FTC and States Sue Toast Over Subscription Fees and Cancellation

The lawsuit challenges recurring charges, cancellation restrictions and financing arrangements in business-to-business subscriptions. Toast disputes the allegations and the FTC's interpretation of federal subscription law.

The Federal Trade Commission and seven state attorneys general have sued Toast, accusing the restaurant technology company of imposing undisclosed fees, adding unwanted subscription services and making it difficult for customers to cancel.

The October 29 lawsuit also challenges financing arrangements that regulators say could require restaurants to repay outstanding business loans immediately if they stopped using Toast's software or payment processing services. Toast disputes the allegations and argues that the FTC is improperly applying a federal consumer subscription law to negotiated business contracts.

Filed in federal court in Northern California, the action also includes California officials from Los Angeles County and San Francisco.

What the FTC alleges

Toast provides restaurant software, payment processing and related services through recurring contracts. Its subscriptions typically run for one or two years, with monthly payments and automatic renewal unless customers cancel.

According to the complaint, restaurants were sometimes enrolled in additional subscription services without their permission or charged fees that weren't adequately explained during enrollment.

One focus is Toast's Pay-as-you-Go offering, which advertises hardware and software for $0 per month in exchange for higher payment processing fees. Regulators allege that restaurants signing up for this arrangement can face costs they weren't expecting. Businesses that don't begin processing payments within 120 days may have to return their equipment or pay its retail value. Those that temporarily close can still be required to pay $85 per month for payment processing.

The complaint also alleges that restaurants canceling Pay-as-you-Go agreements can face early termination fees of $150 for each remaining month of their contracts. Early termination fees and renewal notice requirements aren't inherently unlawful. The FTC is challenging how Toast allegedly disclosed and applied those terms.

Financing could make leaving Toast more expensive

Toast Capital provides financing to restaurants that use the company's technology. According to the complaint, restaurants with outstanding Toast Capital loans can be required to repay their remaining loan balances immediately if they cancel their Toast subscriptions or move to another provider.

The FTC alleges that leaving Toast can trigger a default under the financing agreement, even when a restaurant has otherwise been making its payments. That could leave a restaurant owing substantially more than an early termination fee when it decides to change providers.

Regulators argue that these arrangements create another obstacle for restaurants seeking to leave Toast. The lawsuit does not establish that financing tied to an ongoing commercial relationship is automatically unlawful.

Online enrollment, but a more complicated cancellation process

The FTC's complaint describes several ways restaurants could subscribe to Toast, including online self-service checkout and sales-assisted enrollment. Customers could select a subscription package on Toast's website and complete their purchase online. Others worked with sales representatives, received quotes and finalized their agreements electronically.

Toast also introduced a system in 2025 that allowed sales representatives to send customers links to complete checkout online. According to the complaint, these enrollment routes allowed restaurants to complete their agreements electronically.

Canceling was a different experience, according to regulators. The FTC alleges that restaurants couldn't cancel their subscriptions online. Instead, they had to provide written notice at least 30 days before their agreements renewed.

The requirement appeared within a 25-page merchant agreement that customers weren't required to open during enrollment. Regulators say restaurants could complete the subscription process without seeing the cancellation deadline.

Even customers who provided notice allegedly encountered delays, repeated contacts with customer service or continued charges. One restaurant owner cited by regulators reported receiving a $5,318.87 early termination charge after canceling an account that had been open for four years.

Customer support promises also challenged

Toast advertises customer support around the clock, but regulators allege that restaurants haven't always been able to reach employees who could resolve their problems. One restaurant owner reported being unable to obtain assistance on a Saturday, resulting in thousands of dollars in lost credit card transactions.

The complaint also revisits a $0.99 fee Toast added to certain online orders between 2021 and 2023, alleging that the charge wasn't adequately disclosed to restaurants or their customers.

Toast disputes the allegations and the FTC's legal approach

Toast says it strongly disagrees with the allegations and intends to defend itself in court. The company also challenges the FTC's use of the Restore Online Shoppers' Confidence Act, known as ROSCA.

ROSCA addresses certain online sales and recurring payment practices. Toast argues that Congress did not intend the law to govern negotiated commercial agreements between businesses. The company maintains that no court has established that ROSCA applies to negotiated B2B contracts and warns that such an interpretation could disrupt commercial contracting practices beyond the restaurant industry.

The FTC's complaint, however, describes online subscription enrollment processes alongside the company's sales-assisted arrangements. Regulators allege that Toast failed to clearly disclose important terms and provide customers with a simple way to stop recurring charges. Whether ROSCA applies to these transactions remains disputed.

Toast says it has cooperated with the FTC's investigation since mid-2025 and attempted to resolve the matter before litigation.

The lawsuit also includes claims under the FTC Act and state consumer protection laws. The case remains pending, and the allegations have not been established in court.

INSIDER TAKE

The steady stream of subscription enforcement actions continues, even without new federal cancellation requirements. The FTC and state authorities are relying on existing laws to challenge practices they believe are unfair or deceptive.

The Toast lawsuit brings a different question into focus: how those laws apply to business-to-business subscriptions. Toast disputes the FTC's interpretation of ROSCA, and the outcome could be important for companies that sell recurring services through commercial agreements.

Regulators are also looking closely at what happens after a customer signs up. The FTC is questioning fees, customer support promises and financing arrangements that may make it difficult for customers to leave. The outcome could help clarify how existing subscription laws apply when businesses, rather than consumers, are the customers.

SOURCES

• Federal Trade Commission | October 29, 2026
  FTC and States Take Action Against Toast Inc.
• Federal Trade Commission | October 29, 2026
  Federal complaint
• Federal Trade Commission | Case record
  Toast, Inc. case proceedings
• Toast, Inc. | October 29, 2026
  Toast Responds to FTC Lawsuit