The price of a hot dog at Costco — $1.50 with a soda — has not changed since 1985. The enduring meal deal at one of the country’s largest big-box retailers is by design, according to a report from Business Insider.
Like Costco’s popular $4.99 rotisserie chicken, its hot dogs — available at counters in the front (and sometimes outside) of each store — are priced to move so as to encourage shoppers to purchase other, higher margin items.
“We do not make money off of our food,” a Costco food stall employee named 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 chili.” The deal is well below the national average price for a street hot dog today, which is around $2; hot dogs at major league ballparks averaged $4.50 apiece in 2016.
Costco’s food court started in the mid-’80s when a location of the chain in Southern California decided to put “a single hot dog cart in front of a San Diego warehouse,” according an article in the March 2009 edition of the company magazine, Costco Connection. In the ’90s, Costco added pizza to its $1.50 offerings, and named its outdoor stalls Cafe 150. It also added a Polish sausage option. By the early aughts, the retailer started offering items priced above the $2 mark: Sandwiches, salads, different types of pizza, and desserts rotate through the menu, but they all cost less than $5.
There’s another reason Costco might be keeping its hot dog price so low: That low price encourages patrons who have already finished their shopping to linger near the entrance of the store for a snack or lunch before heading home. The (fast-moving) lines and family crowds add to a bustling, busy feeling retailers want to cultivate because it attracts more customers.
A Costco employee told Popsugar earlier this year that the deal had the added benefit of being a customer service win. The goal is for a customer’s “last experience before leaving [to be] one of a pleasant cashier treating you well and giving you a good deal.”
• Why Costco food courts have charged $1.50 for hot dogs since 1985, according to employees [BI]