--- title: "Toast's free terminal now costs it $85 million a quarter, and the FTC wants the fee that pays for it" description: "The restaurant platform's $0 terminal cost it $85 million in gross loss last quarter while the FTC argues the fees that fund it are hidden. A new CFO inherits both the memory bill and the lawsuit in January." publisher: "The Inference" section: "Policy & Labor" published: 2026-11-05T18:14:47.013Z modified: 2026-11-05T18:14:47.013Z canonical: https://theinference.org/article/toast-s-free-terminal-now-costs-it-85-million-a-quarter-and-the-ftc-wants-the-fee-that-pays-for-it language: en keywords: "Toast, FTC, Payments, Regulation, Earnings" --- # Toast's free terminal now costs it $85 million a quarter, and the FTC wants the fee that pays for it > The restaurant platform's $0 terminal cost it $85 million in gross loss last quarter while the FTC argues the fees that fund it are hidden. A new CFO inherits both the memory bill and the lawsuit in January. [Toast](https://theinference.org/markets/companies/toast)'s free terminal is no longer free to Toast. In the third quarter of 2026 the company gave restaurants hardware and professional services that cost $130 million and billed only $45 million for them, an $85 million gross loss in a single quarter, the widest of the year [3]. The terminal on the counter is funded by the take rate: Toast keeps 104 basis points of the $61.8 billion of card volume flowing through its platform, [six basis points more than a year ago](https://finance.yahoo.com/markets/stocks/articles/toast-tost-said-q3-earnings-111402530.html) [2]. That fee line is exactly what [the FTC's lawsuit](https://theinference.org/article/ftc-and-eight-states-sue-toast-over-hidden-fees-taking-aim-at-a-6-billion-payments-machine), [filed October 29 in the Northern District of California](https://www.devprojournal.com/technology-trends/payment-processing/what-the-ftcs-toast-lawsuit-means-for-payments-isvs/) with seven states and two city attorneys, says is hidden: $0 hardware recovered through processing fees, a $150-a-month early termination charge and an $85 monthly fee for restaurants that close temporarily [4]. Nothing has been proven; Toast argues that ROSCA, a consumer statute, has never applied to negotiated business contracts [2]. ## The take rate must climb or Toast eats the memory bill So the question Toast's numbers force is narrow: does the take rate keep climbing to pay for hardware, or does Toast absorb the cost? Memory prices pushed it toward absorbing. Inventories ended September at $244 million against $114 million at year-end, a deliberate buy-ahead of chips, and [free cash flow conversion fell to 75% of adjusted EBITDA](https://www.businesswire.com/news/home/20261103632656/en/Toast-Announces-Third-Quarter-2026-Financial-Results), $181 million on $240 million, down from $153 million a year earlier [3]. Management named its tools on the call: older-generation hardware, cheaper memory, spot-market purchases [5]. *Chart: **Free cash flow is falling behind operating cash flow as the hardware bill grows** Line chart of Toast's operating cash flow and free cash flow by quarter from Q2 2024 to Q2 2026, with the gap between the two widening in 2026.* *Toast's quarterly operating cash flow and free cash flow, in millions of dollars, Q2 2024 through Q2 2026. Source: Toast quarterly figures from its SEC filings, retrieved 5 November 2026. [6]* *Chart: **Hardware cost ran at three times its revenue in Q3 2026** Column chart comparing hardware and professional services revenue against cost of revenue in Q3 2025 and Q3 2026, showing cost rising from 101 to 130 million dollars while revenue stayed flat, deepening the gross loss.* *Hardware and professional services revenue against cost of revenue, in millions of dollars. Source: Toast, third-quarter 2026 results. [3]* ## February's margin guide, not the beat, prices the terminal The arithmetic lands on 2027, and on the person who will sign the fee line last in December [2]. [Elena Gomez](https://theinference.org/markets/people/elena-gomez) leaves at year-end; Michael Senno takes over January 1 and has [promised only modest margin progression next year, with formal guidance in February](https://www.tradingkey.com/news/transcripts/262272635-) [2]. The suit constrains the first path, raising disclosed fees; the memory market constrains the second. Investors should treat the 2027 margin guide, not the quarter's beat, as the number that prices the free terminal [2]. ## Takeaway Toast's free terminal ran an $85 million quarterly gross loss while the FTC challenges the fees that fund it; with the suit constraining fee increases and memory costs constraining savings, the February 2027 margin guide is the number that prices the strategy. ## Sources 2. [MarketBeat via Yahoo Finance, What Toast (TOST) Said on Its Q3 Earnings Call, 4 November 2026](https://finance.yahoo.com/markets/stocks/articles/toast-tost-said-q3-earnings-111402530.html) 3. [Business Wire, Toast Announces Third Quarter 2026 Financial Results, 3 November 2026](https://www.businesswire.com/news/home/20261103632656/en/Toast-Announces-Third-Quarter-2026-Financial-Results) 4. [DevPro Journal, What the FTC's Toast lawsuit means for payments ISVs, 5 November 2026](https://www.devprojournal.com/technology-trends/payment-processing/what-the-ftcs-toast-lawsuit-means-for-payments-isvs/) 5. [TradingKey, Toast (TOST) Q3 2026 Earnings Call transcript, 4 November 2026](https://www.tradingkey.com/news/transcripts/262272635-) 6. [Toast, quarterly figures from its SEC filings, retrieved 5 November 2026](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001650164) --- Toast's free terminal now costs it $85 million a quarter, and the FTC wants the fee that pays for it — The Inference. Canonical: https://theinference.org/article/toast-s-free-terminal-now-costs-it-85-million-a-quarter-and-the-ftc-wants-the-fee-that-pays-for-it