Spirit Halloween bets on struggling real estate to fuel its growing business. Here's how

Spirit Halloween's ability to pop up and shut down every fall has inspired countless memes online and even a recent "Saturday Night Live" skit. But the company's strategy to occupy more than 1,500 storefronts and hire around 50,000 seasonal workers across North America is no easy feat. 

"We are just physically there for three months. The other nine months there is a tremendous amount of planning and preparation and background work that's being done," said Spirit Halloween CEO Steven Silverstein. 

A key part of the strategy is convincing landlords to agree to short-term leases. The model has proved lucrative for the specialty retailer.

Spirit Halloween was acquired by longtime mall retailer Spencer's in 1999. By 2015, Spirit Halloween was bringing in about $400 million of revenue, according to Moody's Ratings. The firm estimates that the combined businesses, known as Spencer Spirit Holdings, brought in $1.86 billion in 2023. Moody's vice president of corporate finance Michael Tellis said Spirit Halloween accounts for a larger share of the company's revenue than Spencer's does.

"Their store count has gone up as well. But … it's not a huge number. They've really been able to drive additional traffic in the store," said Tellis.

Permanent retailers generally do not want to miss the holiday season, and since they need more time to set up shop than a pop-up, they won't sign contracts once the summer rolls around. Those are the instances that the company likes to capitalize on, said Silverstein.  

Larry Link, president of New York real estate firm Level Group, said a New York City pop-up store typically pays a 20% to 30% premium to use a space for a short-term contract. Lease holdovers and property damage are two of the primary concerns for landlords renting to a temporary retailer, but he said Spirit Halloween is a special case. 

"They essentially have eliminated all the risks of a standard pop-up by virtue of their track record, so I'm certain they use that fact to drive an aggressive deal with landlords sitting on empty space," said Link. 

Prices for New York City commercial real estate leases vary, but the asking price for Spirit Halloween's Chelsea location in southwest Manhattan is $100 per square foot for the 21,300 square foot ground floor for a permanent lessee. The space also has an additional 13,600 square foot lower level floor for less. It is unclear how much Spirit Halloween is paying for its short-term contract.

In rural areas, it is substantially lower. CNBC looked at a Spirit Halloween lease proposal in Redding, California. That space typically leases for about $27,000 per month, according to the listing. The proposal indicates Spirit offering $30,000 for a four-and-a-half-month contract in April. 

"We don't think about rent per square foot," said Silverstein. "We have a great deal of experience in terms of anticipating the revenue that we're going to generate, which will translate into the rent that is worth to us."

Out of the storefronts that the company currently occupies, the top five previous tenants were Rite Aid, Tuesday Morning, Bed Bath & Beyond, Sears and CVS, according to an analysis done by the University of Virginia School of Data Science. All of those retailers except CVS have filed for bankruptcy at some point.

Earlier this month, the company announced it would be rolling out a test concept of 10 Spirit Christmas stores. Eight of those stores will be in existing Spirit Halloween locations. 

Silverstein said the company is deep into planning the 2025 season and even "conceptualizing" its business for 2026.  

"You have to get those seeds in the ground and certainly will be influenced by what comes out of our Halloween experience this year," said Silverstein. 

Watch the video to learn more about the business of Spirit Halloween. 

— CNBC's Gabrielle Fonrouge contributed to this story