Now on the menu at Toast: A new 99 cent fee
boston.com
boston.com
Most customers will not notice and just pay this hidden fee, but that doesn’t make the practice palatable. There have to be other ways for Toast to achieve profitability.
I’m fairly okay with calling this an acceptable trade for having (by modern standards) very independent and well-funded local governments, but I still feel I should point out this’d be more or less impossible in most of the first world.
But a physical store - everything is the same price no matter who buys it. Paper towels are never cheaper or more expensive at the grocery store unless the paper towels themselves change price.
And it's not like receipts don't already divide things up - unprepared food (in MA) is untaxed, but prepared food and some other things are so grocery store receipts already divide food up into categories and indicate where the taxed items are.
If I remember I’m generally paying 20% VAT on my purchases and suddenly I’m seeing $3 of “tax and fees” on my $10 pre-VAT bill, I’ll probably know somebody’s doing something funny. If a store receipt (online or offline) is furthermore legally required to put the pre-VAT price, VAT rate, and post-VAT price for each item separately, there’s no way to sneak in a sudden $1 fee except for putting an item for SUDDEN FEE: $1 somewhere in the list. Presumably such an item would have annoyed quite a few people more quickly and efficiently than the current situation where they need to read about it in the Boston Globe, which might have made the vendor more reluctant to impose the fee to begin with.
Again, I’m not saying this situation doesn’t have its own merits, just pointing out that it only exists because there’s an opaque “tax and fees” item to sneak things into to begin with.
Different products in supermarkets also have different tax rates, most "good" food will have a 7% tax rate while it's 19% for everything else (with many exceptions).
But the pre-tax price is only shown in fine-print, you as the consumer don't need care what taxes are now on the product while shopping.
(Assuming it's a physical store frequented by consumers) every price label on every shelf shows the price including VAT.
Your EU/GB store's receipt will indeed break out the subtotal net of all VAT, the subtotal amount of VAT charged (shown broken down by different rates if that's applicable), and of course the overall total.
Note that 99.9% of EU consumers only care about the price of an item including taxes, so those prices are what consumer shops display, and are the only numbers consumers look at.
It'll depend on what they're buying. When I go to my local bar with friends and am cashing out my tab? Yeah, not noticing that. Eating dinner? Also not noticing.
Buying a $3 coffee? You bet I'm noticing an extra dollar.
My Toast purchases are pretty bimodal. Most of them are either $100+ or less than $20. Sans hyperbole, my point was that I'll notice in one mode but not the other.
Wolt charges money from the restaurants on all orders, so a 11€ sandwich from Subway becomes 12.10€ when ordered through Wolt, then they charge you 4.99€ for delivery and then charge you 0.80€ for a "service fee". So a 11€ sandwich becomes 17.89€ with delivery and fees.
Just state one number on the menu for each item and charge exactly that number. I'm more likely to buy something that says "$12" than "$10+taxes" because it's deterministic and not some vague probability distribution in my head of how much "taxes" is.
I am fortunate to live in a country where the price that's advertised is the price I pay, but every time I visit the United States I am amazed that people are OK with buying something without it being clear in advance how much it costs. And let's not even start about your demented health care pricing.
Apparently Ticketmaster is gonna be dropping them now. Of course, I'm too cynical to actually BELIEVE that but at least it's in the public discourse now all the way up to the PRESIDENT.
Will anything actually change? Well, I hate to be cynical but I am...
I have no idea, but from an outsider’s perspective, it is starting to get silly hearing about so many companies incorporating shitty manipulative pricing schemes in poor attempts at profitability. It just seems unsustainable.
Typical SV startups have a dozen or two engineering teams, each with multiple people. I have no idea what they’re all doing, but it probably involves lots of rewrites
Why, and when things get bad, we don't want them to have to sell off their hard earned vaca mansions? Where will their dogs live then? In one of their living homes? No, they get bailed out whenever things get bad, then the economy won't crash aka they don't have to change any behaviors at all.
With these nasty Chinese raising their prices, and gross truckers asking so much money, everything is getting more expensive for them. How will they buy their 3rd 10,000 acre ranch in Wyoming with that kind of price increase? The good for nothing customers should pay instead!
The desperation will continue as long as money continues to get and stays more expensive than the last decade and a half.
In an established market, you’re always going to lose 80% of deals to people who have more funding. This is hard for your frontline employees to deal with, they experience it as unwillingness from cowardly management that they are paying for. Customers experience this as lower pricing, being more stable, more likely to do giveaways.
P. much every company from that era is in private equity receivership (fire the engineers, get lowest common denominator replacements for all employees, run it till customers give up)
I always thought Toast had held up because they had investment but didn’t light it on fire like other places, and thus were profitable.
Very jarring to read this isn’t tractable. The lesson is if you’re a sharp generalist, you’re always better off doing your own place and being brutally honest with customers about what the other game is. It’ll take a decade to play out fully to your benefit, but, independence is worth it
The entire point of taking a VC check is to run your business at a loss while you grow. The idea is to jump quickly from $0 to millions in revenue instead of having that journey take years. So you hire good people, pay them well, spend on marketing (in some businesses) and take on customers at terms that are break even just to have customers at all.
You learn if you have product market fit but you may not learn if your prices actually sustain your business. And then you can either raise prices (hard) or fire people (hard) to get to profitability . Or just raise more VC money and “make it up on volume”
To me it seems like so many companies start like this, but fail to get past the profitability stage. I guess my question is, are these companies going about this the wrong way? Maybe starting with a big surge of funding to get off the ground is giving false hope to products or corporate strategies that just aren't sustainable. I'm wondering if starting small and letting things grow organically, slowly, is more effective overall in terms of success for businesses. I have no idea though.
What are some examples of companies that grew rapidly with VC funding and eventually became successful, profitable businesses? Netflix, maybe -- anyone know others? (I'm showing my ignorance here, I'm sure there are many obvious ones!)
Compare that to Netflix, which is a business that was able to start small and scale with time. It also had huge first mover advantages as most other profitable software businesses do. Network effects are extremely powerful, and benefit first movers. Uber has spent years trying to cultivate network effects, but the service it provides exists in the real world, with real people and real problems.
I would argue Reddit can be profitable if it knew how to properly scale and innovate with advertising (particularly via search, which is where Google makes its money). There's no real reason Reddit can't be profitable if Instagram, Google, and YouTube are profitable. As for real world software apps, it's a lot more difficult.
Beside the obvious risk of running a company (competition, incompetence etc.) There is excessive regulation, taxes, paperwork etc. I estimate that cumulatively most of us pay around 3/4 of our earnings to regulation, taxes and other forms of bureaucracy.
As a ongoing example I've heard that businesses are leaving California and New York in droves to place with less regulation.
Companies should be forced to honor the lowest advertised price for a good. If they are caught not doing so, they should have to refund the money, in cash, up to a 10-20 year statute of limitations, with interest, and with the highest priority in any bankruptcy proceedings. Executives with a report that signed off on the pricing scheme should be subject to wage/stock clawback.
“Lowest advertised price” needs to have a simple definition. I propose the following:
The courts take a price list or other piece of marketing material produced by the vendor, removing all information that is rendered at less than 90% the size of the actual price. They then apply any mandatory sales tax that is paid directly to the government. The minimum result of doing this with any publication the vendor produced within the prior six months is the price the vendor must honor. Sale dates and other promotion terms must be under 25 words and the same size as the price.
This would ban a few common practices that are problematic:
- Cell phone companies advertise low prices per line, then produce contracts at 3-4x that amount. Actual monthly bills have an additional 10% markup.
- City politicians mandate an after-you-have-eaten “living wage surcharge” be added to restaurant bills, instead of having the price of labor be included in the menu prices.
- The state tax for take out items at restaurants in California is lower / nonexistent, depending on the item. However, the state tax collectors intentionally overestimate the fraction of diners that eat at restaurants (with high variance), then charge restaurants for the difference between reported tax and estimated tax, with a presumption of guilt. Therefore, most restaurants just always overcharge customers tax, then pay the balance to the state, in what is effectively a protection racket.
Cost of Goods Sold (COGS): $2,227 million Non-production costs: $884 million R&D: $280 million
Non-production and R&D costs don't seem excessive. Toast, Inc make a good product widely used and yet cannot make a profit after ten years, and are unwilling to raise the price of their actual product (hardware) to cover costs.
Their big competitor is Square who also lost $540m last year.
If ZIRP-era tech funding across the industry pushed down restaurant equipment prices such that it's not profitable for Square and Toast, have VCs been indirectly subsidising my dinner?
Sure. And your "cab" rides and your co-working space and... Just like they did during dot-com. Just different categories of products.
For NCR, a 'boring legacy' POS manufacturer that number is 6%, but they have a bunch of older existing products (founded in 1884!)
Otherwise, you will be replaced with somebody who will.
As it was in the beginning, and shall be always, world without end. Amen.
Normal businesses provide other businesses a service, charge them a profitable fee for services rendered, and make a few tens to hundreds of millions in profit a year and keep shareholders, employees, customers, etc. happy.
VC funded scam businesses spend billions of dollars in VC funding selling their services at a loss for the single purpose of establishing themselves as a monopsony/monopoly, and then once they've established enough dominance, and destroyed the possibility of a competitive market through VC funding, they turn on the screws and start charging monopoly prices.
Basically, they succeeded in using the "tech startup" and/or "unicorn" branding to somehow bamboozle governments and citizens into believing their entirely monopolistic, anti-free market behavior was not monopolistic and anti-free market.
Oh, and I still don't understand why we aren't recognizing the massive contribution this is playing in inflation. I buy a sandwich today from my local sandwich shop and I get the exact same service I did 15 years ago, except now anywhere between 15-45% of the money goes to some other company not integrated in the local economy whose only purpose is to provide a pretty interface and/or steal my data.
Further, and I'm not necessarily against this part but it's also contributing to tip inflation in a big way. Now everywhere I go has that Toast tip %age screen when I buy something no matter how much or how little actual service was provided. Like most people I feel social obligation to click the button. And voila, now tips are expected for buying a pack of gum at the corner store. At least that money is presumably going to the workers and not the tech bros behind the scenes.
They are either entirely extinct or critically endangered as financialization is rapidly consuming literally every human interaction.
https://www.theguardian.com/commentisfree/2023/mar/11/users-...
Haha, nah man. That ain’t it.
Sorry for the tone of my reply but - no. People use toast because it’s convenient and no humans are involved.
Slowly picking what you want on a website and seeing all your options without having to quiz an employee for a bunch of time on the phone is the convenience. Knowing exactly what you want and saying it aloud is not an inconvenience.
I book through a screen when I can, at my own speed. It's nicer.
However, ordering pickup food online is an amazing service now. I picked up this habit quite recently, when I realized that Google Maps makes it super easy. They present your choices between GrubHub, or the restaurant's own website, or other services. So what I do is get on the bus, then when I'm about 20 minutes away, I'll just open up my phone and order ahead. Credit card payments are no problem; I often use PayPal with GrubHub, or Google Pay.
Calling in an order on the bus would be unthinkable, since I would not be reciting my credit card details by voice in a public space. But online ordering makes it a piece of cake.
This Toast fee may be affecting me soon; I recently started patronizing a coffeehouse that uses Toast, and ordering ahead seemed like a really good idea. We'll see.
Sounds like that's not yet going to see this fee. Could you imagine what a pain it would be to have a fee like this & have staff around to take the flak for it?
These mechanized economic processes allow companies to put humans at their complete mercy, in a way where no real response is possible. Far off technological control.
Use VC money to make product, use VC money to allow to sell product cheap. Gain clients. Product is "sticky". Seek rents.
I see, for example, a declared price of $11.29 for a meal and pay.
This is however not what is charged.
There is a 11% tax. Add $1.24.
There is 18% tip. Add $2.03.
There is a 99 cent fee.
A day later I get a text that I am charged $15.55 (shrug).
Disclaimer: I am from Europe.