BRONCO BILLY Co.,LTD.

The food service industry is a mature market, and competition has intensified due to the expansion of the ready-to-eat (nakashoku) market and other factors. The industry is highly susceptible to economic conditions, and if the number of competitors with similar concepts increases, this could affect performance through a decline in customer traffic. The Group's policy is to differentiate itself through its commitment to ingredients, product development, and enjoyable store environments.

The Group uses Australian beef as a primary ingredient, and if adverse weather conditions such as droughts or floods occur in Australia, if there are significant fluctuations in exchange rates, if tariffs are raised due to the invocation of safeguard measures, or if BSE outbreaks in the United States or elsewhere cause demand to concentrate on alternative sources, procurement prices will rise and procurement costs will increase. If procurement prices for other ingredients also surge or if securing sufficient quantities becomes difficult, this could affect performance. The Group strives to secure necessary quantities through domestic trading companies, but the risk of price fluctuations due to external factors remains.

The Group's sales are heavily dependent on the steakhouse business format "Bronco Billy," and if this concept loses consumer support due to changes in consumer preferences, customer traffic will decline, significantly affecting performance. In addition, if a beef-related problem occurs, such as a BSE outbreak or fraud by a meat trading company, the impact on performance may be greater compared to competitors operating multiple business formats. The Group is working to strengthen its management structure toward developing new business formats and expanding to multiple stores, but the high degree of dependence remains a structural risk.

Beef is used in the Group's main menu items, steak and hamburger steak, and if BSE occurs in the country of origin for imports (mainly Australia), suspension of beef procurement could lead to business suspension or increased costs from securing alternative procurement sources, potentially having a significant impact on performance. When BSE occurred domestically in 2001 and in the United States in 2003, the food service industry as a whole was significantly affected. The Group currently uses mainly well-managed Australian beef, and there have been no cases of BSE discovered in that country, but the risk cannot be eliminated.

The Group operates 161 stores across 1 metropolis, 2 prefectures (fu), and 12 prefectures (ken) in the Tokai, Kanto, Kansai, and Kyushu regions, and its policy is to continue expanding store openings in the Kanto, Kansai, and Kyushu regions as well as new areas. If it becomes difficult to secure properties meeting the store opening criteria, or if there are difficulties in securing personnel or operating multiple stores, there is a risk that the expected profitability will not be achieved after store opening, which could affect performance. In addition, when closing stores, there is a risk of penalty payments for leased properties, losses on disposal of fixed assets, and impairment losses.

The Group's basic policy is to open stores in leased properties, and it provides security deposits to lessors. There is a risk that part or all of the security deposits may become unrecoverable due to the economic failure of the landlord or lessor of a leased property, and in cases of early termination for the Group's own reasons, it may be forced to forfeit the security deposit under the terms of the contract. To date, there have been no cases of security deposits not being recovered due to store closures, but the risk will accumulate as store openings expand in the future.

Part-time workers account for a large proportion of the Group's employees, and in some areas, tight labor supply and demand in store opening areas has necessitated increases in hourly wages. If personnel recruitment and training do not proceed as planned, the planned store expansion may not be achieved, and further increases in hourly wages and rising social insurance premium burdens could affect performance. The Group is working to improve the labor environment and enhance training to improve retention rates, but the structural tightness of labor supply and demand continues.

The Group's business activities are mainly concentrated in the Tokai, Kanto, Kansai, and Kyushu regions, all of which are located within areas designated for enhanced disaster prevention measures against a Nankai Trough earthquake. If a large-scale earthquake or other disaster occurs, damage to stores and the Group's own factories could reduce operating days and hours, potentially affecting performance. In addition, there is a risk that customer traffic could decline significantly due to voluntary refraining from outings caused by the outbreak of infectious diseases, or due to deteriorating employment conditions and declining personal income.

The Group's own factories are subject to regulation under the Food Sanitation Act, and if a food safety incident occurs and results in administrative guidance such as revocation of food business licenses or business suspension orders, or if damages exceeding the scope of insurance coverage arise, this could have a significant impact on performance. In addition, if a significant error occurs in product labeling, customer traffic could decline due to a loss of public trust. The Group addresses this through product liability insurance and efforts to ensure accurate product labeling, but incidents such as mislabeling of product origin continue to occur in the food service industry.

The Group handles customer information from promotional services, inquiry information, and personal information of employees, part-time workers, and others, and if personal information is leaked for any reason, this could affect performance due to claims for damages and a loss of public trust. In addition, if officers or employees commit legal violations, there is a risk of declining customer traffic due to a loss of public trust. The Group has implemented compliance systems and training through the establishment of a code of conduct and a compliance committee, among other measures.