Congressional leaders will be demanding answers from a powerful Big Tech titan that is subjecting millions of American diners to surprising new fees — without the consent or control of the restaurant owners who are providing the food service.
The federal reaction comes after a FOX Business exclusive report on Tuesday about the outrage caused by a new fee imposed by Boston-based vendor Toast Inc.
“We are going full steam ahead with investigating the propriety of their way of doing business,” Rep. Mark Alford, R-Missouri, told FOX Business this week.
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Restaurateurs who rely on Toast for point-of-sale services have reported they are losing business as a result of new fees tacked onto customers’ bills. They call the tech company’s apparently unprecedented fees on customers “medieval” and even “unethical.”
“People are incredibly angry and feel incredibly betrayed,” restaurateur Elizabeth Van Wie, whose family owns Zookz Sandwiches in Phoenix, Arizona, told FOX Business.
Alford, a member of the House Committee on Small Business, brought his concerns to colleagues, including committee chair Roger Williams, R-Texas, after speaking with both constituent restaurateur Matt Wilhelmson and FOX Business this past Monday.
Toast is a cloud-based third-party point-of-sale vendor used by more than 85,000 restaurants.
It is exploiting its access to point-of-sale systems to force fees upon customers without the business owners’ consent, then taking the money for itself, Toast clients allege.
“My contention is that it’s absolutely unethical and illegal. And if it’s not illegal, it should be,” said Wilhelmson, who owns Koehn Bakery in Butler, Missouri.
House members “want to get some answers as to what’s going on and how Toast operates,” said Alford, adding that the committee is drafting a letter for the vendor expressing its concerns and requesting responses.
“This is a story that impacts every American,” Alford also said.
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Van Wie of Phoenix, a longtime Toast customer, said the vendor has been unresponsive to her concerns and outrage.
“It’s like we’re living in a medieval feudal system where Toast can just impose things on us at will. I feel like a complete serf, like I’m being dismissed, like I’m just told what do to and that I just better shut up and take it.”
Toast began unilaterally adding a 99-cent “processing fee” to online orders of $10 or more in various locations around the country earlier this year.
It rolled out the plan nationally on Monday.
The fee is being charged to consumers — not to the restaurants that are paying Toast for its services.
Toast is then lifting the fee for itself, its clients say — paid for by diners who, in most cases, never heard of Toast.
“Toast did us dirty,” fumed one Toast customer on the company’s own client forum.
The 99-cent fee appears as a line item on a diner’s bill, added remotely by Toast. In states with a meals tax, consumers pay taxes on the fee.
Restaurants must report the added charge as income — even though they say the money is being lifted out of their bank accounts by Toast.
Operators allege that the fee is especially harmful to small businesses that rely on high-volume small orders.
The 99-cent fee appears to represent a 10% penalty on the consumer for ordering online a $10 sandwich or pizza.
Eric Stockmann, owner of Giuseppe’s Lunch and Catering in Fenton, Missouri, said he’s lost 70% of his online orders since Toast began slapping his customers with the extra cost in June.
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“We’ve spent a long time encouraging our customers to order online. It’s more efficient in every way,” Stockmann told FOX Business.
“And now it appears to the customer like we’re penalizing them for ordering online.”
The fee is levied even on orders placed through a restaurant’s own website, as well as through third-party Toast partners such as Uber or GrubHub.
The penalty charged to customers comes in addition to the contractual fee that restaurateurs pay Toast to process online orders, as well as the percentage fee restaurants pay for every credit card transaction processed by the vendor.
The receipt includes a note at the end, added without input from the shop owner: “The Order Processing Fee is set by Toast to help provide affordable digital ordering services for local restaurants.”
“’Order Processing Fee’ is a bogus, unethical and a very bad business practice on the part of Toast,” wrote one restaurant client in a post on the vendor’s community forum.
“How can you punish a customer for ordering from us?? And you are doing it in our name!”
Consumers are blaming eateries for the new charge — feedback that, in turn, is forcing restaurateurs to do damage control as they attempt to please longtime customers or win over new guests with online promotions.
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“The fee is buried in taxes and other costs. The customer doesn’t even see it until they come to the restaurant. It looks super shady,” said Van Wie, the Phoenix sandwich shop owner.
“Toast has clearly demonstrated that they’re not interested in partnering with us, that they don’t care if we lose the customers we already have.”
She said restaurateurs around the nation are meeting online to consider a “mass exodus” from Toast.
But business owners say switching point-of-sale vendors represents a significant investment of time and money and can be especially burdensome on small operators.
Toast began testing its new 99-cent fee on restaurant customers in various locations around the country after partnering with Google in February.
“We are thrilled to collaborate with Google to help Toast customers maximize their online presence and take control of their ordering channels,” Aman Narang, COO and co-founder of Toast, said in a statement at the time.
Toast rolled out the feature nationwide on Monday. In promotional materials sent to its client restaurateurs, it said the new “Order with Google” feature was a “free integration.”
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Toast now says the new fees on customers are for the good of all involved, adding that it’s using the money to fund its own research and development.
“To help fund ongoing innovation in restaurant technology, we are updating our pricing model to add a nominal $0.99 fee (this is not a surcharge) paid by guests on orders $10 and over on Toast online ordering channels,” Toast said in a statement this week provided to FOX Business.
“This change helps fund product investments, such as those highlighted above, and continued innovation in support of helping restaurants maintain the direct relationship with their guests.”
Toast, a publicly traded company (TOST), suffered a net loss of $275 million in 2022, according to its SEC filings. It is on pace to fare worse in 2023, with an $81-million loss in the first quarter.
However, Toast’s stock price has surged 30% since February 28.
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FOX Business has made several efforts to seek additional comment from Toast.
“The politest way I can put this is that it’s a back-door way to steal from restaurants,” said restaurateur Trent Patterson of Five12 Restaurant Concepts in Houston, Texas.