Your outdated feeling about how a school should be run and operated is no burden to lay on a layperson. Contract schools will outlast any mom and pop school. The number of students they retain will make the experience more positive all around for everyone. They will have better equipment, more instructors, and the security that the other fellow students aren't just bums off the street itching to hurt as many people as possible before they flake away.
I don't like contract schools for myself, but for anyone trying to run a business the use of contracts is important for maintaining a steady cash flow. Bills must be paid all year round and it's hard to make a budget with month-to-month payments. Some people do it, but at a certain size it becomes very difficult.
I think it's fair to suggest that people consider the many benefits of not being tied into a contract and the risks that signing one entails, but it's not the case that a contract school is necessarily bad--more that contracts can be a necessary evil.
It is important to point out that some schools with long-term contracts, frequent and expensive belt fees, required private lessons at additional fees, etc., are basically financial scams intended to deparate parents from their cash in the name of their children.