FRIENDLY CORPORATION

Business Details

Friendly Co., Ltd., a subsidiary of parent company Joyful Group Co., Ltd., operates the Food Service Business as a single segment, running a chain of "Kamaage Sanuki Udon Kanokawa Seimen" stores primarily in the Kansai region. The menu features udon as its mainstay, combined with Chinese-style noodles (chuka soba) and rice bowls, and is characterized by cost management through in-house production utilizing its own food processing plant (Commissary). As of the end of the third quarter of FY2026 (ending March 2026), the company operated 26 stores. Amid continued increases in energy, labor, and raw material costs, the company is in a state of negative net worth, and there exists a material event related to the going concern assumption.

Recent Overview

Net sales increased 2.8% year-on-year, but losses widened, and delisting procedures are underway

Cumulative net sales for the third quarter of FY2026 (ending March 2026) (April-December 2025) were ¥1,608 million (up 2.8% year-on-year), securing an increase in revenue. However, selling, general and administrative expenses ballooned to ¥1,280 million, expanding the operating loss to ¥47 million (compared to -¥37 million in the prior-year period). The quarterly net loss also worsened to ¥58 million (compared to -¥46 million in the prior-year period). Short-term borrowings increased by ¥110 million to ¥220 million, and net assets worsened to -¥99 million. As a subsequent event, the Board of Directors resolved on January 19, 2026 to implement a share consolidation (1,355,800 shares into 1 share), and the company is scheduled to be delisted from the Tokyo Stock Exchange Standard Market on April 27, 2026. Full-year earnings forecasts are net sales of ¥2,195 million, operating loss of -¥17 million, and net loss of -¥22 million.

Key Products

Growth Drivers

• Expansion of the sales composition ratio of high-value-added products through the introduction of seasonal limited-time menu items (tantanmen, miso chuka soba, spicy beef offal tsukesoba, etc.)
• Promotion of in-house production of chuka soba and sauces utilizing the Commissary, and reduction of the cost ratio (concurrently reducing the ratio of imported ingredients)
• Strengthened approach to new customer segments and participation in municipal initiatives through the introduction of QR code payment (PayPay) at all stores (December 2025)
• Enhanced coupon distribution and increased visit frequency among app-registered members through the upgrade of the proprietary app
• Strengthened individual store management guidance capability, reduced food waste losses, and controlled labor costs through the superintendent system and management support system

Risks

• Deepening negative net worth due to continued recording of operating losses, ordinary losses, and net losses (net assets of -¥99 million, equity ratio of -9.7%)
• Continued pressure on profitability due to soaring energy prices, labor costs, and raw material prices (particularly rice)
• Scheduled delisting from the Tokyo Stock Exchange Standard Market on April 27, 2026 (going private through share consolidation)
• Dependence on deferred repayment of long-term borrowings from parent company Joyful (long-term borrowings from affiliated company of ¥458 million included in fixed liabilities) and reliance on financing through a commitment line agreement with financial institutions
• Risk of additional losses due to continued recording of impairment losses on fixed assets (¥7 million cumulative in 3Q)
• Cost expansion exceeding the increase in sales due to rising selling, general and administrative expenses (from ¥1,237 million in the prior-year period to ¥1,280 million in the current period)