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                                                                   EXHIBIT 10.42


April 8, 1998


Dolf  Berle
14589 Aspen Court
Addison  TX 75244

Dear Dolf,

On behalf of Diedrich Coffee (Company), it is with great pleasure that we offer
you the position of Vice President of Franchise Development. In your role, you
will guide Diedrich Coffee's growth in franchise area development.

Your cash compensation in this position will consist of $155,000 per annum,
earned and paid ratably on a bi-weekly basis, and an annual incentive of up to
25% versus your base salary, based on the Company's performance and your
performance versus specific objectives set for your areas of responsibility.

In addition to your cash compensation, as defined above, you will be eligible
for stock options under the Company's 1996 Stock Incentive Plan. Your initial
grant for 50,000 stock options will vest 50% annually for two years. During the
subsequent five years, you will be granted an additional 10,000 stock options
annually. Your option price for the initial grant of 50,000 shares is set at
$6.25, the common stock price at close of business on March 23, 1998. The
subsequent annual grants will be priced at the common stock price on the date of
issue.

As part of your employment, the Company will provide for accelerated vesting of
your stock options in the event of a change of control.

Your medical and dental plan (HMO) is a company sponsored plan for you, the
employee, and will be effective on the first day of the month after your start
date. Your vacation allowance will be earned at three weeks annually.

If Diedrich Coffee terminates your employment for any reason other than fraud or
other illegal acts, you will be eligible for a severance privilege equivalent to
six months of you annual salary. This sum will be paid in six equal
installments.

Dolf, I am very excited at the opportunity to work with you. I am confident that
you will make a difference at Diedrich Coffee.

Sincerely,

/s/ Timothy Ryan
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Timothy Ryan
President
Chief Executive Officer