One restaurant owner was billed $5,318.87 to leave Toast after four years, and the Federal Trade Commission says the bill came from a fee that restaurants were never clearly told about: $150 for every month remaining on the contract. The agency, California prosecutors and seven state attorneys general sued Toast, Inc., the restaurant point-of-sale company, in federal court on October 29, 2026.
The day in tech, in one email: TLDR is the daily newsletter with links and TLDRs of the most interesting stories in startups, tech and programming.
We may earn a commission if you sign up.
Toast sells terminals, software and payment processing, and it also lends money to its existing customers through Toast Capital. Much of the case concerns what happens when a restaurant tries to stop paying for any of it.
The $150 charge and how it is calculated
According to the FTC’s announcement of the complaint, Toast’s contracts auto-renew on annual or two-year terms billed monthly, at an average of about $900 a month depending on the number of terminals and bundled add-ons. A restaurant that cancels before the term ends is charged an early termination fee of $150 per remaining month, and the FTC and states allege that fee was not disclosed when the restaurant enrolled. The example in the complaint is the $5,318.87 bill. The press release says the customer was refused a refund.
The fee is a charge per month remaining, not a flat penalty, so the cost of leaving rises the earlier a restaurant tries to go. A business closing eighteen months into a two-year deal would face a very different number than one leaving in the last quarter, and the complaint’s point is that neither would have seen the formula up front.
Other charges in the complaint
The charges the FTC lists go beyond the termination fee. Restaurants that do not begin processing payments within 120 days must return the hardware or pay its full retail value; those that close temporarily still pay $85 a month for payment processing; and customers are allegedly enrolled in add-ons such as timekeeping, payroll and payroll tax filing without agreeing to them. The agency also says the pay-per-use plan, advertised with hardware and software at $0 a month, carried higher per-transaction processing fees.
Cancellation is described as a maze. Customers must give 30 days’ written notice of an intent not to renew, which the complaint says is not clearly disclosed at sign-up. Some got no response and were charged again, and others who called were routed to “Customer Care” or live chat, where they met retention questions and sales pitches. For restaurants with a Toast Capital loan, the complaint says, canceling or switching providers counts as a default that makes the full balance due immediately. The support promise is also in dispute. Toast advertises “24/7/365” help, but one owner who called on a Saturday was told the team was unavailable on weekends and lost thousands of dollars in card transactions.
A second fee, aimed at diners
The complaint also revisits a fee that Toast already abandoned. From September 2021 to late July 2023, Toast added $0.99 to certain online orders over $10 placed through its platform, and the money went to Toast rather than the restaurants. The FTC says neither diners nor restaurants adequately consented. That fee drew a backlash in 2023. Toast chief executive Chris Comparato announced the reversal on July 19 of that year, saying the company had made the wrong decision, and Restaurant Business reported the fee was pulled from checkout pages within days. The company works with about 85,000 restaurants, according to that report.
Who sued, and what comes next
The case was filed in the U.S. District Court for the Northern District of California after a 2-0 Commission vote. California is represented by the Los Angeles County Counsel and the San Francisco City Attorney, and the attorneys general of Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma and Utah joined. The claims rest on the FTC Act, state law and the Restore Online Shoppers’ Confidence Act, which bars online sellers from charging a consumer’s account without clearly disclosing material terms and obtaining express informed consent.
The lead FTC attorneys on the case are Stephanie Liebner, Carlton Mosley and Sally Tieu of the Bureau of Consumer Protection. By the agency’s own description, it files a complaint when it has reason to believe a violation is occurring or imminent and a proceeding serves the public interest, which makes the filing an allegation, not a finding.
Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection, said in the agency’s release that the practices are illegal and that the FTC will keep taking aggressive action. The FTC says the case will be decided by the court, and the press release attaches no money figure or specific relief. Toast’s most recent quarterly report, for the period ended June 30, 2026, lists the ability to resolve regulatory investigations or inquiries among its forward-looking risks. No Toast response to the complaint turned up in the sources reviewed, which leaves the main open question the company’s answer in court.
This article was produced with the assistance of AI and reviewed by Morning Overview editors prior to publication.
The day in tech, in one email: Get TLDR →
We may earn a commission if you sign up.
More from Morning Overview
- Seven of Earth’s nine planetary boundaries are breached, and all seven are worsening
- The NSA says three phone features should be off whenever you aren’t using them
- Hurricane Hunter radar shows four warning signs that a tropical cyclone is about to strengthen, a University of Miami study found
- Tropical Storm Rachel is dumping up to 12 inches on four Mexican states on its way to major hurricane strength
