IHG may have ambitious plans for the future, but they aren’t impervious to risk. A helpful risk analysis method we can use with some hypothetical franchise cost would be the expected monetary value (EMV). Reviewing the effects of franchising in the US vs. not franchising is an excellent point to seeing that they are looking to expand heavily in the US market to solidify somewhat of a fail-safe plan to make room for international luxury accommodations. Franchising in the US or Not Franchising in the US

There is a 15% chance consumer interest increases, a 25% chance interest is unchanged, and a 30% chance interest decreases. 

To calculate the expected monetary value for IHG for each decision would be:

Franchise in the US is selected.

EMV of dollar value increase = .15 x $800,000 = $120,000

EMV of dollar value staying same = .25 x $750,000 = $187,500

EMV of dollar value decrease = .30 x -$500,000 = $150,000

EMV of importing = $120,000 + $187,500 + -$150,000 = $157,500

If Not Franchise in US and franchising in China is selected

EMV of dollar value increase = .15 x -$600,000 = -$90,000

EMV of dollar value staying same = .25 x $300,000 = $75,000

EMV of dollar value decrease = .30 x -$150,000 = -$45,000

EMV of not importing = $90,000+ $75,000 + (-$45,000) = -$120,000

Based on the EMV calculations, it’s more profitable to franchise in the US. Franchising in the US has shown to be beneficial during the pandemic. In the US, the potential decrease is higher. The significant difference is the starting point for both. The US has a 450K lead on, just remaining the same compared to China.