Aunt Peg and her nephew Tip operate the "Fright Dungeon" of a traveling carnival, but their carnival owner is threatening to replace them with a female mud wrestling tent. They meet Mike at a gas station while changing locations, but they have no idea that he has put a box of ghoulies on their truck. When they reach Mercyville, the ghoulies take Peg for their leader, and she uses them to help her scare people in the Fright Dungeon and save it from being shut down.