December 17, 2015
ETOBICOKE, Ont. — There was really never any doubt Elias Demangos would get into trucking. His father Angelo arrived in Canada from Greece in 1969 and bought a truck. From that one truck, he established Fairway Canadian Express, which in 2004 merged with Watkins Motor Lines.
The combined entity was generating $1.4 billion in revenue when it was acquired in 2006 by FedEx.
Some of the younger Demangos’ earliest memories involve exploring his father’s warehouses.
“I used to see all the different products sitting there – all the different coloured freight, and I was enamored by it,” Demangos recalls. “It was always exciting. It’s not an easy business. My father used to say trucking is like owning a restaurant in New York City on Saturday night. It’s crazy all the time and you’ve got to get every dish out of the kitchen perfect. You can’t send out one bad dish and say, ‘Well, I had 1,000 people here today – only one dish came out bad.’ To that one individual, that’s the only dish they had. So to them, you’re 100% off.”
Demangos attended York University’s Schulich School of Business and earned his BBA, with an eye towards starting his own trucking business. He had identified the dedicated fleet segment as one that was growing and rich with opportunity.
“My father had dedicated fleet customers and he just found that he had more consistency in the relationship, in the partnership and in the revenue stream,” Demangos explains. “You could find better drivers and you could marry a good driver with a nice contract and he’s home every night, because it’s final mile.”
The trade-off for that is generally lower margins than in truckload or LTL, Demangos acknowledges, and sales cycles that can run three to five years, making it difficult to generate cash flow early on.
When he launched Fortigo Freight Services in 2006, at the age of 22, Demangos started out much like his father – with a single truck. He even delivered its first load himself.
“I remember the first delivery; it was a delivery from Aurora to Bolton and it was across King Side Road and it was a tailgate delivery. I went out and rented a truck. I had pallets to pick up and I remember being the driver and dispatcher and I had to bill it later on,” Demangos recalls. “When I first started my mindset was, I’m going to start it the way my father started his business, which was very bootstraps.”
Soon, Demangos was able to add trucks and hone in on his goal of becoming a dedicated fleet provider.
In 2006, when it came time to hire his first full-time office employee, Demangos called Marie Deveau, who had been his father’s first employee in 1975. He asked her to join the company in a customer service role, the same capacity in which she helped his father grow his business decades earlier. She accepted. The plan was coming together. Soon after, the bottom fell out from under the global economy.
Demangos remembers exactly where he was when it dawned on him the global economy was about to tank, threatening to derail the momentum he had worked so hard to develop with Fortigo.
The revenues dropped 50% month-over-month,” he said. “I was at a business meeting down in Florida and I remember watching CNN. It was October. I remember watching CNN and it was like the world had just collapsed.”
At that time Fortigo had about a dozen trucks on the road and better-established trucking companies were meeting their demise.
“I would equate it to being in the Atlantic Ocean, in one of the worst storms, and you’re in a rowboat going up and down and you look to your right and to your left and you see these big ships – and they can barely handle the waves,” Demangos recalls. “Some of them are breaking and sinking and you’re thinking, how the heck am I going to do this?”
During the tumultuous months of the Great Recession, Demangos’ father Angelo was a calming influence.
“He kept telling me, ‘Son, I’ve been through three or four of these ups and downs over my 50-year career. Don’t focus on the negative. Even if the economy has shrunk by 10%, you can still grow. There’s still business out there. It’s not like there’s no business out there, you just won’t grow as quickly.’ He always said there’s no excuse – you can still grow,” Demangos says.
In hindsight, he now feels he may have been better positioned to survive the recession than better established competitors.
“I wouldn’t say it was easier, but it was certainly a different challenge,” Demangos says. “To start a business at that time, everything (from there) was up. You didn’t go down. It maybe took a bit longer to grow, versus the guys who were losing business and having to really restructure things. For me, it was a growth story. I grew at a bit of a slower rate, but it was still growth all throughout those years. It was actually not a bad time to grow. We didn’t have legacy costs. It really taught me how to manage with little resources and to this day, we still manage a tight ship. It was good training.”
Many trucking companies would not survive the recession, but Fortigo emerged larger and stronger. By now it was pursuing its initial mandate of providing dedicated fleet services to shippers wanting to shed their own private fleets. Many manufacturers, Demangos realized, had developed trucking divisions almost by accident, and were becoming increasingly concerned with the growing risks and liabilities their trucking fleets were exposing their core businesses to.
“Most companies just fell into trucking,” he says. “They were delivering some stuff and they rented a truck to do some deliveries. Then, they had enough deliveries that they went out and leased a truck and the shipper’s name was on the truck. Then it grew enough where they needed another truck and hired a driver – so they just sort of fell into it.”
Many of those manufacturers were eager to return their focus to their core competencies and let a pure trucker worry about things like recruiting drivers and complying with the trucking industry’s increasingly complex regulatory environment. Outsourcing transportation also allowed them to redirect capital to projects that support their manufacturing activities. However, relinquishing control of a crucial element of their supply chain is not an easy decision to make for any manufacturer with a private fleet – and it’s one that, if not executed properly, could lead to their downfall.
Because of this, mistakes during the transition simply can’t occur. Demangos refers to the on-boarding process as “open heart surgery.”
“A customer who makes widgets sources the widget, prices the widget, warehouses the widget and finally sells its widget. If you’re not there to deliver the widget, the entire process they went through is all gone. They’ve lost it and it’s hinging on you,” Demangos explains. “In the LTL world you can try one pallet and if you do well, you’ll get a second one the next day. If you don’t do well, you’ll just never see a pallet again. In the dedicated world, you’re either in the water or you’re not in the water. You get all the trucks in the fleet or you don’t get any of the trucks in the fleet.”
On-boarding a new customer can take weeks or months, depending on the complexity of the operation. This also means when Fortigo lands a new customer, it can find itself having to hire dozens of drivers – and fast. Sometimes the company will hire the private fleet’s drivers but other times it deploys its own, meaning a steady pipeline of driving talent is required.
“Even if we don’t have an opportunity, we’re constantly cultivating our relationships and cultivating drivers that we know in our network, so that when a customer comes on-board we can draw from the best of that list of people that we have,” says Demangos.
For drivers, working for a dedicated fleet can mean more than just driving.
“We’ve got drivers that will stock shelves at a customer site,” says Demangos. “We’ve got drivers who will do things for customers that their shipping and receiving staff should do or that their customer service staff should do.”
Despite the variety of work involved, or maybe because of it, driver turnover at Fortigo is extremely low.
Demangos’ approach to finding and keeping talent is simple.
“Compensate them fairly,” he reasons. “Help them realize they’re part of a family. The fact that it’s a dedicated contract certainly helps. The fact it’s last mile certainly helps, because they’re home every day in most cases – they’ve got some consistency to their life.”
Fortigo’s treatment of its drivers is another value that was instilled in Demangos by his father.
“My father started off as a driver and I remember as a kid in the ’80s going to driver meetings on Saturday mornings,” he recalls. “I remember drivers always coming up to him after the meetings and sharing their concerns and then on the way home, my father would talk to my brother and I and share with us how important the drivers were – that without the drivers, you wouldn’t be able to move anything come Monday morning.”
While Angelo Demangos isn’t involved in the day-to-day operations of Fortigo Freight, he still serves as an invaluable mentor to his son. They share ideas about business development strategies and business in general.
“We talk every day and I share with him my challenges,” Demangos says. “He’s a mentor and a cheerleader and he keeps me motivated and keeps me grounded.”
One of the biggest differences today, from when Angelo was running Fairway, is the role of technology. While Fairway was considered a progressive company in its day, early to automate certain processes, Elias has a different philosophy about technology.
“In my father’s time, technology wasn’t as customer-facing as it is today,” he says. In fact, the younger Demangos has a unique approach to technology adoption: If it doesn’t directly benefit the customer, he won’t invest in it. And rather than forcing its technologies and systems on a customer, Fortigo ensures its own technologies can be integrated with those its customers are already using.
“Our technology platform has to be one that we can adjust regularly. Not just adjust, but integrate with (customers’),” he says.
Today, Fortigo Freight continues its growth and is closing in on 500 trucks across its network, which is centered in Ontario and has a strong presence in neighbouring provinces. Demangos’ vision has been validated by the fact all of the company’s customers have renewed their contracts – none have returned to operating their own trucks.
“We haven’t lost a customer since day one,” he says, adding that maintaining that record is one of his highest-priority goals.
He is also turning his attention to succession planning – though at age 31, he’s not planning on going anywhere himself.
“As our senior executives begin to retire, one of my responsibilities to our customers and to our organization and to our drivers is to have the right management team in place and bringing the right people on-board and training them,” Demangos says. “It’s a challenge and it’s something that we’re spending a lot of time on.”
Given the success Fortigo has achieved and its enviable growth trajectory, clearly, if he wished to, Demangos could sell the company, cash in, and spend the rest of his days sipping ouzo on some Mediterranean beach. But that’s not in the cards, nor is it something he aspires to. Demangos says he’s in love with the minutia of the business and doesn’t see a time where he’d relinquish control of the day-to-day operations.
“I enjoy the hustle and bustle of the business,” he says. “I enjoy the challenges of it. I enjoy the ups and downs. I don’t like weekends, because there’s not a lot of hustle and bustle.”
Sundays are just the worst, he says.
But during those quiet days, on Sundays and on holidays, Demangos can still relive his youth, walking through the warehouse and marveling at the different-coloured freight stacked high, bound for all kinds of different places. The only difference between then and now is that it’s his warehouse.