AP HOLDINGS CO.,LTD.

The Group operates under business permits based on the Food Sanitation Act and assigns a food hygiene manager to every store. However, if a hygiene issue such as food poisoning occurs, this could result in revocation of business permits, business suspension orders, damage to brand image, or claims for damages. Although internal hygiene management manuals, regular hygiene audits, and employee training are implemented, it is difficult to completely eliminate this risk given the nature of the food service industry.

The Group is subject to regulations such as the Food Labeling Act and the Product Liability Act (PL Act). If legal violations occur, such as mislabeling of allergens, false indication of place of origin, or contamination by foreign objects, this could lead to product disposal or recall and a decline in social credibility. While the Group addresses this through clear traceability leveraging its integrated production-and-sales model and a dual-check system for labeling during product development, the risk remains.

As the Group employs a large number of part-time workers, the expansion of social insurance coverage in October 2024 and substantial increases in the minimum wage have increased social insurance premiums and labor cost burdens. The Group is promoting labor-saving through DX initiatives (mobile ordering, automated payment terminals, etc.) and revising its personnel system, but if further labor law reforms or continued tightness in the labor market occur, increased labor management costs could affect operating results.

The Group's core business formats, such as "Tsukada Farm" and "Jitokko Kumiai," are highly dependent on Miyazaki-produced "Miyazaki Jidokko" chicken and Kagoshima-produced "Kuro Satsuma" chicken, exposing the Group to the risk of supply disruption from disease outbreaks such as avian influenza. Rising compound feed and energy costs due to yen depreciation and surging grain prices are also pushing up procurement costs. Although the Group addresses this through diversification of production bases and its brand portfolio, the risk cannot be completely eliminated.

Given the nature of the "integrated production-and-sales" model, stable procurement of proprietary ingredients such as jidori chicken, fresh seafood, and offal forms the foundation of the business. However, external factors such as poor weather, disasters, or virus outbreaks could tighten supply and demand and significantly raise procurement costs. While the Group maintains strong partnerships with contracted farmers and fishermen and is developing diversified procurement routes, if unforeseen circumstances restrict procurement, this could affect operating results and financial condition.

A large number of stores are concentrated in the Tokyo metropolitan area, creating direct and indirect sales decline risk in the event of a large-scale earthquake, typhoon, or similar event. In addition, natural disasters in production regions such as Miyazaki and Kagoshima could disrupt ingredient supply. Although the Group has established BCPs, conducts disaster drills, and holds insurance coverage, it is difficult to completely avoid the impact of a large-scale disaster.

While the Group's basic policy is to open stores in central urban areas and around major stations, there is a risk that suitable properties meeting its conditions cannot be secured as planned. In addition, if losses on disposal of fixed assets, impairment losses, penalties, or restoration costs associated with business format changes or store closures of unprofitable outlets exceed expectations, this could affect operating results and financial condition.

As of FY2026 (ending March 2026), interest-bearing debt balance was ¥4,734 million, with an interest-bearing debt dependence ratio of 59.0% (improved from 75.3% in the previous fiscal year). The Group relies heavily on floating-rate long-term borrowings for its financing. If Japan's monetary policy shift (a rising interest rate phase) continues, financing costs could increase, affecting operating results and financial condition. The Group is working to reduce interest-bearing debt through operating cash flow.

The Group's policy is to consider M&A as a means of business expansion, and due diligence is conducted by external experts. However, contingent liabilities, unrecognized obligations, or labor issues may come to light after an acquisition. If business development does not proceed as planned, impairment of goodwill may be required, potentially affecting operating results and financial condition.

Securing and developing store manager candidates, chefs, head office personnel, part-time staff, and others is essential for continued new business development and store expansion. However, there is a risk that securing personnel as planned will become difficult amid a tightening labor market. If personnel shortages occur, this could lead to delays in new business development, reduced customer traffic due to service quality decline, and delays in store opening plans. The Group is addressing this through enhanced internal training, clarification of career paths, and improved employee engagement.