Mark Jones: Yeah. Scott, just to clarify one point. On the last call, we said we were over the halfway point in franchise terminations and those calling efforts. So in this quarter we had 89 terminations. We still think it will be high in the fourth quarter higher than historical average. We believe in 2024 we will trend back down towards that historical average of 15%. And we don’t see a reason why kind of medium term it should be higher than a 10% to 15% range as we gross up the gene pool.
Mark Miller: Yeah. Scott, this is Mark Miller. So if we just go back and think about franchises in general, the way that I think about it it’s not about the absolute number of franchises. It’s more about how many agents we have. And so where we’re really doubling down is adding franchises or adding agencies back into the franchises that we feel really strongly about. What you’re seeing in the numbers is kind of a net out number. So you’re losing about quite a few agents that aren’t very productive and replacing them with highly productive agents. That includes corporate agents that are converting to franchise ownership. We’re also being very, very selective in the franchises that we’re putting into the community now. So the number of launches you’ll see are greatly reduced from what it was last year, but they’re much more productive and they’re in the geos that we want.
And I think the final part of your question was how many kind of inbounds are we getting now? We’ve transformed the way we hunt for franchises if you will. Instead of doing a lot of outbound calling about 50% of our leads will be coming from, in this quarter from inbound digital marketing type of capabilities which is a new muscle for us and working tremendously well at finding really high-quality franchises.
Scott Heleniak: Okay. That’s helpful detail. And then just the agent to franchise conversions, you said expect to do 34 this year. Is there any kind of target you have in mind just annual conversions kind of going forward? Is that kind of a good number to use just assume the next few years?
Mark Miller: I mean, it is our best source of high-quality franchises. I’d love to ramp that up. But I also don’t want to jeopardize the health of the corporate business. So a lot of it depends on how big the incoming class is going to be, which we mentioned we’re doing really, really well on college campuses. We’re still in the budget process. And so, we literally budget out how many people we want to convert and how much we can take out of the corporate business. But I would say consistent with this year would be a good estimate for next year until we have information. And if the class grows bigger and we have more qualified people I’d certainly like to up that. But right now I would use what we had this year.
Scott Heleniak: Okay. That makes sense. And then just final last question just the product availability that you’re citing, I’m assuming that’s in Florida, California, Texas. Are you seeing that anywhere else or is it just mostly those three states?
Brian Pattillo: Hey this is Brian Pattillo. It’s really across the board. Those are certainly the most difficult states. California and Florida have been difficult for a long time. In fact California we’ve actually seen in many ways a better market, because of many of the large captive carriers have shut down new business which has given us actually a lift on that. But really it’s across most states. We’re seeing many of these carriers are looking to slow down growth as they seek to restore profitability. So almost every single state has been challenged from a product perspective just some more pronounced than others.
Scott Heleniak: Got it. Appreciate. Thanks.
Operator: Thank you. Please standby for our next question. Our next question comes from the line of Josh Shanker with Bank of America. Your line is open.
Josh Shanker: Yeah. Thank you. Good evening everybody. A couple quick numbers questions, what were onboarding the quarter? And how many contracts for new franchises, do you have pending?
Mark Jones: Hey Josh we launched 30 franchises in the quarter. And I believe the signed, but not yet launched pools in the 200s.
Josh Shanker: Okay. I’m looking back to 2019 before the pandemic shook everything up. And by my count it seems like this is a winner or loser type environment you guys operate. And maybe about 30% of franchises didn’t make it out of their first year could get traction. Is that a good way to think about long-term how the company ought to operate among new hires, a new franchisee hires?
Mark Miller: I mean Josh, this is Mark Miller. I would assume that we can bring that number down with the way that we’re like corporate franchises that are corporate agents that convert into franchise ownership are not going to fail at the same rate. I mean we’re bringing in much higher quality franchises so we would certainly expect to bring that number down overtime.
Mark Jones: Yeah. I would point to in this quarter franchises we launched in Q3 of 2023, were 48% more productive, excluding the corporate launches. So just ones we hunted in the wild compared to last year 48% more productive. So the quality of the franchise pool is going up dramatically which helps that we don’t need as much volume. We still would like to see some increasing volume on new franchises but the productivity is so high at this point that we feel very good about the success rate of new launches.
Josh Shanker: And if I can …
Mark Miller: Yeah and obviously the productivity correlates directly to the success, like they’re going to stay in the system a lot longer if they’re more profitable.
Josh Shanker: And if I can get one more in you talked about the opportunity to earn a seven-figure annual compensation from a college hire. Just to understand the pathway someone joins as a corporate agent they prove successful you convert them into a franchise agent and they work for a number of years and get up there. And do we have examples of corporate agents who have become seven-figure earners?
Mark Jones: Yes. Yeah we do. And it’s a pretty clear path. These are typically people that have had a team underneath them before. They know how to recruit. They know how to onboard and to get people down the ramp. And so it’s a relatively I won’t say easy proposition but it’s simple for them to understand. They know how to be a good producer. They know how to get people up to be a good producer. So you don’t need very aggressive hiring targets to get there. It’s a very clear path and we have examples of it in the past.
Josh Shanker: Are the corporate agents still those seven-figure earners or are they franchisees at this point?
Mark Jones: Franchisees.
Josh Shanker: Okay. Got it. Thank you.
Operator: Thank you. Please standby for our next question. Our next question comes from the line of Pablo Singzon with JPMorgan. Your line is open.
