MARCHE CORPORATION

In the izakaya industry, intense competition over price, quality, and service is unfolding not only among industry peers but also with fast food chains, restaurant chains, supermarkets, convenience stores, and others. If the emergence of competitors superior in quality, price, and service causes a significant decline in customer numbers, or if profits are squeezed by rising logistics costs or soaring raw material prices associated with the declining birthrate and aging population, this could materially affect business performance. The Company seeks to differentiate itself based on its unique core competency, which is grounded in the management philosophy of "creating a clinic for the heart."

Recruitment and training costs are on a rising trend due to the tightening of labor supply and demand associated with the declining birthrate and aging population, creating a risk that it will become difficult to secure the personnel necessary for new and existing stores. If personnel meeting hiring criteria cannot be secured, planned new store openings may not be executed as scheduled, and if a shortage of appropriate staffing continues, this could ultimately lead to store closures. While the Company is making maximum efforts to secure personnel, the structural tightness in the labor market persists, and this risk has not been resolved.

If unavoidable food poisoning incidents occur at any stage of production, distribution, storage, or cooking, the Company may be forced to suspend operations for a certain period, which could affect business performance. The Company has established a "Store Incident Prevention Committee" and strives to ensure safety through regular training sessions, hygiene inspections based on its own hygiene management manual, and periodic checks by external inspection organizations. However, given the nature of the food service industry, it is difficult to completely eliminate the risk of food safety incidents.

If a significant error occurs in menu labeling content, this could lead to a decline in credibility and reduced sales, thereby affecting business performance. The Company has established a "Quality Control Committee" and a "Menu Labeling Accuracy Committee," and manages data on production areas, processing procedures, and additives with the cooperation of business partners. Amid the need to comply with laws and regulations concerning food labeling, maintaining and strengthening the management system remains an ongoing challenge.

If the Company is held responsible, as a seller, for complicity in drunk driving or for serving alcohol to minors in violation of the Minors' Drinking Prohibition Act, this could affect business performance through loss of credibility and other effects. The Company conducts regular incident prevention training sessions through its "Store Incident Prevention Committee" and raises compliance awareness among store managers. Given the nature of the izakaya business format, compliance risk associated with alcohol service is an ever-present risk.

In the event of a natural disaster such as an earthquake or major typhoon, damage to store facilities, disruption of social infrastructure and logistics, and evacuation advisories may force store closures or reduced operating hours. If the impact of a disaster becomes prolonged, the risk to business performance could further expand due to declining consumer sentiment and rising food material costs. The Company operates multiple stores, which may limit the impact of a large-scale disaster occurring in a specific region; however, a wide-area disaster could result in substantial impact.

If business performance at directly operated stores deteriorates due to changes in the business environment, such as the emergence of competing stores, and investment recovery becomes difficult, the Company may recognize an impairment loss, which could affect business performance. Since the assets subject to this risk include shared assets as well as directly operated stores used for business purposes, if performance deteriorates simultaneously at multiple stores, the scale of the loss could expand. Against the backdrop of intensifying competition in the food service industry, impairment risk is an item that requires continued monitoring.

As of March 31, 2026, the balance of interest-bearing debt stood at ¥1,213 million, with a dependence ratio on interest-bearing debt of 42.3%, a relatively high level. If market interest rates rise due to changes in financial conditions or other factors, this could affect the Company's financial position or business performance. In a rising interest rate environment, increased borrowing costs directly squeeze profits, making the maintenance of financial soundness an important management issue.

The Company primarily opens directly operated stores by leasing buildings and other properties, and if a lessor were to become insolvent or otherwise face financial difficulty, it may become difficult to continue using the leased premises or to recover claims for lease and security deposits. For a food service chain that primarily opens stores based on lease agreements, the credit risk of lessors constitutes a potential financial risk. While the Company comprehensively considers various conditions when selecting store locations, no specific measures addressing changes in lessors' financial condition have been disclosed.

The Company holds a large amount of personal information obtained through customer surveys and other means, and if such personal information were to be leaked due to fraud or other causes, this could lead to liability for damages and loss of credibility, thereby affecting business performance. While the Company has established a management system in line with personal information protection laws and guidelines, risks such as cyberattacks and internal misconduct are also increasing in the food service industry. Continued strengthening of the information management system is required.