BUSINESS RISKS

The Group conducts its business primarily through the domestic wedding business. However, according to surveys conducted by the Statistics Bureau of the Ministry of Internal Affairs and Communications, Japan is experiencing a declining birthrate, and the population of men and women of marriageable age has been trending downward. As a result, there are concerns that the market for wedding ceremonies and receptions may shrink over the medium to long term.
In response to this potential market contraction, the Company is working to stimulate new demand by entering the inbound wedding business and renewing the concepts of its wedding venues.
However, if the market contracts at a pace exceeding the Company’s expectations, the Group’s financial position and operating results could be adversely affected.

Since its establishment in 1998, the Company has contributed to the development and expansion of the house wedding market from its early stages and has played a leading role in the market. The Company monitors trends in wedding styles through marketing activities that take into account changes in social conditions, lifestyles, generational needs, and other trends, and strives to respond to such changes by entering new wedding style segments.

However, if a new wedding style emerges that replaces house weddings or if the market environment changes significantly, and the Company’s response to such changes is delayed, the Group’s financial position and operating results could be adversely affected.

Wedding ceremonies and receptions are generally concentrated in the spring (March to May) and autumn (September to November), and the Company’s venues are similarly affected by such seasonal trends.
The Company formulates its business plans taking this seasonality into consideration. However, if the Company is unable to secure wedding bookings during peak seasons as planned due to factors such as economic downturns, weakening consumer sentiment, changes in the competitive environment, adverse weather conditions, or the spread of infectious diseases, the performance of individual venues may be significantly affected, which could in turn affect the Group’s financial position and operating results.

The Group’s hotel business has a high degree of dependence on inbound demand from overseas visitors to Japan. Under normal circumstances, the ratio of foreign guests accounts for approximately 90% of total guests. If overseas travel restrictions, advisories against travel, or diplomatic measures restricting international exchanges are imposed due to wars, conflicts, the spread of infectious diseases, or other global events, the number of foreign guests may decline sharply. If such significant changes in the external environment lead to a slowdown in accommodation demand, the Group’s financial position and operating results could be adversely affected.

Facilities constructed and operated by the Group are subject to various laws and regulations, including the Building Standards Act, the Fire Service Act, and the Sewerage Act, as well as local ordinances relating to building structures and locations, including regulations concerning drainage and noise control.
In addition, the Group’s business operations are subject to various laws and regulations, including the Money Lending Business Act, the Installment Sales Act, the Act Regulating the Receipt of Contributions, Receipt of Deposits, and Interest Rates, the Interest Rate Restriction Act, the Travel Agency Act, the Insurance Business Act, the Act on Specified Commercial Transactions, the Public Bathhouses Act, the Hotel Business Act, and the Labor Standards Act.
While the Company conducts its business in compliance with applicable laws and regulations, if the Company were to violate such regulations and be ordered by administrative authorities to take corrective measures regarding construction plans or business operations, the Company may not be able to carry out new venue openings or renovations of existing venues as planned. As a result, the Group’s financial position and operating results could be adversely affected.

As the Group provides food and beverage products, it is subject to the Food Sanitation Act and operates its business after obtaining the necessary business permits from the relevant public health centers.
The Group places particular emphasis on the safety of its food and beverage products and strives to ensure a stable supply of food ingredients and maintain strict hygiene management. In addition to employee education and training, the Group conducts regular sanitation inspections by external specialized institutions, stool tests, and health condition checks of employees in order to maintain and comply with food sanitation management standards.
However, if a sanitation-related incident such as food poisoning were to occur at the Group or at facilities related to the Group, the Company may be ordered to dispose of food products or be subject to measures such as revocation of business permits or suspension of operations. As a result, in addition to potential financial losses, the Group’s social credibility may be damaged, which could adversely affect the Group’s financial position and operating results.

When opening directly operated venues, the Group utilizes various methods such as business land lease rights, leaseback arrangements, and real estate securitization schemes in order to allow flexible expansion depending on the business environment.
While the Company enters into such agreements after carefully considering the profitability and contractual terms of each venue, if the Company is forced to close a venue earlier than the operating period originally anticipated, penalties, losses on disposal of fixed assets, or other related costs may arise. This could adversely affect the Group’s financial position and operating results.

If a large-scale natural disaster were to occur that affects the Group’s facilities or wedding ceremonies and receptions, resulting in a prolonged suspension of operations or other circumstances beyond expectations, the Group may not be able to obtain sufficient compensation through insurance or other means. As a result, the Group’s financial position and operating results could be adversely affected.

The outbreak or spread of infectious diseases or other epidemics may lead to restrictions on overseas travel and declines in inbound visitors to Japan, or may result in reduced economic and social activity due to voluntary restraint on non-essential outings and weakened consumer sentiment within Japan.
If such restrictions on economic and social activities continue for an extended period, the Group may be forced to suspend operations or face other unexpected circumstances, which could adversely affect the Group’s financial position and operating results.

The Group considers the recruitment and development of human resources to be one of the most important management issues for its future business expansion.
Accordingly, while actively conducting recruitment activities, the Group has established personnel systems that incorporate goal management and appropriate evaluation of results, as well as comprehensive education and training programs, in order to develop and secure talented personnel.
However, if the Group is unable to recruit or develop the necessary personnel as planned, the expansion of each business may not proceed as expected, which could adversely affect the Group’s financial position and operating results.

The Group complies with relevant laws and regulations, including the Labor Standards Act, and strives to maintain a sound working environment by appropriately managing working hours and the use of paid leave. The Group also gives due consideration to occupational health and promotes the creation of workplaces where employees can work with peace of mind.
However, if violations of laws and regulations or deficiencies in labor management were to occur, the Group could be subject to administrative guidance or sanctions, and its social credibility could decline, potentially making it more difficult to recruit and retain personnel. Furthermore, if such matters were to lead to labor disputes or litigation, the Group’s financial position and operating results could be adversely affected.

Through its business activities, the Group may obtain personal information or confidential information relating to customers and business partners.
The Group has established strict management systems in accordance with the Act on the Protection of Personal Information and other relevant laws and regulations, as well as internal rules, and strives to prevent information leakage.
However, if incidents such as information leaks occur due to cyberattacks, human error, system failures, or other unforeseen events, the Group may suffer damage to its social credibility or be subject to sanctions. As a result, the Group’s financial position and operating results could be adversely affected.

With respect to wedding venues, hotels, restaurants, and other facilities operated by the Group, buildings and related equipment are either owned or leased by the Company. The Group gives due consideration to safety and functionality and carries out repairs and renovation work as appropriate, taking into account aging and deterioration of facilities.
However, if facilities are damaged due to extreme weather conditions exceeding past levels, such as heavy snowfall or storms, or other natural disasters, and the safety and functionality required for conducting wedding ceremonies and receptions or operating hotels and restaurants cannot be ensured, the Group may be forced to cancel ceremonies or temporarily suspend operations.
As a result, the Group’s social credibility may decline and claims for damages may arise, which could adversely affect the Group’s financial position and operating results.

Some of the wedding venues, hotels, restaurants, and other facilities operated by the Group are leased from developers and other parties, and lease and guarantee deposits are paid at the time of opening new venues. When opening new venues, the Group implements strict credit management and takes care to avoid concentration of leases with specific developers. However, if all or part of such lease and guarantee deposits become unrecoverable due to reasons such as the bankruptcy of a lessor, this could adversely affect the Group’s financial position and operating results.

The Group raises funds from financial institutions for purposes such as the acquisition and renovation of properties owned by the Company and investments and loans to subsidiaries. In addition, due to the deterioration in business performance caused by the impact of COVID-19, the Group implemented additional borrowings, resulting in a significant increase in interest-bearing debt.
The Group is steadily repaying these borrowings in accordance with the repayment terms agreed with financial institutions. While the Group continues to receive ongoing support from financial institutions and does not expect any immediate issues with liquidity, if interest rates rise significantly due to changes in financial conditions, this may lead to an increase in interest expenses, which could adversely affect the Group’s financial position and operating results.

The Group applies the “Accounting Standard for Impairment of Fixed Assets” and conducts impairment assessments by estimating future cash flows from its assets.
If future cash flows generated from the Group’s assets deteriorate or events such as a significant decline in expected future cash flows occur, impairment losses may be recognized, which could adversely affect the Group’s financial position and operating results.

The Group records deferred tax assets in accordance with the “Accounting Standard for Tax Effect Accounting.” In recognizing deferred tax assets, the Group assesses their recoverability based on future tax planning.
However, if future taxable income falls below initial expectations or if a reassessment of recoverability becomes necessary, the Group may be required to reverse deferred tax assets. As a result, the Group’s financial position and operating results could be adversely affected.

The Group positions the hotel business as a key pillar of its growth strategy under its long-term management plan and intends to promote further hotel development.
However, if construction costs increase beyond the Group’s expectations, this may result in higher initial investment costs and increased operating costs. As a result, the Group’s financial position and operating results could be adversely affected.