The Unlikely Asset Class
Bloomberg Businessweek|August 30, 2021
Spencer Patton helped buy or sell about a quarter of the FedEx Ground delivery routes, a new road to riches for entrepreneurs
Thomas Black

The crowd was amped. Some 1,800 strong, they had traveled from across the country amid a raging coronavirus flare-up to assemble in a hotel ballroom in Nashville. The man they were cheering as he took the stage wasn’t a rock star, a preacher, or a politician. It was Spencer Patton, a bespectacled 35-year-old former hedge fund manager in a polo shirt and khakis. Patton has carved out a niche doling out advice to entrepreneurs looking to make it big as contractors for FedEx Ground, the package-delivery service that’s been booming amid a surge in online shopping during the pandemic.

“This is like buying Apple at $1 a share—that’s what we’re doing here,” Patton told rapt attendees packed into the presidential chamber at the Gaylord Hotel. “We’re at the tip of the spear in an asset class that no one knows about.”

The unusual asset class Patton proselytizes about—contracts that give owners the right to operate FedEx Ground routes in specified areas for as long as three years—is red-hot these days. The owners collect a fee for each package their fleets drop off, but they’re entirely responsible for hiring drivers, buying trucks, and dealing with all the issues that come with running a small business. Prices for routes have increased 50% from only a few years ago, but they still may bring returns of more than 20% a year. Patton predicts most contractors will see their sales double over the next three years. Meanwhile, the mom and pops that dominated the industry are selling out to a new class of investors looking for growth and higher returns.

Patton’s celebrity status stems from his deep knowledge of the business: He owns 250 routes across the country, and he estimates that his consulting company, Route Consultant, has brokered about 25% of all the FedEx Ground route transactions in the U.S. So the nation’s thousands of would-be delivery czars are eager to get Patton’s advice on everything, including how much to pay for routes, the latest safety standards, and the skills needed to operate in the urban gridlock of Chicago or the rural byways of Chugwater, Wyo.

Patton came to logistics stardom via a circuitous path. Growing up in Nashville, he got his first taste of trading stocks at age 10 at his dad’s urging and was dabbling in options by age 16. After graduating from Vanderbilt University in 2008, he joined a company in Nashville that bought struggling businesses and turned them around. Two years later he persuaded the partners there to kick in $2 million to back a hedge fund he’d started.

In 2013, Patton walked away from managing other people’s money to concentrate on his own business. He’d methodically studied different industries, including self-storage units and liquor stores, before settling on the then-obscure idea of buying FedEx Ground delivery routes.

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