Future of Beloved Israeli Bakery's New York Outpost Threatened by Dramatic Infighting

Chef Uri Scheft and restaurateur Gadi Peleg are embroiled in a bitter dispute including but not limited to recipe quality control, failure to deliver payments and even physical violence

The babka at Breads Bakery, often called the best in New York.
Brian Kennedy

Only a short time after opening, Breads Bakery, the New York version of Tel Aviv’s Lehamim Bakery, turned into a hit. Its first branch opened in Manhattan in early 2013 and now there are three branches, and it has become one of the best-liked and most-talked-about bakeries in the Big Apple, with its famous babka cake ranked by numerous critics as the best in New York.

Later on, chef Uri Scheft, one of the owners, put out a successful recipe book based on the bakery’s recipes that won several awards.

One could continue to sing the praises of the New York bakery with Israeli roots, but its future is now being threatened by a legal dispute between its owners, Scheft and businessman Gadi Peleg, who have filed a court demand for arbitration.

According to Scheft, Peleg is trying to push him out of the company. Scheft claims that among the ways Peleg is trying to exclude him is by selling items in the bakery that were not authorized by him and do not meet his standards for quality and authenticity. Among the latter, for example, he cited pan-baked cheese mousse jars, potato bourekas sandwiches and white shakshuka.

According to the food website Eater New York, which reported on the dispute last week, the dispute has even become physical, with Peleg allegedly grabbing Scheft’s cellphone away a few months ago in an effort to stop him from photographing the “unauthorized products.” Scheft is also alleging that Peleg, without permission, gave recipes belonging to Scheft to other businesses that Peleg owns, and even transferred workers from Breads Bakery to those eateries, among them the Middle Eastern restaurant Nur, the Rock Pizza Scissors pizza stand and the Chinese street food company Mr. Bing.

Chef Uri Scheft of Breads Bakery.
Eyal Toueg

According to Eater, Scheft is also claiming that since he returned to Israel, leaving Peleg to run the business in New York, Peleg has not made all the quarterly payments due him (each partner is supposed to get 1.5 percent of the revenue in quarterly advance payments).

In 2016, the bakery generated $10 million in revenue, and according to the court papers, Scheft claims to have still not received his share.

Scheft’s lawyer told Eater, “It is unfortunate that Gadi Peleg has chosen to hijack Breads Bakery for his own gain and to disregard his contractual obligations concerning quality control and creative supervision. Mr. Scheft looks forward to being vindicated in arbitration and to recovering control of the brand he created, so that New Yorkers may continue to enjoy the outstanding products they have come to expect from Breads Bakery.”

Scheft himself said, “I cannot respond regarding the legal dispute because I am signed to secrecy and I don’t want to besmirch anyone, but it’s important for me to note that I am completely committed to the Lehamim group and to Breads Bakery; I’m in the [Israeli] bakery many hours daily and my main concern is the product itself and preserving and improving the quality of the product.”

Scheft added that he was optimistic about the future of the bakery and when asked about mediation or reconciliation that would restore the partners’ equilibrium, he said, “Let it be, Amen!”

Peleg declined to comment on the allegations.