Last mile carrier plans to launch franchise delivery model in 50 markets

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diving letter:

  • The Frontdoor Collective (FDC) plans to launch in about 50 markets by 2023 to demonstrate the growth potential of its franchise delivery model, a company executive said in an interview Thursday.
  • The e-commerce-focused last-mile delivery provider currently serves markets in Pittsburgh, Boston, Philadelphia and Houston, said Rick Hernandez, senior vice president of sales and business development. It plans to expand to Southern California and Arizona in about two weeks.
  • Unlike FedEx Ground and Amazon, which use contracted service providers, FDC relies on franchisees for delivery. “We don’t create this antagonistic relationship between management and workers — we align the incentives,” Hernandez said.

Dive insight:

FedEx Ground and Amazon have proven their independent contractor models can scale quickly while remaining flexible, Hernandez said. However, as some contractors clamor for better terms, the FDC wants to prove that the franchisee model for truckers is both scalable and sustainable.

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“You have entrepreneurs who aren’t just focused on their patch,” Hernandez said. “They exchange notes with each other. They give each other guidance because they are part owners of The Frontdoor Collective. It’s not just, ‘I want to run my business.’ They want it to be a huge, scalable model.”

FDC currently has about 95 franchisees signed up for deliveries, with another 300 poised to do so, Hernandez said. The company requires its franchisees to “own an active delivery business in the requested area and have successfully completed at least one peak season,” according to its website. Hernandez added that the company is looking for franchisees with FedEx or Amazon experience.

“You need franchisees who are skilled at hiring and firing — that’s the greatest skill we have in this space,” he said.

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Among the FDC’s target customers are companies that consolidate customer mail for delivery by the US Postal Service — those “that have worked with the Postal Service and are frustrated with it,” Hernandez said. In addition, the FDC is interested in large brands and retailers with their own distribution centers and logistics capacities, as well as smaller customers such as food manufacturers who prioritize on-time and damage-free delivery.

The expansion of FDC comes as FedEx Ground faces a public campaign by Spencer Patton, a major contractor with whom Ground terminated its agreements in August to offer better financial terms to the 6,000 contractors in its network. Patton has advocated for Ground to offer franchise-like benefits and has raised the possibility of a legal challenge to reclassify contractors as franchisees.

“The franchisor has to report on the health of their franchisees, they have to disclose default rates, and franchisors can’t make contract changes with 30 days’ notice,” Patton said in an August email. “There’s much greater state and federal protection for a contract with a franchisee, and we as contractors don’t enjoy that.”

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But both FedEx Ground and Amazon have plenty of incentives to retain the services of the independent companies that operate their delivery networks. FedEx, in its lawsuit against Patton’s Route Consultant company, said competitors tried to exploit his campaign to attract existing Ground customers. Amazon last week announced a new initiative that provides delivery partners with funding to give their drivers access to various academic programs.

“They circled everyone else,” Hernandez said of Amazon’s last-mile delivery model. “But more importantly, doing this in a way that is sustainable from the franchisee’s perspective. It aligns the interests of the entrepreneur and the retailer to provide a superior customer experience.”

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