When Fozzie overhears Hilda, Kermit, and Scooter talking about getting rid of "that bear" he thinks they're talking about him when in actual truth it's Gonzo's teddy bear that is being badmouthed. Meanwhile, Sesame Street's Bert & Ernie make a guest appearance in a musical number with Connie Stevens.
When he's unable to get a spot on the show, Gonzo asks Scooter to be his manager. Scooter thinks Gonzo should do a rock act by banging a large rock with a mallet. Later, Gonzo tries female impersonation in a dress and a blonde wig. But Scooter gives up managing when Gonzo eats his contract.
In an effort to make Kermit jealous, Miss Piggy instructs Scooter to tell him that guest star Avery Schreiber is smitten with her. But when Kermit finds out it was all a trick, Piggy karate-chops everybody in her path.
Fozzie gets stuck in a trick cabinet owned by Marvel the Magician (who is in Toledo) and is left perform his act while in and have two pig stagehands tip the box over so Fozzie can take a bow. In the end, Fozzie escapes thanks to Crazy Harry who is having a good time setting off other explosions.
Kermit is skeptical when everyone backstage is terrorized by "the Phantom of the Muppet Show." aka Uncle Deadly, a monster-actor who performed in the theater years ago, got panned by the critics, and vowed never to perform there again, and not to let anyone else perform either warning the Muppets "Leave or be doomed!"