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www.fueloilnews.com | FUEL OIL NEWS | MARCH 2016 23 FON: You have such a mixture of operations, what provides the com- mon appeal? DOWNEY: What brings them togeth- er is they all want to grow. The other thing is that they really understand the financials. They realize that they may not get their normal margin on the gallons delivered for SmartTouch, but since we carry the entire cus- tomer acquisition and servicing costs, collections—this optimizes their fleet operations and brings down the overall cost per gallon to deliver fuel. FON: How do you handle territories? DOWNEY: We essentially do that by ZIP Code. When we partner with somebody that ZIP Code is essentially their dedicated territory. We're not a broker in the sense that we have multiple operators serving the same territory. And as long as they can keep up with the deliveries in those territories there's no need to make any ad- justments. FON: How is fuel supply handled? DOWNEY: We have about four companies in the network that we supply, but that's not necessarily tied to SmartTouch. What we do is reimburse the dealers in the network for the fuel costs at the OPIS averaged on the day of delivery at their closest rack location. So if they have some good purchasing practices that can add a few extra pennies—or more. By pricing on day of deliv- ery we protect our partners in case the price goes up in between when the order is placed and the fuel is delivered. Typically, these orders are fulfilled within three days, and usually two. FON: How do you price fuel to the customer? DOWNEY: We try to be competitive. We're not trying to be the cheapest provider. But we are typically going to be in the bot- tom half or bottom third of the market price-wise, and hopefully competitive with a lot of the cash providers. We think there is significant value in the level of service we provide and the conve- nience of online ordering. FON: What purchasing options does the customer have? DOWNEY: They can purchase fuel load to load, and we offer an auto fill program based on our k-factor forecasting sys- tem. And customers that use the auto-fill program receive a 3-cent discount. FON: What is the technology require- ment for your dealer partners? DOWNEY: It's really interesting. We have dealer partners who are very large and still do everything on paper, and smaller operations that are highly automated. We have a portal that everybody receives their orders through. They get no- tifications through email and then they go in and put in the expected delivery date, make a delivery and handle that all in their own systems, and they update through our portal how many gallons were delivered. Although we still have the manual component it takes about 10 seconds per order. We're working on doing an active integration with a couple of the software programs out there. FON: Who owns the customer? DOWNEY: We own the customer, though they should be served by the same dealer every time. But, if there are any issues that arise the customers call us and not the dealer, and the dealers like that. Our partners are free to market their own operations in these areas—the only thing we ask is that they do not specifically market to the customers they serve for us. If they put up a bill- board and one of our customers ends up liking a promotion and going over to them, we won't begrudge that. They are a partner of ours and we want to see them grow. FON: What's happening on the HVAC side? DOWNEY: That's moving fairly slowly. We probably have 10 or so partners in that network. When we bought the company this was very new. We've grown the territory by about 2 million homes, in terms of the service area, and promoting this is a focus for this spring. It's essentially a tune-up contract and then the customer will have somebody local for service. It's a little dif- ferent in terms of the backend if there is an installation, etc. We ask the local partner to explain to the customer what's going to be replaced, quote the job, get the signature and enter it in the system, then we bill the customer. FON: How does this integrate competitively with Shipley's operations? DOWNEY: Right now Shipley is one of our largest dealers. We treat Shipley mainly as just another dealer. We're going to be adding other products such as propane, electricity and natural gas and in Shipley service areas those will obviously be Shipley products. But we will be looking for partners in other areas. l F O N "We try to be competitive. We're not trying to be the cheapest provider. But we are typically going to be in the bottom half or bottom third of the market price-wise, and hopefully competitive with a lot of the cash providers." — Steven Downey, SmartTouch Energy President