Kyowa Corporation

If consumers' disposable income and leisure spending decline due to fluctuations in Japan's domestic economy or government economic policy, this will directly affect the number of store visitors and sales. Amusement facilities depend on consumers' discretionary spending, making them particularly vulnerable during economic downturns. A further increase in the consumption tax rate could also suppress personal consumption, and since it is difficult to pass on price increases under a pricing structure based on ¥100 increments (tax included), the Company is addressing this by promoting the introduction of electronic payment systems.

Delays in introducing the latest amusement equipment, insufficient unit numbers, or equipment that does not match customer preferences could reduce competitiveness relative to competing stores and affect business performance. There is also a risk that customers' leisure preferences themselves may change. The Company responds by installing a wide range of equipment genres and introducing the latest equipment ahead of competitors, but the impact could be significant if the Company falls behind in responding to changes in preferences.

There is a risk that the declining birthrate in Japan will lead to a medium- to long-term decrease in the young population, which is the primary customer base for amusement facilities. The Group is advancing store opening measures that take into account medium- to long-term population trends and is working to operate stores that cater to a wide range of age groups; however, if the declining birthrate accelerates further, a contraction in market size will be unavoidable.

Business scale expansion through multi-store development is a pillar of the Company's growth strategy, but if properties meeting the required criteria cannot be secured, or if store operations do not proceed as planned after opening, the growth plan could be derailed, affecting business performance. Although the Company thoroughly examines the trade area population, competitive landscape, and profitability before opening a store, securing leased properties is subject to external circumstances.

The Company primarily raises funds for capital expenditures and amusement equipment purchases through borrowings from financial institutions, and the balance of interest-bearing debt at the end of the consolidated fiscal year under review reached ¥6,639,324 thousand (interest-bearing debt dependency ratio of 35.6%). If interest rates rise significantly, an increase in the interest payment burden could worsen business performance and financial condition. While the Company intends to continue actively expanding its store network while paying attention to financial soundness, changes in the interest rate environment directly affect its financial strategy.

Kazuhiko Miyamoto, the founder and Representative Director and President, plays a critical role in determining management policy and strategy and in driving business operations. If he were to become unable to perform his duties, this could have a material impact on business performance and management. The Company is in the process of building a structure to reduce this dependence, but at this stage, dependence remains high.

Amusement facility operations are subject to regulation under the "Act on Control and Improvement of Amusement Businesses" and the "Act against Unjustifiable Premiums and Misleading Representations," and there is a possibility that tightened regulations or the enactment of new laws could restrict business activities. While the Company currently operates its stores in compliance with each relevant law, changes to regulations on the type and amount of prizes directly affect customer draw, making it essential to monitor trends in regulatory revisions.

If the impact of infectious diseases, including COVID-19, expands beyond expected levels, this could have a significant impact on business performance due to a decline in the number of store visitors and temporary store closures, among other factors. While the Company implements hygiene management and infection prevention measures based on industry guidelines, the effectiveness of such measures may be limited depending on the scale and duration of the spread of infection.

Securing and developing personnel to operate stores, particularly store managers and managers, is a critical issue for business continuity. If the Company is unable to sufficiently secure the desired personnel or if development plans are delayed, the quality of store operations could decline, affecting business performance. While the Company actively conducts recruitment activities through its website and recruitment agencies, there is a risk that intensifying competition in the labor market could make securing personnel difficult.

If personal information held under the membership program or other systems were to leak externally, this could result in a decline in corporate trust and legal liability. In addition, if failures or operational errors occur in the information and network systems necessary for business operations, this could result in lost business opportunities and additional costs. While the Company has implemented measures such as establishing internal regulations, thorough access management, and employee training, it must continue to address external threats such as cyberattacks.