The movie begins with Tai, Sakura, Yugi, and Nate wanting some excitement. SpongeBob decides to bring them to the grand opening of the Flying Mackerel, a new restaurant that acts similar to the Krusty Krab. However, the restaurant proprietor, Francis Teagan, bans SpongeBob from the grand opening party due to his immaturity, much to SpongeBob and Team Arch's disappointment. Meanwhile, Nolan Radcliffe, leader of the House of Radcliffe, complains about his failures to his top cronies, being unable to embarrass the Digital Heroes since the time he assaulted the Kamiya Siblings. When Ryker points out a scheme that they have yet to attempt, Nolan decides to implement it.
That night, Nolan and his boys invade the castle of Lord Gerald Lawson, who's having a discussion with his children, Derrick and Liza, and steal his crown, leaving false evidence to frame Mr. Krabs for the crime, and sends the crown to the distant land of Bone City. Elsewhere, SpongeBob drowns his sorrows in ice cream with Patrick and Team Arch. He initially feels better, but he gains a brain freeze, and remembers why he's disappointed.
The next morning, Lord Lawson barges into the Flying Mackerel and threatens Mr. Krabs for his alleged thievery. SpongeBob arrives and chastises Mr. Krabs under the influence of his ice cream headache, but seeing his boss's life at risk shocks SpongeBob back to his senses and he promises Lawson that he will retrieve the crown from Bone City. Although Lawson doesn't trust him, he is persuaded by Derrick and Liza to spare Mr. Krabs for the time being. However, he freezes him instead (along with the rest of the Digital Heroes by accident) until further notice, and orders SpongeBob to return with the crown in exactly six days (originally ten until Patrick started argument that shortens it). Determined to succeed, SpongeBob, Patrick, Sandy, a reluctant Squidward, and Team Arch leave for Bone City, using custom van that Sandy made for them. While Kari gets everyone into a spiritual form, the House steals the Krabby Patty formula and a blueprint for an old machine that Plankton once made, leaving Mr. Krabs to realize that it was all a setup.
On their way, the encounter a quirky gas station duo and an eerie customer of theirs about their quest. While the duo teases them, the customer wishes them luck, but a thug takes the team's van from. So, they go on foot.
Back at San Francisco, Nolan uses the formula to produce and sell Krabby Patties at his mobile restaurant. He also gives away free digital wristwatches to his customers, which are actually part of Plankton's old machine. However, the House soon catches up on Team Arch's quest, and sends a mercenary of theirs, Boris Bennigan, to stop them. Boris first arrives at the gas station and interrogates the duo about where the heroes are going.
The following night, down the road, Team Arch find the van parked outside a bar called the Rough House, which is filled with ruffians and thugs. They find that the thug who took the van still has the key. After a plan to get it back goes wrong, SpongeBob and Patrick decide to start a bubble party in the bathroom, much to the others' dismay. This gains the attention of Bubba, the owner, after he finds a bubble that escaped. Noticing SpongeBob and Patrick's predicament, two incompetent thugs cause a distraction by claiming to have blown the bubble, resulting in them getting beaten up. As the beatdown commences, Tai sneaks in and takes the key.
The next morning, after noticing the wristwatches, Hiroshi confronts Nolan over the issue, and after realizing the setup, plans on going to Lord Lawson. However, a desperate Nolan manages to activate Plankton's old machine: A mind control device, which swiftly takes control of whoever wears the wristwatches. A frantic Hiroshi tries to escape, but is captured and enslaved by the House and the wearers. However, the rest of Team Arch, along with the citizens who don't have the wristwatch, manage to evacuate San Francisco, and watch as the House takes control. Seeing this, Derrick and Liza, who have been grounded due to their constant interferences, escape the castle to find SpongeBob's team, while Lawson is away on business.
