OHSHO FOOD SERVICE CORP.

Extreme weather, climate change, and geopolitical risks may cause energy and materials prices to surge, while food safety issues such as classical swine fever (CSF) and avian influenza may make stable procurement of ingredients difficult, potentially raising purchase prices. The securities report explicitly states that this risk, which could significantly affect business performance through constraints on menu offerings and higher cost ratios, is constantly present. As countermeasures, the company diversifies production regions, maintains close collaboration with producers, conducts regular audits of contract manufacturers, and considers alternative ingredients.

If food poisoning, foreign object contamination, or other legal violations occur, administrative sanctions such as business suspension or license revocation, combined with the spread of information via social media, could severely damage social credibility and corporate image, significantly affecting business activities. The securities report explicitly describes this as a risk that is constantly present, and the likelihood of occurrence is positioned as high. As countermeasures, the company conducts sanitation patrol guidance at directly-operated and franchise stores, maintains HACCP systems, obtains and maintains FSSC22000 and ISO9001 certification at factories, and submits sample specimens twice a year.

As digital customer information increases with the release of the official smartphone app and online takeout reservations, the securities report explicitly states that personal information leakage risk is constantly present, and if a leak occurs, loss of social credibility and economic losses from damages claims could significantly affect business performance. As countermeasures, the company implements oversight by personal information handling managers, access controls, restrictions on managed areas, development and strict enforcement of internal rules, and advanced security measures including prevention of unauthorized access.

As reliance on information systems increases with the advancement of DX, unauthorized access or ransomware attacks causing system outages or data leaks could significantly affect business performance and financial condition through loss of social credibility, damages claims, and business interruption. The group explicitly identifies increasingly sophisticated and advanced cyberattacks as a major management risk. As countermeasures, the company strictly manages access privileges, operates endpoint monitoring tools, collaborates with external specialist organizations, conducts periodic simulated attack testing, and maintains independent backup environments.

The securities report explicitly states that there remains a reasonable risk of recording impairment losses on fixed assets in the following fiscal year if store operating profit/loss deteriorates due to intensifying competition with the prepared meal (nakashoku) market, declining demand from a declining birthrate and aging population, and rising labor costs. If deterioration in operating results coincides with impairment losses, the impact on performance could be amplified. As countermeasures, the company strengthens the earning power of each store through QSC improvement via the Ohsho Academy, raising store productivity, and continued implementation of various sales promotion measures.

As acquiring specialized skills in cooking techniques, customer service, store management, and IT fields takes several years, if recruitment and training do not proceed as planned, this could slow new store openings, lower store QSC levels, and delay system development, significantly affecting business performance. Competition for talent among companies is intensifying due to earlier job-hunting activities and the spread of year-round recruitment. As countermeasures, the company has raised the starting salary for university graduates to ¥300,000, promotes internal hiring from part-time staff, provides systematic training through the Ohsho Academy and Ohsho Cooking Dojo, and has introduced remote training.

If large-scale typhoons, earthquakes, or other natural disasters damage store or factory equipment and infrastructure and disrupt delivery and supply chains, normal operations may become difficult to sustain, and if the damage is widespread and severe, business suspension could become prolonged. The increasing frequency of extreme weather events in recent years has heightened the significance of this risk. As countermeasures, the company formulates BCPs for each store, factory, and head office, promotes seismic reinforcement and IT infrastructure redundancy, diversifies ingredient sourcing regions, builds production and supply systems to cover affected factories, and secures funding through established credit lines.

In the new store opening strategy centered on the Kanto region, if suitable sites meeting conditions such as trade area, location, and rent levels cannot be secured, the number of new store openings may fall short of plans, potentially preventing the company from achieving planned sales and profits. Since expansion into the Kanto region, where there remains significant room for new stores, is a core part of the growth strategy, failure to meet plans could affect medium-term performance. As countermeasures, the company is strengthening market analysis capabilities through dedicated departments and enhancing new store profitability by reducing construction, equipment, and running costs.

As the company is subject to a wide range of laws and regulations including the Food Labeling Act, the Act against Unjustifiable Premiums and Misleading Representations, the Antimonopoly Act, the Food Recycling Act, the Energy Conservation Act, and the Act on Promotion of Resource Circulation for Plastics, the enactment of new laws or legal amendments could increase compliance costs. Delayed regulatory response leading to violations could result in legal sanctions along with reputational decline and significant economic losses. As countermeasures, the company continuously gathers information on relevant laws and regulations and verifies their relevance to operations by utilizing legislative and regulatory amendment information services, participating in briefings held by public institutions, and holding internal study sessions.

As sales of ingredients and other supplies shipped to franchise stores account for just under 10% of total sales, if a large number of basic franchise agreements were terminated at once, this would directly affect sales, and scandals or performance deterioration at franchise stores could damage the brand image of the entire group and lead to credit concerns. Since control over franchise stores is more limited compared to directly-operated stores, the securities report explicitly states that this potential risk is constantly present. As countermeasures, the company holds regular meetings with franchise owners to understand their financial condition, conducts QSC checks by shop advisors, provides training opportunities through the Ohsho Academy, and supports the transition to directly-operated status or business succession for stores lacking a successor.