UP GARAGE GROUP Co., Ltd.

If a natural disaster such as an earthquake, storm/flood damage, or heavy snowfall, or a serious infectious disease occurs in Kanagawa, Tokyo, Saitama, or Chiba, where the head office and main directly-operated stores are concentrated, human and physical damage may force a significant scaling-down of business. Business continuity may also become difficult due to lifeline disruptions or government evacuation orders. The Group aims to reduce this risk through BCP formulation, regular facility inspections, and safety confirmation email drills.

Purchasing and selling used car accessories and similar items requires a secondhand dealer license from the prefectural public safety commission, and violations may result in license revocation or business suspension. In addition, if purchased goods are found to be stolen property, an obligation to return them without compensation arises under Civil Code provisions, resulting in losses. The Group strives for compliance through membership in the Japan Reuse Business Association, mandating that employees obtain reuse certification, and cooperation with police authorities.

If personal information held through each business is leaked due to intentional acts or negligence by related parties or outsourcing contractors, or through unauthorized external access, this may result in substantial costs, damage claims, and brand damage. The Group has implemented countermeasures including obtaining Privacy Mark certification, establishing a personal information protection management system, conducting company-wide training once a year, and strict management at an external data center.

Rapid technological innovation such as connectivity, automation, sharing, and electrification may change customer needs and transform the demand structure for car and motorcycle-related accessories. If innovative technological changes occur, there is a risk that the market size of the existing used car accessories business will shrink. The Group has established a Corporate Planning Office to monitor industry trends and aims to respond flexibly through continuous development of new businesses and services.

The Group relies heavily on customer buybacks for used goods procurement, and it may become difficult to secure stable procurement in terms of both quality and quantity due to competitor activity and the expansion of CtoC transaction services such as flea market apps. There is a risk that lost sales opportunities due to insufficient procurement could affect operating results and financial condition. There is also a risk that procurement prices for new products could rise sharply due to fluctuations in raw material prices or changes in market conditions, leading to a decline in demand.

The majority of new products are procured from Asian regions such as China, South Korea, and Taiwan, and if there is a drastic change in the political or economic situation in these regions or a large-scale natural disaster occurs, procurement of goods may be disrupted. In addition, for overseas store openings such as in California, U.S.A., differences in laws, culture, and business practices, as well as exchange rate fluctuations, pose a risk of affecting business performance. The Group responds by continuously collecting and analyzing information on business partners and expansion destinations, and by securing goods early and expanding procurement routes.

Continued IT investment is essential for business expansion centered on the EC site "upgarage.com," and if appropriate investment is not made, service quality and brand image may decline and costs may increase. If an information/communication system failure becomes prolonged, there are concerns about lost business opportunities, damage to credibility, and impact on social trust. The Group addresses this through in-house development of the IT department, establishment of IT management regulations, and the construction of a backup system including cloud-based systems.

The main currency for overseas sales is the U.S. dollar, and extreme fluctuations in the USD/JPY exchange rate may affect business performance. This risk is expected to expand as the proportion of overseas sales increases. Currently, the Group monitors exchange rate trends and states that it will consider introducing measures such as forward exchange contracts depending on future increases in the proportion of overseas sales.

The Group operates franchises in five categories including UP GARAGE and Tire Distribution Center, and if a franchisee withdraws for any reason, royalty income will decrease, potentially affecting business performance. There are also concerns about the impact on business performance if litigation related to franchise agreements is filed. The Group aims to build trust with franchisees and improve store operations through regular store visits by supervisors, franchisee meetings held once or twice a year, training programs, inventory support, and system support.

E&E Co., Ltd., the asset management company of the Representative Director and Chairman, holds 71.45% of the total issued shares, and if the major shareholder's shareholding policy or voting rights exercise policy changes, this could affect important management decisions and thereby affect business performance and financial condition. To protect minority shareholders, the Group has appointed three independent outside directors and established a voluntary nomination committee to strengthen governance.