SFP Holdings Co., Ltd.

The restaurant industry has low barriers to entry, resulting in numerous new entrants and ongoing price competition. If market needs and consumer preferences change more than expected, or if competing stores with concepts similar to "Isomaru Suisan" increase, customer traffic may decline and affect operating results. The Group continues to improve food and service quality and store facilities to differentiate itself.

Amid labor shortages across the entire restaurant industry, the Group is actively hiring foreign national employees and improving treatment through revised HR systems and wage increases. However, if changes in the hiring environment make it impossible to secure necessary personnel, this could result in declining customer traffic, reduced operating hours, and difficulty in executing planned store openings. For foreign national employees, the Group is strengthening training and support systems, including multilingual manuals and dedicated support staff.

Against a backdrop of rising rents, securing properties that meet store opening criteria is becoming difficult, and there is a possibility that planned store profitability cannot be achieved due to soaring material prices and other factors. When converting or closing underperforming stores, losses on disposal of fixed assets, impairment losses, penalty fees, and restoration costs may arise, affecting operating results. There is also a risk of store closure due to failure to renew fixed-term lease agreements.

External factors such as abnormal weather, disasters, international conflicts, rising energy prices, higher logistics costs, virus outbreaks, and regulatory changes may make stable procurement of ingredients difficult. If food safety issues arise or procurement costs rise due to tight supply-demand conditions, this directly affects operating results and financial position. The Group regards safe ingredient procurement as an important issue, but there are limits to how it can respond to external factors.

If a food poisoning incident or violation of the Food Sanitation Act occurs, this could result in revocation of business licenses, business suspension orders, damage claims from victims, and loss of credibility. The Group has assigned food sanitation managers at all stores and strengthens its sanitation management system through thorough implementation of hygiene management manuals and checks by external organizations.

The Group actively utilizes foreign national employees in head office and store operations, but if regulations change due to amendments to the Immigration Control and Refugee Recognition Act or similar laws, this could result in changes to employment conditions, a decrease in foreign workers, and increased management costs. Given the Group's high reliance on foreign national employees, the impact of legal amendments could affect operating results in conjunction with human resource acquisition risk.

As of the end of February 2026, security deposits and guarantee money of ¥2,980 million were recorded on the consolidated balance sheet. If these become uncollectible due to deterioration in the lessor's financial condition at the time of store closure or early termination of contracts, this could affect operating results and financial position. Although the Group checks the lessor's creditworthiness at the time of concluding lease agreements, the risk of future deterioration in the lessor's financial condition cannot be completely eliminated.

If a system failure occurs in core systems such as sales management, food ordering, and attendance management due to unforeseen circumstances such as disasters, mechanical failures, or virus intrusions, this could disrupt store operations and affect operating results. The Group has established a backup system using specialized external providers, but risks such as cyberattacks cannot be completely eliminated.

As the Group operates stores nationwide, large-scale earthquakes, typhoons, prolonged abnormal weather, sudden heavy rainfall, and other disasters could directly or indirectly affect sales and thereby impact operating results and financial position. While concentrated store openings in urban centers and around major stations are a strength for attracting customers, this also carries the risk of simultaneous, widespread impact in the event of a large-scale disaster.

The parent company, Create Restaurants Holdings Inc., holds a 58.94% voting rights ratio. If the parent company's management policy changes in the future, this could affect the Group's operating results and financial position. The Group has transactional relationships with the parent company group, including settlement of shareholder benefit vouchers and franchise royalties, and since one director serves concurrently at both companies, there is a governance risk from the standpoint of independence.