Coffee People Inc. Shifts to Franchise Strategy; New and Existing Stores Made Available for Franchisee Ownership.

CASTROVILLE, Calif.--(BUSINESS WIRE)--Sept. 1, 1998--Coffee People Inc. (Nasdaq:MOKA) today announced it will make available all 40 existing company-owned stores in its Coffee Plantation and Coffee People divisions as part of its shift to a company-wide franchising strategy.

The company currently operates three divisions: Gloria Jean's Gourmet Coffees (272 stores in 38 states and six foreign countries), Coffee Plantation (15 stores in Arizona) and Coffee People (26 stores in Oregon). All Coffee Plantation and Coffee People stores are company-owned. Gloria Jean's already pursues a franchising strategy for its stores.

"When we completed the recent merger that brought these three top specialty coffee retailers together, we performed a strategic review to identify the most effective and profitable way to leverage the tremendous value and growth potential of each brand," said Alton McEwen, president and chief executive officer. "We have concluded that the franchise model we follow at GloriaJean's is the best strategy for each of our three operating divisions."

"After an extensive career in retailing, including my tenure as president of Gloria Jean's," McEwen continued, "I know that franchisees bring an extremely high level of commitment to operating their stores. They have a vested interest in the success of the store and that interest is manifested in the kind of superior store-level performance that retail chains see from franchise ownership."

"I also think that specialty coffee is especially well suited to franchising," he added. "There is a social aspect to a coffee bar that is a big part of a store's attractiveness to customers. Having a local operator helps ensure that this intangible local 'personality' is reflected in the store environment, ambience, customer service, etc. We think it's a major reason why many local and regional specialty coffee operators have enjoyed success despite large competitors coming into their markets."

Coffee People Inc. has placed newspaper advertisements in Oregon and Arizona announcing its intention to make available franchises to existing stores, as well as all new Coffee People and Coffee Plantation stores.

"Both of these divisions have excellent brand equity and extraordinary customer loyalty in their respective markets," McEwen said. "This has been reflected in the large number of unsolicited requests we've had over the years to sell franchises in Oregon and Arizona. We believe that this interest will attract many qualified entrepreneurial applicants who will enable us to expand the store base of both divisions more quickly -- and ultimately, more profitably -- than we would otherwise have been able to do."

Looking forward, McEwen noted that the shift in strategy will change the financial structure of Coffee People Inc. and may alter some of the dynamics of its financial performance. "These are positive changes," he said, "that should allow us to grow each division faster and with a high degree of quality control. At the same time, we will free up corporate resources to establish partnerships and make strategic acquisitions of other well-established local or regional operators. Our ultimate goal is to build a powerful national portfolio of leading specialty coffee retailers."

Coffee People Inc. is the second largest specialty coffee retailer in the United States. The company has 313 stores throughout the United States and in six foreign countries, including 272 Gloria Jean's stores in 38 states, 15 Coffee Plantation stores in Arizona and 26 Coffee People stores in Oregon.

This news release contains forward-looking statements that involve a number of risks and uncertainties. Actual results may differ materially from projected results. For a complete discussion of the risks associated with forward-looking information, refer to the Risk Factors contained in the company's 10-KSB for 1997 and the Registration Statement on Form S-4 as filed with the Securities and Exchange Commission on April 24, 1998. Offers of franchises may be made only by means of the company's current Uniform Franchise Offering Circular and, where required, after registration under the laws of various states. For additional information, see the company's current Uniform Franchise Offering Circular and exhibits.

    CONTACT: in.ves'com
              Dolores Chenoweth, 503/469-0338

                       OR
              Coffee People Inc.
              Mark J. Archer, 831/633-4001
              Chief Financial Officer