Mr. Krabs activates this mode in response to the secret formula having gone "missing," so he orders SpongeBob to go outside and take the briefcase from the SWAT Team truck that contains it, intent on framing him.
Mr. Krabs activates the red alert mode to have a discussion with SpongeBob, Patrick, and Squidward about Plankton's plans to steal the formula.
The SpongeBob Movie: Sponge Out of Water
When Plankton uses a robot to lure Mr. Krabs outside the Krusty Krab, he manages to sneak into the safe within a penny. Plankton sees the only thing that stands between him and the secret formula: a pressure plate. Plankton retrieves an identical bottle - a ship in a bottle - and uses it to push the secret formula off the pressure plate, and match the weight so as not to alert anyone. However, when SpongeBob walks in unannounced, he startles Plankton, which causes the latter to tip the bottle off the pressure plate and the security system to activate.
A female computer voice announces "Initiating Lockdown Sequence" with a red alert sound blaring in the background. Metal bars come down over the windows in the office and metal doors slam shut between the office door and the kitchen. Metal sheets slide down rapidly over the exterior windows and the delivery window between Squidward's workstation and the kitchen. A metal cast of Squidward slams over him and traps him, as does a cast to a customer's beverage. The toilets seal shut, the Krusty Krab sign outside slams closed with a large padlock, and the exhaust funnel moves down into the Krusty Krab.
Mr. Krabs runs up just as the last thick metal is closing up the Krusty Krab and it slams shut before he can get inside. His panic, readily induced, causes him to have super strength and push the metal back open to go attack his nemesis.
It is activated after Mr. Krabs notices that the Krabby Patty secret formula isn't on the pillow, but it is later discovered that Patrick had mistaken it for a ketchup bottle.