The coffee-and-doughnut chain will boost the size of its offering to $600 million — more than the $400 million it initially planned in May — when it sells shares to the public this week, sources told The Post.

A big part of Dunkin’s pitch to investors is that the chain will expand beyond its Northeastern base. Of the 6,772 Dunkin’ stores in the US, 55 percent are in New England and New York.

“We believe that our strategy of focusing on contiguous growth has the potential, over the next 15 to 20 years, to more than double our current US footprint and reach a total of 15,000 points of distribution in the US,” Dunkin’ said in its offering papers.

Despite the company’s growth ambitions, the vast majority of the proceeds from the IPO will go toward paying down debt rather than being plowed into new stores.

Indeed, Dunkin’ is relying on its franchisees — who own and run nearly all the stores — to expand its footprint with limited capital investment from the parent. Almost all the 206 net expansions in the US last year came from existing franchisees opening new locations.

“It is the franchisees who will be paying the price for this strategy,” said Irwin Barkan, the author of “Dunk’d: A True Story of How Big Money is Corrupting the Franchising Industry,” which tells of his travails as a franchise owner.

The IPO comes as rising commodity costs put pressure on Dunkin franchisees, who are also finding it harder to line up financing from banks to build stores.

“If the growth is coming from existing franchisees, it is going to be slow,” said one franchisee, who asked to remain unnamed. “This brand really needs a shared growth strategy.”

A Dunkin’ spokeswoman declined to comment.

Read more: NY Post

MarketWatch:  Six years after a gang of private-equity investors took Dunkin’ Donuts private, they’ve decided the time is right to tap the capital markets and toss it back into the public arena.

The prospectus is predictably glowing and full of grand plans. The company envisions doubling its footprint. That means management wants to double its number of stores. Of course they do! Most of the revenue (62%, according to the Deal Journal) comes from royalties and franchise fees. The more Dunkin’ Donuts or Baskin-Robbins ice-cream shops that open, the fatter the revenue stream to the mother ship.

But this isn’t a slam-dunk business plan.

Dunkin’ Brands already has 16,000 “points of distribution,” as the company calls them, in 57 countries, with an especially high concentration in Dunkin’s native New England.

Dunkin’s history and much of its business model smacks of Krispy Kreme Doughnuts . After decades of slow, steady growth across the South, that company got cocky and launched a big push into other regions. It went public in 2000, offering its stock at $21 a share. The shares debuted at $32 and finished their first day of trading at $37. The euphoria lasted three years, then faded fast. So did the share price, peaking at $49.74 in August 2003 before plunging to $1.01 in February 2009. The fall raised the possibility of bankruptcy.

Admittedly, just about everyone’s stock cratered in 2009. But Krispy Kreme’s descent began well before the onset of the Great Recession. It simply got top-heavy, crushed by the weight of its own aggressive expansion and investors’ unrealistic expectations. It’s made a reasonable recovery since and now trades around $5.45 a share. But getting there required some draconian culling of its franchise empire.

There are plenty of reasons to think things might be different for Dunkin’. Its coffee business puts it more in a league with Starbucks /quotes/comstock/15*!sbux/quotes/nls/sbux SBUX +0.08% , and it has plenty of aficionados. It also has an ice-cream business. But that hardly makes it diversified. It’s still peddling sugar and caffeine, both of which are vulnerable to the vagaries of volatile commodities markets, and both of which are nonessential.

So glassy-eyed plans to double the footprint looks like a familiar case of overkill.

But, hey, hasn’t the doughnut business always been about excess? Given the public’s uncontrollable urge for food fads and all things sweet, no one should be surprised if the offer is oversubscribed. It’ll be a real sugar rush.

Hanging on to the stock much past the IPO, however, could end up looking like a kid on a sugar crash — a blubbering, sticky mess.

Admittedly, just about everyone’s stock cratered in 2009. But Krispy Kreme’s descent began well before the onset of the Great Recession. It simply got top-heavy, crushed by the weight of its own aggressive expansion and investors’ unrealistic expectations. It’s made a reasonable recovery since and now trades around $5.45 a share. But getting there required some draconian culling of its franchise empire.

There are plenty of reasons to think things might be different for Dunkin’. Its coffee business puts it more in a league with Starbucks , and it has plenty of aficionados. It also has an ice-cream business. But that hardly makes it diversified. It’s still peddling sugar and caffeine, both of which are vulnerable to the vagaries of volatile commodities markets, and both of which are nonessential.

So glassy-eyed plans to double the footprint looks like a familiar case of overkill.

MarketWatch

From Wall Street Journal

Lynn Cowan of the Wall Street Journal covers the big story that Dunkin’ Brands Group Inc., operator of the seemingly ubiquitous Dunkin’ Donuts chain, is the latest private-equity-backed offering to arrange to go public in the U.S., with the coffee and doughnut restaurant chain registering for an IPO on Wednesday.

Dunkin’ Brands, which was acquired in 2006 by a group of private-equity firms, registered to sell up to $400 million in common stock in an initial public offering; that number is used solely to calculate filing fees, so the final amount it raises could vary significantly.

The company didn’t specify a price range, share size or date for its IPO, but most deals take about three months from filing to launch, so it is likely to go some time this summer. Dunkin’ which operates the Dunkin’ Donuts coffee shop chain as well as Baskin-Robbins ice cream shops, plans to list on the Nasdaq Stock Market under the symbol DNKN.

Dunkin’ Brands Group is seeking some serious dough. The owner of the Dunkin’ Donuts chain as well as Baskin-Robbins ice cream shops, today filed to go public. (Sorry for the terrible pun.)

Dunkin’ Deal: Five Things You Didn’t Know:

1. Financials: It turns out doughnuts are a really good business. Dunkin’ Brands pulled down $577.1 million in revenue last year, about 7.3% higher than a year before. And the company’s total operating income for 2010 was $193.5 million. That gives Dunkin’ Brands a quite enviable operating profit margin of roughly 34%.
2. How Dunkin’ Brands makes money: About 62% of the company’s revenue last year came from royalties and franchise fees paid by the business owners who buy the rights to open Dunkin’ Donuts and Baskin-Robbins stores. All stores are owned by franchisees. About 60% of Dunkin’s total sales are from coffee and other beverages. That’s quite a jolt.
3. Feel surrounded by doughnut shops in New England? You’re right: From the IPO filing – “In our traditional core markets of New England and New York, we now have one Dunkin’ Donuts store for every 9,700 people. In the near term, we intend to focus our development on other existing markets east of the Mississippi River, where we currently, have only approximately one Dunkin’ Donuts store for every 48,400 people”
4. Trouble with the tax man: Dunkin’ Brands disclosed that the IRS is currently auditing its federal income tax returns for 2006, 2007 and 2008. The company’s IPO filing said the IRS “has proposed adjustments for fiscal years 2006 and 2007 to increase our taxable income as it relates to our gift card program, specifically to record taxable income upon the activation of gift cards.” Dunkin’ Brands said it is fighting the IRS on this point.
5. Look out China: Dunkin’ Brands has ambitious growth plans in both the U.S. and abroad. The lion’s shares of Dunkin’ Donuts’ and Baskin-Robbins’ collective 16,000 locations are in the U.S. For international expansion, Dunkin’ Donuts is eyeing China, Germany, Spain and Russia. Baskin-Robbins is shooting for expansion in China, Russia, Mexico, Australia and Indonesia. (Dunkin’ Donuts also coming to India, perhaps by early 2012.)

Bankers and market observers say more private-equity-backed IPOs like that of Dunkin’ Brands are likely to be filed this year, as the funds owning the stocks seek to exit positions they took years ago. In Dunkin’ Brands’ case, Bain Capital Partners, Carlyle Group and Thomas H. Lee Partners LP have owned the company for five years; they purchased it from liquor company Pernod Ricard SA for $2.43 billion.

Earlier this year, private-equity-backed hospitals operator HCA Inc. and energy company Kinder Morgan Inc. completed successful IPOs of more than $1 billion each. While the offering from Dunkin’ Brands isn’t likely to be as big as either of those deals, the company’s brand recognition is likely higher among investors, said Scott Rostan, a former investment banker and founder of Training the Street, a financial-services learning company that trains junior professionals at investment banks in accounting, valuation and financial modeling skills. Both Dunkin’ Donuts and the Baskin-Robbins brands date back to the 1940s.

“Dunkin’ is going to be a good bellwether on two fronts: one for private-equity backed companies seeking to go public, and also as further evidence of the strength and momentum of the IPO market this year,” Mr. Rostan said.

Read more at Wall Street Journal

Banks, including Barclays, JPMorgan Chase, Bank of America Merrill Lynch and Goldman Sachs, have previously provided financing to the company. Dunkin’ Brands is backed by private equity firms, including Bain Capital, Carlyle Group and Thomas H Lee Partners.

Click here for the story from Reuters.

The presentation is titled: The Franchisor In Play: Your Role as a Stakeholder, Not a Spectator

Eric made this same presentation at DDIFO’s National Members Meeting. For more information read: Franchisees as Stakeholders Your Rightful Claim  

The debt due November 2017, sold to investors at 100 cents on the dollar, began trading at 100.5 cents today and rose to 100.875 cents, Markit said.

Barclays Plc, JPMorgan Chase & Co., Bank of America Corp. and Goldman Sachs arranged the debt, which will pay 3 percentage points more than the London interbank offered rate, said the person who declined to be identified because the terms are private. Libor, the rate banks charge to lend to each other will have a 1.25 percent floor.

Bloomberg

Related Stories:

Dunkin Brands

No Slam Dunkin

Reuters Breaking Views

The buyout barons behind Dunkin’ Donuts are taking out some dough. Nearly five years on from one of the era’s most aggressive leveraged buyouts, Bain Capital, Carlyle Group and Thomas H. Lee Partners are hiking up debt on Dunkin’ Brands, which owns the doughnut chain and ice cream retailer Baskin-Robbins, taking out a $500 million dividend in the process. Equity holders may get a short-term buzz, but debt investors should beware.

The refinancing will leave Dunkin’ with a debt-to-EBITDA ratio of more than 7 times, a heavy burden even in the best of circumstances.

True, it’s a lighter load than the original LBO leverage level of 8.5 times, when the private equity trio bought out the company for $2.4 billion. But these are different times, and banks and investors are supposed to have learned the dangers of too much leverage.

Dunkin’s new debt holders probably take comfort in the fact that the firm managed the most severe recession in memory loaded up with debt. It grew its franchise numbers by 3.7 percent during 2009, and spent this year adding even more. Sales are up as well.

Those figures, however, are a slow-down from Dunkin’s impressive growth between 2006 and 2008, when the private equity owners initially polished Dunkin’ Donuts’ image and pushed into coffee. It’s questionable whether similar rates of growth can be achieved again.

Read the full opinion at Reuters

For related stories see:  Moody’s Bites into Dunkin’ Brands

Dunkin’ Taps Junk Rally to Fund Private Equity Payout

Since the Term Sheet is fueled by giant plastic cups full of Dunkin’ iced cofee (yes, even in cold weather), a few notes:

The $2 billion deal is split up into three tranches: $1.25 billion guaranteed senior secured term loan(rated B1), $100 million senior secured revolving credit facility (B1) and $625 million in senior unsecured notes (Caa2).

Assuming it all gets sold, Dunkin’s private equity owners — Bain, Carlyle and THL Partners — plan to pocket $500 million.

Dunkin’ is a highly-levered company at 7x EBITDA, although has decent recurring revenue via its franchise model. The downside to franchising revenue, however, is when it comes to actual dollars. System-wide Dunkin’ sales are around $7.5 billion, but the parent company only brings in around $540 million.

Read more at: Fortune.com 

The company, purchased in 2006 by Bain Capital LLC, Carlyle Group and Thomas H. Lee Partners LP, plans to sell $625 million of senior notes and obtain a $1.35 billion senior credit line to repay securitized debt and help fund a dividend, Dunkin’ Brands said today in a statement distributed by PR Newswire.

Dunkin’ Brands follows Brickman Group Holdings Inc., Goodman Global Inc. and Asurion Corp. in tapping investor demand that’s enabling private-equity firms to carve out payouts before a possible doubling of taxes on dividends in 2011. Banks arranged or started marketing almost $7 billion of leveraged loans in October, 3.5 times more than the year’s average and the most since the credit crisis.

“The conditions are ripe for more debt-financed payments to shareholders,” said John Lonski, chief economist at Moody’s Capital Markets Group in New York. “The absolute level of speculative-grade bond yields are the lowest they’ve been since 2005.”

The average yield on junk debt fell to 7.74 percent on Oct. 22, the lowest since 7.73 percent on June 6, 2007, according to Bank of America Merrill Lynch’s U.S. High Yield Master II index. High-yield, high-risk debt is rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s.

Dunkin’ Brands’ notes will be issued through Dunkin’ Finance Corp., according to the statement.

JPMorgan Chase & Co. and Deutsche Bank AG will manage the bond sale and Barclays Plc will arrange the loan, according to a person familiar with the negotiations, who declined to be identified because the terms are private.

Michelle King, a spokeswoman for Canton, Massachusetts- based Dunkin’ Brands, declined to comment on the financing details.

Read more at: Bloomberg Businessweek

The Sun Herald  reports that Dunkin’ Brands, the parent company of two of the world’s most recognized brands, Dunkin’ Donuts and Baskin-Robbins, today announced that Dunkin’ Finance Corp., a corporate finance entity, proposes to raise approximately $625 million through an offering of senior notes.  The proceeds from the notes offering would be used, together with borrowings under a new approximately $1.35 billion senior credit facility and available cash, to repay in full the outstanding securitization debt of Dunkin’ Brands’ securitization subsidiaries and to pay a cash dividend to Dunkin’ Brands’ stockholders.  Following repayment of the securitization debt, the notes would be assumed by Dunkin’ Brands. The consummation of the notes offering is subject to market and other conditions.

This press release does not constitute an offer to sell or the solicitation of an offer to buy the senior notes.  The notes to be offered have not been, and will not be, registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act of 1933.

Certain statements in this press release are forward-looking statements.  These statements involve a number of risks, uncertainties, and other factors including the failure to consummate the notes offering and potential changes in market conditions that could cause actual results to differ materially.

Read more: http://www.sunherald.com/2010/10/25/2579765/dunkin-brands-announces-proposed.html#ixzz13NzuEElV