Costco's Membership Model: The $1.50 Hot Dog Vow, Kirkland and a 14% Cap

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In 1976 Sol Price, forced out of FedMart, opened Price Club with his son Robert in former Howard Hughes airplane hangars in San Diego as a members-only warehouse for small businesses. Jim Sinegal, who started as a grocery bagger at FedMart, and attorney Jeffrey Brotman opened the first Costco in Seattle in September 1983, capping markups on business goods at 8 to 9 percent, and Costco became the first company to go from zero to $3 billion in sales in under six years. In 1993 Price Club turned down Walmart and merged with Costco as PriceCostco, which became simply Costco by 1997.

Membership fees made up 65.5 percent of net operating income in 2024, letting Costco cap markups at 14 percent, skip outside advertising and stock only about 3,700 items. Kirkland Signature, launched in 1995 and named for the former headquarters city, brought in $86 billion in 2024, often co-branded with names like Starbucks, Jelly Belly and Ocean Spray. To hold its rotisserie chicken at $4.99, Costco built its own poultry complex in Nebraska. Newer strains include a chaotic 2019 Shanghai opening followed by membership drop-offs against Alibaba and Hema, a 2023 union at a Virginia store, a 2025 strike authorization, entrance card scanners, a 2024 fee increase, and a November 2025 lawsuit seeking refunds of tariffs imposed under the International Emergency Economic Powers Act.

• Sinegal reportedly told his CEO he would kill him if he raised the price of the $1.50 hot dog and soda combo.
• In 2009 Costco temporarily stopped selling Coca-Cola products over a pricing dispute.
• Costco sells an estimated $200 million in gold bars every month.
• CEO Ron Vachris, who took over in 2024, started as a forklift driver in Arizona in 1982.
• In Los Angeles, Costco broke ground on 800 apartments built on top of a warehouse.