Silt couple sells business after FedEx Ground changes policies
October 18, 2016
Keith and Rachel Gill, a Silt couple jumping on what looked like a bright business opportunity, didn’t foresee that in only a year they would be unemployed, nearly $100,000 in debt and living out of a popup camper.
Both were looking for a career change in the summer of 2015, and an opportunity to buy a FedEx Ground route covering Silt and New Castle seemed nearly perfect. The job would allow them more flexibility, and the Gills estimated they could work for the next 10 years and retire.
“There were a lot more pros than cons about the opportunity, which didn’t seem like one that would come around too often,” said Keith.
“As a retired veteran, one of my goals was to eventually have my own business,” said Keith, who retired from the Air Force in 1999 after 20 years working in nuclear command and control.
“We put every last cent we had into FedEx Ground as contractors,” said his wife, Rachel. This required that they purchase the route contract and eventually three delivery vehicles and other equipment. They went into debt, took out their life savings, borrowed from family.
A few months in they’d invested about $150,000 into the business.
They had a tag-team operation, what they called a “small mom-and-pop business.” Rachel covered the rural routes while Keith handled the routes within town limits. In a typical day they delivered to about 100 to 125 stops, covering about 300 miles per day combined. The Gills said they received high praise from customers and the company for their deliveries.
But in only six months, this business venture would take a 180-degree turn, said the Gills.
In January of this year “FedEx Ground announced plans to implement independent service provider (ISP) agreements across its entire U.S. pickup and delivery network, including Colorado,” Perry Colosimo, managing director of communications for FedEx Ground, said in an email to the Post Independent.
The Gills said this new model for contractors was essentially forcing them to either triple the size of their territory or get out.
Operating in only one “primary service area,” the Gills were told they would have to buy another two service areas. They didn’t have the money to do this, and even if they did, no contractors in the area were selling.
“At the time, ISP agreements had already been in effect in nearly half of U.S. states, with no disruptions in service,” wrote Colosimo. “These agreements include generally larger contracted service areas for which businesses negotiate agreements that provide them with greater service capacity and operational flexibility to meet the growing demand of e-commerce customers for differentiated service.”
The Gills said before joining FedEx Ground, they heard rumors about the move to the ISP model. “But [the company] said, ‘Don’t worry about it. Get it out of your mind. If it does happen it will be several years down the line, and you’ll have plenty of time to deal with it,’” said Keith.
“Looking back now, they should have never allowed us to sign that contract when in six months they were going to come out with this. They knew about it back then,” said Rachel.
“But we never had that warning before we put this money into the business,” said Keith.
The Gills said they reached out to the company to explain their situation and limitations. Garfield County and Pitkin County communities being in tight corridors meant their options for expansion were restricted.
The couple estimated they would need $300,000 to recoup what their business and routes were worth and lost wages. They requested the company reimburse them this amount, but FedEx Ground responded that it was not in a position to do so.
“We wanted FedEx [Ground] to just help us out because we feel they were at fault for not telling us when we signed the contract,” said Rachel.
“Our transition to ISP agreements is progressing smoothly and will continue in phases through mid-2020. Affected business owners such as the Gills … are being offered monetary incentives and time to make decisions regarding their transition options,” wrote Colosimo.
FedEx Ground was offering $10,000 in assistance to independent contractors to help them transition to either grow or get out of the business, said Rachel.
But accepting that money required them to sign a limited release liability statement, said Keith.
The Gills didn’t take the money because they believe there’s a possibility of a class-action lawsuit — which they couldn’t be a party to if they signed the statement.
“And as much debt as we’re in, $10,000 is like a penny tip,” said Rachel. “It’s not going to save us.”
“The crux of the thing was that we invested in this business for the sole purpose of running packages for FedEx Ground,” said Keith. “We wouldn’t have put money into it had we not obtained the contract to run packages for FedEx Ground.”
The company’s contract relations department also suggested the Gills shadow another contractor. “In a nutshell to give up the name of our business and work for another business,” said Keith.
Their dream of owning their own business would be gone.
“We would make no decisions for our own company. We didn’t want that; we wanted our own company. So when they told us that, it was almost like a slap in the face,” said Keith.
The Gills said they were left with no choice but to sell their company for a fraction of what they’d invested and still be left with the vast majority of the debt they’d taken on.
“Many [contractors] have decided to take the necessary steps to enter negotiations for ISP agreements, and some have opted to sell their business and continue as employees for other service provider businesses, or to pursue other opportunities outside of the business,” wrote Colosimo. “After a number of discussions with the Gills concerning their options, our understanding is that they chose to sell their business to another service provider for whom they have been reported as employees.”
Keith Gill said they were employed briefly by the Aspen company that bought them out to train them on their new route. The couple is now unemployed.
In total the Gills are nearly $100,000 in debt, and they’re still stuck with one of their delivery trucks that the Aspen contractor didn’t need.
The Gills have moved out of their Silt home, which they’re renting out to cover the mortgage. Now they’re looking at the prospect of living out of their camper for the next six months to a year, and they’ve hit the road to look for work in the southeastern U.S. to escape the Colorado winter.
“It’s not just our story,” said Keith. “It’s going to be a lot of other people involved … probably dozens of other [small] contractors that are going to have a very similar story to tell.”