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                                                                   EXHIBIT 10.20

                             SECURED PROMISSORY NOTE


$500,000 Maximum Principal Amount                                August 19, 1997
                                                              Irvine, California

         FOR VALUE RECEIVED, the undersigned, Diedrich Coffee, Inc., a Delaware
corporation ("Borrower") hereby promises to pay to the order of The Virginia R.
Cirica Trust ("Holder") or its successors or assigns, the principal sum of up to
Five Hundred Thousand Dollars ($500,000) or such lesser amount as may be
borrowed under the terms of this Note, together with interest on the unpaid
principal amount from time to time outstanding from the date hereof until the
principal amount of this Note is paid in full, in accordance with the terms of
this Note, at the Note Rate (as defined below). The principal of this Note,
together with all accrued and unpaid interest, shall become due and payable on
August 19, 2002. Interest shall become due and payable monthly as it is accrued,
beginning September 1, 1997.

         1. LOAN AGREEMENT. Borrower and Holder intend to enter into a Term Loan
Agreement (the "Agreement") and this Note shall be entitled to all of rights and
benefits under such Agreement. Reference is made to the Agreement for a more
complete statement of the terms and conditions under which the loan evidenced
hereby is made and is to be repaid.

         2. INTEREST. The principal amount of this Note shall bear interest at
the Note Rate. The "Note Rate" shall be the prime rate plus three and one-half
percent or the maximum rate allowed by law, whichever is less. The prime rate as
of any date shall be determined by reference to the prime rate as published in
the Wall Street Journal (the base rate on corporate loans posted by at least 75%
of the thirty largest U.S. banks). Interest shall be computed daily at the Note
Rate on the basis of the actual number of days in which all or any portion of
the principal amount hereof is outstanding computed on the basis of a 360 day
year.

         3. DISBURSEMENTS. Holder shall advance $250,000 to Borrower upon the
execution by Borrower hereof. Holder shall advance Borrower up to the remaining
$250,000, upon Borrower's request, upon the execution by both Holder and
Borrower of the Agreement and the issuance of the Warrants thereunder.

         All loans made by Holder and all repayments of the principal thereof
shall be recorded by the Holder and endorsed by an officer of the Borrower on
the schedule attached hereto, or on a continuation of such schedule attached to
and made a part hereof; provided that the failure of Holder to make any such
recordation or of


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Borrower to make any such endorsement shall not affect the obligations of
Borrower hereunder.

         4. EFFECT OF NON-PAYMENT OF PRINCIPAL AND INTEREST. In the event that
any principal and/or interest is not paid when due, without affecting any of
Holder's other rights and remedies, the unpaid principal amount and, to the
extent permitted by applicable law, interest, shall bear interest at the Note
Rate and shall be payable on demand of Holder until such unpaid amount is paid
in full.

         5. PAYMENT OF PRINCIPAL AND INTEREST. Principal and interest shall be
payable in lawful money of the United States at Holder's address located at
________________________________, _______, California _______ or at such other
place as is directed by Holder in writing.

         6. PREPAYMENT.

            (a) MANDATORY PREPAYMENTS. Borrower shall prepay the entire
principal balance of this Note (plus all interest then due hereunder)
immediately upon the issuance, offer or sale of any shares of Borrower's capital
stock pursuant to a secondary offering to the public with net proceeds of
greater than Ten Million Dollars ($10,000,000); excluding, however, any offering
of Borrower's common stock pursuant to a stock option, bonus, award or other
employee benefit plan and existing options to purchase any of Borrower's common
stock which are presently held by officers, directors or employees of Borrower.

            (b) OPTIONAL PREPAYMENT. Borrower may prepay any portion of the
principal balance of this Note in any amount which is an integral multiple of
$10,000 at any time without penalty.

         7. SECURITY. This Note and all of Borrower's obligations hereunder are
secured by the security interest granted by Borrower to Holder by that certain
Security Agreement dated August 19, 1997 in which Borrower is the Debtor and
Holder is the Secured Party(the "Security Agreement").

         8. DEFAULT. Each of the following shall constitute an event of default
("Event of Default") under this Note:

            (a) Borrower shall fail to pay when due (whether by acceleration or
otherwise) principal or interest on this Note, and such default shall have
continued for a period of fifteen (15) days; or

            (b) Any representation or warranty made by or on behalf of Borrower
in this Note, the Agreement, the Security Agreement or in any other Loan


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Document (as defined in the Agreement) or in any statement or certificate given
in writing pursuant thereto or in connection therewith is false, misleading or
incomplete in any material respect when made (or deemed to have been made); or

            (c) Borrower breaches or fails or neglects to perform, keep or
observe any covenant set forth in this Note, the Agreement, the Security
Agreement, or any other Loan Document (other than Borrower's obligation to make
all payments due under this Note which is governed by subparagraph (a) above)
and the same has not been cured within ten (10) calendar days after Borrower
receives notice thereof from Holder; or

            (d) Borrower shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due, or shall
take any corporate action to authorize any of the foregoing; or

            (e) An involuntary case or other proceeding shall be commenced
against Borrower seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or an order for relief shall
be entered against Borrower under the federal bankruptcy laws as now or
hereafter in effect; or

            (f) This Note, the Agreement, the Security Agreement or any other
Loan Document for any reason (other than the satisfaction in full of all amounts
owing in connection with the Loan) ceases to be, or is asserted by Borrower not
to be, a legal, valid and binding obligation of Borrower, enforceable in
accordance with its terms, and such occurrence has not been cured to Holder's
satisfaction within five (5) calendar days after Borrower receives notice
thereof from Holder; or

            (g) Borrower has fraudulently conveyed or concealed its property to
prevent attachment or execution by its creditors; or

            (h) Borrower is insolvent and fails to satisfy or obtain the release
of any judicial lien within 30 days of such lien coming into existence; or


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            (i) Borrower has admitted to any person in writing that it is unable
to pay its debts and that it is willing to be adjudged a bankrupt.

         If an Event of Default shall occur and be continuing or shall exist,
the principal amount of this Note and interest accrued hereon shall be
immediately due and payable without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived, and an action
therefor shall immediately accrue.

         9. GOVERNING LAW. This Note shall be governed by, and construed and
enforced in accordance with, the internal laws (including the laws of conflict
and choice of law) of the State of California.

         10. WAIVER. No failure to exercise and no delay in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law.

         11. AMENDMENT. This Note may be amended or modified only upon the
written consent of both Borrower and Holder. Any amendment must specifically
state the provision or provisions to be amended and the manner in which such
provision(s) are to be amended.

         12. FEES AND EXPENSES. Borrower promises to pay all the cost and
expenses, including reasonable attorneys' fees, incurred in the collection and
enforcement of this Note. Borrower and each surety, endorser, guarantor, and
other party ever liable for payment of any sums of money payable under this
Note, hereby, jointly and severally, consent to renewal and extension of time at
or after the maturity hereof, without notice, and hereby, jointly and severally
waive diligence, presentment, protest, demand and notice of every kind and, to
the full extent permitted by law, the right to plead any statute of limitations
as a defense to any demand hereunder.

         13. AGREEMENT. This Note incorporates by reference all the provisions
of the Agreement, including but not limited to all provisions contained therein
with respect to Events of Default, waivers, remedies and covenants, and the
description of the benefits, rights and obligation of each of the Borrower and
Holder under the Agreement.


                            [Signature Page Follows]


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                       [SIGNATURE PAGE TO PROMISSORY NOTE]


         IN WITNESS WHEREOF, Borrower has executed this Note as of the date and
year first above written.


                                            BORROWER:

                                            DIEDRICH COFFEE, INC., a Delaware
                                            corporation

                                            By: /s/ KERRY W. COIN
                                                -------------------------------
                                            Name: Kerry W. Coin
                                            Title: President and Chief Operating
                                                   Officer


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                                 PROMISSORY NOTE

                               LOANS OF PRINCIPAL

<TABLE>
<CAPTION>
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                                                                                Holder                 Borrower
         Date               Amount of Loan        Principal Balance         Recordation By          Endorsement By
------------------------------------------------------------------------------------------------------------------------
<S>                         <C>                   <C>                      <C>                      <C>
   August 19, 1997             $250,000                $250,000            /s/ V.R. Cirica           /s/ K. Coin
------------------------------------------------------------------------------------------------------------------------
   August __, 1997             $250,000                $500,000            /s/ V.R. Cirica           /s/ K. Coin
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</TABLE>


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