Toast Sued by FTC and Seven States Over Hidden Restaurant Fees

Boston-based Toast Inc. (NYSE: TOST), the restaurant point-of-sale and payments company, was sued on Oct. 29, 2026 by the Federal Trade Commission, seven state attorneys general and two California local governments, which accuse it of charging restaurants hidden and unauthorized fees and making its subscriptions hard to cancel. The Toast FTC lawsuit, filed in U.S. District Court for the Northern District of California, seeks a court order to stop the practices, plus civil penalties and money for affected restaurants. Toast denies the claims and says it will fight the case.

Key figures: Filed Oct. 29, 2026 · 1 federal agency, 7 states, 2 California local governments · about $900 average monthly subscription cost alleged · $150 per remaining month early termination fee alleged · Toast reports about 180,000 locations, $1.9 billion in Q2 revenue

What the FTC and States Allege

The plaintiffs are the FTC; the attorneys general of Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma and Utah; and the People of the State of California, acting through the Los Angeles County Counsel and the San Francisco City Attorney. The Boston Globe described the complaint as 70 pages long. It claims Toast violated the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA), a federal law on online subscriptions, along with state consumer protection laws, according to the Illinois attorney general’s office.

Restaurants that use Toast sign auto-renewing subscriptions that cost about $900 a month on average, depending on terminals and add-ons such as payroll and employee timekeeping, the Illinois announcement said. The complaint alleges that customers were often enrolled in add-ons they did not agree to. It also targets Toast’s “Pay-as-you-Go” plan, which is advertised as $0 a month for hardware and software in exchange for higher per-transaction fees. The plaintiffs allege the plan carries fees that are not clearly disclosed. Among the examples cited: customers who do not start processing payments within 120 days of buying a subscription must return their hardware or pay its full retail value.

Cancellation is a central part of the case. According to the complaint as summarized by the San Francisco City Attorney’s office, restaurants can sign up online but cannot cancel online, and must instead call customer support or use live chat. Canceling after the first 120 days triggers an early termination fee of $150 for each month left on the contract. The Illinois office cited one customer who said he was charged $5,318.87 when he canceled after four years. The Utah attorney general’s office said early termination fees can reach $5,000 to $17,000. For restaurants with a Toast Capital loan, the complaint alleges, canceling counts as a default and makes the whole loan balance due at once.

The suit also says Toast added a $0.99 fee to certain online orders above $10 from September 2021 through late July 2023 without adequate disclosure to diners or restaurants, and that the money went to Toast rather than the restaurants. And it alleges Toast advertised “24/7/365” customer support that customers often could not reach.

By the Numbers: What Is at Stake for Toast

The fees at issue sit inside the part of Toast’s business that brings in most of its money. In the second quarter of 2026, Toast reported total revenue of $1.908 billion, up 23% from $1.550 billion a year earlier, according to its Aug. 4 earnings release filed with the SEC. Financial technology solutions, mostly payment processing, produced $1.570 billion of that, or about 82% of revenue (TBR calculation), up 23%. Subscription software, the line that includes the add-ons named in the suit, grew faster, rising about 28% to $290 million from $227 million (TBR calculation). Hardware and professional services were nearly flat at $48 million.

Toast said it served about 180,000 locations at the end of June, up 22% from a year earlier, after adding a record of about 9,500 net new locations in the quarter. Its annualized recurring run-rate rose 25% to $2.4 billion, and quarterly net income nearly doubled to $154 million from $80 million. In its response to the lawsuit, the company put its count at nearly 200,000 business locations. The Globe, citing Morningstar, reported that Toast has about 6,500 employees.

The lawsuit does not put a dollar figure on the penalties or restitution sought. Investors had a muted first reaction: GuruFocus reported that Toast shares were down about 1.2% in afternoon trading on Oct. 29.

Toast’s Response

“We strongly disagree with the allegations in the lawsuit filed by the FTC and will vigorously defend the Company against the FTC’s claims,” Toast said in a statement issued from Boston on Oct. 29. The company argued that ROSCA was written for online consumer subscriptions and that “no court has held that ROSCA applies to negotiated business-to-business agreements.” It said applying the law that way “has the potential to rewrite the laws of commercial contracts.”

Toast said it had disclosed the FTC review in its most recent quarterly filing, had cooperated since mid-2025 and had tried to resolve the matter without litigation. “The FTC disregarded the information we provided showing the extent to which our restaurant customers negotiate their contracts,” the company said, adding that nothing about the case changes its customer service, pricing or support.

What Comes Next

The case now moves through federal court in California, where Toast must respond to the complaint. The next public checkpoint comes sooner: Toast is scheduled to report third-quarter 2026 results after the market closes on Tuesday, Nov. 3, with a conference call at 5 p.m. ET, according to a company announcement. In August, the company guided to $615 million to $625 million in non-GAAP subscription and fintech gross profit and $210 million to $220 million in adjusted EBITDA for the quarter. Toast was already on our list of Boston companies reporting third-quarter earnings, and the call will be its first scheduled earnings call since the suit was filed.

For Boston, the case involves one of the city’s largest publicly traded tech companies, a restaurant software maker headquartered here whose customers include independent restaurants of the kind featured in our Boston restaurant guide. More company coverage is on our Boston business news hub.

Reactions

“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,” said Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection. Illinois Attorney General Kwame Raoul said the suit “alleges that Toast took advantage of small business owners by charging hidden fees and automatically signing them up and charging for add-ons that they didn’t want.” The coalition described the lawsuit as bipartisan.

Sources

• Illinois Attorney General: Raoul files lawsuit against Toast Inc. (Oct. 29, 2026)
• San Francisco City Attorney: Chiu sues Toast (Oct. 29, 2026)
• Utah Attorney General: Utah joins FTC in suing Toast
• Toast: Toast responds to FTC lawsuit (Oct. 29, 2026)
• The Boston Globe: Toast sued by Federal Trade Commission, several states (Oct. 30, 2026)
• SEC: Toast Announces Second Quarter 2026 Financial Results (Exhibit 99.1)
• Toast via Business Wire/Nasdaq: Release date of third quarter 2026 results (Oct. 20, 2026)
• GuruFocus: FTC and States Sue Toast; Shares Dip 1.2%