Well, that was quick — less than a month after sharing that it would add a $0.99 fee for consumers on online orders of $10 or more, restaurant point of sale (POS) provider Toast is walking it back.
The company announced Wednesday (July 19) that it will remove this fee (which was paid to Toast, not to restaurants) by the end of the week. In a statement, Toast CEO Chris Comparato noted that the move followed “extensive discussions” with the platform’s restaurant customers.
“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.”
In a recent feature following the initial announcement of this fee, PYMNTS’ Karen Webster observed “two of the most egregious cardinal sins of platform dynamics” in Toast’s decision to implement charge fee.
“First, failing to recognize who [Toast’s] customer is and who really pays its bills — and going to great lengths not to tick them off,” Webster explained. “And second, creating a situation that could rev up platform dynamics in reverse — which can happen very quickly. Once the customers on the side of the platform who pay the bills lose trust, they look for alternatives. The names for this — doom loop and death spiral — say it all.”
Indeed, restaurants are already facing enough pressure from the current macroeconomic environment, with rising food costs forcing them to raise menu prices and in turn alienating consumers.
Research from PYMNTS’ study last December, “The 2022 Restaurant Digital Divide: Restaurant Customers React To Rising Costs, Declining Service,” which drew from a survey of more than 2,300 U.S. restaurant customers, revealed that roughly a third of consumers have been making purchases from restaurants less frequently amid inflation, and more than 80% changed their restaurant spending behavior in some way in response to rising prices.
Plus, costs added on top of the base menu prices exacerbate these belt-tightening behaviors. Take, for instance, tipping. PYMNTS’ study “Connected Dining: Inflationary Pressure Squeezes Restaurant Tips,” for which we surveyed more than 2,200 U.S. consumers, found that nearly one in three consumers says the expectation to leave a tip makes them eat at home more frequently instead of dining at a restaurant.
With restaurants already so concerned about losing their customers, they certainly are not chomping at the bit to add a new fee — from which they do not profit at all — to diners’ checks.
“When Toast decided to get in the middle of the restaurant/customer relationship without their permission — and worse, decided to impose a surcharge directly to the restaurant’s customer without their permission, it also shifted any potential consumer backlash about that fee to the restaurant,” Webster stated.
Given how quickly Toast reversed course on this decision, it seems unlikely that any other POS provider will be making the same mistake any time soon.
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