Kura Sushi USA (KRUS) risk factors, FY2024 10-K

Other

1. 01Geographical Concentration. Our restaurants are concentrated in California and Texas and in retail centers and shopping malls and could be negatively affected by conditions specific to these states and locations
2. 02Competition. We face significant competition from a variety of restaurants offering both Asian and non-Asian cuisine, as well as takeout offerings from grocery stores and other outlets where Asian food is sold
3. 03Capital Needs. We may need capital in the future, and we may not be able to raise that capital on favorable terms
4. 04unionization activities or labor disputes could adversely affect our business, financial position and results of operations
5. 05Dual-Class Stock Structure. The disparate voting rights of our Class A common stock and our Class B common stock could adversely affect the value and liquidity of our Class A common stock
6. 06Certain Provisions in Our Charter Documents. Our charter documents contain certain provisions which make it more difficult for a third party to acquire control of us without Board approval and for a stockholder to bring claims in a judicial forum that it finds favorable for disputes with us
7. 07Our Status Being a “Controlled Company.” As a “controlled company,” we may rely on exemptions from certain corporate governance requirements required under the Nasdaq listing standards and you will not have the same protections afforded to stockholders of companies that are subject to such requirements

Risks Related to Our Operations and Growth Strategy

1. 08Our long-term success is highly dependent on our ability to successfully identify and secure appropriate sites and timely develop and expand our operations in existing and new markets
2. 09the cost and availability of capital to fund construction costs and pre-opening costs
3. 10of operations. If we are unable to expand in existing markets or penetrate new markets, our ability to increase our sales and profitability may be materially harmed or we may face losses
4. 11Opening new restaurants in existing markets may negatively affect sales at our existing restaurants
5. 12Our sales and profit growth could be adversely affected if comparable restaurant sales are less than we expect
6. 13Our failure to manage our growth effectively could harm our business and operating results
7. 14Our limited number of restaurants, the significant expense associated with opening new restaurants, and the unit volumes of our new restaurants makes us susceptible to significant fluctuations in our results of operations
8. 15Our restaurant base is geographically concentrated in California and Texas, and we could be negatively affected by conditions specific to these states
9. 16A decline in visitors to any of the retail centers, shopping malls, lifestyle centers, or entertainment centers where our restaurants are located could negatively affect our restaurant sales

Risks Related to Our Relationships with Kura Japan and Other Key Suppliers

1. 17We have historically received strategic, operational and financial support from Kura Japan, and as we increase our independence from Kura Japan, we may face difficulties replacing certain services, supplies and financial assistance Kura Japan has provided to us
2. 18Our indebtedness to Kura Japan may limit our ability to be acquired by a third party or acquire a third party
3. 19Any events or circumstances that result in the termination or limitation of our rights under our agreement between us and Kura Japan of our intellectual property could have a material adverse effect on our business, financial condition or results of operations
4. 20We may become involved in lawsuits involving Kura Japan as the owner of intellectual property, or us as a licensee of intellectual property from Kura Japan, to protect or enforce intellectual property rights, which could be expensive, time consuming, and unsuccessful
5. 21Infringements on Kura Japan’s intellectual property rights, including Kura Japan’s service marks and trade secrets, could result in additional expense and could devalue our brand equity, as well as substantially affect our business, financial condition or results of operations
6. 22We rely significantly on certain vendors and suppliers, which could adversely affect our business, financial condition or results of operations
7. 23Changes in food and supply costs and/or availability of products could adversely affect our business, financial condition or results of operations

Other Commercial, Operational, Financial and Regulatory Risks

1. 24Operating results at our restaurants could be significantly affected by competition in the restaurant industry in general and, in particular, within the dining segments of the restaurant industry in which we compete
2. 25Changes in economic conditions could materially affect our ability to maintain or increase sales at our restaurants or open new restaurants
3. 26Food safety and foodborne illness concerns as well as outbreaks of flu, viruses or other diseases could have an adverse effect on our business, financial condition or results of operations
4. 27New information or attitudes regarding diet and health could result in changes in regulations and consumer consumption habits that could adversely affect our business, financial condition or results of operations
5. 28We rely significantly on the operation of our revolving and express conveyor belts, sushi robots and other automated equipment, and any mechanical failure could prevent us from effectively operating our restaurants
6. 29We rely significantly on information technology and cybersecurity, and any material failure, weakness, interruption or breach of security could prevent us from effectively operating our business
7. 30A breach of security of confidential consumer information related to our electronic processing of credit and debit card transactions, as well as a breach of security of our employee information, could substantially affect our reputation, business, financial condition or results of operations
8. 31Our marketing programs may not be successful, and our new menu items, advertising campaigns and restaurant designs and remodels may not generate increased sales or profits
9. 32Our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media and other digital platforms could materially adversely impact our business, financial condition or results of operations
10. 33Negative publicity relating to one of our restaurants could reduce sales at some or all of our other restaurants
11. 34We are subject to all of the risks associated with leasing space subject to long-term non-cancelable leases
12. 35We may need capital in the future, and we may not be able to raise that capital on favorable terms
13. 36We depend on our senior management team and other key employees, and the loss of one or more key personnel or an inability to attract, hire, integrate and retain highly skilled personnel could have an adverse effect on our business, financial condition or results of operations
14. 37As we face labor shortages and increased labor costs, or if we face unionization activities, our growth, business, financial condition and operating results could be adversely affected
15. 38We may be unable to increase our menu prices in order to pass increased labor costs on to consumers, in which case our margins would be negatively affected, which could materially adversely affect our business, financial condition or results of operations
16. 39Our business could be adversely affected by a failure to obtain visas or work permits or to properly verify the employment eligibility of our employees
17. 40Labor disputes may disrupt our operations and affect our profitability, thereby causing a material adverse effect on our business, financial condition or results of operations
18. 41The minimum wage, particularly in California, continues to increase and is subject to factors outside of our control
19. 42Changes in employment laws may adversely affect our business, financial condition, or results of operations
20. 43Governmental regulation may adversely affect our ability to open new restaurants or otherwise adversely affect our business, financial condition or results of operations
21. 44We could be party to litigation that could adversely affect us by distracting management, increasing our expenses or subjecting us to material money damages and other remedies
22. 45Our current insurance may not provide adequate levels of coverage against claims
23. 46Changes to accounting rules or regulations may adversely affect our business, financial condition or results of operations
24. 47Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited
25. 48Changes in tax laws and unanticipated tax liabilities could adversely affect our financial results
26. 49Failure to establish and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price

Risks Related to Ownership of Our Class A Common Stock

1. 50There may be an adverse effect on the value and liquidity of our Class A common stock due to the disparate voting rights of our Class A common stock and our Class B common stock
2. 51Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price
3. 52The price of our common stock may be volatile and you may lose all or part of your investment
4. 53Future sales of our common stock, or the perception that such sales may occur, could depress our common stock price
5. 54In the future, we may also issue common stock or other securities. The number of new shares of our common stock issued in connection with raising additional capital could constitute a material portion of the then outstanding shares of our common stock and dilute our current stockholders
6. 55If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline
7. 56We do not intend to pay dividends for the foreseeable future
8. 57Provisions in our charter documents and Delaware law may delay or prevent our acquisition by a third party
9. 58Our amended and restated certificate of incorporation and amended and restated bylaws each contain an exclusive forum provision, which could limit a stockholder’s ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees

Risks Related to Our Organizational Structure

1. 59We are controlled by Kura Japan, whose interests may differ from those of our other stockholders
2. 60We are a “controlled company” within the meaning of the Nasdaq listing standards and, as a result, will qualify for, and may rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements
3. 61The interests of Kura Japan may conflict with ours or yours in the future
4. 62The corporate opportunity provisions in our amended and restated certificate of incorporation could enable Kura Japan to benefit from corporate opportunities that might otherwise be available to us
5. 63Future sales of our shares by Kura Japan could depress our Class A common stock price