Business Risks

The following are important items considered potential risk factors to the development of the businesses of the Gurunavi Group ("the Group") and deemed necessary for investment decisions or for general understanding of the Group's business operations. The Group is aware of the possibility of these risks occurring and will endeavor to prevent them and respond when they occur. However, in order to properly evaluate the Group's operating status and future business, we believe that you have to pay careful attention to the following items and also to the descriptions in other sections. The forward-looking risk items outlined below are those identified by the Group as of update date. Furthermore, the following is not an exhaustive list of the risks governing an investment in Gurunavi's shares.

1. Gain support from restaurants

The growth of restaurant promotion service sales, which accounts for the majority of the Group's consolidated net sales, is highly dependent on increase in the number of member restaurants and contract fees per restaurant, and is susceptible to trends in the restaurant market and changes in the business environment in the food service industry.
In recent years, the restaurant industry has experienced aggravation of management pressure due to sharp rises in raw material, personnel and utility costs, and there are concerns about deterioration of profitability and diminished motivation to invest in new restaurant openings and sales promotion.
In addition, heightened geopolitical risks such as U.S. policy trends such as trade policy and the U.S.-China conflict could lead to an economic slowdown or a decrease in inbound customers, which could lead to a decrease in sales and deterioration of management for restaurants. Such a deterioration in the business performance of restaurants could adversely affect the performance of our group through a decrease in the number of member restaurants and contract fees per restaurant.
In response, the Group is focusing on the following measures.

･ Strengthen customer referral capabilities through the restaurant information website “Rakuten Gurunavi” (website transformation)

By enhancing the site's functions and providing more information that will motivate consumers to make reservations and visit restaurants, the Group will improve its attractiveness as a highly effective sales promotion tool to attract customers for restaurants struggling with rising costs.

･ Establish “Marketing agent” through various sales promotion and customer attraction support

By providing diverse sales promotion and customer attraction expertise, including digital marketing, SNS utilization, and regional collaboration, not limited to our websites, the Group will support restaurants so that they can find cost-effective ways to attract customers and realize sales maintenance and improvement.

･ Supporting the evolution of sustainable management models through restaurant management DX support (“Gurunavi FineOrder”, etc.)

Through the provision of DX tools such as mobile orders that contribute to labor saving, business efficiency improvement, and customer data analysis, the Group will support restaurants to escape from the high-cost structure, reduce personnel expenses and operating costs, and improve unit prices per customer.

Furthermore, in order to reduce the Group's dependence on income from restaurants, the Group is working to create businesses that will contribute to the optimization of the overall food service industry in Japan, such as building a business to optimize agricultural production and distribution and considering services that will contribute to improving the purchasing efficiency of restaurants, with the aim of acquiring revenue sources other than restaurant support. Specifically, the Group is considering support for building supply chains that will lead to a stable supply of foodstuffs and reduce costs, and through the improvement of the cost structure of restaurants, the Group will indirectly encourage the continued use of our services. In addition, the Group is building services related to promoting the enjoyment of home-cooked meals and ready-made meals, not just dining out.

2. Gain user support of “Rakuten Gurunavi”

The Group aims to increase revenues by increasing the value of “Rakuten Gurunavi” as a marketing tool for restaurants, by enhancing the appeal of “Rakuten Gurunavi” contents and increasing the number of website users.
In the future, if the relative competitive advantage of “Rakuten Gurunavi” declines and user support for “Rakuten Gurunavi” is sluggish due to the evolution of competitors' services or the emergence of new services for restaurants, or if the demand for our services declines due to changes in restaurant selection criteria accompanying heightened environmental awareness among consumers, etc., a decrease in the number of member restaurants, etc. due to slowdown in the number of customers referrals through “Rakuten Gurunavi” may occur, which could adversely affect operating results.
Therefore, the Group, in collaboration with Rakuten Group, Inc., is working to acquire highly engaged users using the Rakuten ecosystem, one of Japan's largest economic zones, with the aim of maintaining and expanding the number of users of “Rakuten Gurunavi”. At the same time, the Group is continuously reviewing the information and content posted on “Rakuten Gurunavi” in line with consumer needs to protect consumers' safe, secure, and enriched food experiences.

3. Risks related to the realization of business plans

The Group, based on our purpose of “Food: Satisfying People and Creating Connections”, aims to build a business portfolio that is resilient to changes in the business environment, not just sales promotion support for restaurants. However, the Group's business plan will not always progress as expected, and in particular, expenses related to staff recruitment and facility reinforcement in new businesses may be higher than anticipated, which could adversely affect operating results. In addition, there is a risk that the Group will not be able to achieve the results anticipated when we make acquisitions or investments as part of our business expansion.
Therefore, the Group implements appropriate measures such as examining in detail the progress of each business plan, including new businesses, and income and expenditure, at the Executive Committee etc. to examine recovery measures in the event of a discrepancy from the plan and evaluate the risks and costs associated with withdrawal.

4. The relationship with Rakuten Group, Inc.

In anticipation of realizing high synergistic effects in the Internet service business and thereby expanding and developing the group's business performance in the future, the Group currently has a capital and business alliance relationship with Rakuten Group, Inc. (“Rakuten”).
As of March 31, 2025, Rakuten is a major shareholder and largest shareholder of the Group, retaining 16.44% of the Group voting rights. However, regarding important business judgments of the Group, prior notification to Rakuten and prior approval of Rakuten is not required, and transactions between the Group and Rakuten are conducted under the same general conditions that apply to transactions with independent third parties. Consequently, independence from Rakuten is secured.
The Group believes that the alliance will be maintained in the future, but, should this tie-up be no longer maintained, there is a possibility that revenues may decrease due to decline in the customer referral capabilities, or it may affect the future business development and capital policy of the Group.
Therefore, in order to maintain its capital and business alliance relationship with Rakuten, the Group has strengthened its close and mutual cooperative relationship with Rakuten, such as increasing the number of Rakuten ID connected members and enhancing the presence of the restaurant business in the Rakuten ecosystem, and is working to further develop both companies.

5. Securing human resources

As the Group expands its business domains, securing and nurturing human resources is becoming increasingly important. Therefore, should utilization of human capital not proceed as planned or if core staff resign, it is possible that profit results may not be achieved as expected, which could adversely affect operating results.
Therefore, the Group initiated the “Work Style Evolution Project” in 2020 to enhance the comfortable and rewarding feeling of work for our employees and thereby improve the job satisfaction, and have strengthened the foundation of human capital management in our group. Furthermore, in April 2024, the Group established the “HR Policy” that will serve as the basic policy for human capital management, and based on this policy, the Group has been implementing reinforcement of recruitment and training, and making appropriate placement and transfer, as well as to reinforce environment preparation and HR systems, and promote diversity and inclusion.

6. Investments in response to changes in the operating environment and technological innovation

The Group's businesses are based on IT, and the Group proactively introduces the latest technology that is likely to enhance the value of its services. Particularly with Generative AI techniques, the Group has set up a specialized organization (CoE:Center of Excellence) in light of their rapid evolution, and promotes company-wide initiatives under the leadership of senior management. With respect to the verification and introduction of Generative AI, the Group is promoting phased and effective implementation while assessing the applicability to services and operations.
However, IT technology is developing rapidly, and if already installed technologies become obsolete, investment costs related to the development and introduction of network-related tools and software could be higher than anticipated and this could adversely affect operating results.
Therefore, the Group has established a structure that can respond flexibly to future technological reforms by securing funds and strategically investing in technology, while constantly monitoring the latest technological trends, including Generative AI.

7. Development structure

The Group strives to actively inject development personnel in order to constantly create new services. If the Group is unable to secure staff in accordance with plans or it is difficult to balance the allocation of personnel and skill levels to the development plan, it is possible that operating results could be adversely affected by delays in business progress or shortfalls in investment results.
To address this risk, the Group strives to secure development personnel by utilizing various human resource acquisition methods, and promotes systematic and effective placement and skill improvement of development human resources.

8. System failure risks

The Group's core restaurant sales promotion support service is provided over the Internet and the Group's operations are heavily reliant upon the stable operation of connected environments and computer network infrastructure. Therefore, if a system failure occurs due to an external attack, internal human error or natural disaster, there is a risk of interruption of service provision to customers and loss of user information. If this happens, the Group's operating results could be adversely affected by a decrease in service usage fees, compensation for users, and loss of reliability for us.
In order to reduce such risks, the Group is building a flexible and disaster-resilient infrastructure foundation by enhancing the backup center, expanding and making redundant servers, strengthening security by introducing a personal identification certification system for entry into server rooms, strengthening the monitoring structure of the internal network, and advancing a phased transition to a cloud environment (cloud migration).

9. Funding

In some cases, the Group may need to raise additional funds to strengthen investments for future growth. However, there are risks that it may be difficult to raise funds due to fluctuations in financial markets, deterioration of credit conditions, and future rises in interest rates.
In the event of an unexpected event, it is possible to incur unexpected expenses. If these risks related to funding (including interest rate risk) materialize, they could affect our financial plans and business operations.
To address this risk, the Group implements thorough appropriate cash flow management and risk management to maintain sound financial conditions. In addition, the Group endeavors to ensure stable funding by enhancing information disclosure to foster confidence from investors, financial institutions, and other parties, so that the Group can carry out various financing in accordance with circumstances.

10. Intellectual property rights

If intellectual property rights such as the technologies, expertise, and service names of the services that the Group provides are acquired ahead of other companies, failure to possess the necessary rights could impede service development and sales, and this could have an adverse effect on operating results. In addition, there is a risk of litigation involving infringement of rights against us in the future, and the Group's operating results could be adversely affected by the burden of payment of license fees and damages.
To prevent this, the Group has set up a specialized department related to intellectual property rights, which is working to properly acquire rights and prevent infringement. In addition, the Group is pursuing applications for patents and trademarks when necessary for newly developed services that may be subject to rights.

11. Personal information

The Group promotes the registration of members extensively with the aim of promoting the use of the various services operated by the Group, and accumulates a variety of personal information in the process. Therefore, should personal information be leaked or fraudulently used by external parties, insiders, or operations vendors, the Group's legal liability, including claims for damages, and loss of reliability could occur, which could adversely affect operating results.
To address this problem, the Group has set up a specialized department related to protection and management of personal information, etc., and has been implementing both hardware and software security measures. On the hardware front, the Group regularly updates and reinforces its security systems to strengthen physical security, and strives to introduce the latest technology to prevent unauthorized access and data leakage. Regarding software, the Group regularly conducts training to raise security awareness among employees and operations vendors, under strict regulations concerning the handling of personal information. In addition, the Group is working to maintain and improve the safety of member information and the reliability of our group, for example, by clarifying our privacy policy on the Group's website to ensure transparency to users.

12. Possibility and impact of changes in legal restrictions

If new legal restrictions are established on online platform operation, data collection/use, and user incentives such as point grant, large-scale renovation of systems related to information display and data handling, increased development/operation effort, and costs to strengthen compliance systems could be incurred, which could adversely affect operating results. In addition, if regulations such as the Subcontracting Act that encourage appropriate pass-through of prices throughout the supply chain are strengthened, there is a possibility that our business performance may be adversely affected by revisions to the transaction conditions of our group or changes in our cost structure.
To address this issue, the Group is continuously monitoring new legal restrictions developments (including regulations related to passing through costs), maintaining an appropriate compliance structure, and considering necessary measures.
Furthermore, the risk of increased costs accompanying the reinforcement of regulations related to CO2 emissions is understood to be limited due to the characteristics of the Group's businesses.

13. Occurrence of a major disaster such as an earthquake

If a huge disaster such as an earthquake, typhoon, or flood occurs, it is assumed that many customers, including restaurants, will be severely damaged. Furthermore, the Group's personnel, facilities, and systems could be severely damaged. As a result, our customer network and service provision infrastructure could be damaged and this could have a significant impact on our operating results.
In preparation for this, the Group has mainly implemented the following measures.

･ Building remote working mechanisms and environments that are not tied to work locations.

･ Geographic distribution of data centers, server redundancy and phased transition to a cloud environment (cloud migration) to mitigate disaster impacts and continue services.

･ Formulate and regularly review business continuity plans for prompt decision-making and action in emergencies.

･ Implementation of training and education programs for the safety of employees and prompt response in emergencies.

Through these measures, the Group has established a structure that will promptly restore service provision to customers and minimize the impact on business performance in the event of a disaster.
Furthermore, regarding the risk of an increase in the severity of natural disasters and a decline in demand for our group services due to the progress of global warming, the Group recognizes the need to build a business portfolio that is resilient to changes in the business environment by acquiring revenue sources other than support for restaurants, and is working to build businesses that will contribute to the optimization of agricultural production and distribution, consider services that will contribute to improving the purchasing efficiency of restaurants, and build services that will promote the enjoyment of home-cooked meals and ready-made meals.

14. Reputation

If a negative reputation arises regarding the quality of the services provided by the Group, the integrity and fairness of the Group, or our stance on the issue of environment and society, and if the trust of stakeholders, the value of our brand, or the filing of litigation or administrative sanctions occur, this could adversely affect operating results.
Therefore, in order to live up to the trust of all stakeholders and fulfil expected social responsibilities, the group implements thorough management based on a philosophy system centering on our purpose, “Food: Satisfying People and Creating Connections”, which in turn is based on the spirit of “Protecting and nurturing Japanese food culture”, which has been with us since our founding.
Specifically, the group is working to reinforce ongoing corporate governance and promote human capital management, and identify and address risks and opportunities related to climate change.
Furthermore, in order to increase management transparency, the group will work to enhance disclosure of non-financial information, including climate change responses, as well as financial information.

15. The continued listing requirements of the Prime Market of TSE

Regarding the status of the Group's compliance with the continued listing requirements of the Prime Market as of the end of March 2025, the tradable share market capitalization did not meet the requirements, and the Group has entered an improvement period since April 1, 2025. If the Group does not meet the requirements by the end of March 2026, the Group will be delisted on October 1, 2026, after being designated as an oversight stock or reorganization stock (six months in principle).
Therefore, as described in "Progress Status Based on the Plan to Meet the Continued Listing Requirements and Changes to the Target Period" (announced on May 23, 2025)", the Group will work to comply with the standards within the improvement period by evolving its business model based on the medium-term business policy (fiscal year ending March 31, 2024 to fiscal year ending March 31, 2026), active dialogue with the stock market, and strengthening the dissemination of non-financial information. At the same time, the Group will consider and implement as appropriate the necessary responses to a change in market classification to the Standard Market, considering cases where the classification does not fit due to changes in the internal and external environment, the impact of market conditions, etc.

Last updated: June 24, 2025