FTC and eight states sue Toast over hidden fees

The Federal Trade Commission and attorneys general from eight states sued Toast on Thursday. The consumer protection lawsuit, filed in US District Court in Northern California, alleges the restaurant software company misled clients with hidden fees and subscription plans that were difficult to cancel.

Toast is a vertically integrated restaurant software and payments fintech. The company sells point-of-sale hardware and software services to help restaurants handle sales. The FTC and states allege a pattern of hidden fees, unauthorized charges, subscription traps, unwanted add-ons, and a difficult cancellation process. The agency is seeking a permanent injunction, compensation, and civil fines.

Alleged deceptive practices and hidden fees

At least tens of thousands of consumers have complained about Toast's practices. The complaint accuses the company of imposing undisclosed charges and unauthorized fees.

From September 2021 through late July 2023, Toast added a 99-cent fee to certain online orders above $10. This fee was applied to customers, not restaurants, on top of existing service fees. Toast obscured this charge. The company ended the fee in July 2023.

Restaurants must enroll in auto-renewing Toast subscriptions. The monthly cost is determined by hardware and services bundled, averaging around $900 per month. Customers frequently complain of being enrolled in and charged for subscription add-ons without consent. Toast used false claims to entice enrollment, including offers of free products. The company advertised 24/7 customer support, but customers claim they cannot get help at any hour.

Toast made cancellation nonintuitive, time-consuming, and far from simple. The process requires the involvement of multiple teams. Customers must give 30 days' written notice, a requirement the complaint says lacked clear disclosure at enrollment. Some were directed to staff who questioned their intent and tried to retain them. Those who cancel owe an early termination fee of $150 per month for each remaining contract month. One customer was charged a $5,318.87 early termination fee after four years, with Toast refusing a refund. Clients who fail to start processing payments within 120 days must return hardware or pay its full retail value.

Toast’s defense and cooperation claims

Toast denied the allegations in a statement released Thursday. The company said it will vigorously defend itself in court.

Toast claimed it has been cooperating fully with the FTC's review since mid-2025. It stated it engaged in good faith efforts to reach a resolution short of litigation. The FTC voted 2-0 to authorize the lawsuit. Toast argues the FTC is attempting to apply the Restore Online Shoppers' Confidence Act, or ROSCA, to negotiated business-to-business agreements. The company says this has no legal precedent and could disrupt commercial contract laws.

Potential impact on restaurant software

The case may set a precedent for applying consumer protection law to business agreements. The FTC alleges Toast violated the Federal Trade Commission Act and ROSCA. As of December 17, 2025, the FTC has undertaken approximately 50 ROSCA actions. The largest settlement reached $2.5 billion.

Christopher Mufarrige, director of the FTC's Bureau of Consumer Protection, said Toast failed to honor promises. He stated the company imposed hidden fees, unauthorized charges, and subscription traps. The lawsuit is 70 pages long. The states involved are California, Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma, and Utah.

The FTC has been investigating the allegations for more than a year. Toast is scheduled to report its third-quarter financial results on Tuesday.