Diedrich Coffee Inc. Announces Transaction to Franchise Houston Area Coffeehouses

Business Wire, May 16, 2001

Business Editors

IRVINE, Calif.--(BUSINESS WIRE)--May 16, 2001

Diedrich Coffee Inc. (Nasdaq:DDRX) announced today that it closed a transaction on May 15, 2001, to sell and franchise three company-owned Diedrich Coffee brand Coffeehouses located in Houston to Magna Cum Latte Inc., a Texas Corporation. Additionally, Magna Cum Latte purchased the rights to develop six new Diedrich Coffee locations in a defined area within the Houston market. Proceeds from this transaction were approximately $1 million.

About Diedrich Coffee

Diedrich Coffee is one of the nation's largest producers of specialty-grade coffee, with annual revenues in excess of $75 million. The company sources and roasts the world's highest-quality coffees and sells them through a variety of wholesale distribution channels, as well as through 376 retail locations in 37 states and 11 foreign countries. The company's primary brands are Diedrich Coffee and Gloria Jean's Coffee. Gloria Jean's is the nation's leading chain of mall-based coffee stores.

The company has headquarters in Irvine. For more information about Diedrich Coffee or Gloria Jean's Coffee call 800/354-5282, or visit the company's Web sites at www.diedrich.com, or www.gloriajeans.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.