The Federal Trade Commission (FTC) of the United States, along with eight states including Florida, filed a federal lawsuit against Toast Inc. on Thursday. The company, which provides payment and management systems for restaurants, is accused of allegedly imposing hidden fees, activating services without authorization, and making it difficult to cancel contracts.
According to the lawsuit filed by authorities in California, some Toast customers faced penalties of $150 for each remaining month of their contract when they attempted to cancel the service. One of them reported a charge of $5,318.87 for early termination that the company refused to refund.
Authorities maintain that restaurants must subscribe to automatic renewal services, with an average cost of around 900 dollars per month, and that some clients were enrolled without consent in additional services, such as payroll processing and scheduling control.
The lawsuit also questions the advertising of Toast's “Pay-as-you-Go” plan, which offers equipment and software for “0 dollars per month,” but charges higher fees for processing payments. According to the FTC, customers who do not start processing payments within 120 days must return the equipment or pay the full price. Restaurants that temporarily cease operations may also face charges of 85 dollars per month for inactivity.
The reported charges would not be limited to the owners. Between September 2021 and July 2023, Toast allegedly unilaterally added 99 cents to certain online orders over $10. According to the FTC, that money went directly to the company and not to the restaurants.
Another controversial point is the cancellation of contracts. The lawsuit states that Toast requires written notice of the intention not to renew at least 30 days prior to expiration. Those who wish to terminate the contract early may face penalties, while some customers have reported prolonged procedures and offers aimed at discouraging them from abandoning the service.
For clients who also contract payroll services, the procedure includes a notice of non-renewal at least 90 days in advance.
The lawsuit also states that restaurants with loans from Toast Capital may be forced to repay their outstanding debt immediately if they cancel the service or switch providers without prior approval.
The FTC also questioned the promise of ongoing technical assistance. A restaurateur reported losing thousands of dollars in transactions after requesting help on a Saturday and finding out that the team in charge did not work on weekends.
"Toast failed to fulfill several of its promises," stated Christopher Mufarrige, director of the FTC's Office of Consumer Protection, when questioned about the reported practices.
On its part, Toast rejected the allegations and stated that it will defend its position in court. The company argued that the FTC aims to apply a law regarding online subscriptions to business contracts, an interpretation it deems inappropriate.
The case remains pending judicial resolution.
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