The Series Continuity Error notes that the Secret formula was a family recipe prior to this episode, but who's to say that Mr. Krabs wasn't just lying about that to give his Krabby Patties more historicity? It's not uncommon for supposed "family recipes" in real life to have turned out to be either been store bought or coming from the back of boxes for their ingredients, so what would be different here?
Krabs choosing to lie about the latter half of the story makes a fair bit of sense, given that not only would he want to paint Plankton in a worse light due to their feud, he was also surrounded by an audience of his customers. Even if he didn't remember the real half of the story, why would he tell his own customers that his recipe was the result of pure dumb luck and the fallout from his and Plankton's collective greed?
This episode also puts the events of The SpongeBob SquarePants Movie into a very different light as to why Plankton would want to Take Over the City so badly, despite his earlier episodes seemingly focused on him wanting only the formula for his failing restaurant; because Plankton also wants to get back at the people (many of whom were probably the exact same bullies when he was a kid) who harmed and scorned him for so many years for his genius. And what better way (in his mind) than to take control of their minds and force them to kiss his feet after so many years of treating him as nothing but vile and worthless?
Him going after Krab's formula is also extremely personal, because above all else, his former friend betraying him in his eye and being lauded and loved by the very bullies who used to hurt them both would make his hatred of Krabs exceptionally strong, especially since Krabs has arguably (at least to Plankton) become willing to side with the very bullies he hates. Thus Plankton wants to steal the very thing that tore them apart not just out of spite, but to tear Eugene down and bring him back down to his level.
The episode also highlights why it is that Mr. Krabs can be so cruel and vicious to Plankton in a number of later episodes, arguably to disproportionate degrees; because while Mr. Krabs might be willing to truly bury the hatchet with his former friend, he's also been backstabbed and hurt by Plankton just as often as he's hurt Plankton in return. After all, despite Plankton being a victim of bullying, he was also willing to start calling Eugene "ragboy" despite how much pain and misery existed in context behind that insult to Krabs, which would have really hurt him and been utterly unforgivable at that age. In his eyes, Plankton was also just as willing to betray him as he claimed Krabs was, and given that behavior hasn't changed at all even at the end of the episode, why would he want to keep giving him the benefit of a doubt? It doesn't justify the cruelty behind his actions, but it does highlight how both of them have become poisoned by their feud, unable to truly bury the hatchet so long as even one of them continues to refuse to address the issue.
Fridge Logic
Mr. Krabs says that times were tough, and so his mother had to fashion his clothes from rags. Yet his mother is wearing the same nice-looking dress that she always does in the series. You'd think she would prioritize getting her son clothed first...
Maybe that dress is something she inherited from a relative?
Or given that this is a flashback, he genuinely might not remember what she wore back then, and just imposed what she normally wore from the present.
