Fast Fitness Japan Incorporated

If the master franchise agreement with Anytime Fitness Franchisor, LLC (term through June 9, 2040) is terminated or not renewed, the non-compete obligation for two years after contract termination could make it difficult to continue business operations. In addition, if the Company is forced to accept requests for royalty increases or discontinuation/changes to trademark use, an increase in various costs could affect business performance and financial condition. A renewal agreement was concluded as of June 8, 2025, and at present no factors have arisen that would impede the continuation of the agreement.

The increase in 24-hour, year-round, machine-gym-focused low-price fitness clubs may lead to intensified price competition and customer attrition due to deterioration in industry image. In addition, the risk of customer attrition due to changes in consumer behavior is increasing amid the growing entry of online fitness service providers. The Group is responding through SNS advertising and disclosure of store congestion status, but changes in the competitive environment may affect business performance.

Fitness club operations have an earnings structure with a heavy fixed cost burden, including labor costs and rent, and if membership numbers fail to reach the plan at the time of store opening due to changes in the competitive environment, it takes time to secure revenue and recover initial investment. Directly operated stores aim to convert labor costs into variable costs through operations centered on part-time staff, but the fixed cost burden during periods of weak customer acquisition may affect business performance and financial condition. It has also been noted that the period before new stores become profitable tends to be lengthening compared to before.

Impairment of property, plant and equipment may be required due to earnings deterioration at directly operated stores, the impact of competitor store openings, the spread of infectious diseases, and other factors. In addition, regarding assets such as software, goodwill, and shares of subsidiaries associated with investments in new growth areas (overseas, The Bar Method Business, EC & Merchandise Business), if the expected results are not achieved as planned due to changes in the business environment, impairment losses or losses on business divestiture may occur. It is explicitly stated that it is difficult to accurately predict the timing and amount of impairment losses.

If deterioration in profitability of FC franchisees (due to soaring rent, personnel costs, utility costs, etc.) results in the termination of sub-franchise agreements with many FC franchisees, this may affect the Group's business performance and financial condition. Since franchisees are independent business operators, if services are not provided in accordance with the Group's guidance, or if violations of laws such as the Personal Information Protection Act occur, there is a risk that the brand value of Anytime Fitness could be impaired. The Group provides support to franchisees, including compliance training.

The membership and entry management system carries risks of system failure and information leakage due to virus infection, cyber-attacks, and the like, and events such as destruction, falsification, or leakage of important data, system outages, or members being unable to enter facilities could occur. The Group has implemented countermeasures and provides education to FC store staff, but if cyber-attacks or fraudulent activities occur beyond expectations, the resulting decline in brand image and social credibility may affect business performance and financial condition. A notable feature of this risk is its broad scope of impact, as a globally common entry management system is used at all directly operated stores and FC stores.

The balance of interest-bearing debt at the end of the consolidated fiscal year was ¥2,143 million (interest-bearing debt dependency ratio of 9.8%), and the Company utilizes borrowings from financial institutions as funds for opening new directly operated stores. As borrowings increase alongside future business expansion, an increase in funding costs due to interest rate trends or an inability to secure sufficient borrowings may affect business performance and financial condition. In addition, some loan agreements include financial covenants, and there is a risk of losing the benefit of the term if these are violated.

The Group has business bases in Germany and Singapore and has positioned global expansion as a growth strategy, but country risks exist in each country, including economic fluctuation risk, foreign exchange fluctuation risk, government regulations, political instability, and restrictions on fund transfers. If these risks materialize and the Group is unable to respond appropriately, this may affect business performance and financial condition. Since overseas expansion involves investment including M&A, it also carries the risk of goodwill impairment.

There have been past instances of improper conduct by store employees, and while rules have been established and employee education implemented to prevent recurrence, if similar incidents occur in the future or information spreads via SNS, this may lead to a decline in brand image and social credibility. Cases of part-time employees posting inappropriate images online have also been increasing in the industry, and the Group outsources daily monitoring to a specialized company. A characteristic of this risk is that the impact on brand image can occur regardless of the accuracy of the information.

At present, no violations of legal regulations have been identified and a compliance framework is in place, but if new legal regulations are introduced or existing regulations are revised, abolished, or reinterpreted in the future, this may constrain business operations. If a serious legal violation occurs, it may affect not only business performance and financial condition but also the continuity of the business itself. FC franchisees are also required to comply with laws such as the Personal Information Protection Act through the franchise system, and the Group faces a broad range of compliance risks, including the risk of violations at FC stores.