While making a batch of Krabby Patties, SpongeBob was fooling around with the extra meat. He molded the meat into the shape of a hot dog, cooked it, and introduced it to Mr. Krabs.
When SpongeBob showed Mr. Krabs how he cooked it, Frank came in to look at where the employees were. He saw it was new and spread the word about it. In no time, there were many orders, enough to actually prevent the customers from eating Krabby Patties. Mr. Krabs crossed the patties off the menu and took away SpongeBob's spatula and grill, which upset SpongeBob. Then SpongeBob and Squidward planned to get the customers to desert the restaurant in order to get the patties back. They were successful, but Squidward was still humiliated about the mascot costumes, as he now had to wear a Krabby Patty one and ended up getting even more humiliated.
SpongeBob became shocked when Mr. Krabs said that the Krabby Patties were gone. As a plan to get them back, he over-inflated one and the customers thought it was explosive. The customers then demanded Krabby Patties. The Krusty Dogs were never seen in any other episode and were discontinued.
On the 2014 independence day celebration (July 4), the Krusty Dogs were sold at the Krusty Krab.