From Rollout to Recall: Toast's 99-cent Online Order Fee Unpacked

October 01, 2024

Would you completely reinvent your online ordering for 99 cents?

Based on recent moves from Toast, that’s the industry question of the hour.

The Boston-based POS platform has sent ripples through the industry with its nationwide launch — and subsequent removal — of a new 99-cent online order fee.

Here’s what you need to know about the 99-cent fee rollout (and rollback).

The 99-Cent Announcement

In June 2023, Toast announced a new 99-cent fee for all online orders over $10. Toast tested out the surcharge with a small number of restaurants earlier this year, slowly rolling out the fee to users across the country.

The 99-cent fee took nationwide effect on July 10th and is mandatory for all Toast users with no opt out. The fee also can’t be paid for by the restaurant — despite restaurateurs like Kathi Turner saying they’d be “happy to pay” for their customers — and is taxable in some states.

Toast users have also brought up the inconspicuous placement of the new fee. Added to the “Taxes & Fees” line item – which is a combination of charges and costs – the 99-cent fee is only visible to customers when (or rather, if) they expand the POS window for more information.

The Industry Response

Like most unexpected news about pricing, the 99-cent announcement generated different reactions from different crowds.

Restaurant owners reacted with customer-centric fervor, calling the implementation of a new fee “unfathomable” and “unorthodox,” saying it’ll drive a wedge between them and their customers. Voices from the business side, however, consider the fee a smart move. Praveen Kopalle, a Dartmouth pricing strategy professor, told the Boston Globe that “drip fees work” to increase revenue and head toward profitability (but also notes that fees aren’t great for brand loyalty).

The Biden administration’s crackdown on “junk fees” has also found its way into the conversation, with people drawing parallels between Toast’s surcharge and the hidden nuisance fees the President is working to remove. Restaurants aren’t part of the conversation just yet, but who’s to say what the future of the Junk Fee Protection Act holds?

Toast’s Response & Fee Removal

Breaking the wave of shock and criticism from its users, Toast offered a number of explanations and reasons to support the new charge, including:

Funding product investments and innovation.
Helping maintain low digital ordering costs.
Protecting restaurants from “third-party” commission fees.

These justifications, no matter how airtight, just weren’t enough to get everyone on board… and Toast received the message loud and clear.

On July 19, Toast CEO Chris Comparato released an updated statement about the 99-cent fee. Comparato’s statement acknowledged that “[Toast] made the wrong decision,” letting users know the fee would be removed from the ordering suite by July 21.

So, What Now?

With the rollercoaster of emotions Toast users have had over the past few weeks, it’s no surprise that some restaurants are exploring options for no-fee POS systems and online orders.

Regardless of your personal feelings about Toast’s surcharge experiment, there are alternative options for restaurateurs to consider.

Stick with your current POS and ordering platform. No change, no harm, no foul. This is a good low-effort option, but it means you’ll be subject to whatever price adjustments your platform implements going forward alongside the other ordering platform fees you pay.
Keep your POS, but try a new ordering platform. Keep your tried-and-true POS system while seeing if a new ordering platform can upgrade your capabilities or lower your costs. Craver helps you save on platform expenses because they don’t do set-up fees, long-term contracts, commissions, or hidden fees…ever. Plus, they integrate seamlessly with Toast POS systems.
Try a brand new POS and ordering platform. Sometimes you can reinvent the wheel. See if something different suits you and your customers best by trying a completely new POS system and platform combination (but make sure to look at the fees!).

Wrap Up

With the nationwide launch (and subsequent removal) of Toast’s digital surcharge, industry chatter has opened up a whole new line of questioning about the value of 99 cents.

Whether you’re a business-forward person looking at profitability or a restaurateur on customer defence…is 99 cents enough to drive customers and clients away?

If Toast’s surcharge rollback has taught us anything, it’s that the answer might be yes.