Diedrich Coffee Inc. (Nasdaq:DDRX), the nation's second-largest specialty coffee retailer, Monday announced the mutual termination of a franchise area development agreement that called for the development of 50 Diedrich Coffee brand coffeehouses in the state of Connecticut and various counties in Massachusetts and New York.

With the termination of this agreement, a total of four franchise area development agreements remain in effect. The four agreements call for the development of 214 franchised coffeehouses, with three of the 214 presently open and operating. Currently, two of these four remaining area developers have not met their agreed upon development schedules.

Diedrich Coffee is in discussion with these franchise area developers to resolve these issues.

About Diedrich Coffee

Diedrich Coffee is the nation's second-largest retailer in the specialty coffee market with annual systemwide revenues in excess of $150 million through 381 retail locations in 38 states and 10 foreign countries. The company's primary brands are Diedrich Coffee brand coffeehouses and Gloria Jean's Coffees, the nation's leading chain of mall-based coffee stores.

With headquarters in Irvine, Diedrich Coffee specializes in sourcing and custom roasting the world's highest-quality coffees and offering them to customers through its coffeehouses and mall stores and via wholesale, mail order and its Web site. For more information about Diedrich Coffee, call 800/354-5282, or visit the company's Web site at www.diedrich.com.

Forward-Looking Statements

Statements in this news release that relate to future plans, financial results or projections, events or performance are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and fall under the safe harbor. Actual results and financial position could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including but not limited to, the successful management of Diedrich Coffee's growth strategy, impact of competition, the availability of working capital and other risks and uncertainties described in detail under "Risk Factors and Trends Affecting Diedrich Coffee and its Business" in the company's annual report on form 10-K for the fiscal year ended June 28, 2000.