The Monogatari Corporation

Due to the mid- to long-term decline in the domestic population and the growth of the home-meal replacement (prepared food) market, the overall size of the eating-out industry is on a shrinking trend, and existing-store sales tend to decline year on year. If the deterioration of the market environment progresses further, this may affect the business results of the Group. As countermeasures, the Group is promoting improvements in quality and service, development of new menus, active sales promotion activities, renovation of existing stores to increase their sales, and expansion of directly-operated new store openings as well as franchise development.

The Group operates multiple restaurant brands both domestically and overseas, and seeks to differentiate itself through unique brand concepts; however, there is a risk that changes in customer needs may cause these concepts to no longer be accepted. If a mismatch with customer needs arises, the customer-drawing power and sales of each brand may decline, potentially affecting business results. As a countermeasure, the Group continuously monitors changes in customer needs and works on formulating unique measures that respond to the needs of the times.

In securing land necessary for new store openings, it is not always possible to secure properties that match the Group's needs, and there is a risk that store openings may not proceed as planned. Even when properties matching the plan are secured, there is a risk that the originally planned store profitability may not be achieved. As countermeasures, the Group gathers information widely not only from real estate agents but also from partner banks and vendors, and after opening stores, it takes response measures based on comparison of plans versus actual results and analysis of issues.

There is a risk that the prices of purchased raw materials may soar due to a combination of factors such as sharp increases in vegetable prices caused by abnormal weather, government-imposed safeguard measures, overseas conflicts, sudden fluctuations in supply and demand, and exchange rate fluctuations. Increases in raw material costs directly squeeze profit margins and may affect the business results of the Group. As a countermeasure, the Group is promoting diversification of procurement routes, among other measures, to secure safe and reliable raw materials.

The Group complies with the Food Sanitation Act and has established a hygiene management system incorporating HACCP concepts; however, it is not possible to completely eliminate the risk of food poisoning occurring at directly-operated stores and franchise stores. Should food poisoning occur, it could severely damage brand image and lead to business suspension, potentially having a material impact on business results. As countermeasures, the Group implements daily checks by store managers, inspections and improvement guidance by area managers, strict quality and hygiene control at manufacturing plants, and regular hygiene inspections by specialized outside firms.

The Group holds substantial fixed assets related to its stores, and there is a possibility that store profitability may decline due to changes in the external environment or a mismatch between brand concepts and customer needs, resulting in a significant deviation from business plans. In such cases, the application of accounting standards for impairment of fixed assets may require recognition of impairment losses, which could affect business results. As a countermeasure, the Group continuously compares plans against actual results and takes response measures based on analysis of issues.