Toast, the Boston-based software company for the restaurant industry, is being sued by the Federal Trade Commission and multiple states for allegedly charging customers hidden fees, falsely claiming strong customer support, and using deceptive practices to thwart cancellations.
The 70-page lawsuit was filed Thursday in US District Court in Northern California by the FTC, attorneys general from seven states including Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma, and Utah, as well as Los Angeles County.
The company allegedly violated the Federal Trade Commission Act and the Restore Online Shoppers’ Confidence Act and should be ordered to permanently stop certain practice and pay compensation and civil fines, according to the lawsuit.
“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,“ Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection, said in a statement.
”These practices are illegal, and the FTC will continue to take aggressive action to ensure a fair, transparent and competitive marketplace,” he continued.
In a statement released Thursday, Toast denied the allegations and said the company will vigorously defend itself in court. The company also emphasized it has been cooperating with the FTC since the middle of 2025.
“The FTC disregarded the information we provided showing the extent to which our restaurant customers negotiate their contracts,” the statement said. “We are prepared to defend our business and fight this unprecedented action through litigation.”
The company said the FTC and other parties to the suit are misapplying the Restore Online Shoppers’ Confidence Act, which is meant to protect consumers, does not apply to contracts negotiated between two businesses.
“Such an application has the potential to rewrite the laws of commercial contracts and disrupt business-to-business providers across the economy, ultimately resulting in less competitive terms and more harm to small businesses,” the company said.
The lawsuit alleges that ”Toast has used false claims to convince consumers to enroll in its subscription services."
The company tells customers their cost is “0″ and promises customer service 24 hours a day seven days a week and 365 days, the lawsuit alleges.
“In fact, none of Toast’s hardware is $0, and Toast customers frequently claim that they cannot get customer support at any hour of the day,” the lawsuit alleges.
When customers try to cancel the services, Toast makes it extremely difficult and imposes unexpected termination fees, the lawsuit alleges.
“Even when customers have managed to navigate Toast’s Byzantine cancellation process and canceled their accounts, in many instances, Toast has hit them with unexpected high-dollar early termination fees (‘ETFs’) or continued to charge them for subscription services without consent,” the lawsuit alleges. “Toast has also hidden order processing fees from restaurants and their customers.”
These practices have continued even “tens of thousands of consumers have complained about these issues to the FTC, online, and directly to Toast,” the lawsuit alleges.
Toast has been a success story in the internet financial industry, having survived the impact of the COVID shutdown on the restaurant industry. The company has 6,500 employees, according to Morningstar.
This is a developing story and will be updated.
John R. Ellement can be reached at john.ellement@globe.com. Follow him @JREbosglobe.