In the Spirit of Sales – A Franchises Case Study

Severed limbs. Fake blood. Fog machines. Rubber masks. Celebrity impersonators and strobe lights. Free of gifts, greeting cards, and repetitive musical fanfare, Halloween still packs one hell of a consumer punch.

What began as the Celtic harvest festival of Samhain (that’s “sow-in”) 2,000 years ago — where burned crops and sacrificed animals appeased deities — evolved into secular and non-secular celebrations across the Roman Empire before reaching its final destination as a consumer-centric event that sees billions of dollars in revenue every year.

Halloween Franchises

According to the National Retail Federation (NRF), consumer spending for Halloween-related  purchases that include candy, costumes, and decorations capped at $7.4 billion in 2014 ($350 million of which was spent exclusively on pet costumes). It was the second most commercial holiday of the year, preceded only by Christmas.

And while big-box department stores all roll out the red and green carpet for the post-Black Friday winter holiday rush, Halloween’s success is generated from a buying and selling market all it’s own, most prominently in the form of seasonal franchises.

A Deadly Simple Marketing Strategy

Like the ghosts once believed to walk the earth on All Hallows’ Eve, the lives of pop-up Halloween superstores are as equally fleeting. With locations in the thousands, pop-up franchises have a two-month life span in which to rake in profits fit to last an entire calendar year. Yet year after year, they succeed geographically where other businesses failed. They thrive in commercial graveyards, adding to their own haunting appeal.

Like Mattress Firm inhabits the empty shells of Blockbusters past, seasonal Halloween franchises fill the gutted halls and abandoned corpses of Borders, Circuit City, Linens ‘n’ Things, and other stores that couldn’t compete in a changing economy.

One day, they’re invisible storefronts, and by Labor Day, they’re open again with rubber masks and makeshift shelves on every wall. And with such a high demand for neon wigs, dark makeup, discount costumes, and eerie decorations, the products sell themselves. Because unlike so many consumer markets, Halloween franchises encourage in-store sales, even though franchise websites are operational year-round.

giphy (1)

Seasonal franchises generate valuable foot traffic and can predict their sales according to whatever day Halloween falls that calendar year — sales get a boost when October 31 falls on a Friday or Saturday. Yet in the roughly 12 weeks Halloween franchises have their doors open, the value of each store is built primarily on instant gratification.

The market is in-person, not online.

There’s no need to wait weeks for delivery, especially for consumers who buy costumes and decorations mere days before the holiday at the seasonal franchises’ busiest time of year, October 14-18. Franchises supply the merchandise, and outsourced workers cover everything else.

A Witch’s Brew of Local Buyers and Outsourced Entrepreneurs

Mom-and-pop shops and online costume stores stay afloat; meanwhile, the seasonal Halloween market is dominated by a few major retailers: Spirit Halloween (owned by the urban-set Spencer Gifts) and Halloween Express (corporately owned out of Owenton, KY) among them.

The first Spirit Halloween store welcomed shoppers back in 1983, only to be bought out by Spencer Gifts by 1993. Today, Spirit supplies products for over 1,000 company-owned and locally run storefronts.

Anyone hoping to open a franchise need only apply and be prepared to pay a relatively low overhead in the form of a $25,000 program deposit. Since storefronts were previously empty, landlords who need to turn a profit of any kind usually rent buildings on the seasonal basis for an average of $20,000. Mix in the cost of shelves and fixtures, and Spirit swoops in to take care of the rest.

Spirit supplies the merchandise and pays for freight throughout the buying season, and takes only a percentage of total sales. Meanwhile, the consignment owner only purchases from Spirit the products that are sold. At the end of the season, merchandise is shipped back to Spirit to be repurposed for the next year.

There’s no loss of profit in an end-of-season, everything-must-go mentality, because stock character costumes like witches and vampires have an incredibly long shelf life (as opposed to Miley Cyrus twerking costumes and emoji masks that burn fast and bright). All this, and Spirit’s pop-up stores still count for over half of Spencer Gifts’ annual sales.

Halloween Express outsources storefronts similarly. The company collects a $10,000 franchise fee and keeps 5 percent of the store’s gross sales. Store managers can expect to pay $180,000 in inventory, plus the cost of fixtures and other incidentals — a small price to pay compared to the hundreds of thousands a single store can make in a season.

Halloween Franchises Have a Scary-Good Market

Last year, a record number of people celebrated Halloween in some degree. According to the NRF’s Halloween Consumer Spending Survey, almost 80 percent of adults aged 18+ both dressed in giphy (2)costume and handed out candy to trick-or-treaters. The number of people celebrating in general jumped from 158 million in 2013 to 162 million in 2014.

This year, with a whole new breadth of superhero and cartoon characters to dress as, and decorations fueled by the post-apocalyptic zombie craze, those numbers aren’t expected to die off any time soon. And when November 1 arrives, seasonal franchises dispossess their hosts and return to the retail graveyards from whence they came.

Subscribe to Our Blog1 (1)

, , , ,

No comments yet.

Leave a Reply

↓
%d bloggers like this: