It's not a loss leader. They still make a profit on the combo because the ingredients are cheap and it takes almost no labor to prepare on a per-dog basis.

And 1.50 is cheap now but was relatively expensive when the combo launched in 1985 (for comparison, a Big Mac combo with fries and a drink was 2.59, a KFC combo was around $3).

It’s a warmed hot dog, a bun, some self-serve condiments, and it’s served by people who can do hundreds of them an hour.

$1.50 might very well cover the cost, but even if it’s a loss leader then it’s entirely negligible.

The mythology around the hot dog price makes people think they’re getting a screaming deal, though. It’s perfect marketing material.