FTC Sues Toast Over Alleged Hidden Restaurant Fees and Cancellation Barriers

The Federal Trade Commission and state authorities sued Toast and affiliated businesses Thursday, alleging that the restaurant technology company imposed inadequately disclosed fees, charged for unwanted services and obstructed cancellations. The case puts the costs of operating a connected restaurant business, including the cost of leaving its software provider, under scrutiny.

The complaint was filed in federal court in Northern California. Its allegations have not been decided by a judge. The plaintiffs seek an injunction and monetary relief, including remedies under state consumer-protection laws. There is no announced settlement or court-imposed payment in the materials reviewed for this report.

Toast had already contested the regulator’s position. In its second-quarter securities filing, the company said it strongly disagreed with the FTC’s legal challenges, including whether some of the cited laws applied to its business. It said it was prepared to defend itself in litigation and could not estimate a possible financial loss.

A restaurant system becomes a recurring financial commitment

Toast sells the terminals and cloud software restaurants use to take orders, accept payments and run operations. The FTC says customers enter automatically renewing annual or two-year subscriptions, billed monthly, with average costs around $900 a month depending on terminals and bundled services. It alleges some restaurants were charged for add-ons without consent.

The agency also challenges disclosures around the company’s pay-as-you-go offer. Among the alleged charges is an early termination fee of $150 for each month remaining on a contract. These are the regulator’s descriptions of contested practices, rather than a finding that every Toast customer faced the same terms or experience.

The business distinction is between the advertised entry price and the full cost over a contract’s life. Hardware, payment processing, payroll and other services can create several overlapping commitments. A subscription that looks manageable in a normal month can become more burdensome when a restaurant closes temporarily or wants to change providers.

The complaint reaches beyond software subscriptions

The court filing also challenges a historical 99-cent charge on certain online orders above $10. It says Toast collected that charge from September 2021 through late July 2023 without adequate disclosure or consent. That allegation concerns an earlier practice; the lawsuit does not establish that diners are currently paying that fee.

For borrowers, the complaint describes another obstacle. It alleges that cancelling subscriptions or changing providers can trigger immediate repayment of an outstanding Toast Capital loan. That would connect a restaurant’s financing decision with its ability to switch operating software. The plaintiffs argue the arrangement can leave businesses choosing between unwanted subscription payments and accelerated debt repayment.

Those issues show why the case is commercially significant. A loan and a software contract may be sold as different products, yet their combined terms can change the practical cost of exit. A demand for the outstanding principal can have a much larger immediate effect on cash flow than another monthly subscription charge.

Investors face a disputed liability, not a settled bill

Toast disclosed that the FTC investigation began with a June 2025 information demand and that staff supplied a draft complaint and proposed settlement order in June 2026. Thursday’s filing therefore advances a previously disclosed dispute into court; it does not mean the company first learned about regulatory concerns this week.

The platform’s scale helps explain the stakes. Toast’s second-quarter results put its locations at approximately 180,000 and quarterly gross payment volume at $60.7 billion. Payment volume measures transactions passing through the platform, not revenue retained by Toast. Its annualized recurring run-rate was $2.4 billion, another measure that should not be confused with quarterly accounting sales.

A legal challenge to fees or cancellation terms can affect the economics of customer retention, even before any financial remedy is determined. Litigation expenses, possible operating changes and the uncertainty around a resolution are separate from the company’s reported growth. That is why an earnings assessment also needs to account for risks outside the headline profit figures.

The next substantive developments are Toast’s response in the case, the court’s treatment of the legal claims and any later agreement or ruling. For now, the public record establishes a filed lawsuit and an earlier company rebuttal. It does not establish liability, a refund entitlement for an individual restaurant or a reliable estimate of the eventual cost.