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San Francisco and states sue Toast over subscription fees and cancellation

San Francisco and states sue Toast over subscription fees and cancellation

Rule Changes San Francisco, CA local

City Attorney David Chiu joins the FTC, Los Angeles County Counsel, and seven states in federal court alleging hidden fees and hard-to-cancel contracts.

Today: San Francisco, FTC, and seven states sue Toast

Overview

Updated 1 hour ago

San Francisco City Attorney David Chiu joined the Federal Trade Commission and seven states in suing Toast, a restaurant point-of-sale company used by about 180,000 restaurants worldwide. The lawsuit alleges Toast enrolled restaurants in auto-renewing subscriptions, charged undisclosed fees, and made cancellation costly.

The case targets the contracts between restaurants and the software they use to take orders and process payments. It also tests whether cancellation penalties and loan-default clauses can be treated as unfair or deceptive practices under federal and state law.

Why it matters

If the lawsuit succeeds, restaurant software contracts could face new limits on cancellation fees and automatic renewals.

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Key Indicators

180,000
Restaurants using Toast worldwide
The company says its point-of-sale software and hardware serve about this many restaurants.
$150
Early cancellation penalty per remaining month
The lawsuit alleges restaurants can face this charge for each month left on a contract.
$85
Monthly payment-processing charge for closed restaurants
The complaint says temporarily closed restaurants are still billed this amount.
99 cents
Alleged online-order fee
The lawsuit says Toast charged this on certain online orders over $10 from September 2021 to July 2023.
$5,318.87
Early termination fee cited in complaint
One restaurant owner was charged this after canceling a four-year subscription, according to the lawsuit.
120 days
Deadline to begin processing payments
The complaint says customers who miss this deadline must return hardware or pay full retail price.
30 days
Written notice required before nonrenewal
The lawsuit alleges this requirement is not clearly explained when restaurants sign up.
7
States joining the lawsuit
Attorneys general from seven states joined San Francisco, the FTC, and Los Angeles County Counsel.

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People Involved

David Chiu
David Chiu
San Francisco City Attorney
Plaintiff in the lawsuit against Toast

Organizations Involved

Toast Inc.
Toast Inc.
Restaurant technology company
Defendant

Boston-based company that sells point-of-sale software, hardware, and payment processing to restaurants.
San Francisco City Attorney's Office
San Francisco City Attorney's Office
Municipal legal office
Plaintiff

The legal office representing San Francisco in civil enforcement actions.
Federal Trade Commission (FTC)
Federal Trade Commission (FTC)
Federal Agency
Plaintiff

Federal agency that enforces consumer protection and competition laws.

Timeline

1 event Latest: Today

  1. San Francisco, FTC, and seven states sue Toast

    Today Legal

    The lawsuit filed in federal court in California alleges hidden fees, unwanted add-ons, and costly cancellation.

Scenarios

1

Toast settles and agrees to change cancellation practices

Possible Resolves by Nov 2, 2027

Discussed by: Based on the complaint's requested relief

The plaintiffs and Toast reach a settlement before trial. The deal includes a monetary payment and changes to how Toast discloses fees, enrolls restaurants, and handles cancellations.

2

Court dismisses the lawsuit before trial

Uncertain Resolves by Jun 1, 2027

Discussed by: Based on the standard motion-to-dismiss stage

Toast files a motion to dismiss. The court agrees that the complaint fails to state a claim and dismisses all claims before discovery or trial.

3

Court orders Toast to stop alleged practices while case proceeds

Possible Resolves by May 1, 2027

Discussed by: Based on the complaint's request for injunctive relief

The plaintiffs seek a preliminary injunction. The court orders Toast to halt the alleged undisclosed fees or cancellation penalties while the lawsuit continues.

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

June 2023

FTC v. Amazon Prime (2023)

The Federal Trade Commission sued Amazon, alleging the company used deceptive design to enroll consumers in Prime and made cancellation difficult. Amazon disputed the claims.

Then

The case put subscription sign-up and cancellation practices under federal scrutiny.

Now

It became a reference point for later enforcement against negative-option marketing.

Why this matters now

The Toast lawsuit makes similar allegations about auto-renewing subscriptions and cancellation obstacles.

2022

FTC v. Vonage (2022)

The Federal Trade Commission alleged Vonage trapped consumers in subscriptions, hid fees, and made cancellation hard. Vonage agreed to pay $100 million to settle.

Then

The settlement required changes to how Vonage disclosed and canceled services.

Now

It showed that cancellation obstacles can carry nine-figure penalties.

Why this matters now

Toast faces similar claims over cancellation penalties and undisclosed charges.

Sources

(1)
SFist