A restaurant can change its menu, its prices, or even its location. But switching the company that handles its orders and payments can trigger thousands of dollars in charges, according to a new federal lawsuit that puts a major restaurant technology provider under scrutiny.
The Federal Trade Commission and officials from seven states sued Toast Inc. and affiliated companies Thursday, accusing the business of charging unauthorized fees, enrolling restaurants in unwanted subscriptions, and making cancellations unnecessarily difficult.
The case also raises a question for small businesses: What happens when the company processing their sales also holds their loan?
Toast, a provider of restaurant point-of-sale systems, payment processing, payroll tools, and financing, rejects the allegations. In a Thursday statement, the company said it would vigorously defend itself and argued that regulators seek to stretch a federal consumer-subscription law into negotiated contracts between businesses.
When A Monthly Bill Becomes A Costly Exit
The FTC says Toast subscriptions average about $900 a month, depending on equipment and add-ons. According to its complaint, some restaurants encountered unwanted subscription charges and undisclosed contract costs.
The alleged costs extend beyond ordinary monthly subscriptions.
Federal and state officials say Toast could charge restaurants $85 a month during temporary closures and impose an early termination fee of $150 for every remaining month of a contract. One customer described a $5,318.87 early termination charge after four years with the service, according to the complaint.
The complaint also describes a separate obstacle: Toast Capital loans.
Regulators allege that when borrowers cancel Toast service or change providers, Toast treats the move as a default and demands immediate repayment of the outstanding loan balance. That arrangement, if proven, could make a restaurant choose between keeping unwanted software charges and paying off its financing at once.
Customers May Have Paid A Fee Their Restaurants Never Approved
The dispute reaches diners as well as business owners.
Regulators say Toast imposed a 99-cent charge on certain online orders over $10 from September 2021 through late July 2023 without adequate disclosure or consent from customers or restaurant operators. The charge went to Toast rather than the restaurant, according to the FTC. The lawsuit does not claim that Toast currently imposes that fee.
Investigators also challenge Toast’s promises of round-the-clock support. The FTC cited an account of a restaurant operator who called for help on a Saturday and allegedly learned that the team needed to solve the problem did not work weekends.
Toast Challenges The Government’s Legal Theory
Toast disputes the case on factual and legal grounds.
Its public response says Congress designed the Restore Online Shoppers’ Confidence Act to address certain online subscriptions, not negotiated business-to-business agreements. The company warns that extending the statute to such contracts could undermine contractual certainty and hurt competition.
The FTC alleges violations of that law, the FTC Act, and state laws. Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma, and Utah joined the federal lawsuit, alongside California local authorities. Texas did not join the case.
The agency lists the action as pending in federal court in Northern California. Its allegations remain unproven, and the lawsuit has not produced a finding that Toast broke the law.
Provided by Dallas Express
