INGS inc.

Key raw materials such as 'Oyama Chicken,' dried sardines, and wheat flour carry the risk of price surges or procurement disruptions due to abnormal weather, avian influenza, international conflicts, and yen exchange rate fluctuations. Should these occur, the resulting rise in cost of sales ratio could have a significant impact on business performance and financial position. As countermeasures, the Company secures multiple suppliers, negotiates directly with producers to secure price and shipment volume, and reviews products, recipes, and selling prices.

Continued expansion of directly managed stores requires the recruitment and development of excellent personnel, but a declining working population and rising wage levels create the risk that stable recruitment becomes difficult. If the development of candidates for managerial positions is insufficient, store opening plans may be hindered, potentially affecting business performance and financial position. As countermeasures, the Company is promoting diversification of recruitment methods and developing managerial candidates through training curricula.

Impairment accounting is applied with each directly managed store as the minimum grouping unit. If cash flows generated from assets held by directly managed stores, including new brands, deteriorate, impairment losses may arise, potentially having a significant impact on business performance and financial position. As countermeasures, the Company is analyzing and reviewing food ingredient costs, labor costs, and other expenses, and normalizing cash flows by improving sales through enhanced QSC (Quality, Service, Cleanliness).

Since stores are concentrated in the Tokyo metropolitan area (Tokyo, Kanagawa, Saitama, and Chiba), there is a risk that sales could decline significantly in the event of a large-scale earthquake, typhoon, or other natural disaster. Business restrictions imposed by authorities due to the spread of infectious diseases such as COVID-19, as well as disruptions to ingredient procurement caused by geopolitical risks or terrorism, could also affect business performance and financial position. As countermeasures, the Company has formulated and disseminated a BCP and is developing business formats such as ready-to-eat meal offerings.

The Company is subject to a wide range of laws and regulations, including the Food Sanitation Act, the Food Recycling Act, the Act on Prohibition of Drinking by Minors, the Road Traffic Act, the Adult Entertainment Business Act, the Fire Service Act, and the Personal Information Protection Act. Serious violations of laws or costs incurred to respond to legal amendments could significantly affect business performance and financial position. As countermeasures, the Company confirms legality with its retained attorney and has established a compliance verification system through internal audits and a Risk and Compliance Committee.

If serious errors occur in labeling, such as falsification of ingredient origin or tampering with expiration dates, social credibility could decline, potentially having a significant impact on business performance and financial position. In the event of food poisoning or other incidents, there is also a risk of business suspension orders or revocation of business licenses. As countermeasures, the Company has established and strengthened internal systems for confirming ingredient origin during recipe development, verifying that delivered goods match orders, and checking expiration dates.

In addition to shrinking food demand due to population decline and aging, the competitive environment in the food service market is intensifying due to growth in delivery and ready-to-eat meal demand, and deterioration of market conditions could affect business performance and financial position. There is also a risk that if competitors newly enter the market after a store opens, the store may not achieve the profitability originally planned. As countermeasures, the Company is promoting product development and QSC enhancement using app-based surveys, and developing delivery and takeout products utilizing services such as Uber Eats and Demae-can.

The Company is expanding its business based on new store opening plans, but there is a risk that stores cannot be opened on schedule as planned if suitable properties cannot be found or if construction schedules are delayed. A discrepancy between the store opening plan and actual results could affect financial position and business performance. As countermeasures, the Company decides on store openings after comprehensively examining location conditions, lease terms, profitability, and investment payback period.

Changes in labor-related laws and regulations, such as caps on overtime work, mandatory acquisition of annual paid leave, the equal pay for equal work system, and the expansion of social insurance coverage to part-time workers, could lead to rising labor costs and difficulty in employing excellent personnel. If a legal violation occurs, it could lead to administrative guidance or claims from employees, resulting in a loss of social credibility and brand damage. As countermeasures, the Company is implementing efficient staff allocation through recruitment for shortened working hours, enhanced employee benefits, cloud-based shift management, and DX of the ordering system.

Funds for store openings, such as store fixture costs and lease deposits, are procured mainly through borrowings from financial institutions. If sudden changes in financial conditions make it difficult to secure sufficient financing, or if interest rates rise significantly, this could affect business performance and financial position. While the Company strives to reduce procurement costs through continued dialogue with multiple financial institutions, a fund structure dependent on borrowing remains a risk factor. As countermeasures, the Company is working to optimize its interest-bearing debt ratio through the accumulation of profits and securing diverse fundraising methods.