ROUND ONE Corporation

The Group's business model is primarily premised on customers visiting stores, and if a situation making store visits difficult, such as the spread of COVID-19, becomes prolonged, continuation of business operations may become difficult. Beyond infectious diseases, unforeseen circumstances such as natural disasters and terrorism also carry the risk of dampening entertainment consumption sentiment. Although the Group has formulated a BCP and is advancing risk countermeasures, there are limits to complete preparedness for unpredictable events.

Representative Director and President Kimihiko Sugino is the founder and a major shareholder, and a corporate culture has been established in which major management decisions since the company's founding have depended on him. If for any reason it becomes difficult for him to manage the company, this could have a material impact on business development and operating results. While efforts are being made to foster a corporate culture that ensures autonomous growth, resolving this structure of dependence remains a mid-to-long-term challenge.

The Group aims for mid-to-long-term growth through store openings in the United States and China, but there is a risk that domestic know-how may not be applicable due to differences in laws and customs, and that unforeseen circumstances, including litigation, may arise. If examination of various laws and regulations in the locations of store openings or securing necessary personnel is delayed, this may hinder new store opening plans and affect future operating results. Following the transition to a holding company structure in April 2024, the Group has been building an information-sharing system with group subsidiaries, but failure to manage this appropriately could also lead to a decline in trust.

New business developments such as the "Japanese Food Hall" and the high-end Japanese restaurant "ROUND ONE Delicious" require substantial investment. If store openings and operations do not proceed as originally planned and sales and profits fall short of expectations, recovery of invested capital may be delayed or become difficult, potentially affecting operating results and financial condition. The risk of launching new businesses is also linked to supplier dependence (delays in ingredient procurement), constituting a compound risk factor.

With the progression of the declining birthrate and aging population in Japan, the young generation that constitutes the Group's core target has been gradually decreasing. While the Group is focusing on capturing family and senior demographics as well as inbound demand, if expansion of target demographics does not proceed as planned, this may affect operating results. Combined with the risk of declining users of Bowling and Amusement, there is a risk that the revenue base of existing domestic businesses will shrink over the mid-to-long term.

If the Group is slow to respond to service improvement and cost reduction through the use of AI technology, its competitiveness may decline. In addition, system failures or information leaks caused by cyber attacks could affect operating results. The training and securing of necessary personnel is a challenge, and continuous strengthening of the information management system is also required from the standpoint of personal information protection.

As business expands both domestically and overseas, securing and developing excellent personnel has become an important challenge, and if personnel development does not proceed smoothly, this may lead to increased labor costs and a decline in service quality. Given the nature of the business, the Group employs a large number of part-time workers, and appropriate responses are required to the declining birthrate, stricter labor laws, and harassment issues, among others. If these matters are not adequately addressed, this may affect operating results through recruitment difficulties and rising turnover rates.

Domestic amusement facilities are subject to restrictions on store location, business hours, and customer age, etc. as Category 5 businesses under the Entertainment Businesses Control Law, while the food and beverage business is subject to regulation under the Food Sanitation Act and alcohol-related laws, and advertising and sales promotion are subject to regulation under the Act on Specified Commercial Transactions and the Act against Unjustifiable Premiums and Misleading Representations, among others. If these legal regulations are changed, this may affect business development and operating results, and similar regulatory risks exist in each country of operation. Store facilities are also subject to regulations such as the Building Standards Act and the Fire Service Act, and there is a risk of large-scale renovation costs arising from regulatory changes.

The Group operates the majority of its store buildings under lease arrangements, and fixed rental costs and constraints on lease terms may affect business development. If impairment losses need to be recognized due to deteriorating store profitability or declines in prevailing real estate prices, this may affect operating results. Accidents caused by aging facilities and unexpected large-scale repairs are also risk factors that increase financial burden.

In IP-utilization initiatives within the entertainment business and in new food and beverage businesses, it has become necessary to build a business operation system that includes intellectual property and brand strategy, and the importance of maintaining and developing the "ROUND1" brand itself is also increasing. If disputes arise regarding quality defects, brand impairment, or rights, this may lower social credibility and affect business development and operating results. Risks related to rights management are also inherent in IP-collaboration prizes and other items procured from suppliers.