Toast Lawsuit Tests Franchisees Locked Into Mandated Tech

Toast's restaurant customers pay around $900 a month on average for its point-of-sale subscriptions, according to a lawsuit filed Oct. 29. A lot of franchisees pay it because their franchise agreement says they have to.

The Federal Trade Commission, the attorneys general of Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma and Utah, and the Los Angeles County Counsel and San Francisco City Attorney sued Toast in federal court in Northern California. The complaint alleges Toast enrolled restaurants in paid add-ons without consent, buried fees behind a "Pay-as-you-Go" plan advertised at $0 a month for hardware and software, and made cancellation hard enough that customers kept paying, according to the Illinois attorney general's announcement. One customer was charged a $5,318.87 early termination fee after canceling following four years.

The complaint also takes aim at Toast Capital loans. Canceling a subscription or switching providers is treated as a default that makes the full loan balance due at once, according to the San Francisco City Attorney. The allegations have not been proven in court, and the FTC's commissioners authorized the complaint by a 2-0 vote, QSR Web reported.

Toast says it will fight. "The FTC disregarded the information we provided showing the extent to which our restaurant customers negotiate their contracts," the company told investors, as quoted by Franchise Herald.

That defense lands differently in franchising. Franchise Herald found disclosure documents for brands including Chop5 Salad Kitchen, Fat Shack, Dog Haus, Better Blend and Beef 'O' Brady's that name Toast as the required POS provider for the term of the franchise agreement. A franchisee in that position signs directly with the vendor, usually on standard terms, and cannot switch without breaching the franchise agreement. The bargaining power sits with the brand that picked the vendor, not the operator paying the bill. Items 8 and 11 of the franchise disclosure document are where those obligations live.

Toast is not the only vendor courting franchise counters; Block's Square launched a voice-enabled kiosk pitched at QSR systems last month. As franchisors start mandating newer software, including AI agents that answer phones and work leads, the same three questions apply: who signs the contract, what it costs to leave, and where the customer data ends up. We asked a version of that last question about AI lead agents in October.

Revscale, which publishes this site, builds AI agents that franchise and multi-location businesses configure in plain language for work like answering inbound leads and calls. Its CRM records every lead and conversation, and it is built to pass that activity into the CRM and tools a business already uses rather than to become the end of the line. Whichever vendor a brand chooses, data that flows into systems the brand and its operators already control is easier to keep when a contract ends.

Franchise Herald expects the case to take years, not months. Franchisees on current Toast contracts will be rereading their disclosure documents long before a judge rules.

Revscale Media is published by Revscale.