Three F Co.,Ltd.

Changes in the domestic operating environment, such as trends in the economy and personal consumption, abnormal weather and unseasonable conditions, and intensifying competition with other companies in the same industry and retailers in different industries, may affect business results and financial condition. Because the Group operates the Convenience Store Business as a single business, its sensitivity to fluctuations in the external environment is high. The Group has established a system for analyzing risks and formulating countermeasures through its "Crisis Management Regulations" and Crisis Management Committee.

Disasters such as fires and earthquakes, or unforeseen accidents, may cause delays or suspension of logistics to stores or damage to the stores themselves, potentially disrupting business operations. Since the Convenience Store Business depends on the continuous operation of its store network for its revenue, the impact of a wide-area disaster would be particularly significant. The Group has established individual response manuals for large-scale disasters to minimize the expansion of risk.

The Group is subject to a wide range of laws and regulations and administrative licensing and approvals, including those related to food safety, fair trade, environmental protection, and personal information protection, and future tightening of regulations or legal amendments may give rise to new costs in response. Although officers and employees strive to ensure compliance with laws and regulations, changes in the regulatory environment are difficult to predict, and the associated response costs could affect business results and financial condition. The Group has established a risk management system based on its "Crisis Management Regulations" and is working to respond appropriately.

As the Convenience Store Business involves the sale of food products, should a food-related incident arising from a handled product occur, it could result in decreased sales due to loss of customer trust, the occurrence of liability for damages, and costs associated with responding to the issue. While the Group thoroughly manages quality, freshness, and hygiene, it is difficult to completely eliminate risks across the entire supply chain. The Group has prepared individual response manuals for food-related incidents and other issues to minimize the expansion of such risks.

Because the Group has entered into a corporate franchise agreement with Lawson, Inc. and operates stores under the "Lawson・Three F" brand, if the relationship of trust between the two parties is damaged and the agreement is terminated, the very foundation of the business could be lost, potentially having a severe impact on business results and financial condition. Since the franchise system presupposes a relationship of trust between both parties to the agreement, deterioration of the relationship due to any factor represents a risk. The Group strives to maintain a favorable relationship, but the securities report does not disclose specific details of measures to prevent termination of the agreement.

Because the Group enters into franchise agreements with franchisees, who are independent business operators, under the "Lawson・Three F" brand, legal violations or misconduct by a franchisee could damage the brand image. In addition, should troubles or litigation arise with a franchisee, the outcome could, depending on the circumstances, affect business results and financial condition. The Group operates its chain through the ongoing building of relationships, but it is difficult to fully control the conduct of individual franchisees.