create restaurants holdings inc.

There is a possibility that food prices will rise and supply will become unstable due to a combination of factors such as high crude oil prices, yen depreciation, Russia's invasion of Ukraine, and weather factors. Although the Group's dependence on specific ingredients is low, it responds through price negotiations with suppliers and menu revisions to pass on costs to selling prices and adjust usage ratios; if such responses are insufficient, earnings will be directly squeezed.

Amid solid dining-out demand driven by selective consumption and expanding inbound demand, there is a risk that the Group will be unable to secure the necessary human resources, as well as a risk of soaring labor and recruitment costs. The Group is responding through expanded hiring of foreign nationals, developing an environment for diverse working styles, and labor-saving through DX such as serving robots and mobile ordering; however, insufficient staffing could disrupt store operations and new store opening plans.

The Group's basic store opening format is through leasing, and there is a possibility that fixed-term lease agreements will not be renewed after the contract period ends. The Group is reviewing its investment criteria in light of changes in favorable location conditions since the COVID-19 pandemic and increased investment amounts due to inflation; however, store closures resulting from failed contract renewals could affect business performance.

As the Group's basic store opening format is through leasing, it deposits security deposits and guarantee money with lessors when opening stores. Depending on the financial condition of the lessor, all or part of these amounts may become unrecoverable upon withdrawal at the end of the contract period. Although the Group conducts credit checks on lessors at the time of contract, if such deposits become unrecoverable, this will directly impact business performance.

If hygiene issues such as food poisoning or foreign object contamination occur, business performance may be affected due to a decline in product credibility and damage to the corporate image. The Group strives for prevention through thorough hygiene management manuals, the establishment of the president-led "Food Safety and Security Promotion Office," and strengthened systems for allergen management and regular inspections; however, it is difficult to reduce this risk to zero.

At the end of the current fiscal year under review, interest-bearing debt (excluding lease liabilities) accounted for 19.1% of total assets, with capital expenditure funds procured mainly through borrowings from financial institutions. As these are currently procured mainly through long-term borrowings at fixed interest rates, the Group will not be affected for a certain period; however, if funding costs rise at the time of refinancing, business performance may be affected.

Natural disasters such as earthquakes, tsunamis, and typhoons, disruptions to lifelines and transportation networks, and the spread of infectious diseases may lead to a decrease in customer visits, disruption of ingredient procurement, and difficulty securing employees, potentially disrupting store operations. As the Group operates stores both domestically and internationally, the scope of impact is broad, and there is a risk of a severe impact on business performance, as seen during the past COVID-19 pandemic.

The Group relies on information systems for major operations such as store management and food procurement, and if a system failure occurs due to computer viruses or external cyberattacks, business performance may be affected. The Group implements preventive measures based on security guidelines to reduce risk, but complete protection cannot be guaranteed given the increasing sophistication of attack methods.

As the Group operates stores in a variety of locations and holds tangible fixed assets such as buildings and structures, if store profitability declines significantly due to changes in the environment and the recoverable amount falls below the book value, an impairment loss may be recorded, potentially affecting the Group's financial position and business performance. This risk of temporary loss recognition is particularly heightened during large-scale store openings/closures or sudden changes in market conditions.

As a result of having carried out numerous M&A transactions expected to generate synergies as part of its growth strategy, the Group holds a substantial amount of goodwill and intangible assets. If unexpected outcomes occur and the assessed value of goodwill or intangible assets falls significantly below book value, an impairment loss may be recorded, potentially having a material impact on the Group's financial position and business performance.