International Business Times recently published a follow-up piece to its July 28th article on Dunkin's IPO. IBT's article references last week's analyst coverage initiation of Dunkin' stock and the sell downgrade issued by lead underwriter Goldman Sachs. Goldman's opinion is contrary to recent statements made by Dunkin' Brands CEO Nigel Travis to CNBC in which he stated, "We're almost recession proof." 

Michael Keller, a Goldman Sachs analyst in New York, wrote in a note this week after initiating coverage on Dunkin' (NASDAQ: DNKIN) that "despite a boost" from the launch of single-serve K-Cups, the company's U.S. business is "highly macro-sensitive against an uncertain economic backdrop."

Goldman Sachs analyst Michael Keller believes Dunkin' overstated its ability to grow the U.S. store count to 15,000 units over the next 10 years. Rather, Keller believes Dunkin' only has room to grow an additional 3,200 units, resulting in a U.S. store count of only 10,000 units.

Dunkin' has said it plans to grow its number of U.S. stores to 15,000 in the next 10 years. Keller estimates in his note that Dunkin' may be able to open roughly 3,200 more Dunkin' Donuts in the U.S., resulting in a total of 10,000 shops instead.

IBT journalist, David Magee, digs deeper into Dunkin' by comparing its growth model to one-time Wall Street darling Boston Chicken — now trading as Boston Market.

Boston Chicken, now Boston Market, was a Wall Street darling in the mid-1990s as the chain grew rapidly, opening stores throughout the United States and sending the company's stock flying higher and higher. But the company was merely creating a steady stream of revenue from one-time development fees and increasing royalties through franchise sales.

Once growth slowed, somebody thought to look at the success of the existing franchises, taking a look under the company's proverbial hood. Seems Boston Chicken had dismal same-store sales year-over-year, and many locations were losing money, fast. When the new-store growth slowed, investors and the company had little to show for their stock.

Boston Chicken filed for bankruptcy in 1998. The chain was renamed Boston Market, and eventually taken over by private equity firm Sun Capital Partners.

Similarly, Wall Street and financial journalists have fallen for Dunkin' Group (NASDAQ: DNKN) via the company's stock IPO. Wednesday was a giant love-fest, as investors sent Dunkin's IPO up more than 40 percent on the trading day and sometimes-jaded financial journalists turned as sweet and mushy as a cherry-filled glazed donut.

I'm afraid the excitement over Dunkin', which also owns Baskin-Robbins ice cream stores, might not last so long. The ingredients here have striking resemblance to Boston Chicken's 1990s story.

Mr. Magee raises key concerns regarding Dunkin' Brands' business model for the retail investor to consider before deciding to invest in DNKN stock:

1. Same-store sales at Dunkin' are relatively flat, and that's been the case for the past several years. Dunkin' reported negative same-store sales in 2008 and 2009 and only a modest 2.3 percent increase in 2010 on the backbone of enhanced market in advance of the IPO.
2. The company has a debt problem. Dunkin' is essentially a franchiser, yet the company brought $1.5 billion in debt to its IPO.
3. Baskin-Robbins is on the decline, and has been for years.
4. Dunkin' has an aggressive growth plan for new stores, which must be the only reason investors are valuing Dunkin' at IPO at almost 80 times earnings as competitor Starbucks trades at roughly 28 times trailing earnings. But as investors like Dunkin's plan to grow to double current size in the U.S. alone -- adding 500 stores per year -- while expanding abroad as well, that may be the Biggest Boston Chicken catch.

Dunkin's business model is asset light and based on selling an intangible trademark versus owning real stores requiring astute management with a keen eye on bottom line profitability. The mere selling of the trademark resembles the failed growth strategy behind Boston Chicken.

Since same-store sales are flat, and have been, and Dunkin's set-up doesn't allow for much food-offerings expansion beyond what's already being done, the company will drive its growth from one-time franchise fees and roll out fees much like Boston Chicken did.

The journalist conducted a simple real world business indicator analysis comparing Dunkin' against its largest competitor Starbucks {SBUX} and concludes Starbucks as the more sustainable concept with greater brand equity.

At several Dunkin' stores visited, the crowd was one to three. At several Starbucks stores visited in the same time period, the crowd was 15-25.

Apparently, Dunkin's business model and growth story is parallel to Boston Chicken's model of selling franchises versus Dunkin's primary competitor Starbucks who owns hard assets. If Dunkin' intends to remain as a purely franchised business model, then they may share the same fate as one-time Wall Street darling Boston Chicken.

Still, there's only so much money to be made from selling coffee and donuts, especially when customer service is sub-par on average and many stores face cleanliness issues. Bring in the debt issue, and consider that Dunkin' plans to derive its growth from one-time store openings, and you have the recipe for another serving of Boston Chicken.