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It is also well established that trademarks embody goodwill.
Renziehausen v. Lucas, 280 U.S. 387, 388 (1930); Stokely USA,
Inc. v. Commissioner, 100 T.C. 439, 447 (1993); Canterbury v.
Commissioner, supra at 252; Philip Morris Inc. v. Commissioner,
96 T.C. at 636. Consumers associate the Mister Donut trademark
with their pleasurable experience at Mister Donut shops. As a
result, goodwill is also embodied in the trademarks, which Duskin
acquired and which cause customers to return to Mister Donut
shops in the future and patronize them.
Petitioner's business in the operating countries was
conducted by granting Mister Donut franchises. Under the
purchase agreement, Duskin received petitioner's rights as
franchisor under the existing franchise agreements in the
operating countries. The franchisees in the operating countries
possessed the exclusive right to open stores pursuant to
established conditions and at locations approved by the
franchisor. In order to ensure that the distinguishing
characteristics of Mister Donut were uniformly maintained, the
franchise agreements had established standards for furnishings,
equipment, product mixes, and supplies, which the franchisees
were required to meet. The franchise agreements also required
that franchisees operate their shops in accordance with uniform
standards of quality, preparation, appearance, cleanliness, and
service. The agreements provided that the franchisor could not
open, or authorize others to open, any Mister Donut shops in the
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