When customers arrived at Mendel’s Delicatessen, a cafe in Hong Kong’s upscale Kennedy Town neighborhood, early last month for their morning bagel and coffee, they were surprised to find two large, black-clad men standing out. In a video from the scene, as the men blocked the entrance, staff could be heard saying the store was open, even as another woman told curious passers-by: “You don’t want to come here, it’s a situation.” This situation gripped Hong Kong’s obsessive expatriate community and turned the woman at its center, Rebecca Schrage, into something of a public enemy No. 1. Her story shows the dangers of letting a private business dispute play out in public, and how difficult it can be to control a narrative when it has gotten away from you. In an Instagram post on June 11, after several days of unrest, Mendel’s said: “Security has been hired by another party to verbally and physically prevent Mendel’s guests and team from entering the venue and creating a disturbance such as disabling the main power.” Although Mendel’s did not mention Ms. Schrage by name, she was easily identifiable in videos posted online. With little information available, people soon took to social media with their own theories, many accusing Ms. Schrage of trying to shut down a competitor to her Schragels Bagels business. As Mendel’s continued to release videos and allegations – saying staff were subject aggressive harassment by hired thugs – Shragels’ social media accounts were flooded with trolling and negative comments. Until June 13, when Mendel’s released a video of police saying the guards had no right to shut down the restaurant, His staff had become the charismatic heroes of the Hong Kong restaurant scene and Ms. Schrage the villain. Two days later, when the restaurant reopened after a brief closure, customers flocked to Kennedy Township to show their support. Around the same time, people bombarded Schragels online, lowering its Google star rating, and a local food publication removed the restaurant from its list of the best bagels in town. Mendel’s Delicatessen and Schragels Bagels, as seen on June 22. James Griffiths/The Globe and Mail Throughout this drama, which inevitably became known as “BagelGate,” there were whispers of a more complicated story. A former Hong Kong banker of American descent, Ms Schrage is a household name in the city’s food scene. Shrugels has attracted widespread media coverage since its launch in 2014, including from CNN and the New York Times. The scion of a family that ran Jewish delis in New York in the 1950s and 1960s, Ms. Schrage started out as a bagel maker while working in finance before turning to baking full-time as the business took off. In mid-2021, she wanted to expand her business from simple bagels and open a deli similar to the ones her grandparents ran. She decided to name him after her father, Michael Mendel Schrage. According to court documents, Ms Schrage approached James Wilson, an Australian restaurateur she had known for eight years, to set up a company together. Mr. Wilson put her in touch with one of his partners, Michael Watt, co-owner of Shady Acres, a popular bar. The three agreed to form a new company, Joy Lux Club Ltd., in which Ms. Schrage would be the majority shareholder, along with Mr. Wilson and Mr. Watt’s company Jones Crusher Ltd. Ms. Schrage and Mr. Watt were listed. as directors of the new company and the partners agreed to collectively advance HK$800,000 (about $132,000) for start-up costs. On July 9, 2021, they leased a storefront in Kennedy Town for the new Mendel’s Delicatessen. By September, it was clear that the estimate for the installation costs was too low, and Mr Wilson and Mr Watt proposed to give more money to the business, for a total of HK$1.8 million. In a statement issued after the scandal broke, Ms Schrage said that when she asked for evidence to justify the increase, she was told “the accounts were not available and the supporting documents were ‘… thrown away’”. He didn’t put in extra money. According to a lawsuit later filed against her, Ms Schrage paid HK$232,000, while Jones Crusher contributed more than HK$1.3 million, to get Mendel’s ready for its planned launch in February 2022. By then, the relationship had completely dissolved. Ms. Schrage no longer trusted her partners, and shortly before Mendel’s opened, she revoked the restaurant’s food and beverage licenses, delaying its launch for two months. Mendel’s was finally able to open in mid-April, but toward the end of that month, Ms. Schrage allegedly transferred the entire balance in the company’s bank account to a third party for “safekeeping” and then called a meeting without Mr. Watt to remove him from the only other director. On May 30, Jones Crusher sued Ms. Schrage for misrepresentation and breach of contract. Ms. Schrage escalated in turn. He called police and said the deli was operating illegally — no action was taken — and then sent staff to shut it down, firing employees, blocking deliveries and turning off the power, according to a second lawsuit filed June 9. According to Ms. Schrage, sales made at Mendel’s appeared to be “diverted to other businesses that I’m not a part of.” “That’s why there was a need for security at the facility,” he said. “It seemed appropriate to take steps to protect the business, my idea and prevent any illegal activities.” Her actions, including removing Mr. Watt as a director, were done with “my authority as the majority shareholder,” Ms. Schrage said. In her lawsuit, Jones Crusher said that because the shares were to be distributed on a pro rata basis and Ms. Schrage had not paid, she was not legally the majority shareholder. In addition, he said, firing Mr. Watt was against the Joy Lux Club’s bylaws, which required a quorum of at least two directors to take any such action. Ms Schrage’s statement on June 15, nearly five days after the scandal first broke, did little to reverse the trend on social media, while Mendel’s Instagram account, run by an associate of Mr Watt’s, continued happily reposting messages of support from the public, along with a countdown to the eventual court case, which is set to go to trial in August. They signed “peace, love and Mendel’s”. The Morning Update and Afternoon Update newsletters are written by Globe editors, giving you a concise summary of the day’s most important headlines. Sign up today.
