Kairikiya Co., Ltd.

The Group procures ingredients through three wholesale distributors, but procurement at appropriate prices may become difficult due to epidemics such as avian influenza, poor crop harvests, sharp exchange rate fluctuations, or significant changes in ingredient market conditions. The materialization of geopolitical risk is also expected to raise procurement costs for foreign-sourced ingredients and make stable procurement more difficult. As countermeasures, the Group has established a system utilizing three wholesale distributors concurrently, and seeks to minimize impact through regular visits to producers and processors and consideration of alternative menu items.

As Japan's population decline slows growth across the restaurant industry as a whole, intensifying competition with rival companies is expected. The Group has a high degree of dependence on the ramen business, and if competition with rivals in terms of product appeal and service intensifies, it may become difficult to secure revenue as planned. The Group addresses this through market analysis utilizing think tanks and securities analyst reports, along with a differentiation strategy based on strengthening service and product capabilities.

If deterioration in store profitability results in a determination that recognition of impairment losses on fixed assets is necessary, this may affect business results and financial position. In addition, regarding goodwill acquired through M&A, if actual performance falls significantly short of the business plan at the time of acquisition, there is a risk that a substantial goodwill impairment loss will need to be recorded. The Group addresses this through monthly monitoring of store-level profit and loss, early countermeasures at stores showing signs of performance deterioration, and detailed due diligence for M&A transactions.

Securing and developing personnel is essential for business expansion through directly-operated stores, and if changes in the recruitment environment prevent the Group from securing necessary personnel, or if training of store manager candidates does not proceed as planned, new store opening plans may be hindered. In addition, responding to recruitment difficulties may lead to increases in part-time hourly wages and recruitment costs, potentially affecting business results. The Group addresses this through the design of personnel systems enabling diverse talent to thrive and the development of curricula for early skill acquisition.

Expansion of directly-operated stores requires continuous new store openings, but if properties meeting conditions for location, lease terms, and profitability cannot be found, store opening plans may be delayed. Additionally, even after opening a store following sufficient investigation, there is a risk that changes in the surrounding environment or errors in forecast accuracy may prevent securing sufficient customer traffic, resulting in revenue falling short of plan. The Group addresses this by expanding store development personnel and improving forecast accuracy through analysis of the gap between projected and actual sales.

If in-house franchise stores or franchisee-operated stores cause damage to brand value due to legal violations or reputational harm, this may affect the Group's overall business results and financial position. In addition, penalties arising from contract termination, store buy-back costs, reputational damage from litigation disputes, and the emergence of self-competition may also affect business results. The Group addresses this through stricter franchise screening, regular confirmation of operating conditions and owner interviews through store visits, and proactive resolution efforts when problems arise.

While hygiene and quality control based on HACCP and hygiene inspections by external organizations are conducted at all stores, in the unlikely event that a serious incident such as food poisoning occurs, this may have a material impact on business results and financial position. Since the Company does not operate a central kitchen and instead conducts preparation and cooking at each individual store, thorough hygiene management is particularly important. The Group addresses this through group training for acquiring hygiene knowledge, store visit checks, and regular hygiene inspections conducted by external specialized organizations.

The government has set a goal of achieving a nationwide average minimum wage of ¥1,500 during the 2020s, and it is highly likely that the minimum wage will be raised regularly each year. For the Group, whose business model in the restaurant industry is labor-intensive, a significant rise in labor costs would directly affect business results. The Group is building a framework enabling short-term skill acquisition and aims to achieve hourly wage rates unaffected by minimum wage revisions.

Representative Director, President and Founder Hajime Fujita plays an important role across the full range of corporate activities, including store development, product development, and formulation of management policy, and if unforeseen circumstances or his resignation were to occur, this may affect business results and financial position. In addition, lease agreements for some stores are backed by personal debt guarantees from Mr. Fujita, meaning dependency on this individual exists structurally. The Group is working to resolve excessive dependence on a specific individual by delegating authority to each division head and establishing executive officer positions.

The Group has expanded subsidiaries both domestically and internationally under the growth strategy pillar of "building a sustainable growth model through multiple brands," but deficiencies in governance functions or insufficient understanding of subsidiaries' business models could result in significant losses or impairment of corporate value. The Group seeks continuous strengthening of its governance framework through thorough reporting and approval processes for material matters based on its affiliated company management regulations, and regular internal audits of subsidiaries by the internal audit department.