Horiifoodservice Co., Ltd.

The spread of infectious diseases, including COVID-19, may force store closures or shortened operating hours in response to requests from national and local governments. Even after the disease has been contained, normalization of economic activity and recovery in customer visits are said to require time, creating a risk that the impact on business results could be prolonged. Although the Company continuously implements infection prevention measures, fundamental avoidance measures are limited.

The eating-out market is in a mature and shrinking trend, and the operating environment remains challenging due to increasingly selective personal consumption and intensifying price competition. The Company seeks to differentiate itself through the private-room spaces and sourcing-focused ingredients of its "Kakureyado Shinobiya" format, but if it fails to respond to changes in consumer needs and preferences, there is a risk that sales could decline due to reduced customer-drawing power of its core format. In the fiscal year under review, sales of Kakureyado Shinobiya were ¥1,642,850 million (51.0% of the composition ratio), accounting for more than half of revenue, meaning the trends of this format are directly linked to overall business performance.

The Company focuses its store openings mainly on the North Kanto Area and the Metropolitan Area, and in the fiscal year under review, the combined share of these two areas in sales reached a high level of 85.3% (¥2,747,715 million). If the economic conditions in these areas deteriorate due to weather, epidemics, natural disasters, or other factors, the impact on overall business results could be severe. In addition, there is a risk that business expansion plans could be delayed if suitable properties meeting store-opening criteria cannot be secured in a timely manner, or if sales performance after opening a new store is unfavorable.

The majority of the Company's revenue depends on its original formats such as Kakureyado Shinobiya and Hitachi no Kuni Mondokoro (86.5% of sales composition in the fiscal year under review, ¥2,783,979 million), with alcohol sales in particular having a significant impact on store profitability. If the decline in alcohol consumption intensifies, or if demand for the core formats decreases, the impact on business results would be significant. The Company's basic policy is to develop at least one new business format per fiscal period, but there is also a risk that the rollout of new formats may not proceed as planned.

The Company procures much of the drinks, seasonings, and ingredients used in its stores from Horii Butsuryu Co., Ltd., and in the fiscal year ended November 2025, the proportion of total procurement sourced from this company reached an extremely high level of 93.7%. While there is a mutually dependent relationship in that nearly 100% of Horii Butsuryu's total sales are to the Company, if procurement is disrupted for any reason—such as changes in trading terms, unsuccessful contract renewals, or revocation of its liquor sales license—this could have a material impact on store operations and business results.

If commodity market prices surge, it may become necessary to pass the increase on to selling prices, potentially leading to a decrease in customer visits. On the other hand, if price pass-through is difficult due to competitive constraints, there is a risk of deteriorating profit margins. The Company has not disclosed specific hedging measures and its structure is therefore susceptible to being directly affected by market price fluctuations.

In store operations, securing capable personnel—particularly store managers, who require time to train—is essential for providing high-quality products and services. The Company implements measures such as training through its proprietary curriculum and the conversion of part-time and temporary staff to full-time employment, but if human resource development does not proceed smoothly or if the necessary personnel cannot be secured in a timely manner, this may affect business expansion and results.

If diseases such as BSE or avian influenza, or food hygiene management issues, occur, there is a risk that customer visits could temporarily decline due to increased consumer anxiety. In addition, if labeling issues arise—such as false country-of-origin labeling or falsification of expiration dates (including those attributable to ingredient suppliers)—this could affect business results through a decline in social trust. The Company strives to develop and strengthen its internal systems, but it is difficult to completely eliminate risks arising from external suppliers.

The Company faces multiple regulatory risks, including the Food Sanitation Act, the Food Recycling Act, and the expansion of social insurance coverage for short-time workers. Violations of the Food Sanitation Act may result in dispositions such as revocation of business licenses or suspension of operations, while tightening of the Food Recycling Act may result in additional costs such as equipment upgrades. In addition, if the scope of social insurance coverage expands further, increased insurance premiums and difficulty securing short-time workers could affect business expansion and results.

The Company's headquarters are located in Ibaraki Prefecture, an area affected by the Great East Japan Earthquake, and it has previously experienced direct and indirect business disruption. Future aftershocks or a major earthquake directly beneath the Metropolitan Area could make store operations difficult or impossible. Combined with the regional concentration structure in which 85.3% of sales depend on the North Kanto and Metropolitan Areas, the impact on business results in the event of a major natural disaster could be severe.