Yakiniku Sakai Holdings Inc.

Given the nature of restaurant operations, it is difficult to completely eliminate the occurrence of food poisoning, and should an incident occur, the Company may be subject to a comprehensive business suspension order covering not only the affected store but a wide range of locations, potentially causing a significant decline in sales. Furthermore, extensive media coverage may damage the corporate image, creating a risk of reduced customer traffic over the medium to long term. Although the Company exercises the utmost care in hygiene management, it recognizes that this risk cannot be completely eliminated.

The Group, which depends on imported ingredients such as seafood and beef, faces the risk of increased procurement costs due to exchange rate fluctuations (sharp yen depreciation), changes in policies or trade agreements of source countries, depletion of fishery resources, rising fishing vessel fuel costs, and conflicts such as the situation in the Middle East. For beef, exchange rate risk is mitigated to some extent through short-term forward foreign exchange contracts, but the effectiveness of these measures may be limited during periods of sharp yen depreciation. Such cost increases directly affect profitability.

There is a risk that procurement of key ingredients may become difficult due to the outbreak of diseases such as BSE or avian influenza, unfavorable weather conditions, natural disasters, or conflicts such as the situation in the Middle East. In particular, since the Group's primary business area is the Tohoku region, deterioration in the harvest conditions of key ingredients such as rice directly affects operating results. Should procurement instability and sharp increases in ingredient prices occur simultaneously, this may have a significant impact on operating results and financial position.

As of the end of the consolidated fiscal year, the balance of interest-bearing debt (borrowings) reached ¥7,454 million, which could have a material impact on cash flow at repayment dates. The Restaurant Business is prone to earnings fluctuations due to changes in the external environment such as economic conditions and infectious disease outbreaks, and the burden of repayment during periods of deteriorating performance poses a risk of financial constraint.

The balance of leasehold deposits and guarantee deposits related to lease agreements amounted to ¥2,151 million as of March 31, 2026. Should an unforeseen event occur affecting the financial condition of a lessor, part of these deposits may become unrecoverable, which, depending on the amount involved, could affect the Company's business performance.

Given the nature of the Restaurant Business, which operates numerous stores, deterioration in business profitability may result in the application of impairment accounting, leading to the recognition of impairment losses on fixed assets, which could affect business performance and financial position. It has also been pointed out that store aging and shrinking trade areas leading to sluggish sales may delay renovation investments, creating a risk of falling into a vicious cycle.

With the advancing decline in birthrate and aging of the population, securing and developing human resources in the restaurant industry is becoming increasingly difficult. If sufficient personnel cannot be secured, this may lead to a decline in service quality, reduced customer traffic, increased labor costs, and delays in store opening plans, thereby affecting business performance. The Group regards securing and developing human resources as an important issue, but responding to the structural labor shortage remains an ongoing challenge.

Should the spread of a large-scale infectious disease such as COVID-19 and accompanying administrative measures such as states of emergency lead to continued voluntary restraint by customers from going out, business operations may become difficult. A shortage of customers and employees due to the spread of infection could also affect business continuity. For the Group, which operates businesses across multiple business locations and commercial facilities, the impact on operating results and financial position is significant.

Regarding customer personal information acquired through business activities, the Company has implemented measures such as access restrictions, encryption, and use of external payment services; however, should personal information be leaked externally due to malicious cyberattacks or other causes, the resulting response costs and loss of social trust could have a significant impact on operating results and financial position. Particularly sensitive information such as credit card information is structured so as not to be directly held by the Company itself.

In M&A transactions and capital and business alliances aimed at achieving sustainable growth, the Company conducts prior due diligence on financial condition, contract terms, and other matters; however, should the profitability of a target company deteriorate due to changes in the business environment after the transaction, this may result in the recognition of impairment losses on goodwill or shares of affiliated companies, or the recording of allowances for loans to affiliated companies, thereby affecting the Group's business performance and financial condition. Similar risks may also arise if the initially anticipated results are not achieved, or if a capital and business alliance is dissolved or modified.