This is a great discussion, since we are now in a similar situation, though with a neighbor, not a relative or friend. His dog has come on my property at least three times - the first time he chased my old cat up a tree. The cat fell out of the tree and had to go to the vet for injuries (at great cost to me.) A few days later one of my chickens disappeared, and last night the dog raced onto my property and took one right in front of me - she was dead before I could get to the dog.
Our local dog warden says that he has to compensate me, and that I have the right to shoot the dog if it comes back (not that I ever would.) She also says that if I can catch it the next time it shows up she'll come get it and take it to the pound. I am afraid to let the chickens out - while I agree that I don't want them to live a terrible life, we only have a few and they are our pets -we are not farmers. (This IS backyard chicken dot com, not poultry farmer dot com!) I'm afraid the dog will kill my cats, too, since he now has a taste for blood, so I'm keeping them inside. (The one is too old to get away, and the other is declawed so she couldn't climb a tree at all.)
I'm pricing electric fencing, but it is awfully expensive - I am not happy at having to spend the money since I am quite broke! But I guess I was naive going into this, and didn't realize, despite warnings from friends, how likely it was that we'd lost a bird to predators. (We live in the center of a small town - coyotes and foxes and even raccoons are rarely seen around here, though I know it only takes one.) I just thought people keep their dogs on leashes! My bad, and the trauma of seeing poor "Dandelion" ripped limb from limb in front of my eyes (and my children) has sure taught me a lesson.
Set up a dog trap... use a live chicken in a kennel as bait, allow only one way to get close... and trap (like a fox trap) if you look up fox traps... and then call the pound for a trapped dangerous dog...