KICHIRI HOLDINGS & Co.,Ltd.

The food service industry has low barriers to entry, resulting in many new entrants and a continuously intense competitive environment. Amid ongoing price competition driven by sluggish personal consumption, the Group faces the risk of intensified competition from competitors opening new stores. As a countermeasure, the Group seeks differentiation by pursuing added value through improved service capabilities and enhanced product strength.

As consumer awareness of food safety and security increases, should a food safety issue such as food poisoning occur, it could severely damage the company's image and have a material impact on business results. The Group thoroughly implements hygiene management through bacterial testing of employees, hygiene management checks at stores, and employee education and guidance.

Funds for capital investment related to store openings are procured primarily through borrowings from financial institutions. As of the end of the current consolidated fiscal year, interest-bearing debt stood at ¥2,991 million, and the interest-bearing debt ratio against total assets of ¥7,091 million was a high 42.2%. Future fluctuations in procurement interest rates could increase financial costs and affect business results. The Group's policy is to maintain an appropriate level of interest-bearing debt while comprehensively considering interest rate trends, economic conditions, and the financial balance.

As the basic policy is to open all stores through leasing, the balance of leasehold deposits at the end of the current consolidated fiscal year reached ¥1,010 million (14.3% of total assets). If a landlord's business deteriorates or an unprofitable store's lease is terminated midway, part or all of the leasehold deposit may not be refunded. Impairment of deposits poses a risk that directly affects the financial condition.

When opening new stores, consumable expenses such as fixtures and fittings and sales promotion expenses are temporarily incurred, and concentrated store openings or openings near the fiscal year-end can be a factor that reduces profit. In addition, when closing stores, losses on retirement of fixed assets and penalty fees for canceling lease contracts may arise. Furthermore, there is a risk of recording impairment losses if profitability declines significantly due to sudden changes in the external environment or upon making a decision to withdraw from a store.

All stores have obtained restaurant business permits based on the Food Sanitation Act, and there is a risk of receiving dispositions such as business suspension or permit revocation in the event of a violation of the Act. In addition, if regulations under the Food Recycling Act are tightened, additional costs such as new capital investment may arise, potentially affecting business results. The Group states that no grounds for disposition have arisen at this time.

The Group employs many part-time workers, and if the criteria for social insurance coverage are expanded, an increase in social insurance burden could affect business results. The food service industry has a high dependence on part-time workers, posing a relatively greater risk from the impact of expanded coverage.

The continuous securing of excellent, hospitality-minded personnel is recognized as an important management issue, and if recruitment and development of personnel do not proceed as planned, it could affect business results. While the policy is to develop executive personnel through the promotion of new graduate and mid-career hiring and the enhancement of education and training, competition for talent across the food service industry as a whole remains intense.

Poor harvests of agricultural products due to natural disasters or unusual weather, and supply-demand fluctuations such as the invocation of safeguard measures, may make ingredient procurement difficult or raise purchase prices. Although the Group states it has no dependence on specific ingredients, market fluctuations directly affect the cost ratio of the food service business, posing a risk of deteriorating profitability. The Group's policy is to proactively work to secure a stable supply of ingredients.

The Group's stores are concentrated in the Kansai region and the greater Tokyo metropolitan area, and in the event of a large-scale earthquake, typhoon, or other natural disaster in these regions, a large number of stores could suffer severe damage simultaneously. Due to the geographical concentration of stores, a single disaster could have a significant impact on overall business operations, posing a risk that could affect both business results and financial condition.