FIT EASY Inc.

The Company employs a policy of leveraging franchise (FC) member stores as independent operating entities to accelerate nationwide expansion with limited investment capital. However, there is a risk that if an FC member store fails to provide services in accordance with the Company's guidance, or violates laws and regulations such as the Personal Information Protection Act, this could damage the value of the Fit Easy brand. Although the Company has established selection criteria and contract termination standards for FC member stores and conducts compliance training, complete control is difficult to achieve because they are independent operating entities.

Fitness club operations have a revenue structure with a large fixed cost burden, including labor costs and rent. There is a risk that if membership numbers fall short of plan following a new store opening due to changes in the competitive environment, or if rent increases upon renewal of a lease agreement, this could impede revenue generation and recovery of initial investment funds. The Company conducts thorough location surveys and seeks to convert labor costs into variable costs by staffing stores solely with part-time workers, but the fundamental risk inherent in the fixed cost structure remains.

As the business expands rapidly, securing personnel responsible for property development, franchisee development, store development, FC support, and administrative functions is extremely important. However, competition for hiring personnel with specialized know-how is intensifying, and there is a risk that if hiring does not proceed as planned or if current employees resign, this could lead to a slowdown in new store openings or a weakening of the franchisee support system. In particular, the loss of personnel in property development, franchisee development, and store development would constrain business expansion and directly affect business results.

The Company groups each directly managed store as an asset group and monitors monthly operating and revenue conditions. However, there is a risk that if store revenue and valuation significantly decline due to factors such as the opening of competing stores nearby, impairment of tangible fixed assets would become necessary, affecting business results and financial condition. Although the Company implements customer acquisition measures after store openings (such as changing advertising media), external competitive factors cannot be entirely eliminated.

The Company operates a shared customer management system across all directly managed and FC stores, enabling member information management, membership fee collection, and cross-store usage via facial recognition. There is a risk that cyberattacks or improper conduct by system users could result in the destruction, alteration, or leakage of important data, or system downtime. If a system failure occurs, members may be unable to enter facilities, which could affect business results and business development. The Company implements security measures and conducts user education, including for FC stores.

In operating fitness clubs, the Company acquires and uses customers' personal information through membership registration procedures and other processes. There is a risk that in the event of a leak or improper use, this could lead to claims for damages and a decline in brand image, affecting business results and business development. The Company complies with the Personal Information Protection Act, has established internal regulations and employee training, and obtained the Privacy Mark (No. 19001498(01)) in April 2024, striving for proper management.

There is a risk that abnormal weather and natural disasters (such as large-scale earthquakes and floods), which have been increasing in recent years, could cause large-scale damage to facilities and equipment, making business operations difficult, or could make it difficult to procure facilities and equipment, delaying new store openings. Given that the scale of natural disasters is expected to expand over the medium term due to climate change, there are concerns about the impact on business results for the Company, which has a high degree of dependence on facilities and equipment in operating fitness clubs.

In addition to the risk of competitive relationships arising from new entrants by competitors or changes in transportation access after the Company's store openings, there are risks of intensifying price competition and deterioration of industry image due to an increase in low-price, low-quality similar fitness clubs, as well as customer attrition due to an increase in entrants offering online fitness services. The Company seeks to differentiate itself through its unique positioning strategy, SNS advertising, and a congestion status display service utilizing AI facial recognition (rolled out at all stores in September 2023), but continued response to changes in the market environment is required.

There is a risk that if the number of stores opened and target membership numbers fail to reach planned levels due to factors such as economic fluctuations, changes in the market environment, decreased willingness of FC member stores to open new stores, difficulty securing candidate locations, shortages of necessary personnel, or difficulty applying store-opening know-how outside the three Tokai prefectures (Aichi, Gifu, and Mie), this could affect business results and financial condition. The Company implements DX-based customer acquisition forecasting and investment profitability verification, as well as location-specific promotions starting two months before opening, but the risk of failing to achieve plans due to external factors remains.

The Company has a controlling shareholder structure in which Representative Director and President Senji Kunie and related parties, including his asset management company, hold 55.27% of the total number of issued shares. There is a possibility that if his shareholding ratio declines, this could affect the stock market price and the exercise of voting rights. In addition, the tradable share ratio remains at only 39.73%, creating a risk that reduced liquidity could cause stagnation in share trading. The Company has appointed three independent outside directors and established a nomination advisory committee, a compensation advisory committee, and a special committee, and has indicated a policy to increase the number of independent outside directors to a total of five, subject to approval at the ordinary general meeting of shareholders scheduled to be held on January 30, 2026.