FUJIO FOOD GROUP INC.

The Group operates 393 stores domestically and 5 stores overseas, and its basic strategy is to expand the number of stores through steady openings. However, if suitable properties matching required conditions cannot be secured, or if the performance of new stores does not proceed as planned, this could affect operating results. While the Group carefully formulates business plans based on the track record of existing stores in light of location and lease conditions to examine profitability, the risk of failing to achieve plans is ever-present given intensifying competition in the restaurant industry.

The restaurant industry has low barriers to entry, resulting in numerous new entrants, and extremely intense competition continues due to sluggish personal consumption and cross-industry price competition. While the Group differentiates itself by specializing in the "Taishu-shoku" (mass-market dining) business format, an increase in store openings by competitors with similar concepts could affect competitiveness and business outlook. The Group is also considering strict responses, centered on its Legal Affairs Office, regarding past violations of non-compete obligations and infringements of intellectual property rights by franchise member companies.

Directly-operated stores and franchise stores hold business permits under the Food Sanitation Act. If food poisoning or sanitation issues occur, this could lead to revocation of business permits, business suspension orders, damage claims, and deterioration of brand image, thereby reducing sales at directly-operated stores and royalty income from franchisees. In addition, if the scope of social insurance applicable to part-time workers is expanded, the Group, which has a high proportion of part-time workers, could face increased social insurance burdens and a decline in the number of prospective workers, potentially affecting operating results. Although the Group thoroughly enforces hygiene management based on store operation manuals, it is difficult to completely eliminate such risks.

If infectious diseases such as BSE, avian influenza, or norovirus occur, or if food mislabeling problems or sanitation issues in food-supplying countries arise, this could lead to a decline in demand for dining out or an increase in ingredient prices. Agricultural products also carry procurement price volatility risk due to fluctuations in harvest yields caused by weather conditions, and rises in procurement prices or difficulty securing necessary quantities could affect operating results. While the Group is strengthening efforts to ensure the safety and stable supply of ingredients, risks arising from external factors remain.

Securing and developing excellent human resources is a critical issue as the Group expands store openings. In addition to mid-career hiring, the Group is focusing on new graduate recruitment, and is working to retain personnel through the introduction of career advancement plans, personnel evaluation systems, stock option programs, and regular training sessions. However, if the necessary personnel cannot be secured or if personnel development does not proceed as planned, this could affect operating results. As labor shortages become more severe across the restaurant industry as a whole, the likelihood of this risk materializing is high.

As of FY2025 (ending December 2025), interest-bearing debt (borrowings and lease obligations) accounted for 36.3% of total liabilities and equity. If future changes in interest rate conditions or deterioration in the Company's creditworthiness lead to higher funding costs, or if fundraising becomes difficult, this could affect operating results. In a rising interest rate environment, increased interest payment burdens risk straining the Company's financial structure, and the Company has indicated a policy of continuously working to improve its financial structure.

If profit/loss or cash flow from operating activities continues to be negative due to deterioration in the restaurant industry environment, or if the market value of held fixed assets or shares in affiliated companies declines significantly, an impairment loss may be recognized under impairment accounting standards, potentially affecting operating results. Given the business characteristic of holding numerous directly-operated stores, the risk of impairment of store fixed assets tends to materialize readily when business performance deteriorates.

The Group operates 5 directly-operated stores in Shanghai and has 4 subsidiaries in the United States, China, and Singapore, in addition to advancing brand expansion in Taiwan through a joint venture company (Bi Le Shi Restaurant Co., Ltd.). Country-specific legal regulations, political, economic, and tax-related country risks, or changes in the circumstances of joint venture partners could force stores or companies to withdraw, potentially affecting operating results. Amid heightened geopolitical risk, particular attention is needed regarding business risks related to China and Taiwan.

The Group has built its own sales management system, and system failures such as hardware or software malfunctions, human error, communication line failures, or computer viruses could have a material impact on operating results. In addition, while the Group has implemented measures such as entering into confidentiality agreements and outsourcing management of My Number (individual number) information with respect to the management of personal information of business partners and employees, if an information leak occurs, this could affect operating results through damage claims and deterioration of brand image.

Weather-related factors such as cool summers, extreme heat, warm winters, and large-scale natural disasters could affect operating results and financial position through fluctuations in customer numbers and impacts on ingredient procurement. In addition, if an unexpected infectious disease outbreak leads to shortened store operating hours or temporary closures, this could result in a significant decline in sales. Based on experience with the COVID-19 pandemic, these risks have a substantial direct impact on performance in the restaurant industry.