YOSHINOYA HOLDINGS CO.,LTD.

Stable supply of required raw materials in necessary quantities may become difficult due to disease, adverse weather, natural disasters, conflicts, infectious diseases, and other factors. In addition, fluctuations in feed prices, market prices, and exchange rates may cause procurement costs to surge, potentially having a significant impact on the Group's business performance through increases in cost of sales. The Group is continuously working on hedging this risk by developing new raw material sourcing regions and diversifying procurement.

In the fiscal year under review, the Yoshinoya segment accounted for 67.2% of net sales, meaning the Group's earnings are heavily dependent on a single segment. Should the performance of domestic Yoshinoya operations decline, consumer preferences change, or raw material prices surge, this could have a significant impact on the Group's overall business performance. While the Group aims to reduce this dependence by nurturing core businesses, resolving this dependency structure is expected to take considerable time.

Due to rising wages, increasing recruitment costs, and expanding domestic labor demand, securing the necessary number of employees, including full-time staff, part-timers, and part-time workers, may become difficult. Since the Group partly relies on foreign workers, there is also a risk that labor cost burdens may further increase due to amendments to immigration laws or revisions to systems such as the Employees' Pension Insurance. If securing employees becomes difficult, this could lead to revisions of store opening plans or temporary suspension of operations at some stores, potentially having a significant impact on business performance.

Ensuring product safety is extremely important in both the restaurant business and the external sales (mail order) business. Should a hygiene issue such as mass food poisoning or a product incident due to labeling errors occur, this could damage the Group's brand image and public trust and result in the payment of damages, potentially having a significant impact on business performance. The Group has established a Group Quality Assurance Office to ensure consistent hygiene management from procurement and manufacturing through to in-store cooking, and has built a system for appropriate disclosure of allergen and country-of-origin information.

With the overall market size of the restaurant industry stagnating, competition is intensifying further due to the rapid expansion of the ready-to-eat food market at convenience stores and delivery businesses, and shifts are also being observed among the main customer base. Failure to respond to changes in consumer preferences and the diversification of sales channels could affect the Group's net sales. The Group is working to boost sales through the development of new business formats, responses to takeout demand, and overseas expansion.

In the fiscal year under review, the Group recorded an impairment loss of ¥1,036 million. Should events occur in the future that significantly affect assumptions for business recovery, additional impairment losses on store assets may arise, affecting business performance. Store assets are currently evaluated based on assumptions for business recovery that are considered reasonable at this time; however, the risk could materialize if the premises regarding the recovery period or business outlook prove to be incorrect.

The Group is highly dependent on information and communication systems for supply chain management, store ordering, order-taking, and payment processing. Should a system failure occur due to a computer virus or cyberattack, efficient operations and timely provision of products to consumers could be hindered. In the event of a personal information leak, in addition to the impact on brand image and public trust, response costs and damages payments may also arise. The Group strives to reduce this risk through the implementation of appropriate preventive measures, disclosure of its privacy policy, and proper management by the responsible department.

In addition to various laws and regulations concerning food hygiene, store facilities, labor, and the environment, there is a risk that violations of laws and regulations by franchisees in the franchise business could damage the Company Group's credibility. Increased costs associated with responding to strengthened legal systems may also affect business performance. The Group has established a Risk Management Committee based on its Risk Management Regulations, and shares and implements measures to address legal and regulatory revisions across the Group.

As a transition risk, there are concerns about rising procurement and energy costs due to stricter environmental regulations aimed at combating global warming, as well as a decline in public trust if the Group is perceived as lacking sufficient environmental consideration. As a physical risk, business performance could be affected by the suspension of factory and logistics operations or temporary store closures due to typhoons and other events (acute risk), as well as the deterioration in quality and price surges of food ingredients due to rising average temperatures and changing weather patterns (chronic risk). The Group recognizes the importance of climate change and is advancing its response, but specific quantitative impacts have not been disclosed.

The Group operates directly-managed stores and franchises in overseas markets such as the United States, China, and Southeast Asia. Unpredictable fluctuation risks related to political conditions, the economy, laws and regulations, and natural disasters in the countries of operation, as well as differences in business customs, could affect business performance. There is also a risk that brand image could be damaged due to rights infringement from similar trademarks. Addressing country-specific risks unique to each country has become an important issue for business continuity.