GOURMET KINEYA CO.,LTD.

For store assets in the restaurant business, the necessity of impairment treatment is assessed based on declines in asset value and cash flow. If additional impairment treatment becomes necessary due to a significant deterioration in the business environment or other factors, it may have a material impact on operating results and financial condition. Future cash flows are estimated based on business plans approved by management, and the risk may materialize if the plans are not achieved.

In light of rising construction costs, labor costs, and material costs, the Group has adopted a store opening policy that emphasizes investment efficiency. However, there is a risk that it may be difficult to secure locations that meet the criteria, or that planned revenues may not be achieved due to changes in the location environment after opening. In addition, if store closures increase due to poor performance and closure-related losses occur, this may affect operating results and financial condition.

The restaurant industry has low barriers to entry, resulting in many new entrants, and the market is in a saturated and mature stage with increasingly diverse customer needs. The Group seeks to differentiate itself by improving customer service and sales capabilities and consolidating low-profitability business formats; however, if competition intensifies further, it may hinder business activities and future growth, affecting operating results and financial condition.

Stores obtain restaurant business permits under the Food Sanitation Act and are managed through regular sanitation inspections by the Quality Assurance Department and various manuals; however, if food poisoning or food sanitation complaints occur, business activities and future growth may be hindered. In addition, group company Mizuma Railway Co., Ltd. is subject to regulations under the Railway Business Act, the Road Traffic Act, and other laws, and any significant regulatory changes could also affect management.

As the Group primarily opens stores through leasing, the balance of lease deposits paid to developers reached ¥4,224 million (13.7% of consolidated total assets) at the end of the current consolidated fiscal year. If a developer becomes insolvent and a bad debt loss occurs, it may hinder business activities and future growth, affecting operating results and financial condition. Although an allowance for doubtful accounts is recorded based on historical loss rates and individual assessments, full recovery cannot be guaranteed.

As business expands, securing appropriate personnel is necessary, and the Group is working to improve motivation through more active recruitment of new graduates, the introduction of a performance-linked compensation system, and a shift to a position-based wage structure. However, if the necessary personnel cannot be secured in a timely manner, business activities and future growth may be hindered, affecting operating results and financial condition. Amid ongoing labor shortages across the restaurant industry, competition for talent with other companies is also a challenge.

As part of its strategy to expand its business domain from the core restaurant business into the food industry as a whole, the Group positions M&A (acquisitions, business transfers, joint venture establishment, etc.) as an important means to this end. While decisions are based on criteria such as synergy effects and contribution to long-term growth, financial condition may deteriorate in the short term (e.g., a decline in the shareholders' equity ratio). If the expected synergies are not realized, there is also a risk of additional losses arising from goodwill impairment, among other factors.

In conducting business overseas, the Group is exposed to various country risks, including differences in laws, systems, and political, economic, and social conditions in each country. If these risks materialize, they may affect the Group's operating results and financial condition. Exchange rate fluctuation risk and changes in local regulations are also sources of uncertainty in business operations.

The Group holds customers' personal information and manages it in accordance with legal obligations. However, should information leak externally, it could lead to a decline in brand image and loss of public trust. With the advancement of digitalization, risks such as cyberattacks are also increasing, requiring continuous information security measures.

If natural disasters occur and result in suspension of store operations or damage to facilities, this may affect the Group's business activities and operating results. Detailed response policies are described in the sustainability-related concepts and initiatives, and the Group is working to reduce risk through measures such as the development of business continuity plans (BCP).