EXHIBIT 10.29

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into by and between DIEDRICH COFFEE, INC.,
a Delaware corporation (the "Company") and PHILIP G. HIRSCH (the "Executive"), and shall be effective as
of September 1, 2002 (the "Effective Date").

RECITALS

The Company and the Executive desire to enter into this Agreement to establish the terms and conditions of the Executive's employment by the Company as its Chief
Executive Officer.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recital, and subject to the conditions and covenants set forth herein, the parties agree as follows:

ARTICLE I  DUTIES AND TERM

1.01Duties.The Company hereby employs the Executive as its Chief Executive Officer and the Executive hereby
accepts such employment upon the terms and subject to the conditions set forth in this Agreement. Unless earlier terminated, the term of the Executive's employment under this Agreement shall commence
on the Effective Date and shall continue until August 31, 2004 (the "Term"). The
Executive shall perform such duties and functions consistent with his role as Chief Executive Officer as may from time to time be assigned to him by the Board of Directors of the Company (the
"Board").

1.02Other Business.The Executive agrees that during the course of the Company's business hours throughout the
Term, he will devote the whole of his time, attention and efforts to the performance of his duties and obligations hereunder. The Executive shall not, during the Term, without the written approval of
the Board first had and obtained in each instance, (a) directly or indirectly, be employed by, an advisor to or an investor in any business enterprise that offers products or services
competitive with the Company's or (b) engage in any activity that materially interferes with the Executive's performance of the duties assigned the Executive hereunder, in each case as
determined in the sole and absolute discretion of the Board.

ARTICLE II  COMPENSATION AND BENEFITS

2.01Salary and Bonus.For all services to be rendered by the Executive under this Agreement, the Company shall
pay, or cause to be paid, to the Executive in cash, payable in accordance with the normal payroll practices of the Company for senior executive officers (including deductions, withholdings and
collections as required by law), the following:



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2.02Stock Options.Contemporaneously with the execution of this Agreement, the Company will grant
non-qualified options to purchase one hundred twenty thousand (120,000) shares of common stock of the Company under the Company's 2000 Equity Incentive Plan (the
"Plan") upon the terms and conditions set forth on the Option Grant Schedule attached hereto, and upon such other terms and conditions contained in the
Plan. The Board will review the issuance of additional stock options annually.

2.03Executive Benefits.During the Term of the Executive's employment:



ARTICLE III  TERMINATION OF EMPLOYMENT

3.01Termination of Employment.The Executive's employment under this Agreement is expressly "at will," and
either the Executive or the Company may terminate the Executive's employment with the Company at any time and for any reason, with or without cause. Any termination of the Executive's employment is,
however, subject to the terms and provisions ofSections 3.02, 3.03 and 3.04of this Agreement.

3.02Death or Disability.



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3.03Termination by the Company.





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3.04Termination by the Executive.





ARTICLE IV  CONFIDENTIAL INFORMATION AND NONSOLICITATION

4.01Confidential Information.The Executive acknowledges and agrees that the Company has developed and uses
certain proprietary and confidential information, data, processes, business methods, computer software, data bases, customer lists and know-how ("Confidential
Information"). The Executive agrees that the Confidential Information is a trade secret of the Company which shall remain the sole property of the Company notwithstanding that
the Executive, as an employee of the Company, may participate in the development of the Confidential Information. During the term of this Agreement and at all times thereafter, other than in the
performance of his duties hereunder, the Executive shall not disclose any Confidential Information to any person or entity for any reason or purpose whatsoever, nor shall the Executive make use of any
Confidential Information for the Executive's own benefit or for the benefit of any other person or entity. Upon termination of this Agreement for any reason, the Executive will promptly surrender to
the Company all Confidential Information in the Executive's possession or under the Executive's control, whether prepared by the Executive or by others.

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4.02Nonsolicitation.The Executive agrees that for a period of three (3) years following the termination
of the Executive's employment hereunder, the Executive will not directly or indirectly solicit or attempt to solicit any of the employees of or consultants to the Company to leave the Company or to
become employees of or consultants to any other person or entity if such employment or consulting would interfere with such employee's or consultant's ability to continue providing services to the
Company.

ARTICLE V  MISCELLANEOUS

5.01Modification and Waiver of Breach.This Agreement shall not be altered, amended or modified except by
written instrument executed by the Company and the Executive. A waiver of, or failure to insist upon compliance with, any term, covenant, agreement or condition contained in this Agreement shall not
be deemed a waiver of any other term, covenant, agreement or condition and any waiver of any other term, covenant, agreement or condition, and any waiver of any default in any such term, covenant,
agreement or condition shall not be deemed a waiver of any later default thereof or of any other term, covenant, agreement or condition.

5.02Assignment, Successors.This Agreement may not be assigned by either party hereto without the prior written
consent of the other party. This Agreement shall be binding upon and inure to the benefit of the Executive and the Executive's estate and the Company and any assignee of or successor to the Company.

5.03Notices.All notices, requests, demands and other communications under this Agreement must be in writing
and shall be deemed given upon personal delivery, facsimile transmission (with confirmation of receipt), delivery by a reputable overnight courier service or five (5) days following deposit in
the United States mail (if sent by certified or registered mail, postage prepaid, return receipt requested), in each case duly addressed to the party to whom such notice or communication is to be
given as follows:

To the Company:

Diedrich Coffee, Inc.
2144 Michelson Drive
Irvine, California 92612
Attention: Chairman of the Board
Fax Number: (949) 260-1610To the Executive:

Philip G. Hirsch
[Address]


Any party may change its address for the purpose of thisSection 5.03by giving the other party written
notice of the new address in the manner set forth above.

5.04Severability.If all or any part of this Agreement is declared by any court or governmental authority to be
unlawful or invalid, such unlawfulness or invalidity shall not serve to invalidate any portion of this Agreement not declared to be unlawful or invalid. Any paragraph or part of a paragraph so
declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such paragraph or part of a paragraph to the fullest extent possible while
remaining lawful and valid.

5.05Entire Agreement.This Agreement, along with the terms of the Company's 2000 Equity Incentive Plan,
contains the entire agreement between the Company and the Executive with respect to the subject matters hereof and supersedes all prior or contemporaneous agreements, arrangements or understandings,
written or oral, with respect to the subject matters hereof.

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5.06Legal Fees; Arbitration.The parties hereto expressly agree that in the event of any dispute, controversy
or claim by any party regarding this Agreement, the prevailing party shall be entitled to reimbursement by the other party to the proceeding of reasonable attorney's fees, expenses and costs incurred
by the prevailing party. Any controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance or breach of this Agreement or otherwise arising out of
the execution hereof, including any claim based on contract, tort or statute, shall be resolved, at the request of any party, by submission to binding arbitration at the Orange County, California
offices of Judicial Arbitration & Mediation Services, Inc. ("JAMS"), and any judgment or award rendered by JAMS shall be final, binding
and unappealable, and judgment may be entered by any state or federal court having jurisdiction thereof Any party can initiate arbitration by sending written notice of intention to arbitrate (the
"Demand") by registered or certified mail to all parties and to JAMS. The Demand shall contain a description of the dispute, the amount involved, and
the remedy sought. The arbitrator shall be a retired or former judge agreed to between the parties from the JAMS' panel. If the parties are unable to agree, JAMS shall provide a list of three
available judges and each party may strike one. The remaining judge shall serve as the arbitrator. Each party hereto intends that the provisions to arbitrate set forth herein be valid, enforceable and
irrevocable. In his award, the arbitrator shall allocate, in his discretion, among the parties to the arbitration all costs of the arbitration, including the fees of the arbitrator and reasonable
attorneys' fees, costs and expert witness expenses of the parties. The parties hereto agree to comply with any award made in any such arbitration proceedings that has become final and agree to the
entry of a judgment in any jurisdiction upon any award rendered in such proceeding becoming final.

5.07Governing Law.This Agreement shall be governed by and construed in accordance with the laws of the State
of California, without regard to its choice of law principles.

5.08Counterparts.This Agreement may be executed simultaneously in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and the same instrument.

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

| |  | THE COMPANY:                       
| |  | -----------------------------------
| |  | DIEDRICH COFFEE, INC.              
| |  | By:                                
| |  | THE EXECUTIVE:                     
| |  | PHILIP G. HIRSCH                   
| |  | /s/PHILIP G. HIRSCHPhilip G. Hirsch

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OPTION GRANT SCHEDULE

|                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Date of Grant:           |  | The date of grant shall be the date that the Board approves the grant of the Options (the "Grant Date").                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Number of Option Shares: |  | 120,000 non-qualified option shares (the "Options").                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Exercise Price:          |  | The exercise price shall be the average of the last reported price of the Company's common stock on the Nasdaq National Market on the five trading days prior to the Grant Date.                                                                                                                                                                                                                                                                                                                                                                                         
|Vesting Schedule:        |  | (a) 60,000 options shall vest on August 31, 2003; and (b) 60,000 options shall vest on August 31, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Expiration Date:         |  | (a) If the Company terminates Executive "for cause," then all of his unexercised Options (whether or not vested) will expire and become unexercisable as of the date of such termination.                                                                                                                                                                                                                                                                                                                                                                                
|                         |  | (b) If Executive's employment ceases for any other reason, (including, but not limited to, termination by the Company without cause, Executive's resignation for any reason, expiration of the Term, death or disability) then: (i) all Options that
have not become exercisable as of the date of termination or resignation will immediately terminate and become unexercisable; and (ii) all Options that have become exercisable will terminate and become unexercisable on the two year anniversary
of the date that Executive ceased to be employed by the Company.
|Additional Terms:        |  | The Options shall be subject to the terms and conditions of the Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

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