BUFFALO CO.,LTD.

Both the car accessories market and the food service market are mature markets, and numerous competing stores exist within each trading area. If the competitiveness of the Group's businesses relatively declines, it could have a material impact on business performance. As countermeasures, the Group is promoting improved customer satisfaction through enhanced customer service and hospitality, the expansion of original Pit Service Labor Charges menus in the Autobacs Business, and responding to diverse needs through "Yakiniku Like" and "PISOLA (Italian Restaurant)" in the Food & Beverage Business.

The Group operates stores under franchise agreements, and new store openings require the approval of the franchise headquarters. If planned store openings cannot be achieved due to screening based on location environment, regional characteristics, profitability, etc., it may affect the Group's business expansion plans and performance. The Group works closely with the franchise headquarters, jointly developing and planning new store projects to reduce this risk.

When opening new stores or expanding floor space in the Autobacs Business, stores with sales floor area exceeding 1,000 sqm may become subject to regulation under the "Large-Scale Retail Store Location Law" and the "Revised City Planning Law." If planned store openings cannot be achieved due to the designation of restricted areas at the discretion of local governments, it may affect business performance. At present, no stores are subject to such regulations, and the Group's policy is to coordinate with local residents and government bodies from the store planning stage.

If officers or Group employees commit legal violations, whether intentional or negligent, it may result in claims for damages and have a material impact on business performance. In addition, if customer information held by the Group is leaked externally due to misconduct or other causes, it could damage the Group's social credibility and affect business performance. The Group has established a "Compliance Code," "Internal Whistleblowing Regulations," and "Personal Information Protection Regulations," among others, to raise legal compliance awareness among all employees, including officers.

Various risks exist in areas such as waste disposal, handling of hazardous materials, pit work accidents, handling of customer personal information, and food hygiene management, which could affect business performance through direct damage or a decline in customer numbers due to deteriorated customer impressions. The franchise headquarters provides ongoing alerts and guidance based on case information, and the Group works to reduce the manifestation of such risks through strict compliance with various laws and internal rules.

Against the backdrop of the declining birthrate and aging population, the retail and food service industries face growing difficulty in recruitment and labor shortages, and changes in labor supply and demand may increase various costs related to securing personnel, thereby affecting business performance. The Group is working to improve the working environment and retain personnel through diversifying recruitment of new graduates, mid-career hires, and foreign technical intern trainees, training personnel through internal and external training programs, introducing a three-day weekend system (April 2025), and implementing base pay increases for managerial positions (April 2025).

Sales volumes of winter car accessories handled in the Autobacs Business, such as studless tires and tire chains, are significantly affected by winter weather conditions. In mild winters, sales volumes may decline, which could adversely affect business performance. As a countermeasure, the Group is stabilizing earnings by expanding Pit Service operations such as vehicle inspections, maintenance, and body/paint work, which are less affected by seasonal fluctuations, and by strengthening its automobile insurance service offerings.

In the event of fire, earthquake, typhoon, or other disasters, store damage or personnel shortages due to death or injury of officers and employees may occur, potentially leading to decreased sales and costs associated with restoration and staff replacement, thereby affecting business performance. The Group strives to reduce this risk by establishing crisis management regulations, maintaining evacuation and fire-fighting equipment, and incorporating fire prevention plans and drills into daily operations.

If social and economic activities are restricted due to the spread of a large-scale infectious disease caused by an unknown virus or similar pathogen, store operations may become difficult, potentially affecting business performance. The Group has established crisis management regulations and built a system to promptly implement infectious disease countermeasures at stores after quickly grasping the responses of the government and local authorities.