So what will higher commodity prices and discontent among McDonald’s franchisees do to the Dollar Menu?

The question arose yesterday after McDonald’s disclosed its second quarter results and said it was considering changes to the Dollar Menu, which offers US customers items such as a double cheeseburger or a McChicken Sandwich for a dollar.

That is pretty cheap and it is much more popular among customers than franchisees, which in effect have a price cap imposed upon them by McDonald’s. For other items they sell, they have more freedom to charge a premium.

The effect on franchisees’ profits since McDonald’s introduced the Dollar Menu in has been striking, according to a Stanford University study published last year. It found that McDonald’s had constrained franchisees’ ability to set higher prices than stores directly operated by McDonald’s.

The study found that the”franchisees’ premium” for a Big Mac Meal in 199 was 12.5 per cent but dropped to 3.5 per cent by 2006. In contrast, the premium for Chicken McNugget meals, which did not have a ready substitute on the Dollar Menu, had changed only slightly.

Meanwhile, McDonald’s has been spending the majority of its national advertising budget on marketing budget items such as the Dollar Menu. That has placed further strain on relations with franchisees.

Now, it seems as though something is going to have to give. So it is time to go out and buy that double cheeseburger for a dollar while stocks last.

I have reviewed a new book by Donald Keough, the former president of Coca-Cola, called The Ten Commandments of Business Failure in tomorrow’s FT.

Here are the first few paragraphs of the review:

The thing that bothers me about this book is the author’s grandfather’s toe. According to Donald Keough, the former president of Coca-Cola and life-long friend of Warren Buffett, his grandfather John was an Iowa homesteader who was cutting wood one day when “he swung the axe and cut off his toe. He simply shoved the toe back on, bound it up with burlap, and finished his work… the toe, the foot and my grandfather survived.”

I am sorry, but I do not believe that. You cannot amputate a toe, fasten it back on with a bit of cloth and re-attach it, bones, tendons, muscle and all. This is the kind of hearsay that goes down well in a bar, where standards of proof are low, but would not work in a court of law.

Grandpa Keough’s toe sticks out, so to speak, but the rest of Keough’s narrative also has a touch of Irish-American blarney. There is plenty of tough, no-nonsense advice dispensed here, much of it undeniably valid, but is it the whole truth and nothing but the truth?

The evidence suggests not. Keough has plenty of stories he could tell about Coca-Cola, where he served as president under chief executive Roberto Goizueta and then joined the board. From this vantage point, he not only oversaw what Coke’s chief executives did but also had a fearsome reputation for interfering.

You can read the rest here. Feel free to leave comments below.