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Janelle: Today I have with me Frank Pacera, who is the Senior Director of Real Estate for Spirit Halloween. Frank, it’s great to have you with us, today.
Frank: Great to be here.
Janelle: So Frank, tell us a little bit about Spirit Halloween.
Frank: Sure. Spirit Halloween is a company that’s been in existence for almost 30 years. The first Spirit store opened up in 1983. It actually started out in northern California, in the San Francisco area, and since then, we’ve grown year after year into a chain of almost 1,000 stores. We’re going to be just shy of 1,000 stores for this 2012 Halloween season.
We’re in pretty much every state throughout the United States, and also including Canada. We hit Canada about three years ago, and began opening stores up there. Spencer Gifts bought the company back in 1999 from the original owner, who was based out of northern California, like I said.
And then it just has grown tremendously as a temporary Halloween retailer. We are the largest temporary Halloween retailer out there. Nobody comes close to us as far as our size and our store count.
And the thing that sets us apart, too, from competition is our in-store experience. You just come into a Spirit Halloween store, and it’s not just about the costumes. It’s about the experience that we provide our customers within our stores. It’s like a show that we put on when you come into a Spirit Halloween store.
Janelle: How far in advance do you start prepping for the Halloween season?
Frank: Pretty much Nov. 1. The minute our door is closed, we are, or actually even before our doors close, we are prepping for the next season. Given the amount of stores that we do, this temporary business has turned into a year-round business for us, as far as the planning and the preparation aspect of it. So we literally are, 12 months out of the year, getting ready for this one holiday. Once our stores are shut each year, we kind of recap and take a look at our home runs and so forth, and we just begin looking for new locations for that upcoming season.
Janelle: So take us through the process as best you can of the life cycle of the pop-up store and Spirit Halloween. What are some of the major steps that are involved in planning, opening, running, and then closing down the pop-up store?
Frank: Well, the site selection process is one of the biggest, obviously, because without having the stores, the rest can’t take place. So it’s a process that, like I said, really starts right after the season. Right after we close our doors, we have a field of operation people who are based throughout the country and they basically scout their entire markets that they’re responsible for on a regular basis.
They’re looking for new spaces that have become available, and they spend months doing that, and we then negotiate the deals. We have great relationships with landlords out there, and begin negotiating deals for the year, and spend a good, I would say, about eight months from the time the season ends to the time the next season begins taking care of the real estate piece.
As we get closer to the summer, we obviously start getting ready for the stores to open. We start hiring and training people. We actually bring all of our district managers out to New Jersey, where we’re based out of, to attend a week-long training meeting. We get them ready for the season and train them as far as getting the stores open, running the stores while they’re open, and then shutting them down.
Then usually by Aug. 1, we try and take possession of most of our stores. The month of August we’re building out our stores, getting them ready for the opening, which typically takes place around Labor Day weekend.
We try and get most of our stores open, give or take, around the beginning of September, and they’re open usually until Nov. 1. And then we shut them down, pack up our stores, and clean them up so we can hand them back to the landlords in great condition. And then we start it all over again for the following year.
Janelle: So it sounds like you have baked a pretty strict process into your operations here. Do you go back to old sites ever, or is it really starting with a fresh start, looking at the available inventory out there and seeing what fits your needs?
Frank: Sure, we do try to go back if they’re the sites that obviously were a hit for us. If we were in a location that did not do as well as we had hoped, we’re not going to go back to that location. But if it was a location that did well for us, we will try and sit down with the landlord as quickly as possible after the season to see if we can negotiate a deal with them for the upcoming season.
The unfortunate thing is, it’s a small percentage we’re able to recapture for the next year, and basically it’s because of permanent deals. Sometimes the location that was a good location for us may get leased to a permanent tenant, so that we’re not able then to turn around and renegotiate another deal with them for the upcoming season. Then we’ll have to start from scratch in that particular market and just go out and find a new location to replace that location that got leased to a perm.
Janelle: Can you tell us about the specific things that you look for when you’re identifying a suitable space? And then tell us about how you lay out the store.
Frank: All of our stores are unique and different. Our typical store is 7,000 to 10,000 square feet, but we do have ones that are smaller than that and ones that are larger than that. We like to be in centers that have other national tenants, such as a Best Buy, a Target, or a Walmart, where there’s traffic from national tenants.
Our stores are very unique inside. Shoppers can come in and not just shop for a costume, but really have an experience when they’re in there shopping. We have a great field team, we have a great visual team, who, when they set up the stores inside, they adapt to the different types of stores -- whether it was a former book store, whether it was a former furniture store, whether it was a former video store.
Each store is so unique and so different that we have to adapt to all those different style stores, just add a lot of life to it and make it seem like we’re a permanent tenant, like we’ve been there and that we’re not going anywhere.
Janelle: When you compare a pop-up retailer to a permanent retailer, there are some unique challenges that you face as a pop-up retailer that a permanent retailer wouldn’t. So are there any sorts of challenges that come to mind that you could talk about and tell us how you handle them?
Frank: I think the biggest challenge is the fact that every year we have to look for different locations. I’m not sure of any retailer out there that year after year is opening up 1,000 new stores. A retailer who’s growing may open up 25 stores, say, as an example, for a particular year, whereas we have to each year look for those 1,000 stores.
For landlords, their goal is to fill that space on a permanent basis. They want to get a retailer in there who’s signing a long-term deal. Over the years, landlords have become very supportive of the temp pop-up business, which is great. They see the potential for additional income on a space that’s not making any money currently and add some excitement to their center, add some traffic to their centers, and so forth. We’ve been a great fit for a lot of these landlords who have these vacant spaces out there.
On the permanent side, you may take a couple of years until you actually find that right location or that right location becomes available. On the temporary side, we can’t delay Halloween. Halloween is always Oct. 31. If that great location is not available, we can’t say, “Alright, well we’ll just wait until next year and hope that that location does become available.” We have to come up with a plan B and figure out how to still get a location in a particular market.
This year, for instance, we actually did some tent locations. We have approximately six tent locations out there where there wasn’t a viable space available for us. Rather than just walking away and not doing a store, we thought outside the box and said, “OK, let’s try putting up a tent in these particular areas.” So that’s the difference when you’re preparing the pop-up business versus the permanent side of the business.
Janelle: I understand you were at a children’s Halloween event earlier today. Could you tell us about that?
Frank: Sure. It’s called Spirit of Children. It is a great charity that we put together back in 2006. It was initially started in 11 hospitals, where we basically raised money in our stores for these local children’s hospitals, and we asked customers to make a small donation. Every single dollar that they donated, we then gave back to those hospitals. This year, it just has exploded. We raised more than $7 million, I think it was, for 130 hospitals last year. We’re looking to increase that again this year.
It’s just a day that we go out to the hospitals and we bring some excitement to the kids that are a little bit less fortunate and are spending time in a hospital during this Halloween season. We bring them costumes, we bring them a lot of games, a lot of fun things to play. But throughout our season when we’re open for business, we’re collecting donations from our shoppers and asking them to make a donation to their local children’s hospital.
Janelle: Frank, it was great talking with you. We appreciate you taking some time out. I know it’s crunch time right now, so it was good being able to catch up.
Frank: Thank you, I appreciate it.