SpongeBob at home one morning as he drinks a cup of coffee made by Gary and also eats French toast. He goes over and looks at his calendar. It says "You are a winner," and SpongeBob hugs himself. It also says "first day of summer," and SpongeBob gets excited. When he goes to work, he sees Mr. Krabs even more excited for summer. SpongeBob asks him why, and he says that on summer vacation, children go around spending money, and the Krusty Krab will get more profits through kiddie meals (which he raises the price of them from $1.99 to $4.99). However, he sees that the children are all at a new playground, and decides to make a playground of his own, Krabby Land.
At work the next day, Mr. Krabs reveals the grand opening of Krabby Land, which he proudly built himself. Krabby Land is a little more than a dopey-looking assembly of cheap (and dangerous) attractions such as Fort Adventure, which is nothing more than a collection of big stinky mattresses and other junk. The Dumpster of Doom is another disgusting gem in Mr. Krabs' new nightmare playground. The other attractions are even more terrible, yet bordering on laughable.
The children are horrified, yet speechless with disappointment, but Mr. Krabs gives them coloring books/liability waivers and says that whoever hands theirs back gets to meet "the one and only Krabby the Clown." He tells them that Krabby the Clown will come soon, and tells SpongeBob to stall them while he counts the money. SpongeBob pretends to be Krabby's sidekick "the Krabby Patty Burglar," and the children hate him. He accidentally injures himself while trying to amuse them by blowing bubbles and them popping in his eye which makes the kids laugh. He realizes that they like pain, and begins intentionally harming himself, even hiring two thugs to torture him by feeding him lima beans.
After awhile, SpongeBob goes to Mr. Krabs, who is sorting through a large stack of money, presumably the children's, and tells him that he cannot stall anymore, being horribly beaten and missing limbs. Mr. Krabs tells SpongeBob he is being selfish and tells him to "get back to work," but upon seeing SpongeBob's limbs flying around (the children were using them as boomerangs), he fears that his windows will be smashed, so he tells him to let the crowd of children enter the restaurant for Krabby the Clown's arrival. Excited, children and SpongeBob rush in front of Mr. Krabs who welcomes Krabby the Clown. However, it turns out that Mr. Krabs turns around and immediately puts on a bow tie and a blue-painted tomato on his nose, and says "Hey kids! Thank you all for coming! Thank you! Eat plenty of Krabby Patties! Ar, ar, ar!" He then walks back into his office, leaving the children and SpongeBob jaw-dropped in confusion. This latest rip-off is the last straw for the children.
An extremely disappointed SpongeBob confronts Mr. Krabs, saying that he expected Krabby the Clown, but all he saw was "Cheapy the Cheapskate." Mr. Krabs undresses from his costume and finally says to SpongeBob that he does not care about the children but for their money and is willing to do whatever it takes to get their money (even if it means having to scam them with a cheap and dangerous playground and a talentless clown) and even calls the kids stupid and foolish enough to be the victims of his scam. He then taunts SpongeBob for being unable to stop him in time by saying twice, "Survival of the fittest."
Mr. Krabs tries to go to the bank with the money he has made but he is confronted by an angry mob of children who have overheard his confession and are planning to punish him. Mr. Krabs, realizing that he is about to be punished and has given the kids his confession which was not taken well; tries to reconcile but fails as the kids charge, beat him up, and destroy the playground.
Inside, SpongeBob is bewailed that he will never learn the "true meaning of summer," that he thought it was long ago, in which Squidward means that it was that morning. Monroe calls SpongeBob over about the summer miracle, where the kids take back their money and distribute it back to themselves. SpongeBob guesses it is the true meaning of summer, but he asks Squidward where Mr. Krabs is who misses out the fun.
The scene cuts to Mr. Krabs, tied on fours between poles, who warns to return his "green stuff" (which means money for him). However, the thugs, paid by children for his swindling, reply him with a can of lima beans and a truckload of them, causing him a distress by the torture like what SpongeBob did earlier — only to learn not to underestimate the kids.
The final scene with the kids rioting against Mr. Krabs and taking his money for making a poor character as Krabby the Clown is a likely reference to a 1993 incident at a shopping mall where Barney was billed, but the children became enraged and destructive when a skinny impostor appeared on stage.
This may also be akin to the Simpsons episode "Kamp Krusty" when Bart spearheads a revolution against Mr. Black's oppression after seeing Barney hired to be a knockoff Krusty.
The attractions in Krabby Land include:
"Rocketship Fantistica" (a garbage barrel hanging by a rope)
"Dumpster of Doom" (a bashed-in dumpster with the name spray painted on the side)
"Hose World" (hoses hanging from a bar)
"Fort Adventure" (a pile of nasty mattresses and other junk)
The muscular fish that helps injure SpongeBob is the same fish that beats up Squidward twice in the later episode "Boating Buddies."
When Squidward replied to SpongeBob when he said that he thought what Mr. Krabs said was the true meaning of summer for a long time ago, he replied "You mean this morning?"
This is false considering SpongeBob walked back to work after the play ground "Infiltration" with Mr. Krabs.
In SpongeBob Comics #52, there is a comic strip titled "Krabbyland." The only difference between that comic title and this episode's title is that the comic title combines the words "Krabby" and "Land" into one word.
Both of the thugs are wide-eyed when they torture SpongeBob, suggesting that they are disturbed that SpongeBob intentionally wants to be tortured.
In Indonesia, Monroe did not say "Come on outside, Mr. SquarePants. It's a summer miracle!" Instead, he says "I'm sorry, Mr. SquarePants. But it's a summer miracle!"
Also, the scene where SpongeBob spills soapy bubble water onto his eyes is usually skipped due to time constraints.
Krabby Land is a spoof of McDonaldland, Playland and McDonald's playplaces. Krabby the Clown is most likely a spoof of Krusty the Clown from The Simpsons or Ronald McDonald, while the "Krabby Patty Burglar" an obvious parody of the Hamburglar.
The motto of Krabby Land is "Where a kid can have fun-for the right price." This is a reference to Chuck-E-Cheese's motto, "Where a kid can be a kid."
The title card/ending music (Disneyland) sounds similar to Super Mario 64's Merry Go Round music.
The number of kids who attend the summer playground activity at The Krusty Krab changes throughout the episode, possibly because some of them left.
At the end, the wrinkles on Squidward's head disappear.
When we see the line of people before zooming in to Krabby Land, most or perhaps everyone in line were adults or adult height.
When limbless SpongeBob enters Mr. Krabs' office, he has cuts and bruises all over his body, but when SpongeBob hops onto Mr. Krabs' desk, his cuts and bruises are gone.
When SpongeBob visited Mr. Krabs' office, the door on the side shows a hallway that cannot possibly even fit in The Krusty Krab instead of the kitchen.
SpongeBob had no arms or legs when the kids took them and used them as boomerangs, but in other episodes they grow back right after he loses them. When he walks out the back door to the children, his arms and legs are back.
It is possible that SpongeBob has control over if/how his limbs regenerate.