SRS HOLDINGS CO.,LTD.

If consumer motivation to dine out declines significantly due to large-scale natural disasters, war, terrorism, new infectious diseases, or abnormal weather during peak seasons, net sales could decline substantially. As the Group's main business is restaurant operation, changes in the external environment have a direct structural impact on operating results. The Group has implemented measures such as formulating a business continuity plan (BCP), but such measures may not necessarily fully prevent or mitigate the impact.

There is a risk that raw material prices and logistics costs may rise, or supply shortages may occur, due to abnormal weather, natural disasters, international conflicts, sharp exchange rate fluctuations, rising energy costs, or a shortage of logistics drivers. Although measures such as diversifying sourcing regions and reviewing delivery efficiency have been implemented, rising costs may affect operating results. Given the food service industry's high dependence on food ingredients, fluctuations in procurement costs directly affect profit margins.

Goodwill arising from corporate acquisitions is recorded on the consolidated balance sheet, comprising ¥4,538 million for Amino Co., Ltd., ¥217 million for Foods Net Co., Ltd., and ¥601 million for Sushi Benkei Co., Ltd. (as of March 31, 2026). If expected results are not achieved due to changes in the business environment or other factors, an impairment loss may be recorded, which could affect operating results. While the Group currently judges that the goodwill appropriately reflects future earning power, deterioration in the external environment could trigger impairment.

Amid an expected decline in Japan's working-age population, securing diverse talent, including women and foreign workers, has become an important challenge. If recruitment in line with plans becomes difficult, or if delays in personnel development or continued personnel attrition occur, achievement of business plans may become difficult. In addition, if labor costs rise more than expected due to a deteriorating recruitment environment, this could also affect operating results.

There is a risk that labor costs may rise due to growing social momentum for wage increases against the backdrop of rising consumer prices, revisions to labor-related laws and regulations, and changes to the social insurance system. The Group has announced the "SRS DX Promotion Declaration 2030" and is working to improve productivity and maximize operational efficiency for all employees; however, if there are delays or shortcomings in responding to changes in relevant laws and regulations or the labor environment, this could affect operating results. Because the Group employs diverse employment types, including regular employees, contract employees, and part-time workers, the scope of impact from system changes is broad.

Store operations, food ingredient procurement, delivery, and other operations depend on information systems. If a failure occurs due to communication outages, program malfunctions, computer viruses, or external cyberattacks, efficient store operation and service provision could be impeded. This could result in loss of critical data or incurrence of response costs, which could affect operating results. While the Group works to reduce risk by establishing a rapid response system, complete prevention is difficult.

As a restaurant operator, ensuring food safety is the most critical issue. The Group has established the "SRS Group Audit Office Safety and Hygiene Section," which regularly checks ingredient quality control and store hygiene management. However, if a serious food safety-related problem occurs, whether internally or externally, this could affect operating results. Food safety incidents directly lead to loss of consumer trust and carry the risk of reduced sales through brand damage.

The Group depends on the "Washoku Sato" business format for 38.1% of consolidated net sales (FY2026, ending March 2026), making concentration in a single business format a management risk. While the Group is focusing on developing other business formats such as "Tendon Tempura Honpo Santen," "Nigiri Chojiro," and "Katsuya," deterioration in the performance of the "Washoku Sato" format could directly affect the Group's overall operating results. Until format diversification progresses further, maintaining the competitiveness of the core business format remains an important management challenge.

The Group handles large volumes of customer information, specific personal information, and confidential information related to business operations. If such information were to be leaked for any reason, this could result in damage compensation claims or a decline in social credibility, affecting operating results. The Group has implemented measures such as establishing and disseminating rules for handling personal information within the Group and outsourcing My Number (individual number) handling to external specialist providers, but it is difficult to completely eliminate the risk of leakage.

As of March 31, 2026, the interest-bearing debt dependency ratio stood at 26.0%. If interest rates rise in the future, financial costs could increase, affecting operating results. Although the Group is working to reduce its interest-bearing debt balance under a conservative financial policy, sensitivity to changes in the interest rate environment remains. In addition, the Group holds a balance of guarantee deposits placed with lessors of ¥4,369 million (as of March 31, 2026), and there is a risk that recovery could become difficult in the event of a lessor's bankruptcy or similar event.