A Startup Charges $18 for Costco's $1.50 Hot Dog — and Says Demand Is Growing

A new delivery startup is charging $18 for Costco's $1.50 hot dog and drink combo — a markup of 1,100 percent, as calculated by SFGATE. The same platform, called No Tip, sells the retailer's $9.95 pizza for $30.

The founder says business is growing.

No Tip is the work of Jack Chen. The service delivers Costco food court items — hot dogs, pizza, and cookies — to customers' front doors. Chen laid out his reasoning in an interview with SFGATE. "It was just basic math … I just increased the price to what their budget was."

Who pays $18 for a $1.50 hot dog?

Costco's food court holds a special place in the retail economy. The $1.50 hot dog combo has not changed price in decades, and the menu is often cited as a key attraction for members who visit the store. Costco built loyalty on that deal. Chen's startup tests what that loyalty is worth when someone else does the driving.

His answer so far: quite a lot. "A lot of offices are ordering from me," Chen told SFGATE. "It's the company's money. As long as you're not too expensive, I mean, they've got the money to blow."

The platform's pricing structure is all-inclusive. There are no tips, which is the origin of the company's name. Customers pay one price upfront, and that price absorbs delivery, service and everything else baked into the transaction. The trade-off is visible on every menu item, and customers have noticed the high prices, according to the report.

What does the markup actually look like?

The numbers are stark when placed side by side:

• Costco hot dog and drink combo: $1.50 in store, $18 on No Tip
• Costco pizza: $9.95 in store, $30 on No Tip
• Hot dog markup: 1,100 percent, per SFGATE's calculation

Chen did not dispute the arithmetic. He acknowledged the price inflation is high. But he framed the service as aimed at a specific customer: someone who values the time saved and is willing to pay for the convenience rather than drive to a warehouse club, stand in line, and haul food back to an office or home.

The comparison he offered was not with Costco's own counter. It was with mainstream delivery. "I know my friends have paid, like, $30-plus dollars for some terrible Domino's in the past… So why not try to do this?" Chen told the outlet.

Why the demand hasn't cracked

By conventional retail logic, a 1,100 percent markup should kill demand. Chen says it has not. "You'd be surprised how some people are just craving it specifically," he told SFGATE.

Two forces appear to be at work in his account. First, Costco's food court items carry an unusual pull — people crave them by name, not merely as generic fast food. Second, his office customers are spending company money, not their own, which softens the price sensitivity that would stop an individual buyer at $30 for a pizza.

The model is a straightforward arbitrage on convenience. Costco sells the $1.50 combo as a loyalty device, pricing it near cost to pull members through the door and keep them returning. No Tip takes that same item, adds delivery, and re-prices it for buyers who want the product without the trip. The startup captures the gap between what Costco charges to build loyalty and what time-pressed customers will pay to skip the warehouse.

The open question is scale. The source report does not disclose No Tip's revenue, order volume, delivery radius or headcount, and the company says only that its business is growing. Chen's bet rests on a narrow proposition: that the pull of the food court is strong enough, and corporate expense accounts loose enough, to sustain delivery prices that would look absurd at the register.

If he is right, Costco has built more than loyalty. It has built a brand strong enough that an outsider can mark it up twelvefold and still find buyers.