SF’s city attorney and several states are suing technology company Toast, alleging it trapped restaurants into costly subscriptions, charged undisclosed fees, and made it exceedingly difficult for businesses to cancel their services.
San Francisco City Attorney David Chiu has joined the Federal Trade Commission, Los Angeles County Counsel, and attorneys general from seven states in suing Toast Inc and affiliated companies, alleging the restaurant technology provider has charged businesses undisclosed fees, enrolled them in unwanted services, and made it prohibitively expensive to cancel subscriptions.
As the Chronicle reports, the lawsuit, filed in US District Court for the Northern District of California, follows tens of thousands of complaints from restaurants, both directly to Toast and to the FTC. California accounts for the largest share of those complaints, according to the filing.
“Restaurants trusted Toast so they could simplify operations. Instead Toast trapped them in inflexible subscriptions with hidden fees,” Chiu said in a statement. “We know that the Toast platform is used by many restaurants in San Francisco, around California and our country, and we want to ensure that we put an end to Toast’s deceptive practices that are harming our world-famous restaurant industry.”
Toast, headquartered in Boston with offices in San Francisco, provides point-of-sale software and hardware used by approximately 180,000 restaurants worldwide, according to the Chronicle. Its services include order management, payment processing, inventory tracking, payroll, and financing.
According to the complaint, restaurants must sign up for automatically renewing annual or two-year subscriptions, with monthly charges varying based on the number of terminals and additional services. Some customers reportedly found themselves paying for add-ons, including employee timekeeping and payroll processing, that they had never authorized.
Toast also advertises a Pay-as-you-Go plan offering hardware and software for no monthly charge in exchange for higher transaction fees. However, the lawsuit alleges the company fails to adequately disclose additional costs associated with the supposedly free equipment and services.
Among the examples cited are customers who fail to begin processing payments within 120 days of purchasing a subscription, who must return their hardware or pay its full retail price. Restaurants that temporarily close are still charged $85 per month for payment processing, while those attempting to terminate their contracts can face an early cancellation penalty of $150 for every remaining month.
Toast also allegedly charged restaurant patrons an additional 99 cents on certain online orders exceeding $10 between September 2021 and July 2023. The money went directly to Toast, rather than the restaurants, and the complaint says neither businesses nor customers adequately consented to the charges.
The lawsuit also describes a cancellation process involving multiple departments and steps, beginning with a requirement that customers provide 30 days' written notice of their intent not to renew. That requirement is allegedly not clearly explained when restaurants sign up.
Some owners who submitted cancellation notices reportedly received no response and continued to be billed. Others were directed to customer service by phone or live chat, where they were questioned about leaving and subjected to sales pitches.
One restaurant owner cited in the complaint was charged $5,318.87 in early termination fees after canceling a four-year subscription. Toast allegedly refused to refund the money.
Restaurants with outstanding Toast Capital loans face another potential obstacle. According to the lawsuit, Toast treats canceling its subscriptions or switching providers as a loan default, requiring customers to immediately repay their entire remaining balance. That leaves businesses facing the choice of continuing to pay for unwanted services or dealing with accelerated loan repayment on top of cancellation penalties.
The complaint also challenges Toast's claims of 24/7/365 customer support. Although the company advertises around-the-clock assistance from people who understand the restaurant industry, customers have reportedly struggled to reach employees capable of resolving their problems.
One business owner who called on a Saturday was told that the department responsible for handling his issue wasn't available on weekends. The resulting problem cost the restaurant thousands of dollars in credit card transactions, according to the complaint. Other customers described spending weeks or months trying to resolve issues without receiving promised follow-ups.
The lawsuit alleges violations of the FTC Act, the Restore Online Shoppers' Confidence Act, and related state laws. The case will be decided by the court, and the allegations have not yet been established as fact.
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