There was a documentary a few years ago about Costco and it was revealed that the fee you pay to be able to use Costco pays for ALL of their overhead which means everything that goes out the door is more profit than most other companies. In a marketing course, I took many years ago (around 50) it was said that a 25% markup usually covered your overhead for the average company. So the hot dogs are probably mostly profit. I worked in the Costco food court, the hotdog/polish dogs were insanely popular – AND it includes a 24oz beverage. The dogs are an area I don’t see Costco cutting costs on any time soon; however, they have ditched many other less cost-effective items and sent them to the food court graveyard. Including, but not limited to:
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My 80-year-old father and I drive 5 miles to Costco, just for a hot dog and a soda. The line is always 30+ people deep too. Everyone I know loves Costco’s hot dogs, they are pretty good. A buck fifty to get that kind of foot traffic inside your store for a hot dog is just damn good business. The ONLY way anyone is “losing money” on a $1.50 hot dog/soda combo is because the customer might have otherwise bought something more profitable. No one is actually selling a hot dog and soda at a loss when charging $1.50, they simply are profiting less than they could.