KUSHIKATSU TANAKA HOLDINGS CO.

The restaurant industry has low barriers to entry, and the market environment remains challenging due to the growth of the home-meal replacement market and intensifying price competition. The Group is seeking differentiation through the concept of "Kushikatsu Tanaka," but if competition intensifies further, this could affect business results or financial condition. Amid continued sluggish personal consumption, maintaining and improving existing store sales has become an important management challenge.

The Group operates stores centered on the "Kushikatsu Tanaka" brand, leveraging its strength as an affordable, recession-resistant B-grade gourmet offering. However, if brand value is damaged due to changes in customer preferences, scandals, food poisoning incidents, or reputational damage on social media, this could have a material impact on business results or financial condition. Inappropriate operations at franchise-affiliated stores could also be a factor in brand damage.

The Group procures ingredients from food wholesalers and manufacturers and beverages from specialized beverage wholesalers, diversifying its suppliers to stabilize quality and absorb price fluctuations. However, if a supplier becomes unable to procure goods for any reason, or if ingredient prices rise significantly due to weather or market conditions, this could affect business results or financial condition through an increase in the cost of sales ratio.

The Group is proceeding with store openings around residential areas, city centers, and major suburban stations, but if it cannot secure properties that meet conditions for location, rent, and profitability, store opening plans may not proceed as scheduled. In addition, if changes in transportation access or new entry of competing stores occur after opening, expected store profitability may not be achieved, which could affect business results or financial condition.

In accordance with the Food Sanitation Act, the Group assigns food hygiene managers at all stores and conducts hygiene management through store operation manuals, hygiene inspections by external organizations, and on-site audits of partner factories. However, should a food poisoning incident or similar accident occur, this could have a material impact on business results or financial condition through brand damage, business suspension, damages claims, and other consequences.

Continuous expansion of directly-operated stores requires securing and training necessary personnel, and the Group has diversified its recruitment methods and established training curricula including on-the-job training. However, if changes in the recruitment environment make it difficult to secure necessary personnel, or if the training of store manager candidates does not proceed as planned, the store opening plan for directly-operated stores may be delayed, which could affect business results or financial condition.

The Group groups cash flows primarily by store unit, and if store profitability deteriorates due to significant changes in the external environment and operating income continues to be negative, it may become necessary to record impairment losses on fixed assets. Recording impairment losses could directly affect business results or financial condition.

The Group is subject to a wide range of laws and regulations, including the Food Recycling Act, the Rice Traceability Act, the Act on Control and Improvement of Amusement Business, the Act Prohibiting Alcohol Consumption by Minors, and the Road Traffic Act. If a violation of laws or regulations occurs, the Group may be subject to administrative dispositions such as business suspension, and if legal regulations are strengthened in the future, new expenses such as capital expenditures for compliance may arise, which could affect business results or financial condition.

The Group holds personal information of employees and customers, and strives for appropriate management in accordance with the Act on the Protection of Personal Information. However, if a leak or unauthorized use occurs, this could result in loss of social trust and claims for damages. In addition, the Group outsources information processing such as sales management, ingredient ordering, payroll calculation, and accounting processing to external vendors, but if unforeseen circumstances such as natural disasters, equipment failures, or network failures occur, this could disrupt operations and affect business results or financial condition.

The Group conducts overseas business, and if political unrest, terrorism, or tightening of foreign investment regulations occurs in the countries where it operates, it may be forced to suspend store operations or withdraw, making it difficult to recover the amount invested. In addition, exchange rate fluctuations when translating the financial statements of overseas subsidiaries into yen could reduce consolidated net sales and profit, and there is also a risk that rising local ingredient procurement costs could reduce profitability.