Y.S.FOOD CO.,LTD.

The Company positions M&A as an important growth strategy under its holding company structure; however, there is a risk that expected synergies may not be realized after an acquisition, or that anticipated outcomes may not be achieved due to changes in the business environment. In addition, the Company operates multiple restaurant brands, and if brand value declines or operational management systems prove inadequate, resulting in deteriorating performance at group companies, this could affect the Company's operating results and financial position. Although the Company conducts thorough due diligence and review when carrying out M&A, the risk of such issues materializing after the fact cannot be entirely eliminated.

As the Food & Beverage Business is the Company's core business, it is directly affected by economic conditions, trends in personal consumption, changes in consumer preferences, and intensifying competition within the industry. If cost increases in raw material prices, logistics costs, labor costs, and energy prices continue, profitability may decline, and if these costs cannot be appropriately passed on through sales prices, operating results may be adversely affected. The Company is addressing this through both cost management and pricing strategy, but the risk of fluctuations in the external environment continues to exist.

The Company's sales tend to be concentrated during peak periods such as Golden Week, the summer holiday season, and the year-end and New Year holidays. If natural disasters, adverse weather, or a deterioration in international conditions occur during these periods, the number of customer visits, including inbound visitors, may decline, significantly affecting business performance. Due to this seasonal concentration of sales, the impact of risks materializing during specific periods on overall annual performance is relatively significant. Advance measures against changes in the external environment are limited, making risk avoidance difficult in certain respects.

Securing and developing store operations personnel, management personnel, and specialized personnel is important for sustainable growth; however, there is a risk that securing the necessary personnel will become difficult due to a declining working-age population resulting from the falling birthrate and aging population, as well as intensifying competition for talent. If labor costs rise beyond expectations, business operating costs will increase, potentially adversely affecting operating results. The Company recognizes personnel recruitment and development as an important issue, but given the structural labor shortage across the industry as a whole, addressing this challenge is difficult.

In the Food & Beverage Business and food manufacturing operations, including OEM contract manufacturing, the Company has established a quality control system through obtaining business licenses under the Food Sanitation Act, assigning food sanitation managers at all stores, and thoroughly disseminating hygiene management manuals. However, if issues such as food poisoning, contamination by foreign matter, labeling deficiencies, or product defects occur, this could result in a loss of public trust and liability for damages. Such issues could have a material impact on the Company's operating results and financial position, and given the need to manage an extensive store network including franchise stores, the scope of risk management is broad.

In addition to fixed assets such as store equipment, production facilities, and land, the Company records goodwill arising from M&A transactions, and if it becomes difficult to recover investments due to changes in the business environment or declining profitability, the Company may record impairment losses. The recording of impairment losses would directly and adversely affect the Company's operating results and financial position. As the Company actively pursues its M&A strategy, the balance of goodwill may continue to increase going forward, making the management of impairment risk an important financial issue.