OM2Network Co.,Ltd.

If mass food poisoning incidents or other sanitary issues occur, or if consumer avoidance sentiment heightens due to epidemics such as BSE, foot-and-mouth disease, swine diseases, or avian influenza, this could have a material impact on business performance. In recent years, incidents threatening food safety, such as mislabeling and misrepresentation problems involving frozen foods, have become increasingly serious, and this is regarded as a particularly important risk for the Company Group, which centers its business on meat. Although the Company Group has long implemented measures emphasizing safety and freshness, it is difficult to completely eliminate the impact of external factors.

As a company handling fresh perishable foods, there is a risk that if a sanitation-related accident occurs at a business location (store or plant), the trust built up over many years could be undermined in a single incident. The Company Group requires sanitation management at each business location based on work manuals, handwashing, and sterilization manuals, and monitors implementation status through store visits by supervisors, but the risk cannot be completely eliminated.

Almost all of the Company Group's store openings are in tenant form, and there are 9 developers with which the Group has 5 or more stores. Depending on sales performance and overall business relationships, there is a risk of being forced to close stores, and depending on the response of major developers, this could have a significant impact on business performance. Although the Group maintains favorable relationships with all developers, as a tenant, the structure is such that contract continuation depends on the counterparty's decision.

While new store openings are essential for the growth of the retail and food service chain business, overstore conditions continue in many regions domestically, and intensifying competition with rival stores could lead to deterioration in operating revenue and an increase in extraordinary losses due to higher store closure costs. Individual stores are constantly exposed to risks of deteriorating business environment due to aging facilities, changes in foot traffic, and the emergence of competing stores, and the Company Group is not exempt from these risks.

Almost all of the Company Group's stores are leased properties, and there is a possibility that lease agreements could be terminated due to circumstances on the lessor's side. In addition, as of the end of the current consolidated fiscal year, the Group has deposited a total of ¥960 million in security deposits, and there is a risk that a portion of this could become unrecoverable if a lessor's creditworthiness deteriorates or the lessor becomes insolvent. While the leasing format has the advantage of a lighter capital investment burden, it also carries the structural vulnerability that contract continuation depends on the lessor's intentions.

The Company Group has entered into basic franchise agreements with 20 franchise stores in the Food Service Business and operates stores under the same trade name. If misconduct or other incidents occur at a franchise store, the brand image of the entire chain, including directly-operated stores, could be damaged, potentially affecting business performance. Although the proportion of franchise stores relative to the total number of stores is limited, the risk of brand damage has the nature of spreading throughout the entire chain.

Further growth of the Company Group requires the recruitment and development of excellent personnel, and the Group is working on personnel development through new graduate and mid-career hiring as well as training by job level. However, if the Group is unable to secure or develop the necessary personnel, this could affect business development and performance. Against a backdrop of the declining birthrate and intensifying competition in the labor market, competition for talent in the meat and food service industries remains an ongoing challenge.

If a large-scale earthquake, storm or flood damage, fire, or other disaster occurs, this could cause damage to stores, plants, and other facilities as well as human casualties, and could also adversely affect business performance due to disruptions to business operations and logistics. The Company Group operates numerous stores and plants nationwide, and in the event of a widespread disaster, there is a risk that multiple locations could be affected simultaneously.

There is a possibility that defamatory or slanderous rumors regarding the Company Group's products, services, officers, or employees could be spread through social media or internet bulletin boards. While the Group attracts customers through media such as its website, reputational damage in the digital sphere carries the risk of affecting business performance through impacts on brand image and customer attrition.