DAISYO CORPORATION

Food safety incidents such as food poisoning or foreign object contamination in the restaurant business are recognized by the Group as its greatest risk. If an incident occurs, it could lead to a decline in sales due to loss of public trust, losses from damages compensation, and administrative sanctions such as business suspension. As countermeasures, the Group has established two institutions, the "Food Hygiene Research Institute" and the "Sogo Kagaku Niigata Research Institute," and has introduced a HACCP-compliant hygiene management system at its food factories.

There is a risk that procurement difficulties or sharp increases in purchase prices may occur for key ingredients such as fresh seafood and vegetables, which are central to the Group's menus, due to environmental changes, adverse weather, or large-scale natural disasters. Suspension of logistics center functions or disruption of delivery functions can also be a cause of procurement disruptions. The Group treats quality control as its most important issue, addressing this through the pursuit of traceability and the expansion of direct sourcing from production areas.

The restaurant industry market to which the Group belongs is a mature market, and competition among companies, including the ready-to-eat (nakashoku) market, is intensifying alongside diversifying consumer needs. If the market size shrinks significantly or competition intensifies beyond expectations, this could affect business performance and financial condition. Responding to the challenging business environment remains an ongoing issue.

In the Kanto region and major urban centers where stores are concentrated, the occurrence of large-scale natural disasters, abnormal weather, or the spread of infectious disease could result in a decline in customer visits and difficulty in conducting normal business operations. The concentration of stores in specific regions heightens geographic risk, raising concerns about a significant impact on business performance and financial condition.

The Group operates an integrated comprehensive logistics service combining external sales, warehousing, and transportation, centered on its logistics subsidiary "DS Logistics," but there is a risk that sharply rising fuel prices could push up transportation costs, and that serious vehicle accidents could result in damages compensation or administrative sanctions that significantly impair profitability. The wholesale and logistics business is expanding as a core business alongside the restaurant business, and any disruption to its operations would have a significant impact on consolidated results.

The Group has concluded contracts with franchise (FC) and voluntary chain (VC) member operators, primarily under the "Shoya" format, but if an unforeseen incident such as food poisoning occurs at a member store, or an event that damages the Daisho brand occurs, this could lead to reputational damage to the Group as a whole. The Group addresses this through the supply of safe ingredients, hygiene management, and business guidance to maintain close working relationships with member stores, but risk remains in areas beyond its direct control.

The Group positions the acquisition and development of excellent personnel as its most important issue for the growth of each business, but if changes in the recruitment environment or delays in training result in an inability to secure sufficient personnel, this could hinder business operations. Building the human resource foundation to support the expansion of both the restaurant and logistics businesses remains an ongoing management issue.

The Group is subject to a variety of laws and regulations, including the Food Sanitation Act, the Labor Standards Act, and the Motor Truck Transportation Business Act, and if it violates these regulations due to hygiene issues, labor issues, or other matters, this could affect business performance and financial condition. In addition, revisions to existing laws and regulations or the enactment of new ones could lead to increased compliance costs or business constraints.

The "Accounting Standard for Impairment of Fixed Assets" is applied to fixed assets held by the Group, such as stores, land, and real estate, and there is a possibility that impairment losses will be recognized on assets whose profitability has declined. Although store openings are centered on leased properties, lease and security deposits could also affect the financial condition if they become uncollectible due to the bankruptcy of the landlord or other reasons. Additional impact from future changes in accounting standards cannot be ruled out.

The Group holds personal information of employees, banquet customers, and sales clients, and if information leakage or unauthorized use occurs, this could develop into a loss of public trust and a damages compensation issue. In addition, with the rapid spread of social media, if reputational damage arises and spreads through online posts or media coverage, this could also affect business performance and financial condition. Disruption to store operations, such as ingredient procurement or attendance management, due to system failures (from disasters, power outages, computer viruses, etc.) is also recognized as falling within the same risk area.