The Food CourtNarrow moat

The food court is a rounding error in Costco's accounts and one of the most efficient pieces of marketing in American retail.

The hot dog and soda combination has been priced at $1.50 since 1985. In 2022 Costco's then chief financial officer told investors the price would stay there "forever," describing the moment the founder made clear it was not up for discussion¹. Adjusted for inflation, the same combination would cost several times as much today. Costco has instead absorbed four decades of cost increases on a product it sells at the entrance to every warehouse.

Read as a food business this is indefensible. Read as advertising it is very cheap indeed. The combo is the single most repeated fact about Costco in general circulation, and what it communicates is not that the food is good but that the company will not use a captive audience against them — which is exactly the belief the annual fee is bought on. No campaign could establish that proposition; a price that has not moved since 1985 establishes it every day, in public, at no media cost.

The same logic runs through the rest of the ancillary food business, and the 10-K files the food court alongside gasoline, pharmacy, optical and tire installation as businesses that "operate primarily within, next to or near our warehouses, encouraging more frequent shopping"². Fresh foods, the category the food court sits beside, were $37,988 million of fiscal 2025 net sales and were named as a driver of the gross margin improvement that year³.

There is a second effect worth naming. A trip that ends in lunch lasts longer, and a member who is not in a hurry buys more. The food court is at the exit for the same reason the fuel is in the car park.

There is no clean metric for a marketing asset. The closest proxy is the one Costco reports anyway: whether members keep coming. Frequency contributed 5 points of comparable growth in fiscal 2025 and 2 in the third quarter of fiscal 2026⁴.