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  "documentTitle": "Goosehead Insurance, Inc. (GSHD)",
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  "authorName": "Wolfpack Research",
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  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2023-02-16 00:00:00",
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  "notes": "Includes specific references to former employee interviews and market data.",
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      "text": "According to our calculations, as discussed in Appendix A, since GSHD went public in 2018, the failure rate for signed first-year franchisees has increased from 56% to 67.4%.",
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      "text": "Failure Rate of Signed Franchises In First Year",
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      "text": "We spoke with five former employees and one point of agreement was that nearly all referrals, (85%-95% according to former employees who put a number on it), were tied directly to home closing transactions. The agents would then try to cross-sell leads on other types of insurance to go along with their homeowner's policy. These leads have dried up significantly as a slowing housing market has driven down demand for mortgages nationwide and the cross selling that goes with it.",
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      "text": "Management is spinning an increase in churn as a positive. It is not. In our view, increased churn can only mean that more franchisees are running out of money and defaulting on their agreements.",
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      "text": "Rising premiums have driven up the company's renewal revenues, but renewals have previously only accounted for 60% of revenues. 700 of GSHD's 1403 franchisees have less than two-years of tenure. New franchisees need to write new policies to stay in business and 193 franchisees have already closed their doors in 2022.",
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      "text": "According to our calculations, as discussed in Appendix A, since GSHD went public in 2018, the failure rate for signed first-year franchisees has increased from 56% to 67.4%.",
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      "text": "GSHD's has touted its narrow focus on building relationships with referral partners tied to home closing transactions, like real estate agents and loan officers, as their differentiating business strategy. This strategy may have fueled growth for GSHD when the housing market was active, but our analysis indicates that it is becoming a serious drag on the company's growth as the housing market has slowed.",
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      "text": "In our assessment, the real reason GSHD is warning analysts that churn will increase is because the company's growth is rapidly declining because of the conditions in the housing market where applications for mortgages have declined 67% YoY:",
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      "text": "first-year franchisee failure rate: 67.4%",
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      "text": "Signing a GSHD Franchise Agreement Comes with a High Risk of Failure",
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