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                                                                   EXHIBIT 10.35

                            INDEMNIFICATION AGREEMENT

       This Indemnification Agreement ("Agreement") is made as of this 17th day
of November 1997 by and between Diedrich Coffee, Inc., a Delaware corporation
(the "Company") and John E. Martin ("Indemnitee"), with reference to the
following:

                                    RECITALS

       A. The Indemnitee is currently serving as a Director and/or Officer of
the Company and the Company wishes the Indemnitee to continue in such capacity.
The Indemnitee is willing, under certain circumstances, to continue in such
capacity.

       B. The Indemnitee has indicated his concern that the indemnities
available under the Company's bylaws and available insurance, if any, may not be
adequate to protect him against the risks associated with his service to the
Company. The Indemnitee may not be willing to continue in office in the absence
of the benefits accorded to Indemnitee under this Agreement.

                                    AGREEMENT

       In order to induce the Indemnitee to continue to serve as Director and/or
Officer for the Company and in consideration for his continued service, the
Company hereby agrees to indemnify the Indemnitee as follows:

       1. The Company shall indemnify, and advance expenses to, Indemnitee as
provided in this Agreement and to the fullest extent permitted by applicable law
in effect on the date hereof and to such greater extent as applicable law may
thereafter from time to time permit. The rights of Indemnitee provided under the
preceding sentence shall include, but shall not be limited to, the rights set
forth in the other Sections of this Agreement. The indemnification and
advancement of expenses contemplated by this Agreement are intended to be
provided in accordance with the terms and conditions of this Agreement
regardless of whether any of the events underlying the indemnified claims or
actions or advanced expenses occurred before or after the date of this
Agreement. The rights of Indemnitee under this Agreement shall survive
termination of his status as a director, officer, employee or agent of the
Company.


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       2. Indemnitee shall be entitled to the rights of indemnification provided
in this Section 2 if, by reason of the fact that he is or was a director,
officer, employee or agent of the Company, he is, or is threatened to be made, a
party to any threatened, pending, or completed action, suit or proceeding, other
than an action by or in the right of the Company. Pursuant to this Section 2,
Indemnitee shall be indemnified against expenses (including attorneys' fees),
judgments, damages, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such proceeding
or any claim, issue or matter therein, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal proceeding, had no reasonable cause
to believe his conduct was unlawful.

       3. Indemnitee shall be entitled to the rights of indemnification provided
in this Section 3 if, by reason of the fact that he is or was a director,
officer, employee or agent of the Company, he is, or is threatened to be made, a
party to any threatened, pending or completed action, suit or proceeding brought
by or in the right of the Company to procure a judgment in its favor. Pursuant
to this Section, Indemnitee shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him or on his behalf in
connection with the defense or settlement of such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company. Notwithstanding the foregoing, no
indemnification against such expenses shall be made in respect of any claim,
issue or matter in such proceeding as to which Indemnitee shall have been
adjudged to be liable to the Company in the performance of his duty to the
Company if applicable law prohibits such indemnification; provided, however,
that, if applicable law so permits, indemnification against expenses shall
nevertheless be made by the Company in such event if and only to the extent that
the court in which such proceeding shall have been brought or is pending, shall
determine.

       4. Any indemnification under Sections 2 and 3 of this Agreement, unless
ordered by a court, shall be made by the corporation only as authorized by the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Sections 2 and 3 of this Agreement.
Such determination shall be made (1) by a majority vote of the directors who are
not parties to such action, suit or proceeding, even though less than a quorum,
or (2) if there are no such directors, or if such directors so direct, by
independent legal counsel, in a written opinion, or (3) by the stockholders.

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       5. If the Company does not respond to a written claim for payment under
this Agreement within sixty (60) days of having received a claim under this
Agreement, it shall be deemed to have waived any right to refuse to pay such
claim under this Agreement. If a claim under this Agreement is not paid by the
Company, or on its behalf, within ninety (90) days after a written claim has
been received by the Company, the claimant may at any time thereafter bring suit
against the Company to recover the unpaid amount of the claim and, if successful
in whole or in part, the claimant shall be entitled to be paid also the expense
of prosecuting such claim.

       6. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of the
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.

       7. Notwithstanding anything to the contrary herein, the Company shall not
be liable under this Agreement to make any payment in connection with any claim
made against the Indemnitee:

              (a) for which payment is actually made to the Indemnitee under a
       valid and collectible insurance policy, except in respect of any excess
       beyond the amount of payment under such insurance;

              (b) for which the Indemnitee is indemnified by the Company
       otherwise than pursuant to this Agreement;

              (c) based upon or attributable to the Indemnitee or any member of
       his immediate family gaining in fact any personal profit or advantage to
       which he was not legally entitled;

              (d) for an accounting of profits made from the purchase or sale by
       the Indemnitee of securities of the Corporation within the meaning of
       Section 16(b) of the Securities Exchange Act of 1934 and amendments
       thereto or similar provisions of any state statutory law or common law;
       or

              (e) brought about or contributed to by the dishonesty of the
       Indemnitee seeking payment hereunder; however, notwithstanding the
       foregoing, the Indemnitee shall be protected under this Agreement as to
       any claims upon which suit may be brought against him by reason of any
       alleged dishonesty on his part, unless a judgment or other final
       adjudication thereof adverse to the Indemnitee shall establish that he
       committed (i) acts of active and deliberate dishonesty or (ii) acts with
       actual dishonest purpose and intent, which acts were material to the
       cause of action so adjudicated.

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       8. No costs, charges or expenses for which indemnity shall be sought
hereunder shall be incurred without the Company's consent, which consent shall
not be unreasonably withheld.

       9. The Indemnitee, as a condition precedent to his right to be
indemnified under this Agreement, shall give to the Company notice in writing as
soon as practicable of any claim made against him for which indemnity will or
could be sought under this Agreement. Notice to the Company shall be directed to
Diedrich Coffee, Inc., 2144 Michelson Drive, Irvine, CA 92612, Attention:
Corporate Secretary (or such other addresses as the Company shall designate in
writing to the Indemnitee); notice shall be deemed received if sent by prepaid
mail properly addressed, the date of such notice being the date postmarked. In
addition, the Indemnitee shall give the Company such information and cooperation
as it may reasonably require and as shall be within the Indemnitee's power.

       10. Costs and expenses (including attorneys' fees) incurred by the
Indemnitee in defending or investigating any action, suit, proceeding or
investigation shall be paid by the Company in advance of the final disposition
of such matter, if the Indemnitee shall undertake in writing to repay any such
advances in the event that it is ultimately determined that the Indemnitee is
not entitled to indemnification under the terms of this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement, no
advance shall be made by the Company if a determination is reasonably promptly
made (l) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion that, based upon the facts known to the board or counsel at the
time such determination is made, (a) the Indemnitee acted in bad faith or
deliberately breached his duty to the Company or its stockholders, and (b) as a
result of such actions by the Indemnitee, it is more likely than not that it
will ultimately be determined that the Indemnitee is not entitled to
indemnification under the terms of this Agreement.

       11. Nothing herein shall be deemed to diminish or otherwise restrict the
Indemnitee's right to indemnification under any provision of the certificate of
incorporation or bylaws of the Company or under Delaware law.

       12. This Agreement shall be governed by and construed in accordance with
Delaware law, but without reference to the conflicts of law's principles of that
jurisdiction.

       13. This Agreement shall be binding upon all successors and assigns of
the Corporation (including any transferee of all or substantially all of its
assets and any successor by merger or operation or law) and shall inure to the
benefit of the heirs, personal representatives and estates of Indemnitee.

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       14. If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason whatsoever (a) the validity,
legality and enforceability of the remaining provisions of this Agreement
(including, without limitation, all portions of any paragraphs of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that
are not themselves invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby, and (b) to the fullest extent possible, the
remaining provisions of this Agreement (including, without limitation, all
portions of any paragraphs of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
of the parties that the Company provide protection to Indemnitee to the fullest
enforceable extent.

       IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and signed as of the day and year first above written.

                                        DIEDRICH COFFEE, INC.
                                        2144 Michelson Drive
                                        Irvine, CA 92612


                                       -----------------------------------------
                                       By:  Jonathan B. Eddison, Vice President,
                                       General Counsel and Assistant Secretary

AGREED TO AND ACCEPTED:

INDEMNITEE

Signed:
       ---------------------------
Name:  John E. Martin

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(address)


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