SAIZERIYA CO.,LTD.

Operating revenue in the restaurant business fluctuates due to a wide range of factors, including natural disasters, abnormal weather, economic downturns, wars and terrorism, social events, competitor store openings, price competition, and changes in consumer preferences. Delays in store openings or failure to meet recruitment plans may also result in the failure to achieve sales plans, potentially adversely affecting consolidated business results. Although the Group has taken measures such as diversifying production areas and multiple procurement sources, a structural vulnerability to changes in the external environment remains.

If global conditions cause significant fluctuations in food commodity markets, a combination of rising procurement prices, food shortages, and yen depreciation could adversely affect consolidated business results. The Group strives for stable, low-cost purchasing through diversification of production areas and multiple procurement sources; however, its dependence on a global supply chain makes it susceptible to geopolitical risks and exchange rate fluctuations. In particular, production activities in Australia and foreign-currency-denominated imports from around the world amplify foreign exchange risk.

The Group conducts production activities in Australia and imports food materials from various countries in foreign currencies, so exchange rate fluctuations directly affect purchase prices, business results, and financial condition. When translating the foreign-currency-denominated financial statements of overseas subsidiaries into yen, assets, liabilities, and revenues also fluctuate. The Group utilizes hedging contracts such as forward exchange contracts and currency swaps, but risks remain of opportunity losses from fluctuations exceeding expectations and of counterparty default risk.

If overseas or domestic factories (commissaries) become inoperable due to natural disasters, food poisoning incidents, fires, or other causes, it could disrupt food supply to all stores and have a material adverse effect on consolidated business results. Because the Group employs a centralized production and distribution model, there is a high risk that the shutdown of a specific facility could spread throughout the entire business. There is currently no specific description of alternative procurement measures in the securities report.

If the recruitment and training of talented personnel does not proceed as planned, or if the number of resignations significantly exceeds expectations, it could hinder business expansion and adversely affect consolidated business results. In addition to the risk that future demographic changes may make it difficult to secure an adequate workforce, personnel cost burdens may also increase due to revisions to various labor laws and regulations. The Group states that it is making efforts to become an attractive employer for job seekers through active store expansion.

The increasing sophistication and refinement of cyberattacks, such as ransomware attacks, are heightening risks of unauthorized external access, malware infection, information leakage, system shutdowns, and data tampering. If such incidents occur, they could result in the leakage or loss of business data (including personal information), suspension of store operations, and damage to brand image, potentially adversely affecting consolidated business results. The Group makes extensive use of the internet and various networks in store operations and headquarters functions, inherently exposing it to the risk of becoming a target of attacks.

The Group's restaurant business is subject to regulation under the Food Sanitation Act, and operating a restaurant requires the appointment of a food sanitation manager and a permit from the prefectural governor. If a food poisoning incident occurs, the Group could be ordered to dispose of food, have its business permit revoked, be prohibited from operating, or be suspended from operations for a certain period, potentially adversely affecting consolidated business results. As the Group operates restaurant chains in countries around the world, it is also required to comply with food safety regulations in each country and region.

Because the Group imports food materials from optimal sourcing locations around the world and operates restaurant chains in various countries, serious food safety issues arising internally or externally in any country or region could affect business performance. Given the structure of its global supply chain, quality control at each stage of production, transportation, and storage is essential, and a single food poisoning or foreign object contamination incident carries the risk of undermining trust in the brand as a whole. The securities report does not provide specific details of the quality control system.

Because the Group enters into lease agreements with store owners and provides security deposits, if a store owner goes bankrupt or otherwise becomes unable to return the deposit, it could adversely affect consolidated business results. In addition, when closing unprofitable stores ahead of schedule, the Group may incur losses on disposal of fixed assets, lease cancellation losses from waiving claims for the return of security deposits, and cancellation penalties. Because the Group employs a scrap-and-build strategy, these costs associated with store closures arise on an ongoing basis.

If an infectious disease such as a novel strain of influenza spreads globally, increased employee absences, disruptions to food supply, and difficulty securing energy could cause factory operations and store operations to be scaled back or suspended. Because the Group has expanded its business across regions worldwide, there is a risk of simultaneous impact across multiple countries and regions. If significant human and business impacts occur, they could have a material effect on business performance.