Federal and state enforcers allege that Toast imposed hidden fees and made cancellation difficult. Toast disputes the claims. Here is what the pending case does—and does not—mean for California businesses reviewing their own software contracts.
A new enforcement action against a major restaurant-technology provider has drawn attention to a practical question for many California businesses: what do the fees, renewal terms, and cancellation provisions in a software subscription actually require?
What Happened?
On October 29, 2026, the Federal Trade Commission, the attorneys general of Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma, and Utah, and the People of the State of California, acting through the Los Angeles County Counsel and the San Francisco City Attorney, filed suit against Toast and affiliated entities in the U.S. District Court for the Northern District of California. 12
This is a government enforcement lawsuit, not a private class action. The FTC’s case page lists the matter as pending. A complaint reflects the agency’s “reason to believe” the law is being violated; the FTC notes that the case will be decided by the court. 12
What Does the Government Allege?
According to the FTC’s announcement, the complaint alleges four general categories of conduct: 2
- Inadequately disclosed fees and subscription add-ons allegedly charged without customers’ consent.
- A multi-step cancellation process that allegedly led some customers to incur continued charges.
- Customer-support promises, including “24/7/365 support,” that the complaint allegedly shows were not kept.
- Treatment of cancellation as a default on Toast Capital loans, allegedly requiring immediate payment of the outstanding balance.
The FTC says the complaint alleges, for example, that customers wishing to cancel were required to pay an undisclosed early termination fee of $150 per month for each remaining contract month. 2 It also says the complaint alleges that, from September 2021 through late July 2023, Toast added a $0.99 fee to certain online orders above $10. That allegation concerns historical conduct; the FTC describes the fee period as ending in 2023. [2]
These examples are allegations, not findings, and they do not mean every customer incurred the same charges. The FTC states that the complaint alleges violations of the FTC Act, the Restore Online Shoppers’ Confidence Act (ROSCA), and related state laws. 2
What Does Toast Say?
Toast says it strongly disagrees with the allegations and will vigorously defend against them. It also disputes that ROSCA, which it describes as addressing certain online subscription practices, applies to its negotiated business-to-business agreements with restaurant customers. Toast asserts that no court has so held; that is the company’s position, and whether ROSCA reaches these agreements is a question the court has not resolved. 34
Why Does This Matter for California Businesses?
Three distinctions are worth keeping in mind.
Consumer subscription rules are not automatically commercial-contract rules
California’s automatic-renewal provisions define “consumer” by reference to an individual who acquires goods or services for personal, family, or household purposes. 5 An ordinary restaurant software purchase should not be assumed to qualify.
Different statutes raise different questions
The government relies on the FTC Act and ROSCA, along with related state laws. 2 California’s unfair-competition and false-advertising statutes are distinct from its consumer automatic-renewal provisions, and falling outside one consumer statute does not necessarily eliminate every commercial remedy. Contract, misrepresentation, and other claims depend on their own elements.
A government lawsuit does not cancel your contract
Enforcement agencies have powers that private businesses do not. The filing of this case does not by itself terminate any customer’s agreement or establish an individual refund entitlement. A business’s options depend on its agreement, the representations it received, its billing history, the applicable law, and the claims actually available to it.
What Should Business Owners Review?
For any business software subscription, it may be useful to gather and review:
- Subscription duration, renewal dates, and notice requirements.
- Authorized add-ons compared with actual charges.
- Termination fees and cancellation procedures.
- Financing provisions tied to continued use of the software.
- Sales representations, signed agreements, invoices, and written cancellation records.
This lawsuit is not a reason to stop payment or disregard contractual notice requirements. Doing so without analysis may create separate breach risks. Our article on contract termination after breach explains how termination rights are generally evaluated.
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Questions About a Software Contract or Billing Dispute?
If your business is reviewing a commercial contract, disputed charges, or cancellation terms, our business litigation practice can help evaluate the agreement and your options.
Omeed Mahrouyan is the founder of Mahrouyan Law, P.C., a California firm handling business and commercial litigation, property and cargo damage claims, personal injury, landlord representation, startup transactions, and practical intellectual property matters. Clients work directly with him on strategy, drafting, and case decisions.
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