It’s insidious, nearly invisible, and hiding in The Cloud. A behind-the-scenes payment processing company tried charging customers an upfront ‘processing fee’ when they ordered via the app or online. Now, they’ve cancelled the fee, after massive push-back…
A typical reciept for an order processed by Toast: The Processing Fee was added
remotely, by point-of-sale vendor Toast Inc., without the retailer’s consent.
It’s out there, lurking in the shadows of the foodservice delivery industry. It performs the financial processing of payments for electronic orders. And it recently got unwanted attention because customers and the restos they order from were furious.
Customers were getting stuck with an additional (US)$0.99 ‘processing fee’ on their bills. And the restos they order from were being bombarded by customer complaints.
What it is
According to Wikipedia, “Toast Inc. is an American cloud-based restaurant management software company based in Boston, Massachusetts. The company provides an all-in-one point of sale (POS) system built on the Android operating system” But it’s much more than that.
But Toast describes itself thus: “Toast empowers over 99,000 restaurants nationwide to do just that. The only all-in-one platform built exclusively for restaurants, we’re on a mission to enrich the food experience for all. Toast connects employees, operations, and guests on a reliable, easy-to-use platform so restaurateurs can stay one step ahead of a rapidly evolving hospitality market.”
Well, all that did for me was to muddy the waters. Not very transparent at all. But if you read between the lines of Toast’s declaration, you realize that its much more than a financial service.
What they’re doing
They claim they not only enable the transfer of money from customer to seller, but collect and analyse the huge amounts of data generated when folks order via app. Or even via restos’ websites. That last note has the resto people particularly upset. Hence the blurry language in their mission statement. Nobody likes to be spied on. But no online platform that has users (i.e.- all of them) fails to gather and analyse – and sell – the data their users activities’ generate. That’s where the real money is for social media platforms such as Facebook, X (Twitter), and their ilk.
The payment processing game
Here’s the burr that’s got under users’ and resto operators’ saddles…
While other payment processing organizations such as Interac and Pay Pal also take a fee for their services, it’s billed to the sellers as a percentage of the bill amount. It’s usually between 2 and 4 percent. Some Resto operators try to build that cost into their prices. But consumers end up footing that bill through higher menu prices. Others add a separate ‘pay by credit surcharge’ to customers’ bills to offset the processing charge they pay. And that’s on top of the interest charged by the credit issuer when the consumer pays by VISA, MasterCard, AmEx or other credit cards.
Toast charges an upfront fee to users for ‘hardware and implementation’, plus a ‘software subscription’ fee. The latter is $220. per month in Canada, for the ‘recommended’ suite of services – just to have the system in place. And, yes, Toast also charges its own percentage fee to retailers on every transaction.
Is Toast in financial trouble?
It’s hard to say.
On one hand, Toast Inc. reported that, in Q3 2023: “Revenue grew 37 percent year-over year to $1,032 million. Gross profit of $226 million was up 50 percent year-over-year. […] Gross profit grew 49 percent year-over year to $244 million.” However… “Net loss was $(31) million in Q3 2023 compared to net loss of $(98) million in Q3 2022.”
Whatever that really means. I guess it’s good news that that the gross profit shot up an amazing 50 percent. But it seems Toast is spending more than it brings in, since it claims a net loss.
Accountants can make the numbers appear to say anything they want them to say. But we live in what has been called the Age of Greed. Could that be the motivation behind the new, unilateral buck-a-payment charge? Toast responded to inquiries with hazy gobbledygook, suggesting the fee was needed to ‘make its service better’ and unlock innovation’. Empty rhetoric.
A hasty retreat
“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,” Toast CEO Chris 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.”
I wonder how charging consumers a buck a transaction ‘keeps costs low’? That’s sheer and utter nonsense! Do the Toast brain trust actually expect anyone to buy that sort of candy floss rhetoric?
What he’s really saying is, Toast didn’t like all the negative attention the fee was generating. Various news channels reported large number of resto owners using the Toast system were threatening to moved to another payment processor. Nor did Toast want to be hauled before the courts or a Congressional Committee to explain itself, as many restaurateurs and at least one House Rep threatened.
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 was already making plans to investigate the fee.
My take
Shame, Toast! You’ve learned a hard lesson. Now, take a long hard look at your operation. If you can’t do business profitably, just call it a day…
~ Maggie J.