By Kyle Woodley

McDonald's (MCD) clientele can finally rest easy, as "dog food" is coming off the menu at the Golden Arches.

In the wake of an outcry by the celebrity chef Jamie Oliver, McDonald's said on Thursday said it will stop using ammonium hydroxide, a common ingredient in cleaning solutions that's dubiously dubbed "pink slime," in its beef patties.

"Imagine how happy an accountant is. You just turned dog food into what can potentially be your kids' food," he told "Food Revolution" viewers.

A McDonald's USA senior director credited the change to the restaurant's priorities on food safety, not Oliver. But whatever the reasons, the move has been made.

If the use of "pink slime" is a great method to make low-grade meat fit for human consumption, a shift away from that and toward better meat, unless a more favorable cleanser can be found, almost certainly means higher costs.

That's not good news for McDonald's, which has taken great pains to fend off rising commodity costs for vegetables, beef and grains.

As most McDonald's workers will tell you, the fast-food chain is less restaurant, more factory. Unlike restaurants like Chipotle Mexican Grill (CMG) that are happy to shovel food at will and grow merely by adding stores, McDonald's is a lean, mean portion machine that partitions every pickle and mechanizes every ketchup squirt. That -- and its ability to purchase in seemingly endless bulk -- helps outweigh the forces of food inflation.

Any significant increase to the price of one of McDonald's staples, then, would be felt in its profit margins, which the company has seen plateau around or slightly above 20% for more than two years after a steady increase from around 10% a decade ago and which fell slightly in the most recent quarter.

What should further worry investors is the coupling of this potential hit with McDonald's less-than-bright outlook for 2012. One of the biggest problems the company  has said it will face this year is volatile foreign currency cutting into its profits, but CEO Jim Skinner also noted other concerns, including ingredient costs.

McDonald's has already shed about 2% since it reported earnings Tuesday, and it's still trading at a P/E of 19, which is around its highest point since 2007. Combine that with a market that has come to expect nothing less than financial excellence from McDonald's, and future signs of weakness could be met with even harsher reaction.

Investors are currently celebrating the fast-food giant's most recent sterling earnings. But the loss of "pink slime" may in fact mean the loss of cash for what was the best-performing Dow stock of 2011.

Kyle Woodley is the assistant editor of InvestorPlace.com. As of this writing, he did not hold a position in any of the aforementioned securities.

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