DUSKIN CO., LTD.

In business operations centered on the franchise system, execution of measures such as new product/service introductions and new store openings requires the understanding, cooperation, and financial contribution of franchisees. If such understanding cannot be obtained, plans may be suspended or delayed. If trouble arises with franchisees, franchisee withdrawal, litigation, or legal violations/scandals by franchisees could affect operating results. Maintaining a favorable relationship with franchisees as the franchisor is a prerequisite for business continuity.

Store expansion through the franchise system is subject to regulations such as the Act on Special Measures for the Promotion of Small and Medium Retail Business, the Antimonopoly Act, and the Japan Fair Trade Commission's Guidelines Concerning Franchise Systems (revised April 2021). Amendments or repeals of these laws, or the enactment of new laws, could affect business operations and operating results. Continuous monitoring of regulatory tightening trends is necessary.

The Clean Service Business, the core business of the Home Sales Group, faces a shrinking market due to the spread of disposable products in the household market and the growing awareness of cost reduction among businesses in the corporate market. In the Mister Donut Business of the Food Group, changes in consumer preferences, rising raw material costs, and intensifying competition may also affect operating results. The Company is responding through the development of hygiene-related products, expansion of sales channels, and entry into Asian markets, but the continuation of the market contraction trend poses a risk fundamental to the business.

The Clean Service Business uses chemicals and large volumes of water in its cleaning processes, and violations of legal regulations such as the Water Pollution Control Act or tightening of environmental regulations could affect the business. The Care Service Business is subject to regulations such as the PRTR Act, and the Group as a whole is subject to the Food Sanitation Act, the Act against Unjustifiable Premiums and Misleading Representations, and the Act on Promotion of Subcontracting Small and Medium-sized Enterprises. There is a risk that amendments/repeals of laws, enactment of new laws, or administrative guidance could affect operating results.

In the Home Sales Group, quality issues involving environmental hygiene products, natural water, cosmetics, or health foods could lead to a decline in credibility and impact operating results. In the Food Group, the occurrence of food poisoning or violations of the Food Sanitation Act could result in significant impacts such as compensation liabilities, business suspension, and loss of credibility. While hygiene management guides incorporating HACCP principles and regular inspections have been established, there are limits to achieving complete management across all stores, including franchisees.

In the Life Care Business, unforeseen accidents may occur while providing services primarily to elderly customers, potentially resulting in liability for negligence. In the Care Service Business, defects by service staff or issues with equipment and materials could cause health damage, leading to compensation claims or loss of credibility. Quality improvement efforts are underway through education and training, manual development, and licensing systems, but due to the nature of human-provided services, it is difficult to completely eliminate such risks.

Cyberattacks, malware infections, targeted attacks, and ransomware-based cyber extortion could result in leaks of personal information, business suspension, recovery costs, and responses to monetary demands. The Group and its franchisees hold extensive personal customer information, and any information leak could result in compensation claims and loss of credibility. Measures such as establishing personal information protection regulations, conducting training for officers and employees, holding study sessions for franchisees, implementing system security measures, and conducting regular audits are in place, but continuous response to increasingly sophisticated and diversified threats is required.

The development and securing of personnel capable of practicing hospitality is positioned as fundamental to the business, but if the labor market tightens going forward, making it difficult to secure personnel, or if talented personnel leave, this could lead to a decline in competitiveness and efficiency. Efforts are being made to plan personnel acquisition by combining stable new graduate hiring with mid-career hiring of immediately effective personnel, but the structural issue of labor shortages accompanying the declining birthrate and aging population poses a medium- to long-term risk.

Natural disasters such as earthquakes, typhoons, floods, and tsunamis, abnormal weather associated with climate change, and the spread of infectious diseases such as novel viruses could cause business suspension, equipment damage, and disruption of electricity, fuel, and water supply at business locations nationwide. Measures such as safety confirmation systems, natural disaster response manuals, business continuity plans, and training have been implemented, but given the nationwide scale of business operations, it is difficult to avoid all damage and impact.

The Clean Service Business and the Mister Donut Business, among others, are operated in Asian markets, where political and economic instability, terrorism, labor disputes, and the enactment or amendment of laws and regulations could prevent business activities from developing as expected. Evacuation policies have been established for cases where local evacuation advisories are issued or personal safety is at risk, and systems for obtaining advance information from HR consulting firms and accounting/finance partner companies have been put in place, but the risk cannot be completely avoided.