Franchise Business Established as the Fourth Business and a Reporting Segment

「The manufacturing and sales division for Chinese prepared foods incurred higher costs due to construction of a new plant, but production capacity has improved to approximately 10 times the previous level.」

「The FOOD business mainly comprises the bakery division and the manufacturing and sales division for Chinese prepared foods. In the bakery division, Ginza Nishikawa has opened GINZA NISHIKAWA COFFEE ROASTERY in Japan, offering sandwiches, coffee and other products. Overseas, Ginza Nishikawa's K11 Art Mall store opened in September as China's first specialty shokupan restaurant, and new stores in Taipei and Hong Kong are scheduled to open by the end of the year. In the Chinese prepared-food manufacturing and sales division, D&D Co., Ltd. began operating its new Hadano plant in August. In addition to existing customers, it aims to expand sales channels into the hotel and restaurant markets.」

「The Group is also preparing and planning to develop its franchise business in Taiwan and the United States.」

「The reportable segment previously referred to as the franchise business has been renamed the FOOD business, reflecting its focus on food-related operations. The Company has also reviewed its aggregation method to more appropriately reflect profit and loss by reportable segment.」

「The sales environment surrounding the specialty bakery industry has become increasingly competitive due to an oversupply of stores. In this business environment, the Company is operating stores with an emphasis on profitability and implementing a scrap-and-build strategy. At the same time, it is actively developing products, pursuing M&A and expanding overseas, but during the current consolidated fiscal year, store closures, a review of its store-opening strategy and the recognition of extraordinary losses affected performance. As a result, sales were ¥2,568.165 million, down 11.9% year on year, and the Company recorded an operating loss of ¥133.048 million, compared with operating profit of ¥74.645 million in the previous fiscal year.」

「Ginza Nishikawa is strengthening its expansion into overseas markets. Following Shanghai Xintiandi, its second overseas store, it opened Shanghai Zhongshan Park, its third overseas store, on 29 October. The Company aims to continue expanding its market in China.」

「The franchise business now comprises the delivered boxed-meal business for seniors, the Ginza Nishikawa business and the Ganso Go-ban Kagurazaka Main Store business. The Company acquired shares in D&D Co., Ltd., which operates Ganso Go-ban Kagurazaka Main Store, making it a subsidiary. In the Ginza Nishikawa business, the domestic specialty bakery market has become a red ocean over the past 2 years as more companies have entered, and the Company is strengthening its expansion into overseas markets. On 5 May, it opened Shanghai Xintiandi, its second overseas store.」

「Ginza Nishikawa became the first company in the specialty bakery industry to enter the US market, opening the Santa Monica store in July last year, followed by its second overseas store, Shanghai Xintiandi, in May this year. The stores attracted considerable attention on social media before opening, and despite prices roughly twice those in Japan, customers have continued to purchase the products every day, with the stores repeatedly selling out. As a result, the business has already generated a significant response, including being selected as the No. 1 bread and dessert outlet in the entire Shanghai area on Dazhong Dianping, one of China's largest review sites, turning shokupan food culture into a social phenomenon of sorts.」

「The Company expects the results of the above measures to emerge in due course. It is also actively opening stores in new areas, but the business was affected by the red-ocean market during the current fiscal year. As a result, sales were ¥2,174.889 million, down 30.5% year on year, and operating profit was ¥79.057 million, down 82.4%.」

「In the Ginza Nishikawa business, the Company opened its first overseas store in Santa Monica, United States, in July and began its international expansion.」

「In the premium shokupan business, the Company is proceeding as planned with store openings toward a 200-store network by the end of 2023. However, the number of entrants into the specialty bakery market has increased in recent years due to the premium shokupan boom, making the market a red ocean and bringing it into an era of淘汰. In this market environment, Ginza Nishikawa has introduced the following measures to strengthen franchisee support for the post-red-ocean market: ① Although prices of raw materials and other inputs have increased, prices for franchisees will not be raised. ② New products will be introduced to differentiate the business from competing stores. ③ Advertising will be increased proactively to differentiate the business from competing stores.」

「The business continued to perform steadily despite the COVID-19 pandemic. Although the Company had set a target under its first store-opening plan of 100 stores over 3 years by the end of 2021, it opened its 100th store in April of this year, 8 months ahead of the target date. It has also set a target of 200 stores by the end of 2023 by adding 100 stores over the next 2 years. Nama Matcha Mitsu, which began nationwide sales in June, contributed to performance. However, SG&A expenses increased due to intensified entry by competitors into the specialty bakery market and proactive investment for growth, including the delivered franchise business. As a result, sales were ¥3,127.445 million, up 2.6% year on year, while operating profit was ¥448.332 million, down 12.7%.」

「The business continued to perform steadily despite the COVID-19 pandemic. Although the Company had set a target under its first store-opening plan of 100 stores over 3 years by the end of 2021, it opened its 100th store in April of this year, 8 months ahead of the target date. It has also set a target of 200 stores by the end of 2023 by adding 100 stores over the next 2 years. In addition, sales of the new product Nama Matcha Mitsu began in June. As a result, sales were ¥2,199.661 million, up 9.0% year on year, and operating profit was ¥351.773 million, up 4.2%.」

「Under our first store-opening plan, we had set a target of 100 stores over 3 years, by the end of 2021. However, we opened our 100th store in April this year, 8 months ahead of the target date. We now aim to add 100 stores over the next 2 years and have set a target of 200 stores over 5 years, by the end of 2023.」

「The business continued to perform steadily despite the COVID-19 pandemic. Although the Company had set a target under its first store-opening plan of 100 stores over 3 years by the end of 2021, it plans to open its 100th store in April of this year, 8 months ahead of the target date. It has also set a new target of 200 stores over 5 years by the end of 2023 by adding 100 stores over the next 2 years.」

「In particular, the Group is expanding nationwide the Ginza Nishikawa specialty bakery stores, which use the Group's commercial alkaline ionized water and focus on premium shokupan. Although the food service and restaurant industries were described as being devastated during the COVID-19 pandemic, these stores were barely affected. This once again demonstrated their positioning as a staple food. The Company set a target under its first store-opening plan of 100 stores over 3 years by the end of 2021, and selected its 90th store, the JR Osaka Station store, for opening by the end of 2020. As a result, sales in the business were ¥3,109.217 million, up 100.9% year on year, and operating profit was ¥507.280 million, up 38.4%.」

「The Company set a target under its first store-opening plan of 100 stores over 3 years by the end of 2021 and is proceeding as planned. As a result, sales in the business were ¥2,042.356 million, up 157.6% year on year, and operating profit was ¥334.093 million, up 118.7%.」

「The Company set a target under its first store-opening plan of 100 stores over 3 years by the end of 2021 and is proceeding as planned. As a result, sales in the business were ¥980.579 million, up 300.9% year on year, and operating profit was ¥174.917 million, up 244.1%.」

「The Company set a target under its first store-opening plan of opening 100 stores over 3 years. As of the end of January 2020, it had opened 50 stores, including directly operated and franchised stores, in 22 prefectures, at a pace exceeding the original plan, which contributed to business performance. As a result, sales in the business were ¥2,586.892 million, up 862.6% year on year, and operating profit was ¥541.303 million, up 1,585.6%.」

「From the current fiscal year, the business has been disclosed as a new fourth business segment after growing to exceed 10% of the Group's sales scale. The Company made new investments in the previous fiscal year and expanded performance in the franchise business, mainly in delivery and food-related operations. It expects the business to continue contributing to performance. As a result, sales in the business were ¥1,548.006 million, up 1,363.0% year on year, and operating profit was ¥366.424 million, up 7,680.5%.」

「From the current fiscal year, the business has been disclosed as a new fourth business segment after growing to exceed 10% of the Group's sales scale. The Company made new investments in the previous fiscal year and expanded performance in the franchise business, mainly in delivery and food-related operations. It expects the business to continue contributing to performance. As a result, sales in the business were ¥792.969 million, up 1,259.4% year on year, and operating profit was ¥152.754 million, up 2,814.6%.」

「As the business had grown to account for more than 10% of total group sales, the Company established the franchise business as its fourth business and began reporting it separately from the current fiscal year.」