McDonald's Holdings Company (Japan), Ltd.

If a hygiene issue specific to restaurant operations occurs, in addition to direct impacts such as the suspension of operations at individual stores, it may adversely affect the consolidated operating results of the Group as a whole. The Company conducts SQMS (Supplier Quality Management System) assessments and external audits by third-party organizations for domestic and overseas suppliers, and implements measures at stores such as appointing food hygiene managers, conducting employee training, and taking out liability insurance.

If a hygiene issue or negative reputation affecting society at large occurs, it may result in decreased sales, increased costs for strengthening safety and hygiene measures, related capital expenditures, and safety campaign expenses, thereby affecting operating results. As countermeasures, the Company actively discloses information on the country of final processing and the main countries of origin of key raw materials, conducts periodic audits of target suppliers, and performs residue testing by third-party inspection organizations.

Prices of key raw materials such as beef and potatoes fluctuate due to international commodity market conditions, and logistics delays may also occur due to labor-management negotiations in exporting countries, which may affect operating results. The Company strives to secure favorable trading terms by maintaining relationships with numerous suppliers both domestically and overseas.

Since some raw materials and supplies are imported from overseas, exchange rate fluctuations directly affect procurement costs and may influence operating results. The Company strives to avoid risk through appropriate and flexible forward foreign exchange contracts via trading companies, but complete hedging may be difficult during periods of rapid yen depreciation.

Competition is intensifying not only within the hamburger-centered fast food industry but also with convenience stores and prepared meal (delicatessen) retailers, which may affect market share and profitability. The Company sets the IEO (Informal Eating Out) market as the axis of its competitive analysis and strives to secure an advantageous position through the introduction of advanced technology and management methods.

The Company leases the land and buildings for its head office, offices, and more than 95% of its stores, creating a risk that even well-performing stores may be forced to close due to non-renewal or early termination of lease contracts for reasons attributable to the lessor. The balance of "leasehold and guarantee deposits" at the end of the consolidated fiscal year under review was ¥43,053 million, and there is also a risk that all or part of this may become unrecoverable due to the lessor's bankruptcy or other circumstances. The Company works to reduce this non-recovery risk through credit management of lessors and a policy of not depositing more than necessary.

Logistics-related operations such as the purchase of goods and supplies, inventory management, and store delivery are outsourced to specific external contractors, and if procurement is significantly disrupted due to sudden increases or decreases in demand, natural disasters, quality issues, bankruptcy, or other causes, it may affect the Group's financial position and operating results. The Company strives to maintain stable procurement by maintaining close relationships with specific contractors while continuously reviewing and improving its logistics and procurement operations.

Operations such as store management, food ingredient procurement, and delivery systems depend on information systems, and if a system failure, computer virus, or external cyberattack occurs, it may significantly affect the Group's financial position and operating results through disruption of efficient store operations and loss of important data. The Company implements preventive measures such as system detection and monitoring through the introduction of monitoring tools.

The Company manages the personal information of a large number of customers and employees, and any leakage could lead to a loss of social trust. In addition, compliance issues such as legal violations by officers and employees or inappropriate use of social media may also adversely affect the Group's financial position and operating results. The Company has established a system including regulations based on the Personal Information Protection Act, periodic reviews of information management systems, a company-wide risk management committee, a compliance hotline, and audits by the internal audit department.

If a major infectious disease outbreak occurs domestically or overseas, or if a natural disaster such as a typhoon or earthquake occurs, it may result in store closures, reduced operating hours, facility damage, and disruption of logistics, which could significantly affect the Group's financial position and operating results. The Company addresses this through the development of diverse sales channels such as delivery services, mobile ordering, and Park & Go®, taking out non-life insurance, and dispersing its nationwide store and logistics network.