JFLA Holdings Inc.

In investment and financing projects such as corporate acquisitions, subsidiary establishment, and alliances, there is a risk that if the invested business does not progress as planned, asset value may decline due to reduced profitability or falling market value. The occurrence of impairment losses or divestitures may affect the financial position and operating results, and this is closely linked to the core strategy of enhancing the value of the entire group. The Group conducts prior assessments of risk and recoverability, but states that reliable forecasting is difficult.

Against a backdrop of soaring raw material and fuel costs driven by yen depreciation and instability in international affairs, there is a risk that an economic downturn will affect demand and purchasing power for dairy products, seasonings, and food service. The Group states that an economic downturn caused by various external factors could significantly affect its financial position and operating results. The Group is working to strengthen its earnings base by implementing various cost reduction measures.

Many raw materials for restaurant chains are agricultural products, creating a risk that procurement may become difficult due to unfavorable weather, epidemics, or the invocation of safeguard measures. In the distribution and production businesses, many raw materials and products are procured from overseas, and conflicts, changes in supply and demand, or regulatory changes in the countries of procurement may lead to increased procurement costs or supply shortages. Fluctuations in the market prices of key raw materials and energy resources such as heavy oil also affect the financial position and operating results.

Amid growing social concern over food safety, including foreign object contamination, BSE, avian influenza and other epidemics, and food mislabeling issues, there is a risk that if a food safety incident occurs, it could damage brand image and give rise to claims for damages. There is also a possibility of receiving administrative dispositions such as revocation of business licenses or suspension of operations under the Food Sanitation Act, which could damage the credibility of the entire Group. Continued efforts to secure safe and reliable food ingredients are a prerequisite for business continuity.

The Group conducts overseas business mainly in the European region (the UK, the Netherlands, and Germany), and there is a risk of unforeseen events arising from conflicts and political changes such as the situations in the Middle East and Ukraine, exchange rate fluctuations, and differences in systems, customs, and religion in each country. These factors may directly affect the financial position and operating results. In particular, exchange rate fluctuations affect the translation of overseas business earnings.

The Group operates restaurants under food service business licenses obtained pursuant to the Food Sanitation Act, but there is a risk of receiving administrative dispositions such as disposal of food products, revocation of business licenses, or suspension of operations in the event of an incident such as food poisoning. Claims for damages from affected parties are also anticipated, which could damage the credibility of the entire Group. Damages arising from personal information leaks and the resulting decline in social credibility are similarly recognized as risks affecting the financial position and operating results.

As the aging society with a declining birthrate progresses, there is a risk that it will become difficult to secure appropriate personnel to support business expansion. In addition, if the training of successors for traditional food manufacturing techniques such as soy sauce, miso, pickles, and sake does not proceed smoothly due to labor shortages and other factors, technical succession may become difficult, potentially affecting the financial position and operating results. The Group is working to develop skilled technicians based on its basic philosophy of "preserving Japan's traditional, high-quality food lifestyle and food culture and passing it on to the next generation."

Restaurant chain stores (sales business) and factories (production business) scattered both domestically and overseas are exposed to natural disasters such as typhoons, earthquakes, and epidemics. In the event of a disaster, stores may be forced to close and factories to halt production, potentially affecting the financial position and operating results. The Group's broad business deployment, including overseas locations, contributes to risk diversification while also expanding the potential scope of disaster exposure.

While the Group opens stores with an emphasis on profitability after conducting trade area surveys, rent assessments, and investment simulations, there is a risk that stores may become unprofitable due to economic trends or changes in consumer preferences. An increase in unprofitable stores may affect the financial position and operating results. The success or failure of the store opening strategy in the sales business has a structure that directly impacts the Group's overall earnings.

Competition in product development within the food industry is intense, and there is a possibility that the advantages of the Group's products could be lost in a short period due to a succession of similar follower products and price competition. There is also a risk that new products developed by the Group may fail to gain sufficient recognition in the market, which could affect the financial position and operating results. Intensifying competition within the same category is recognized as a structural risk leading to declining profitability.