L.A. County Joins FTC Suit Accusing Toast of Hidden Fees and Cancellation Traps on Restaurants

The lawsuit says the restaurant software giant billed owners for add-ons they never approved, buried termination fees and made leaving costly; Toast says the subscription law at its center does not apply.

By Herald Staff · Oct. 31, 2026, 2:30 PM ET

An unbranded point-of-sale tablet with a blank glowing screen and a small card reader on a worn wooden restaurant counter beside a stack of paper receipts and an espresso cup, with green leather booths, tiled walls and Edison bulbs behind it and palm trees against a violet sunset and the downtown Los Angeles skyline through the window. — Restaurants that use Toast pay an average of around $900 a month in subscription costs, according to the FTC, which along with Los Angeles County alleges the company hid fees and made cancelling difficult. Toast denies the claims.

Los Angeles County has joined federal regulators and seven states in suing Toast Inc., the restaurant software and payments company whose order screens and card readers sit on counters at thousands of eateries. The lawsuit, filed Oct. 29 in federal court in Northern California, accuses the company of burying fees in its contracts, charging restaurants for add-ons they never agreed to and making its subscriptions hard to cancel, according to the Federal Trade Commission. Toast says it strongly disagrees and will fight the case.

The Los Angeles County Counsel's Office and San Francisco City Attorney David Chiu are suing on behalf of the People of the State of California, alongside the FTC and the attorneys general of Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma and Utah. The case is United States of America, et al., v. Toast, Inc. et al., No. 3:26-cv-12705, San Francisco's announcement said.

"My office is committed to protecting small businesses from unfair, deceptive, and unlawful practices," Los Angeles County Counsel Dawyn R. Harrison said in that announcement, adding that the office hopes the lawsuit "sends a message to other businesses that they must comply with all consumer protection laws."

What the Complaint Alleges

Restaurants that use Toast sign up for auto-renewing subscriptions that average around $900 a month, depending on how many terminals they use and which services are bundled in, such as employee timekeeping and payroll, according to the FTC. The complaint says customers frequently report being enrolled in, and billed for, add-ons without their consent.

Regulators also take aim at Toast's "Pay-as-you-Go" plan, which advertises hardware and software for $0 a month in exchange for higher per-transaction fees. According to the complaint, as summarized by the FTC:

Restaurants that don't start processing payments within 120 days must return their hardware or pay its full retail value.
Restaurants that close temporarily still owe $85 a month for payment processing.
Customers who cancel face an undisclosed early termination fee of $150 for each remaining month of the contract.

The complaint further alleges that from September 2021 through late July 2023, Toast added a 99-cent fee to certain online orders over $10 placed through its platform, without adequate disclosure to diners or the restaurants. That money went to Toast, not the restaurants, the FTC said.

Leaving is the other sticking point. The complaint says customers must give 30 days' written notice of their "intent not to renew," a requirement not clearly disclosed when they sign up, and that some who did so got no response and kept getting charged. Others were sent to customer care or live chat, where they faced questions and sales pitches meant to talk them out of canceling.

Cancelling can be especially expensive for restaurants that borrowed through Toast Capital, the company's in-house loans. If those customers cancel or switch providers, the complaint says, Toast treats it as a default and demands immediate repayment of the outstanding balance.

Regulators also challenge Toast's promise of "24/7/365 support." In one example from the complaint, a business owner who called on a Saturday was told the team that could help wasn't available on weekends, costing the owner thousands of dollars in credit card transactions, the FTC said.

The suit claims violations of the FTC Act, the Restore Online Shoppers' Confidence Act and related state laws, and the FTC's commissioners voted 2-0 to file it. The California plaintiffs are seeking penalties, restitution for affected restaurants and a court order to stop the practices. The FTC noted that filing a complaint means it believes the law may have been violated and that a court will decide the case; the allegations have not been proven, QSR Web reported.

Toast Pushes Back

In a statement, the Boston-based company said it "will vigorously defend" itself and argued that the online-subscription law at the center of the case doesn't fit. "No court has held that ROSCA applies to negotiated business-to-business agreements, and we don't believe it applies here," Toast said, warning that such a reading could "rewrite the laws of commercial contracts."

Toast said it has cooperated with the FTC's review since mid-2025, including efforts to settle without litigation, and that the agency disregarded evidence of how much its restaurant customers negotiate their contracts. "Nothing about today's news changes our customer service, pricing, or support," the company said, noting that nearly 200,000 business locations run on Toast.

Why It Matters Here

The case lands as Los Angeles leaders are trying to make it cheaper to run a restaurant. Mayor Karen Bass this week ordered city departments to speed up outdoor dining permits and look for money for restaurant grants, as The Herald reported. For owners squeezed on rent and payroll, the fees built into the systems that ring up every check hit the same bottom line. The case is assigned to Judge Thomas S. Hixson, according to Law360's case docket.

Original reporting by The Los Angeles Herald, drawing on the Federal Trade Commission, the San Francisco City Attorney's Office, Toast Inc., QSR Web and Law360, as linked above.