Business Risks

According to future population estimates by the National Institute of Population and Social Security Research (IPSS), a Japanese national research institute affiliated with the Ministry of Health, Labour and Welfare (MHLW), it is predicted that the population of men and women in Japan said to be of marriageable age is expected to shrink in the future. According to an announcement in April 2023, it is estimated that the total population of Japan will decrease to 87 million by 2070. The Group’s business performance in the domestic market may be affected if the bridal market shrinks in the future.

Although the Group endeavors to plan and propose wedding styles that can arouse potential customer interest and match their preferences by keeping track of contemporary needs and fashion trends, the Group’s business performance may be affected if it is unable to respond to changes in awareness and preferences regarding wedding styles.

The Group’s business performance may be affected if hotels and specialized ceremony halls enter the guesthouse wedding business through the renewal of existing facilities, or if competition with other companies in the industry intensifies, due to factors such as market entry by new competitors from different industries.

The Group’s business performance may be affected, such as by the hindrance of business operations and store development, in the event of a violation of legal regulations relating to the Group’s business in Japan—namely regulations under the Food Sanitation Act, etc., regarding the provision of food and beverages, regulations under the Consumer Contract Act, etc., regarding contracts with customers, laws and regulations such as the Building Standards Act, regarding the construction and renovation of wedding & banquet facilities and dress shops, or other regulations under various ordinances—or in the event of large-scale revisions to such laws and regulations.

The Group’s business performance may be affected in the event of any large-scale political upheavals, changes in economic conditions, revisions to relevant laws and regulations, war, terrorism, or natural disasters, etc., occurring overseas, affecting the Group’s overseas business operations, or the wedding business as a result of the suspension of imports of products, etc.

The Group believes that securing and developing talented human resources is of the utmost importance to continuously open stores and enhance services. In addition to actively recruiting personnel in Japan and overseas, the Group systematically conducts OJT training for the personnel it hires at each workplace, and implements various training programs according to job type and position. However, the Group’s business performance may be affected if the Group’s rate of securing and developing human resources cannot keep up with its store opening plans, making it difficult to open stores as planned and maintain the level of service to customers.

Since the Group tends to hold more weddings and receptions during the second quarter (which includes April and May) and the fourth quarter (which includes October and November), the Group’s revenue tends to be concentrated around the same time. If the number of couples holding weddings during these periods is sluggish, then the Group’s business performance may be affected.

As of December 31, 2022, the Group posted goodwill of 11,203 million yen in its consolidated statement of financial position, mainly from LBO in December 2016, and also holds various other tangible and intangible non-financial assets. If the profitability of the businesses relating to these non-financial assets declines in the future, the Group’s financial position and business performance may be affected by impairment losses on the difference between the book value and recoverable value of these non-financial assets.

In the procurement of food ingredients and utility costs for utilities used at store locations, the Group may experience uncertainty or instability in procurement of food ingredients or soaring prices due to factors that are difficult to predict—such as geopolitical risks, climate change, natural disasters, and pandemics. In such cases, the Group’s business performance may be affected due to a resulting increase in the cost of sales. Although the Group responds to these risks by reviewing wedding plans, etc., the Group’s business performance may be affected if the Group is unable to pass on such price increases to selling prices.

The Group procures some of its wedding costumes and food ingredients from overseas. These transactions are affected by foreign exchange rate fluctuations. Although the Group reviews selling prices as necessary, the Group’s business performance may still be affected as a result of significant fluctuations in exchange rates.

When opening a new wedding & banquet facility or dress shop in Japan, the Group considers factors such as store profitability, securing human resources, and investment plans on an individual basis, taking into account the target customer base and expected unit price based on factors such as the surrounding environment and specific regional characteristics, to determine candidate locations. However, the Group’s business performance may be affected if we cannot find a candidate location that meets the requisite conditions for opening a store, if we are unable to secure the expected profitability for a new store opening, or if the profitability of existing stores declines significantly due to the deterioration of facilities over time, etc.

The Group has obtained business licenses from the relevant public health centers in accordance with the Food Sanitation Act and assigned food sanitation managers to all wedding & banquet facilities and restaurants in Japan. To prevent incidents such as food poisoning, etc., we have also formulated a food hygiene manual and thoroughly manage employee hygiene, including regular fecal examinations and management of daily physical condition. We also conduct regular hygiene inspections through specialized organizations. Despite the implementation of these hygiene management measures, the Group’s business performance may be affected if a hygiene problem occurs at one of our facilities. In addition, since business licenses must be renewed for a certain period of time, failure to renew them may also impede the continuation of business and affect the Group’s business performance.

In the event of such occurrences, the Group will also establish a crisis management headquarters as necessary, to collect information on damage and give direct instructions and orders to each facility to ensure business continuity, or to resume and restore business operations as soon as possible. However, the Group’s business performance may be affected if the occurrence of such events hinders the operation of the Group’s wedding & banquet facilities, dress shops, and restaurants, if the costs of restoration are high, and/or if restoration takes a long time.

The Group handles the personal information of many customers, including brides and grooms, in the course of conducting its business. To maintain this personal information and ensure its security, the Group has established a system that can prevent unauthorized access from the outside or intrusions by computer viruses, etc., and monitor and detect information leaks from the inside. We have also established a set of Basic Regulations on the Protection of Personal Information and procedural manuals, thoroughly educate personnel, and operate and manage internal information appropriately. However, despite these measures, there is still a risk of legal liability if personal information is leaked. Even if the Group is not held legally liable, the Group’s business performance may still be affected due to a decline in social confidence in the Group.

The Group procures business funds through borrowings, including loan agreements (syndicated loans), from financial institutions. As of December 31, 2022, the ratio of borrowings to total assets was 44.2%. Although the Group plans to reduce its borrowings in the medium to long term, the Group’s financial position and business results may be affected by the posting of borrowings, finance costs, and interest expenses if such reductions do not progress. While most of the Group’s borrowings are at variable interest rates, the Group does not hedge against interest rate fluctuations in light of current interest rate trends. Fluctuations in funding rates due to rising market interest rates or other factors could affect the Group’s business performance, financial position, and cash flow. As of December 31, 2022, the total amount of borrowings was 14,127 million yen, and the variable interest rate ratio of total borrowings was 92.1%.

These financial covenants set general numerical standards for maintaining net assets and profits. Currently, the Group’s performance does not conflict with financial covenants. However, if there is some conflict in the future and a claim is made by the lender, the Group will lose the benefit of time with respect to contractual deadlines. Additionally, if refinancing becomes difficult, such as due to turmoil in financial markets or changes in the stance of financial institutions on lending, the Group will lose the benefit of time with respect to contractual deadlines at the end of the contract period. In the event of any of these circumstances, it will be necessary to secure funds to repay debts immediately, which may affect the Group’s financial position and cash flow.

Due to the impact of restrictions on economic activities—such as the prohibition of the provision of alcoholic beverages and requests for shorter business hours—due to the declaration of a state of emergency issued in response to the COVID-19 pandemic and subsequent priority measures to prevent the spread of disease, some weddings and receptions have been postponed. The Group will give top priority to ensuring the safety of customers, employees, and other stakeholders in accordance with requests from local government and guidelines of industry groups in response to infectious disease epidemics or pandemics, such as the COVID-19 pandemic, or the occurrence of large-scale natural disasters. However, the Group’s business performance may still be affected if social and economic activities are restricted due to such events.

The Company has adopted a stock option system which uses share acquisition rights as incentives for directors and employees. We are also considering utilizing the stock option system in the future—but if the share acquisition rights granted in the future are exercised in addition to the share acquisition rights currently granted then the value of shareholdings may be diluted. As of December 31, 2022, the potential number of shares under share acquisition rights was 1,840,000 shares, which is equivalent to 7.4% of the total number of issued shares outstanding (25,000,000).

The Company has received investments for the purpose of net investment from a fund (investment started in July 2012) with investment advice provided by Polaris Capital Group Co., Ltd.—an independent investment company in Japan. The fund currently remains a major shareholder. Although the fund plans to sell a portion of its shares at the time of the Company’s stock market listing, the fund may still hold a considerable amount of the Company’s shares even after listing. As a result, the liquidity of the Company’s shares and stock price formation may be affected, depending on the fund’s shareholding and disposal policy. Additionally, if the fund holds a substantial number of the Company’s shares, then it may have a significant impact on the outcome of the resolutions of the Company’s General Meeting of Shareholders, such as the appointment or dismissal of Company officers, organizational restructuring such as mergers with other companies, capital reduction, and amendments to the Articles of Incorporation. We are not currently aware of the extent, possibility or timing of such risks materializing.