They do not close your store. My store is undergoing a full remodel right now.
It will vary from store to store, but some new hires are made to help with the POG and demerch workload. Some TMs are shifted to the remodel team, to assist with tasks dayside. A construction crew is hired, and a majority of the work is done overnight. Some areas are walled off to prevent guests and TMs accessing areas undergoing heavy construction. For example, my store traded out food avenue for a new area that holds our beer and wine (my store cannot sell spirits/liquor). Our deli, bakery, and most of our meat wall is currently walled off for addition construction.
The construction moves gondolas overnight, pog team will set the new planogram/remerchandise if it's a temporary move. Your store will receive containers to store new signing and fixtures in. The dayside remodel team picks up and finishes pog workload, audits pogs to order additional fixtures/displays/signing, and helps ensure the new sets are brand.
It is a giant headache to be honest. There have been days weve had product dual or triple located all across hardlines, especially with BTC. We've had entire aisles removed from the floor and backstocked so that that type of product isn't on the floor. We've had to set some sections only to reset them when the correct fixtures come in the next day.
As for as who determines this, corporate. my suspicion on how is either a Powerball esque drawing, or magic 8 ball.