Popular product, captive market. What could go wrong in a business with these elements? Yet by January 1997, Kentucky Fried Chicken (Bermuda) Ltd. (KFC) was on the brink of bankruptcy, loaded with debts of about $1 million and unable to meet payroll.

What happened since those dark days in the fried chicken business is a textbook study in how a company can pull off a turnaround from the path to financial ruin.

Businesses usually get into trouble through a lack of planning, inadequate staff training and poor marketing, said consultant Graham Redford of Total Office Management Ltd., part of the Total Group of companies. Any one of these elements can hurt a business. Often one feeds off the other.

Despite having a lock on an appealing product KFC got itself into cash flow problems by spending millions on expanding its Queen Street operations, adding pizza to its menu, and opening another outlet just a couple streets away in Hamilton.

"The company was in a death spiral,'' Mr. Redford said.

Luckily for KFC, which is traded on the Bermuda Stock Exchange, some forward looking financiers stepped in and took control. Sensing opportunity in the company's plight Lines Overseas Management (LOM) bailed out the company by advancing $100,000 to meet short-term needs and ousted all but two of the board of directors. A rights offering raised $965,000.

A year later, by the end of January 1998, the company had closed down the Burnaby Street outlet, reduced debt down to $670,000, and had $200,000 in the bank. The company was into a profit of $69,439, compared to losses of $600,000 in the seven months before the crisis.

Last month debt was down to less than $100,000. Earnings for the six months to July 31 were $168,034.

LOM had done its research before putting its money and reputation on the deck.

Prior to ponying up the $100,000 injection, the brokerage firm had hired Mr.

Redford's company to go in and make a decision as to what, if anything, could be done to save the company.

"That was the most stressful part,'' Mr. Redford said. "That decision has to be made quickly but it cannot be made lightly. We looked at the figures. With the volume of sales they should have been in no way in the position they were in. We gave a resounding `yes'.'' After a report was put together Mr. Redford was asked to stay on implement his own medicine. He is still in that capacity, essentially acting as the full-time general manager.

In an interview he said the process of fixing a company involves information gathering, strategic evaluation, planning and implementation.

"We try and make the necessary changes so that any financing company is not throwing their money into a bottomless pit,'' he said. "At KFC there was no one major problem. There was just lots and lots of little problems combined to get the company into trouble. The real issue is analysing what the key resources of the company is -- staff, money, equipment, and time.'' When called in to help a company he goes in as an outsider to try and objectively analyse the strengths and weakness of the operations. Separate meetings are set up with owners, management and staff.

"It's staff, staff and staff,'' he said. "One of the main things is to get staff to talk about the company. The key at the beginning is to get them at ease to give you the facts that you need before you can do a strategic evaluation. No recommendations or evaluation are done at this time. We are really just gathering information.'' He then takes the information to Viv Redford, Rick Correia, Steve Marklew, and Nick Quinn, his four partners in the Total Group. The firm markets itself as an outsourcing company, providing consulting, marketing, communications, research, administration, and information technology services.

"We are all Bermudian and we think we understand the Bermudian business culture which goes a long way,'' Mr. Redford said. "You have to get the right information. Then we sit down and brainstorm. You then get a more objective viewpoint.'' The comeback of KFC At this stage of strategic evaluation the firm brings the owners and key managers back into the process to discuss the current condition of the company and the objectives over the next three to five years.

"We then write out a business plan,'' he said. "For KFC we didn't write out a business plan. There was no time. The business had such a high volume of business. At KFC everyone knew there were lots of problems. We prioritised the problems.'' Once Mr. Redford was asked to stay on he had to get the staff on his side.

Morale was low. Behind him was a new board of directors that was motivated to push the business forward.

"You have a consultant in there and half think you are a hatchet man and half don't know why you're there,'' he said. "You're dealing with changes in the work place. You're dealing with individuals and individuals are not always open to change. You try to keep staff participating in the process so they can see the reasons behind the change -- the logic. Basically in the end you can't force people to change.'' KFC's problems were a particularly tough challenge for the Total Group. The business was open seven days a week, and Mr. Redford was unable to use weekends for staff training.

At least in 1995 the company had already cut its losses by getting out of the pizza business. In May 1997 the company closed down its Burnaby Street outlet.

Mr. Redford said the problems arose from decisions based on a lack of marketing research and planning.

"At the end of the day they decided to go to a two-in-one concept,'' he said.

"Pizza Hut and KFC. The main problem was service. There were two conflicting demands. Chicken -- which was quick service -- was being serviced from the same line as an order for a 20-minute pizza. Those wanting chicken had to wait for those wanting the 20-minute pizza. It brought out some interesting complications. What do you do if a customer wants a pizza and a chicken? Do you serve the chicken and make them wait for the pizza? Or do you keep the chicken back and serve both together?'' He calls the decision to open the Burnaby Street outlet an "interesting'' strategy.

"They opened the Burnaby Street outlet without adequate research,'' he said.

"It was not a stand-alone operation. It relied heavily on management and resources from Queen Street. It diverted management attention away from Queen Street. They didn't do the market research. It was literally next door. It might have had better success at the other end of the Island. Essentially they were stripping their own resources. There was deteriorating speed and service.

They spread their resources very thin. We are still nowhere near where we want to be.'' He said effective market research is one part of the picture. A company must formulate a strategy and operation plan which includes the necessary financial data.

KFC was relying on an outdated accounting system which produced figures one to two months later giving managers and the board information too late to act on.

The Total Group put in a new accounting system as part of the fix.

"They didn't take advantage of the technology that was available in accounting,'' Mr. Redford said. "Timely data is key to any business especially in the food and beverage industry. By the time you find out a problem two months down the line it's too late to solve it. At KFC we are completely live at all times. I can plug right into the system and get an idea in one hour or in one day how much has been sold on any one item. Without timely information you are doomed.'' Now what KFC needs is a "hot'' operations manager, he said, one who knows the fast food business. The company has been searching in Bermuda for the past few months without success.

"We have gotten the company basically financially solvent,'' he said. "In essence we have done our job. The company has been put back on its feet. We have recognised that I am not the person to take the company forward. I have my own company to run.'' Mr. Redford summarises his job as finding ways to add value to the company.

Not all the companies the team deals with are in trouble. Some want to outsource their operations. Others need help getting growing the business.

"At the end of the day we are trying to build shareholder value,'' Mr.

Redford said.