Juan Gallástegui
President
Gallástegui Armella Franquicias
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View from the Top

Strong Franchises Stepping Stones for Competitive Market

Wed, 02/14/2018 - 09:24

Q: How has Gallástegui, a franchising consultancy, making the most of Mexico’s downstream changes?

A: Our position has changed greatly compared to 2017. We were working with several service station brands looking to franchise their businesses. One of the most visible companies to date is La Gas, which deployed a commendable growth strategy in the country’s southeastern region. Today, we have an exclusive arrangement with Hidrosina, one of the largest and strongest groups among gasoline retail companies. We are putting the finishing touches on its franchise model and are jointly devising its franchise commercialization strategies as the market opportunities are sizable. There are 8,000 independent service station owners who can now choose to either affiliate themselves to a larger group or remain with PEMEX. 
We are uncertain about the NOC’s continued interest in the service station market. While it remains strategic in terms of brand presence, we think PEMEX’s main interest is focused on fuel wholesale. PEMEX remains an important supplier of gasoline for all new brands such as BP, Shell, G500, Hidrosina, La Gas and OXXO GAS. Gasoline price differentials remain primarily rooted in logistics efficiency, market decisions and bilateral negotiations between these different groups and PEMEX. We believe this scenario will prevail for the next two to three years. As long as we continue to lack a proper infrastructure that includes terminals and pipelines that enables these groups to purchase gasoline from any trader besides PEMEX, the situation will see little to no change. Even if a company imports gasoline from other suppliers and brings it to Mexico by ship, the pipelines and storage facilities used to supply that fuel to the company are still owned by PEMEX, and therefore the price is dictated by the NOC. We anticipate that the first groups that will look to suppliers other than PEMEX will be those close to the US border as they can easily import gasoline by land. Nevertheless, the situation remains complicated as the NOC will stay in the market with its significant number of dispatching stations.
Q: How does Gallástegui provide a differentiated customer service?

A: We assist our clients in their efforts to standardize their franchise business to NOM-005 compliance for the operation of service stations. We go one step further by designing this standardization to translate into a distinctive customer service. Customers do not enjoy going to gas stations, just as much as they do not like going to the bank. Banks in Mexico are already working toward digitalization and creating a more comfortable experience for their customers. The challenge for gas stations, as this commodity cannot be provided via the web, lies in finding ways to make the visit to a service station fast, efficient and pleasant for the user, from a multisensorial standpoint, which is common in restaurants and apparel stores. Those principles should also be applied at service stations. Client satisfaction measurement processes must also be implemented. It can be as simple as standardizing elements inherent to customer service or playing popular music in the background. The provision of additional services, such as membership schemes, will also become increasingly common. COFECE is adamant it will foster competition within the industry as now all service stations are no longer under one corporate roof. We can provide our expertise on how to operate a franchise based on standardized and measurable systems for client satisfaction and focus on the major points that will prove critical in building this competitiveness and creating added value. We have experience in international markets and are highly motivated to implement international best practices regarding client satisfaction at gasoline stations in Mexico.

Q: What are Gallástegui’s objectives for 2018?

A: Gallástegui will continue providing its expertise and knowledge to contribute to the consolidation of a mature gasoline market on its way to reaching real competition. We strongly believe a renewed focus primarily directed at customer service is critical in any franchise strategy looking to secure a strong foothold in the Mexican market.