Why Costco food courts have charged $1.50 for hot dogs since 1985, according to employees
- Costco's food court is famous for its tasty hot dogs.
- You'll be out $1.50 if you order the Costco menu staple with a soda.
- That price hasn't changed since 1985, and there's a reason why not.
Costco food courts have a famous - and delicious - north star.
That'd be the hot dog and soda combo, which has been priced at $1.50 since 1985. While Costco menu items vary across the US - and around the globe - the hot dog meal is one major constant.And the staple isn't just static - it's popular. The Daily Meal reported that Costco sells 100 million hot dogs a year.
Employees dig it, too.
One San Diego-based Costco worker told Business Insider that the combo was a "classic." Business Insider spoke with 36 Costco employees - four of whom told us that the hot dog and soda combo was their go-to food court order, while two said it was the best deal in the whole store.
Business Insider's Hollis Johnson wrote that the hot dog was "easily one of the best hot dogs we've tried, at least in terms of fast, cheap food. Our expectations were low, so the quality is all the more surprising."
So what's Costco's reasoning for keeping its hot dogs the same price since 1985? To understand, it helps to know a bit of the history behind Costco's hot dog meal - and the retail chain's food court, in general.
The Costco food court that fans know and love can trace its lineage back to 1984, when the then-eight-year-old chain decided to stick a "single hot dog cart in front of a San Diego warehouse," according to David Wight's article in the 2009 edition of the company magazine Costco Connection. Employee Jay de Geus was tasked with hawking the Hebrew National hot dogs.From there, Costco launched Café 150 - named for the fact most of its menu items cost $1.50. In 1993, Costco merged with Price Club and inherited the chain's pizza kitchen, too.
Then in 2008, Costco switched out its traditional kosher dogs for new Kirkland hot dogs. Wight cited the inability to square the "availability of kosher raw materials and kosher production-plant capacity" with the chain's demand for hot dogs.
While the food itself changed, the price has remained the same
So what's Costco getting out of its $1.50 hot dog? Employees have some theories.
An anonymous Costco employee told Pop Sugar that Costco charges $1.50 for a hot dog and soda "just so your last experience before leaving is one of a pleasant cashier treating you well and giving you a good deal."
On Quora, a former competitive buyer at Costco wrote that the food courts are actually "the main contributor to the dividends its shareholders get."
"Do not think for one minute that Costco does not make a huge margin on food court products," user Lenin Lobaton wrote. "That is where the profit of Costco comes from. In short, the food court is a gold mine for Costco."
In response to another Quora question, he wrote that "the $1.50 hot dog and soda, pizza, and churros are all bottom-line contributors."
Other Costco employees say the hot dog deal is bait to draw in hungry shoppers.
"We do not make money off of our food," food court employee Josh Smith wrote on Quora. "The $1.50 hot dog deal is called a 'loss leader,' which means that it is used to draw in buyers for other higher-priced items like the chicken bake, brisket sandwich, and our new item, chili."
"The whole thing is mainly a 'member service' which is just to keep them happy," he wrote.
What's the real answer?
"Holding a price that steady for that long sends a clear message about what is possible when you decide to operate your business model on a 'cost plus' basis, instead of a 'what the market will bear' basis," Fuller wrote.
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