By Joe Guzkowski, Restaurant Business
Toast is removing its controversial 99-cent online order processing fee just days after it was implemented nationwide.
In a statement Wednesday, Toast CEO Chris Comparato said the change came after discussions with operators, many of whom have lashed out over the fee. It was applied to customers who placed online orders of $10 or more and intended to help fund software improvements.
“While we had the best of intentions—to keep costs low for our customers—that is not how the change was perceived by some of you,” Comparato said. “We made the wrong decision and following a careful review, including the additional feedback we received, the fee will be removed from our Toast digital ordering channels.”
The large POS provider has faced mounting criticism over the fee since it was made public earlier this month. Restaurants were upset that Toast was charging their own customers for its software without offering restaurants the option to waive or offset the fee. Others did not like that Toast was essentially raising their prices for them.
Some said they were considering ditching Toast for another vendor, while others praised Toast’s technology but complained about the fee.
U.S. Rep. Mark Alford, R-Mo., a member of the House Committee on Small Business, told Fox Business News last week that the committee planned to investigate the fee.
While Comparato acknowledged that the fee was not the right way to go about generating revenue, he reiterated that “innovation requires investment” and hinted that price hikes could be coming.
“Like any business, as we add new capabilities to our existing product suite, we will adjust pricing thoughtfully to help fund product investments and unlock innovation that delivers value to help you thrive,” he said.
The order processing fee will be gone by the end of the week. But it had already started disappearing Tuesday afternoon, taking some restaurants by surprise. Christian Anderson, owner of Chop Shop Casual Urban Eatery in Colorado, was informed by a Restaurant Business editor that the fee was no longer appearing on his restaurant’s online checkout page.
“This looks different than it did a few days ago,” Anderson said over the phone. He later confirmed that the fee was gone.
At Bagels By Jarrett in West Orange, N.J., the fee was also not there on Tuesday afternoon. Owner Jarrett Seltzer said he spoke with his Toast rep and got the impression that the removal was permanent.
The restaurant, which does all of its business online, had been offering customers a discount code to offset the 99-cent fee.
Boston-based Toast works with about 85,000 restaurants and generated revenue of more than $2.7 billion last year. But the publicly traded company has struggled to turn a profit, posting a net loss of $252 million last year and $81 million in the first quarter of 2023 alone.
In an SEC filing Wednesday, the company said it did not expect dropping the fee to impact its guidance for the second quarter or for the fiscal year. Nonetheless, its stock price was down nearly 12% early Wednesday.
I think this innovation was not entirely fair to all restaurants in the country. Here I agree with those people who began to resent this. I would also not understand why a restaurant should raise prices on its menu, just to cover the costs of this fee. Everything was fine and everything worked fine, but this company wanted to make even more money, actually. But not all people are willing to waste their money without even realizing on what. Now when prices in restaurants are inflated, and in general, food prices, it was clear and expected that this innovation would be met with a negative.