WASHINGTON, D.C. — The Federal Trade Commission and the attorneys general of California, Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma, and Utah filed a lawsuit against Toast Inc. and affiliated entities on Thursday. The complaint alleges Toast Inc. imposed hidden fees, unauthorized charges, and deceptive subscription traps on restaurant customers.

Toast Inc. markets and sells point-of-sale hardware, software, and payment processing services to small businesses in the restaurant industry. The company sells its software as an annual or biennial subscription service billed monthly and markets financing products called Toast Capital loans to existing customers.

According to the complaint, Toast subscriptions cost an average of around $900 per month, depending on the number of terminals and add-on services. Customers were frequently enrolled in and charged for subscription add-ons such as employee timekeeping and payroll processing without their consent.

The complaint alleges Toast advertised a "Pay-as-you-Go" plan with $0 monthly hardware and software fees but higher transaction fees, while imposing undisclosed fees on hardware and software costs. Clients who fail to start processing payments within 120 days of purchasing a subscription must return all hardware or pay the full retail value.

Restaurants facing temporary closure are still required to pay $85 a month for payment processing, the complaint states. Customers wishing to cancel must pay an undisclosed early termination fee of $150 per month for each remaining contract month.

From September 2021 through late-July 2023, Toast unilaterally charged restaurant patrons a $0.99 fee without adequate disclosure or consent. The fee was applied to certain online orders above $10 placed through Toast’s platform and went to Toast rather than the restaurants.

Toast instituted a multi-step cancellation process requiring coordination of multiple teams, leaving customers to incur months or years of unwanted charges. The company requires customers to provide 30 days’ written notice of intent not to renew, a requirement not clearly disclosed in the enrollment flow.

Multiple consumers reported receiving no response to timely written cancellation notices and incurring additional charges. Customers contacting Toast to cancel were subjected to questions about why they wanted to cancel and sales pitches to dissuade them.

One consumer was charged a $5,318.87 early termination fee when cancelling his account after four years, which Toast refused to refund. The complaint also alleges Toast Inc. failed to deliver on customer support promises and made it difficult to cancel services.

"Toast failed to honor a number of its promises and instead imposed hidden fees, unauthorized charges and subscription traps that drained the hard‑earned profits of businesses just trying to serve their customers," Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection, said. "Small businesses are the backbone of communities across the country, and they deserve tools and services that are transparent, reliable and truthful." "These practices are illegal, and the FTC will continue to take aggressive action to ensure a fair, transparent and competitive marketplace," Mufarrige said.