper truck on your books, a cheaper asset that's not, you're not amortizing as it doesn't cost as much to amortize. Mm-hmm. But you have higher maintenance expenses. Or the last route you can do is you can go out for a lease. Either do, um, either, it's either gonna be a capital or operating lease.
And that's a question for you to talk to your accountant with, to understand what are the tax implications of a. Operating lease versus a capital lease. Mm-hmm. But general, there are full service leases where they're handling the maintenance for you. Um, and, and that comes to its own necessary issue.
'cause like in general, when you're buying assets, you can depreciate that asset. Mm-hmm. So it reduces your taxable income. And so you can get, and because we're all s s-corps, that means it reduces your personal income taxes as well. [00:19:00] Um, if you are, um, doing it as a lease. You're expensing the lease payment, so it reduces your taxable income that way, but you don't get the, it's, it's reducing it on the other side of the tax equation.
So it's reducing your income and so you're paying less in taxes that way, you know, there's pluses and minus to both of 'em. Yeah. Talk to your account. Understand,
Josh Gregory: talk to your accountant. Yeah. That's the, the, the nuttier and greater you get into the details. It's, it's gonna come down to the nuance of talking your account.
I mean, that goes back to like, if you're gonna be a, a,
Alex Frum: um. A successful TSP. Mm-hmm. You need to have a good, a good accountant who understands how to handle the depreciation, whether it's straight line or it's, um, accelerated and has a plan and understands like, these are the revenues I'm generating and this is how I want to progress.
And then you need to have a good lawyer who can advise you about understanding. Like if you're operating in, if you're organized in Illinois and you're operating in Tennessee, [00:20:00] you know these are where the tax implications are and this is where you should be basing your assets and your revenue as much as possible.
Josh Gregory: Yeah. Those are super important. As you get larger, especially like you're saying, multi, multi terminal, uh, businesses, a lot of that, it becomes even more important to have a lawyer. Yeah. So I, I think we've talked about. Two of the pillars here. Yeah. Uh, the safety and financials. What are, what are the next two?
Alex Frum: Yeah, the last two are, um, they go back to what FedEx evaluates on. Right? Mm-hmm. So FedEx is always looking at your safety score. Yep. Um, which we can talk about another time, but looking at your safety and then they're looking at your availability and your service.
Okay.
Alex Frum: Your availability, um, every day.
That you have a dedicated run or an unassigned run, you get a point.
Mm-hmm.
Alex Frum: Um, for that day, whether you run or not. So if I have a tractor on my A one that's assigned to an unassigned or to a dedicated run, as long as that tractor's available to run, like I have a driver and a tractor, I get one point.
Okay, so in a year you can get 365, 6, you know? Yeah. [00:21:00] 365 points. Um, if you take a decline mm-hmm. If you don't have a tractor and a driver available, you get a debit. You get zero points for that day. Okay. So you have the ability FedEx expects you to provide then with availability 90% of the time. Mm-hmm. So as opposed to p and d where you have to run every single day.
Yeah. You get to actually fail 10% of the time. Okay, so out of, on a solo run that runs seven days a week mm-hmm. 365 days a year, you can fail. 36 times cannot fail 37. If you get, if you fail 37, you're gonna be required to provide an opportunity to cure to FedEx. Mm-hmm. Um, but as long as you keep it above 90%, you know, FedEx is going to, you know, give you a hard time about it, but you're not failing.
Yeah. And you can't lose that run. Now if you dip below 90%, you have 45 days to cure that situation. Mm-hmm. And improve yourself and get back above the 90%. And then your clock resets. Service is different. Service is making sure [00:22:00] your trailers arrive on time. Okay. So I'm, I have a, FedEx has a, a set time that all trailers are supposed to be able to do a certain run.
Mm-hmm.
Alex Frum: Depending on the length of the run and what kind of rose they're on, determines. You know, how long it can la um, how long it can take for to get trailer from point A to point B. Mm-hmm. In general, uh, for mainline stuff that's on highway routes, uh, they're expecting you to drive around 55 miles per hour.
Even though our trucks can drive up to 65 under the contract, and most highways are 65, they expect you to be 55. Now, if that highway is 55, so think of like inner city, like you're driving through a city. Yep. A lot of times they'll actually assume even slower. For you, so you have plenty of time. So a run that takes 600 miles, they're gonna, or say a yeah, a run that takes 600 miles.
Um, they're gonna assume it takes you longer than 10 hours. Mm-hmm. You know, it could take you every bit of 11 hours to drive that 600
Josh Gregory: mile run. [00:23:00] And you know, if there's traffic or if something happens on the run, do you automatically fail service or what's No.
Alex Frum: So you only fail service realistically, if.
You've taken too long to run, not because of traffic or weather, just because you are inefficient.
Yeah.
Alex Frum: Or if you had a mechanical breakdown. Okay. So if you run into an accident, FedEx is gonna acknowledge that that's a, a situation out of your control and you shouldn't be assessed at. Um, for example, I had last week we had these torrential.
Yeah. Rain in Tennessee and Kentucky. And Arkansas and Texas. Um, I had a run that normally takes 20 hours to complete. Mm-hmm. It took me 30 hours to complete it.
Yeah.
Alex Frum: FedEx said, Hey, what happened? I gave them pictures of the, you know, the flood conditions. Yeah. Flood conditions. And they said, okay. Yeah. And no problems.
Okay. And they completely understand in those situations,
Josh Gregory: if it's something like that, do you have to communicate? Proactively, like if you see, if you're on, if you got driver out there and you're like, oh, they're already late. I gotta make sure [00:24:00] FedEx knows or like, or like that. If you come back to them afterwards and just provide proof, is that fine?
Um,
Alex Frum: so in that situation, um, we had been proactive.
Mm-hmm.
Alex Frum: Um, the senior managers just wanted to get a, a better understanding of the situation. And so I sent them pictures because my drivers love to send me pictures of stuff like that, the crazy stuff that they see on the road. Um. But no, normally you want to be proactive.
You want to be communicating on a regular basis. So like, you know, it's just part of my standard operating procedures. Every single time my drivers are waiting longer than 30 minutes, they're supposed to call my managers and let 'em know, Hey, we're in a traffic accident. Mm-hmm. On I 71, I've been sitting here for 30 minutes.
Yeah. Um, and so then I can communicate that to FedEx. If necessary. Like if I think that it, this is gonna be a longer holdup, then I'll communicate to them, Hey, we've been sitting here for 30 minutes. I expect it to be a couple more hours. There's been a fatality on the road.
Mm-hmm.
Alex Frum: Like last night I got a call at.
Like eight 30 at night. One of my drivers had, was stuck on I 70. There was a [00:25:00] fatality. We didn't know when the, the highway was gonna open up. You know, those trailers were supposed to be in to FedEx by the Twilight Sort. Mm-hmm. So I called them and said, Hey, there's been a fatality. They were already aware.
The fatality, yeah. They knew about it. I said, you know, a couple hours later I called back and said, Hey. I might have an hours of service issue. My driver's been on duty for 15 hours. You know, I can only stay on duty for 16 before I'm outta service. They said, thank you for the heads up. We will dispatch a vehicle to meet you at the next exit.
Wow. Okay. You know, so that you can drop there, they can recover the load and progress it. And then I will no longer be outta service. So like my driver under the hours of service rules. Mm-hmm. And this is higher level math, but this is something that goes back into safety, safety, availability, and service.
Under the hours of service rules. Um, your driver's only allowed to drive 11 hours mm-hmm. In any 14 hour time period. However, there are exemptions, so if you hit adverse conditions, you can get a two hour drive time extension. Um, and then if you have [00:26:00] once a a week, once in any eight day period, you can do a two hour duty day extension to 16 hours.
Okay.
Alex Frum: So in this situation, we had an unforeseen circumstance, a fatality on the highway. So we u we ended up using my two hour drive time extension, and we used our two hour. Duty day extension, and we still blew through them. Hmm. So in that situation, you are allowed to progress the loads, the next safest point, and then you are required to go off duty.
So my driver had to drop the load and then leave. Um, we coordinated with FedEx, so FedEx had a vehicle where they were waiting for us because my driver can't even guard. The trailer's at that point. Yeah. Because he's actually has to go off duty. Completely off duty. Right? Yeah. Guarding would mean that he's still on duty.
So we had coordinated ahead of time with FedEx. He went off duty, and then he was able to personally convey back mm-hmm. To, uh, the hi, the, the home base of that truck. Okay. Which was. 10 minutes away. Yeah. Mean, but it was kind of crazy. We were like three miles away from the exit where the [00:27:00] fatality happened and we, you know, couldn't use that under the hours of service.
You're not allowed to take that load all the way back to FedEx. You have to stop it at the next closest point, and then FedEx will recover the load. Okay.
Josh Gregory: Yeah, I mean it's, it's great that they will recover the load without it being a service violation, though. Yeah. Yeah. I mean, they completely
Alex Frum: understood the situation.
Yeah. We were in constant, I mean, I think, like I said, we notified FedEx around seven or eight o'clock about the situation. Yeah. My driver didn't get home until two 30 in the morning. Geez. Yeah.
Josh Gregory: Okay.
Alex Frum: So generally when there's a fatality on the road, um, and it's unfortunate like you, the more and more you Dr.
Your drivers do mm-hmm. You're gonna come across these fatalities. They generally shut the highway down until the coroner comes out and removes all the um.
Josh Gregory: Evidence, essentially evidence and everything.
Alex Frum: And they've done an initial investigation. They have to take pictures and look at skid marks and, you know, be able to have a good sense of a assessing fault.
And then they have to clear all the material. Mm-hmm. So you're talking about them bringing, you know, in a [00:28:00] fatality that there's usually a tremendous amount of damage that they have to bring records out to, to clear up the trucks or the vehicles, um, clear all the debris off the road because you don't want to have people having blowouts.
Yeah. You know, driving all over the glass. So it's, it's, it's a lot of work.
Josh Gregory: Yeah. So. We've talked about, I think the four pillars here. The four columns, the, the three of 'em that are really FedEx driven, KPIs, safety service, and availability. And then the fourth, that's, it's not a FedEx KPI, but if you're failing on your financials, your business is gonna go with it.
Well,
Alex Frum: I think it's, I mean, financials is so important because at the end of the day, I mean, one, you, you, we don't enter into this business to do charities, you know? Right. Yeah, we're all in is to make money. Yep. That's the goal of being an a small business owner or an entrepreneur. But at the, at the, at the other extension, FedEx doesn't want to have counterparties that are bankrupt or teetering on the f uh, uh, bankruptcy.
So, I mean, that's a lot of different things. I mean, a line haul business can. Sustain a tremendous amount of debt, and that's why it makes it a very [00:29:00] attractive business to acquire and to buy and build equity up in. But at the end of the day, you have to be careful how much leverage you're putting on that business because you have to be able to, to amortize the, that, that debt schedule.
Josh Gregory: Yeah. So of, of those four, where do you see. Contractors get into the most trouble or struggle the most.
Alex Frum: Um, I mean, number one is safety. Yeah. Uh, and then number two is finance. I mean, number one is, is so hard. I mean, 'cause many of us come into this business without any kind of background in truck driving.
Yeah. You know, we don't have our CDL Yeah. We've never gotten our CDL. We don't plan on getting our CDL or if you plan on getting your CDL, you're not gonna have the year's worth of experience that these other, uh, truck drivers have. Yep. Um, so safety is really hard. To understand and it, it takes a lot of work to understand, okay, what is FedEx talking about?
Mm-hmm. You know, go through all the safety modules that FedEx has on my ground biz. You know, go through all the safety modules that you do at route consultants or you know, that the other counterparties like safety forward. Mm-hmm. Or, um, [00:30:00] line haul safety or line linehaul solutions put together. I mean, understand the concepts and understand, okay, this is what causes rollovers.
This is what causes re ations, this is what causes sideswipes like. The biggest risk to my business is not a rear end collision or a rollover. The biggest risk to my business is sideswipes. Hmm. Those are the most frequent occurrences and types of accidents that occur.
Hmm.
Alex Frum: They're not the highest dollar amount, but they're the most frequent.
Got it. And as a truck driver, it's, you know, get in the cab and look, you know, you know when you're driving, you know when you're sitting in the seat. How much vis visibility do you have to your sides, to your passenger side, to your driver's side? That's one of the reasons why all my trucks are becoming equipped with the side radar to give my drivers better tools to understand what is on your left and your right.
So you don't have those sideswipes, is it just
Josh Gregory: an audio signal when Yeah, so
Alex Frum: it's a, it's a radar puck. It's a, it's a, a hockey puck that goes on the side, on the outside of the truck that actually set, uses lidar
mm-hmm.
Alex Frum: To identify if there's vehicles in your [00:31:00] blind spots on either side. And it looks all the way back to the end of the trailers.
Mm-hmm. So it tells you, you know, in your. 70 feet of Yeah. Or 80 feet of truck distance, you know, are there any vehicles that you cannot see in your blind spots there? Yeah. And it's really cut down on my sideswipes. That's good. You know, I, uh, I had a bad situation in 2022 with a number of sideswipes.
Mm-hmm. I went back to one of my manufacturers or to my dealers and said, Hey, how do I solve this problem? They're like, well, there's this hockey power. Yeah. You know, cost $1,500 to buy and install and it'll cut it down and it's reduced my size wise by a great deal. Um. You know, you can go, there's a, a number of different third party vendors that provide safety solutions to trucks.
Yep. They're part of the, they, they come equipped now in a lot of vehicles, you know, through the OEMs, but they're produced by Bendix and Waco. Waco. Um, so they provide you solutions. And then there's a third one that's called Meritor. Those are the three big safety providers. Okay. Or safety equipment solution providers.
Definitely look at those if you're [00:32:00] buying older trucks.
Josh Gregory: Yeah.
Alex Frum: Um, so that's. You know, I found the hardest part is safety. The other one is finance. Because a lot of people don't think about when they're buying this business, they're like, oh, this business generates X amount of money. I can put this amount of debt on it.
But you're not thinking about, okay, it generates this amount of money in year one. It generates this money in year, in year two. This generates this amount of money in year three, keeping all things static. Are you generating enough revenue? Mm-hmm. And free cash flow that you can amortize your current debt.
And buy replacement vehicles. Yeah. And that's the thing that a lot of people make mistakes on is not, is looking at a business and saying, oh, I can run this business like this for the next 10 years. Well, you have an asset. That's not only depreciating or you've already depreciated, but it's actually deteriorating.
Mm-hmm. As you go along. So a vehicle as it gets older and older costs more money to maintain and eventually you're gonna have to replace it, and that costs money. So can you project out [00:33:00] looking at the vehicle inventory that you have right now, that you're gonna be able to afford the replacement cost of that vehicle?
And so that's what I find. So in year one, what. What gums up most contractors is safety.
Mm-hmm.
Alex Frum: In year two, it's still safety. Year three, year four, year five. They're usually on top of safety by then and now as finances. That really comes to bite them in the butt. Yeah. Because they're not ready to, they don't have enough money or they haven't scheduled.
They're, or they haven't ma maintained their balance sheet or haven't figured out how to efficiently allocate their capital.
Mm-hmm.
Alex Frum: Um, effectively to be able to replace those trucks in the future. And that's what gets a lot of people in trouble.
Josh Gregory: Yeah. Yeah. 'cause it, I would say too, you know, service and availability, if that's your main issue, it's usually a symptom of something else.
Yeah. Like, whether it's a safety problem or a recruiting problem or a financial problem where you can't bring in new drivers or new trucks. It's usually. Um, it, that's usually just a reflection of other problems that are happening in the business.
Alex Frum: Yeah. And FedEx, I mean, let's put it this [00:34:00] way, service and availability.
Availability is almost always a function of either poorly maintained vehicles mm-hmm. Or not being able to recruit. Yeah. And more often than not, anybody can recruit and anybody can maintain. And if you can't. There might be a wider issue within an industry, and FedEx actually might give you leeway. Yeah.
So during the pandemic, FedEx recognized that we couldn't recruit drivers and we couldn't maintain our vehicles because it was so hard to source parts. Yeah. And so they actually lowered the availability thresholds in those situations. Yeah. Okay. So FedEx actually, that's why like availability and service, they are important.
Mm-hmm.
Alex Frum: But they're not gonna terminate your vehicle because if you're having availability or service issues, you can probably recruit your way or maintain your vehicles out. Or if it's such a big issue and it's across the industry, then FedEx is gonna make accommodations. Yeah. But FedEx will never make accommodations for safety.
Mm-hmm. And they will never make accommodations for finance.
Yeah.
Alex Frum: You need to be a solvent. Successful fi, um. A contractor and you need [00:35:00] to be a safe contractor. Otherwise they don't wanna do business with
Josh Gregory: you. Yeah. And I think that's a, a perfect summary. Yeah. Uh, we'll leave it at that. So I, I think that really helps people think through, you know, if they're trying to figure out where to be successful, what are the things they need to worry about at a high level to be successful as a line haul contractor.
Yeah. I think those four pillars are, are an imperfect encapsulation, and I think that hierarchy of safety, financials, service, and availability are, are the right way to think about it. Yeah. To be successful. I
Alex Frum: agree. And I think if you, everything can get drawn back into those four pillars. Mm-hmm. So everything that you.
You learn as you become an advanced contractor, how to manage unassigned runs, how to deal with your fuel card, how to recruit teams, you know, all those things go back into one of those four pillars. There's nothing in the universe of being a contractor that can't go back to those four pillars. Yeah.
Josh Gregory: Perfect. Alright, Alex, well thank you for walking us through all that today. Awesome. It was my pleasure. [00:36:00] Yep.
