The episode begins at the Krusty Krab with a customer eagerly waiting for his Krabby Patty, freaking Squidward out. He then tells SpongeBob to hurry up with the order. The Krabby Patty hits Squidward in the face and singes him. As SpongeBob serves the customer his Krabby Patty, he hears a child crying in the distance. Mr. Krabs tells him that it's because he lost his teddyfish he was playing with. Krabs tells him to retrieve it from the Krusty Krab's Lost and Found, which is located below the kitchen floor.
SpongeBob rummages through a box he finds in the Lost and Found, but couldn't find the teddy bear. Mr. Krabs tells him to turn on the lightswitch, which he does. SpongeBob gets distracted by all the interesting stuff he finds on the shelves and plays with some of it, distracting him from his mission. He then finds a Bikini Bottom snowglobe on one of the shelves and shakes it out of eagerness. This causes Bikini Bottom to ramble and for the citizens to scream as if an earthquake were occuring.
Meanwhile, with the child still crying, Mr. Krabs wants to know what's taking SpongeBob so long. Squidward comes in the kitchen to complain about the excessive crying and Krabs tells him that SpongeBob might be lost in the Lost and Found. Although this doesn't concern him, Mr. Krabs commands Squidward to go down there and find him, which he reluctantly does.
The snowglobe that SpongeBob shaked turned out to attract a group of elderly children who have been trapped in the Krusty Krab's Lost and Found for 60 years. Upon talking to them, SpongeBob sees the teddyfish he's supposed to bring back in one of the kids' hands. SpongeBob then snatches it from Ginger, explaining that he needs to return it to a crying child, then proceeding to exclaim "Finders keepers!" and find an exit. Angered, the children follow him and Ginger demands her teddyfish back.
Back at the Krusty Krab, due to SpongeBob's elongated absence in the kitchen, the customers decide to leave since their hunger is not being fulfilled. Because of this, Mr. Krabs starts crying with the child.
Meanwhile, when Squidward is looking for SpongeBob in the Lost and Found, he finds a box of kazoos on one of the shelves, which takes him back to when he was a kazoo player in elementary school, which all the kids hated, even though Squidward thought he was really good at it. To his excitement, he then finds a box of clarinets, which are then stepped on by SpongeBob after he is trying to run away from the elderly. Squidward tries to exit as well, by pulling the handle of an "emergency exit," which then turns out to be a grease trap. Thereafter, a river of grease is released and flows through the Lost and Found, nearly clogging its capacity.
SpongeBob realizes the grease flowing, commenting that he hasn't cleaned the grease trap in 10 years. Realizing this, each of the children get on each other's shoulders to stay alive. However, SpongeBob has a better idea.
Shortly after, SpongeBob returns from the Lost and Found and bring back the child's teddyfish. Not only that, but he also brings Ginger and the other lost children back to their parents (who regularly visited the restaurant to find them), much to the latter's relief.
There are many items from The SpongeBob SquarePants Movie placed in the lost and found, possibly meaning this episode could take place after it. However, creator Stephen Hillenburg confirmed that the movie takes place after the series (even episodes that haven't aired yet), so this remains ambiguous at best. They could simply be homages to the movie.
Many items from older episodes and The SpongeBob SquarePants Movie are seen on the lost-and-found shelves. These include: