The $1.50 Hot Dog Deal That Sparked a Death Threat at Costco

The Famous Food Court Combo That Never Changes Price:

Walk into any Costco warehouse today and you'll find the same deal that existed in 1985: a quarter-pound hot dog and refillable soda for just $1.50. 

This price has remained frozen in time while everything else has gotten more expensive. The story behind this pricing decision involves a dramatic conversation between two company leaders that has become business legend.

When The Numbers Don't Add Up:

In 2009, Costco's chief operating officer Craig Jelinek approached company cofounder Jim Sinegal with concerning news. The food court was losing money on every hot dog combo sold. 

With rising costs for beef, buns, and beverages, the math was simple: they needed to raise prices or accept ongoing losses. Jelinek suggested increasing the combo price to help the bottom line.

A Threat That Became Company Policy:

Sinegal's response was swift and memorable. He told Jelinek he would "kill him" if the price went up. This wasn't just an emotional outburst from a passionate founder. 

It represented a core business philosophy that valued customer loyalty over short-term profits. The hot dog combo would remain $1.50, no matter what it cost the company.

The Real Cost Of Cheap Hot Dogs:

Costco loses money on every hot dog combo sold, but this apparent financial mistake serves a bigger purpose. The cheap food court acts like a magnet, drawing customers into the store where they spend money on other items with higher profit margins. 

Shoppers might come for the $1.50 lunch but leave with a cart full of bulk goods. The hot dog becomes what business experts call a "loss leader."

Taking Control Of The Supply Chain:

Rather than accept ongoing losses, Costco found a creative solution. The company built its own hot dog manufacturing facilities and took control of the entire supply chain. 

They switched from Hebrew National to their Kirkland brand hot dogs, cutting costs while maintaining quality. This vertical integration allowed them to keep the $1.50 price while reducing losses.

Customer Loyalty Worth More Than Profit:

The hot dog combo has become a symbol of Costco's commitment to its members. Customers know they can count on this deal remaining constant in a world of rising prices. 

This builds trust and loyalty that extends beyond the food court to the entire shopping experience.

Why This Story Still Matters Today:

Jelinek eventually became CEO after Sinegal retired, and the hot dog price remains unchanged. The story demonstrates how businesses can use strategic pricing to build long-term customer relationships. 

While other companies chase short-term profits, Costco's approach shows that sometimes the best business decision is the one that doesn't make immediate financial sense.