RUNSYSTEM CO.,LTD.

If a state of emergency declaration or business suspension request is issued by the national or prefectural government due to the spread of a new infectious disease, the utilization rate of directly operated stores is expected to decline significantly, leading to an anticipated decrease in net sales and royalties. Given the nature of the Entertainment business, which is centered on store operations, it has a structure that is directly susceptible to the effects of voluntary refraining from going out and business restrictions.

While the complex café industry continues to expand due to new entrants, some regions are experiencing a decrease in the number of stores due to store withdrawals and business format conversions. If performance declines due to intensifying competition, costs associated with store withdrawal or relocation and decreased revenue could affect the performance of the Company and its group. The Company and its group will continue to promote new store openings but will be required to respond to changes in the competitive environment in each region.

In 24-hour, year-round store operations, there is a high dependence on part-time staff, and against the backdrop of a declining working population, costs for securing employees are increasing. If capable personnel cannot be secured, there is a risk of decline in the quality of customer service. As countermeasures, the Company is pursuing regular recruitment activities, building an education system, and introducing the Labor-Saving System (Self-Service System).

While comics, magazines, and other materials provided in stores are currently interpreted as not constituting lending acts, future amendments to the law or agreements with copyright holders could result in a prohibition on business use or the need to pay royalties. Although permission for business use has already been obtained for software, there is a risk that changes in the legal environment surrounding copyright could directly affect business costs and operations.

The internet services provided in stores carry the risk of being used for crimes such as fraud, defamation, and spam email that exploit anonymity. The Company and its group require identity verification and membership registration for all users and work to deter crime through information exchange with the police via the Japan Complex Café Association, but if unauthorized use occurs, there are concerns about the impact on social credibility and business performance.

Personal information obtained through membership registration is centrally managed on the head office server, and if an external leak occurs due to unforeseen circumstances, a decline in sales due to loss of credibility and the occurrence of damages compensation costs are anticipated. The Company strives to prevent leaks through the establishment of information management regulations, minimization of access privileges, and introduction of security systems, but it is difficult to completely eliminate risks such as cyberattacks.

Directly operated stores are basically leased properties, and security deposits are paid upon contract conclusion, but there is a possibility that part or all of these deposits may become unrecoverable due to the landlord's economic insolvency, etc. In addition, funds lent as construction cooperation funds carry a similar risk of becoming difficult to recover, and in the case of early termination due to circumstances on the Company's part, there may be a need to waive the right to claim the return of security deposits or to pay penalty fees.

The Company and its group obtain business licenses subject to regulations such as the Food Sanitation Act, the Act on Control and Improvement of Amusement Business, etc., prefectural ordinances, and the Personal Information Protection Act. If these laws are amended or regulations are strengthened, the Company may be forced to incur increased compliance costs or change its business format, potentially affecting business performance. The Company strives to improve the precision of legal compliance through the establishment of a compliance system and thorough communication to employees.