Toast Tests a New Online Customer Fee, But Will It Stick?

Toast Inc., provider of popular payment and business-management systems for restaurants, is testing a 99-cent fee for online orders of $10 and above that the company could roll out nationwide next month. The test is generating criticism from restaurateurs on social media and debate in the merchant-acquiring industry about pricing for eateries.

According to reports in The Boston Globe and Nation’s Restaurant News, Boston-based Toast is testing the consumer-facing surcharge with an unspecified but small number of restaurants. It could be imposed nationally July 10, the reports say.

The press reports further say that customers of Toast restaurants don’t see the surcharge unless they click to expand the “Taxes and Fees” line in their online order forms.

In an email to Digital Transactions News, a Toast spokesperson says the 99-cent add-on is a “fee,” not a “surcharge,” that will “help fund ongoing innovation in restaurant technology.”

“This change helps fund product investments…and continued innovation in support of helping restaurants maintain the direct relationship with their guests,” the spokesperson says. Investments are being directed toward improvements in the Toast TakeOutApp and integrations with Order with Google, the spokesperson notes.

Test restaurants implementing the new fee earlier this year saw a 13% average increase in the percentage of approximately 450 customers placing orders via Toast Online Ordering, the spokesperson says.

Toast was serving 79,000 restaurant locations at the end of 2022 and processed more than $92 billion in gross payment volume over the year, according to the company’s latest annual report. The spokesperson didn’t respond to a question about what percentage of its orders is online. Toast’s major rivals in the restaurant payments space include NCR, Square, Fiserv Inc.’s Clover, Lightspeed, and TouchBistro.

Any price increase from suppliers comes under fire from merchants, however, so whether Toast’s surcharge will have staying power is unclear. Inflation currently is running at about 4%, down from a year ago but still well above the Federal Reserve’s target of about 2%. Not surprisingly, the test has triggered blowback in social media and online forums, according to the press reports.

Sheridan Trent, director of market intelligence at Omaha-based merchant-acquiring consultancy TSG, tells Digital Transactions News that overall pricing for restaurant payments is “trending up a bit right now,” although she does not have numbers. Toast will need to assess whether the revenue benefits of the new fee outweigh the possible negative reactions of merchants when they notice it, she says. History may be on the company’s side.

“They have a reputation of having reasonable pricing for merchants,” Trent says. “Even with this fee, they probably still are competitive on pricing.”

In addition, Trent notes that switching to a competitor could be difficult for many Toast merchants because their software systems for managing their operations are integrated with payments, making a switchover a potentially complex operation. “It’s a tricky area,” she says.