Structural reform through the implementation of the medium-term management plan

「We reviewed our medium- to long-term management vision in line with business developments and revised the medium-term management plan. We will now pursue the plan over the new period from the fiscal year ending March 2027 to the fiscal year ending March 2029. As the plan contains many uncertain factors, including the situation in the Middle East, it will initially be implemented as a provisional version, and we will carry it out while assessing developments. We plan to formulate and disclose a finalized version again based on the situation and outlook during the interim period of the fiscal year ending March 2027.」

「We will explain the progress during the interim accounting period under the medium-term management plan “Kourakuen Resilience,” which the company is currently pursuing.」

「In the current fiscal year, the first year of the medium-term management plan covering the fiscal years ending March 2026 through March 2028, we will steadily implement the medium-term management vision “Kourakuen Resilience” (Kourakuen’s ability to recover).」

「Amid this economic environment, our group worked to enhance corporate value under the theme of “creating attractive products, the foundation of dining out, and improving QSC.” To encourage customers to visit more frequently, we offered limited-time products every month and introduced a time-limited “Chinese Dining” menu to attract customers after lunchtime. We promoted these initiatives to new customer segments through digital marketing using social media and other channels. We also changed the grand menu in September and replaced menu items, while keeping the prices of standard products such as “Chinese noodles” unchanged. As a result, for the interim consolidated accounting period, net sales were ¥13,713 million, up 5.0% year on year, operating income was ¥427 million, compared with an operating loss of ¥409 million in the same period of the previous year, ordinary income was ¥403 million, compared with an ordinary loss of ¥421 million, and interim net income attributable to owners of the parent was ¥512 million, compared with an interim net loss attributable to owners of the parent of ¥253 million.」

「As part of the measures described above, we revised the grand menu in May. While reducing the number of menu items, we increased the number of set menus and promoted their value through set pricing, resulting in an increase in average spend per customer. We also announced new menu items through LINE and other social media, benefited from Kourakuen being featured in television programs and other media, and extended operating hours. As a result, monthly sales and customer numbers steadily increased year on year at existing stores, showing signs of recovery in performance, which had remained sluggish since the COVID-19 pandemic.」

「As described below, we entered into an agreement to transfer fixed assets on 31 March 2023 and completed the transfer on 7 July 2023. The transfer of owned assets was carried out to improve asset efficiency through the effective utilization of management resources.」

「Against this backdrop, our group has adopted “back to basics” as its management policy and will address the following priority issues and measures.」

「To enhance our corporate value and the common interests of our shareholders, we are working as a group toward achieving the medium-term management plan. The key elements of this medium-term management plan are as follows.」

「The key elements of this medium-term management plan are as follows: (a) improving profits at existing stores and developing the New Kourakuen model; (b) expanding the New Kourakuen model overseas and grouping new business formats within the group; (c) expanding the external sales business in conjunction with the construction of a new factory; (d) strengthening our financial position; and (e) management that emphasizes corporate governance.」

「For the fiscal year ending March 2023, we will continue to implement the four-pillar basic strategy pursued through the previous fiscal year: “reform of taste,” “a fundamental shift in marketing methods,” “utilization of owned assets and optimization of the store portfolio,” and “a leaner management structure.”」

「To enhance our corporate value and the common interests of our shareholders, we are working as a group toward achieving the medium-term management plan.」

「Our group has adopted as its management vision the transformation from an eat-in food-service business into a comprehensive food company on the premise of the post-COVID era. To capture not only demand for dining out but also demand for takeout and other prepared foods, we are pursuing various initiatives to increase sales that Kourakuen had not previously undertaken, including drive-through service, takeout, delivery, Kourakuen’s fried-chicken business, and online sales.」

「To enhance our corporate value and the common interests of our shareholders, we are working as a group toward achieving the medium-term management plan. The key elements of this medium-term management plan are as follows.」

「To enhance our corporate value and the common interests of our shareholders, we are working as a group toward achieving the medium-term management plan. The key elements of this medium-term management plan are as follows: (a) improving profits at existing stores and developing the New Kourakuen model; (b) expanding the New Kourakuen model overseas and grouping new business formats within the group; (c) expanding the external sales business in conjunction with the construction of a new factory; (d) strengthening our financial position; and (e) management that emphasizes corporate governance.」

「To enhance our corporate value and the common interests of our shareholders, we are working as a group toward achieving the medium-term management plan. The key elements of this medium-term management plan are as follows: (a) improving profits at existing stores and developing the New Kourakuen model; (b) expanding the New Kourakuen model overseas and grouping new business formats within the group; (c) expanding the external sales business in conjunction with the construction of a new factory; (d) strengthening our financial position; and (e) management that emphasizes corporate governance.」

「Our group previously pursued an expansion strategy focused on sales, but changed course toward profit-driven management following the substantial loss recorded for the fiscal year ended March 2018 and the change in representative director and president in November of that year. Specifically, we have pursued initiatives to reduce fixed costs in order to lower the break-even point, considered improving store operating efficiency through the introduction of tablets and SI-based systems, and strategically withdrawn from unprofitable stores. In response to further changes in the operating environment, including calls for people to refrain from dining out due to the COVID-19 pandemic, we are accelerating these measures.」

「Based on our experience with Typhoon Hagibis, we decided to promote the development of a highly profitable business structure resilient to disaster risks and periods of declining revenue. Specifically, we will implement fundamental structural reforms covering our stores, factories, and head office, shift rapidly toward “profit-driven management,” and aim to achieve the medium-term management plan. Going forward, we plan to promptly close or convert unprofitable stores, introduce measures to strengthen the profitability of existing stores, rebuild the supply chain as a factory initiative, promote “visualization and systematization” and further reduce head-office expenses as head-office initiatives, and reform operations related to budget-versus-actual management. As a first step in this fundamental structural reform, we decided to close or convert 51 low-profit stores between December 2019 and April 2020.」

「Based on the environment surrounding our group and our medium- to long-term management strategy, with the corporate objective of achieving long-term and stable growth in corporate value, we pursued measures aimed at realizing food safety and security and “New Kourakuen” under a four-pillar strategy of “reform of taste,” “a fundamental shift in marketing methods,” “utilization of owned assets and optimization of the store portfolio,” and “a leaner management structure.”」

「Based on the environment surrounding our group and our medium- to long-term management strategy, with the corporate objective of achieving long-term and stable growth in corporate value, we pursued measures aimed at realizing food safety and security and “New Kourakuen” under a four-pillar strategy of “reform of taste,” “a fundamental shift in marketing methods,” “utilization of owned assets and optimization of the store portfolio,” and “a leaner management structure.”」

「We have adopted a four-pillar strategy of “reform of taste,” “a fundamental shift in marketing methods,” “utilization of owned assets and optimization of the store portfolio,” and “a leaner management structure,” and will promote measures aimed at realizing food safety and security and “New Kourakuen,” while working to secure and enhance the corporate value of our group and, in turn, the common interests of our shareholders. We will also add “reasonably priced menus suited to an era of tax increases” and “the addition of a premium line one level above the standard offering” to the four-pillar strategy and pursue these initiatives as the “Kourakuen Reiwa Strategy.”」

「Based on the environment surrounding our group and our medium- to long-term management strategy, with the corporate objective of achieving long-term and stable growth in corporate value, we pursued measures aimed at realizing food safety and security and “New Kourakuen,” under four transformation themes: “reform of taste,” “a fundamental shift in marketing methods,” “utilization of owned assets and optimization of the store portfolio,” and “a leaner management structure.”」

「Based on the environment surrounding our group and our medium- to long-term management strategy, with the corporate objective of achieving long-term and stable growth in corporate value, we pursued measures aimed at realizing food safety and security and “New Kourakuen,” under three transformation themes: “reform of taste,” “a leaner management structure,” and “utilization of owned assets and optimization of the store portfolio.”」

「Based on the environment surrounding our group and our medium- to long-term management strategy, with the corporate objective of achieving long-term and stable growth in corporate value, we pursued measures aimed at realizing food safety and security and “New Kourakuen,” under three transformation themes: “a leaner management structure,” “reform of taste,” and “monetizing assets.”」

「In addition, to achieve a group structure of 1,000 stores and establish an efficient management structure, we entered into a franchise agreement with PEPPER FOOD SERVICE CO.,LTD. and began developing a new business format. Furthermore, to improve the efficiency of our management resources and increase profitability, we closed stores where long-term growth was not expected, transferred the Kyoto factory, utilized assets through a sale-and-leaseback transaction, and merged with a consolidated subsidiary through a short-form and simplified merger.」

「Based on the environment surrounding our group and our medium- to long-term management strategy, with the corporate objective of achieving long-term and stable growth in corporate value, we adopted “back to basics and decisive reform” as our company policy and continued to pursue food safety and security and open new locations, while advancing a product policy that emphasized “value” over “price.” However, business conditions remained difficult due to the impact of issues related to food safety and security and adverse weather conditions. In addition, to achieve a group structure of 1,000 stores and establish an efficient management structure, we entered into a franchise agreement with PEPPER FOOD SERVICE CO.,LTD. and began developing a new business format. Furthermore, to improve the efficiency of our management resources and increase profitability, we decided to close 52 stores where long-term growth is not expected, transfer the Kyoto factory, and merge with a consolidated subsidiary through a short-form and simplified merger.」

「In addition, to improve the efficiency of our management resources and increase profitability, we decided to close 52 stores where long-term growth is not expected.」

「Based on the environment surrounding our group and our medium- to long-term management strategy, with the corporate objective of achieving long-term and stable growth in corporate value, and with “back to basics and decisive reform” as our company policy, we continued to pursue food safety and security and proactively open new locations, while advancing a product policy that emphasized “value” over “price.”」

「Based on the environment surrounding our group and our medium- to long-term management strategy, with the corporate objective of achieving long-term and stable growth in corporate value, and with “back to basics and decisive reform” as our company policy, we will continue to pursue food safety and security and proactively open new locations, while promoting the development of new formats and products and strengthening quality reform for products and services. In addition, we have identified growth and expansion measures and management efficiency and business-structure reform measures as issues to be addressed in achieving the medium-term management plan. By implementing various measures to achieve these objectives, we intend to devote ourselves to securing and enhancing the corporate value of our group and, in turn, the common interests of our shareholders.」

「Against this backdrop, based on our group’s medium- to long-term management strategy, with the corporate objective of achieving long-term and stable growth in corporate value, and with “the first year of structural reform through execution of the medium-term management plan” as our action goal, we continued to open new locations proactively while promoting the development of new formats and products and strengthening quality reform for products and services.」

「Against this backdrop, based on our group’s medium- to long-term management strategy, with the corporate objective of achieving long-term and stable growth in corporate value, and with “the first year of structural reform through execution of the medium-term management plan” as our action goal, we continued to open new locations proactively while promoting the development of new formats and products and strengthening quality reform for products and services.」

「With the corporate objective of achieving long-term and stable growth in corporate value, and with “the first year of structural reform through execution of the medium-term management plan” as its action goal, we will continue to open new locations proactively while promoting the development of new formats and products and strengthening quality reform for products and services.」