HAMAYUU CO., LTD.

Due to population decline and the falling birthrate combined with an aging population, expansion of the food service industry's market size is difficult to expect, and the operating environment remains challenging amid diversifying customer needs and intensifying inter-company competition. The Company is implementing measures such as improving service and product capabilities, developing new products, expanding its Central Kitchen, and enhancing productivity through IT utilization; however, further deterioration of the market environment may affect the Company's financial position and business results.

If supply-demand tightness arises due to soaring vegetable prices caused by unusual weather or the spread of viruses, the cost of procuring ingredients may rise, putting pressure on profitability. Since raw material costs account for a major portion of cost of sales in the food service business, if price pass-through proves difficult, this may have a direct impact on the Company's financial position and business results.

Funds for store construction costs and leasehold deposits and other opening costs are primarily procured through borrowings from financial institutions, and interest-bearing debt (borrowings, bonds, and lease obligations) accounted for a high 43.3% of total assets at the end of the 58th fiscal year. Going forward, if interest rates rise while this situation persists, financial costs may increase, potentially affecting the Company's financial position and business results.

The Company applies impairment accounting treating each store as an independent cash-generating unit, and there is a risk of recognizing impairment losses if operating income/loss and cash flow remain continuously negative due to significant changes in the external environment or a decline in store profitability. Although improvement plans are formulated and implemented when profitability deteriorates, if profitability declines significantly due to changes in the business environment, this may affect the Company's financial position and business results.

The outbreak of a new infectious disease is expected to result in shortened store operating hours, temporary store closures, a decrease in customer visits due to voluntary restraint from going out, sluggish personal consumption, and delays in the supply of raw materials. In addition, if infected employees occur at the Central Kitchen (Toyokawa Plant) in Toyokawa City, Aichi Prefecture, this could disrupt the production and supply of ingredients, potentially affecting the Company's financial position and business results.

A portion of ingredient delivery to each store, as well as the storage and delivery of processed food ingredients prepared at the Toyokawa Plant (Central Kitchen), is outsourced on a concentrated basis to Showa Reizo Co., Ltd. If an unforeseen incident such as an accident occurs at that company's distribution center, logistics functions could be temporarily suspended, leading to a risk of ingredient shortages at stores, which may affect the Company's financial position and business results.

The Central Kitchen and each store have obtained operating permits based on the Food Sanitation Act and implement hygiene management checklists, on-site guidance, and bacterial testing; however, should a food poisoning incident or similar accident occur, there is a risk of administrative sanctions such as disposal of food products, suspension of operations, or revocation of operating permits. This may have a material impact on the Company's financial position and business results.

The Company's store network is concentrated in the Tokai region, and in the event of a large-scale earthquake, typhoon, abnormal weather, or other natural disaster, there is a risk of a significant temporary decline in customer numbers and a resulting decrease in sales. Because the business structure is regionally concentrated, if a widespread disaster occurs, multiple stores could be affected simultaneously, which may affect the Company's financial position and business results.

Representative Director and President Yonghou Lin plays an important role in formulating management policy, determining business strategy, and developing business formats, locations, and menus. Although the Company is working to strengthen its organization and delegate authority, if he becomes unable to perform his duties for any reason, this may affect the Company's financial position and business results.

Securing excellent human resources is essential for stable growth, and the Company is pursuing active recruitment activities and post-hire training to develop personnel into effective contributors early on. However, if changes in the hiring environment or other factors make it difficult to sufficiently secure and develop personnel, this may lead to a decline in service quality and customer draw, as well as difficulty opening new stores as planned, which may affect the Company's financial position and business results.