First of all, let's get past the idea that contracts are a bad thing. They're a thing. They have positive and negative aspects.
Many businesses which deal with recurring fees use a contract model. It serves a variety of purposes. As mentioned, it can keep people coming, although as also noted, if that's how a business has to keep the customers coming back, it may not be an ideal model.
However, from a purely business standpoint (forget the martial arts part, just say 'business'), they can be quite good. When a business needs to expand, or to get a line of credit, or to prove that they are a going concern for a variety of other reasons, contracts are 'Accounts Payable'. They are assets. Banks like to see assets.
Imagine going to your bank because you want to expand or buy your own building, etc. You ask for a mortgage loan, and the bank says "Great! What is your income?" You produce your income statements and they say "Oh, wait. You mean any or all of your students could quit tomorrow and your income would be zero?" And you say "Yes, because I do not believe in contracts." So the bank says too bad, so sad, come back when you can offer them some reassurance that the money will keep rolling in so you can repay your loan.
Contracts are contracts. It doesn't matter if you're buying a refrigerator on buy-here, pay-here credit or signing up for Kung Fu lessons. If people sign up for martial arts lessons and agree to pay X amount per month for Y months, then that is what they should do. Most contracts offer some way of negating the contract, but that is up to the business to offer and the buyer to read and understand. Typical exemptions include relocation more than X miles away, or if the business itself closes and does not offer an alternative, long-term disability, loss of employment, etc. They might or might not be in the contract. People should READ THE CONTRACT. If they fail to do so and fail to pay, they get turned over to a collection agency. That's how it works. It's not evil and it's not wrong.
Collection agencies typically buy 'bad paper' for pennies on the dollar. Unfortunately, it's difficult to recoup full value from defaulted contracts which are not secured by real property.
Another way of securing recurring income without a contract is the model being currently employed by some low-cost fitness centers in the USA. That is, month-to-month with no contract, but requiring automatic withdrawal from a checking account, and making 'quitting' require an affirmative action on the part of the quitter. That is, instead of just not showing up and therefore not paying every month, the money keeps coming out of the student's checking account until the account is closed or the student sends an actual letter to the company (fitness center, dojo, etc) requesting to end the membership. Some may not like this, but no one gets turned over to a collection agency, there is some predictability for the business, and there is encouragement to attend (even if it isn't the best way to encourage attendance). Trust me, most fitness centers that bill this way would go out of business if everyone who paid actually went. They would not have even close to enough room to handle them all. They COUNT on most people paying but not going. Human nature pays the bills.
Having said all that, our dojo is month-to-month. I like it, it works for me. I would attend no matter what was required by my dojo. But that's just me.
If I were trying to run a dojo as a business, I would absolutely require either a contract or go month-to-month with automatic withdrawal. If I were only running it as a hobby (not a strong enough word, but it will have to do), then month-to-month would be fine.
Businesses are BUSINESSES. They are most successful when they are run as one, if financial success is what is desired.
Think about it this way. I'm sure there are some grocery store owners who don't care about profits and only want everyone to have the best possible food for the lowest possible cost. Most of them, however, are in business to make money. Sorry, sad fact of life. Martial arts training really isn't any different. Probably a lot more are in it because they love it and just want to pass along their knowledge, but MOST of them are businesses, trying to earn a living and make a profit. That's how it is.
