Contracts Were the Wrong Default
By Justin Hall
Open Source Jiu-Jitsu
Contracts Were the Wrong Default
On member contracts, the old industry norm I followed for ten years, and why I now believe they were always the wrong tool for the job.
Justin Hall / Founder, Open Source Jiu-Jitsu
For the first ten years of my academy I used twelve-month member contracts because everyone in the industry used them and the justifications I gave myself and my customers seemed reasonable at the time. They were not. This article is the case against them, written by someone who used them for a decade before changing his mind, and an argument that the industry's quiet drift away from contracts is one of the healthier shifts our field has made.
The way it used to be
When I opened my first academy, contracts were the industry default. Twelve-month commitments were standard. A motivated owner would upsell the new member to a two-year or three-year contract as part of the initial sign-up, often with a small monthly discount in exchange for the longer commitment. The model was so widespread that almost no one questioned it. Members signed contracts. Owners enforced contracts. That was how the business worked.
I did the same thing for the first ten years I owned my academy. I had every new member sign a twelve-month agreement. I upsold longer commitments when I could. I treated those contracts as a meaningful part of how I ran the business and how I thought about the business. In retrospect, I was wrong, and the case against contracts is so clear that I cannot honestly defend the position I held for that decade. This is that case.
The justifications, and why they were wrong
There were two justifications I gave for using contracts. One was for the customer. One was for myself.
The customer-facing justification was that Jiu-Jitsu takes time. It takes a year of consistent training before someone reaches the point where they could realistically defend themselves with what they have learned, and a twelve-month contract was framed as protecting the customer from their own future doubt. They might want to quit at month three when they were sore and frustrated. The contract would keep them engaged long enough to get past that wall and into the part of the practice where their growth would become visible to them.
This justification was self-serving. It was an instructor speaking as though they knew better than the customer what was good for the customer. It was a paternalistic framing that has been used to justify all kinds of bad commitments, and the people most likely to accept it are the people most vulnerable to it. The healthy version of the same argument is that we coach members through the early difficulty, we educate them on what to expect, we earn their continued engagement through the value we provide, and we let them decide whether to continue. The contract version short-circuits all of that.
The internal justification was that contracts gave the business a quantifiable value. Without contracts, the argument went, an academy had no real way to value its membership base. With contracts, you could point to the total dollar value of active commitments and call that the academy's worth.
This was also wrong, and it was wrong in a way that is worth naming clearly. A Jiu-Jitsu academy's value is not the dollar total of its active contracts. The value is the academy's profit, multiplied by a reasonable multiplier that reflects how long the academy has been in business, how strong the brand is, how stable the operations are, and how much of the business depends on the founder rather than the systems. Contracts add no value to that equation. A profitable academy with three hundred month-to-month members at a hundred and fifty dollars per month, running a thirty percent margin, is worth more than an unprofitable academy with three hundred members on twelve-month contracts. The contracts make the second academy feel more secure on paper. They do not make it worth more.
What actually happens when you try to enforce a contract
The contract value argument falls apart even further when you look at what happens when members try to break their contracts and the academy tries to enforce them.
There are two outcomes when an academy pursues a broken contract, and both of them are bad for the academy.
The first outcome is that the academy sends the broken contract to a collections agency. Collections agencies typically keep about half of whatever they collect. They are not subtle, and the collection process generates a substantial amount of pain and resentment in the customer being pursued. Sometimes the customer pays. The academy receives roughly half of the contract balance after collection fees. The customer who paid never returns to the academy, never refers another member, never says anything positive about the academy in their community, and often says a great deal that is negative.
The second outcome is that the customer does not pay even after collections. The academy receives nothing. The customer's credit is damaged. The customer is now actively hostile to the academy. The negative word-of-mouth is the same as the first outcome, except now the customer also has a grievance to share about how their credit was hurt by the academy.
In either outcome, the academy has converted a member who might have come back, or referred another member, or simply left quietly, into a hostile ex-customer who will tell anyone who will listen about how the academy went after them.
This is not a hypothetical. In 2009, before Google reviews were universal, I had a student who simply disappeared. No call, no notice, no response to any of our outreach. After several months of nonpayment, we turned the contract over to collections. Not long after, I got a notice that the student had filed a complaint with the Better Business Bureau. I was in my twenties, did not understand how the BBB worked, did not respond to the complaint properly, and frankly did not think much about it. About a year later a prospect came in, loved the class, told me he wanted to sign up. Then he did some basic research and found that my academy had an F rating with the BBB. He told me to my face that he could not enroll because of that rating. I lost the membership.
I also later learned how the BBB grading actually works. Failure to respond to complaints drops your grade to F. The process for restoring it runs through the BBB's accreditation system, which costs money. I paid what I had to pay to get the grade back to something tolerable. The total cost of that single broken contract, by the time I added up the lost prospect, the BBB fees, and whatever number of other prospects walked away after seeing the same F rating without telling me, was orders of magnitude more than the contract balance I had been chasing in the first place.
That story is from 2009, and the BBB was the dominant public rating infrastructure at the time. The modern review economy makes the dynamic considerably worse. Today the same ex-customer leaves a one-star review on Google with a detailed account of how the academy pursued them through collections for a contract they could not afford to honor, which sits at the top of search results for anyone considering the academy for years. The cost of trying to enforce a single broken contract, measured in lost future business, is often several multiples of the contract balance itself. I have seen academies lose meaningful pipelines of new members because of one or two ugly reviews about contract enforcement.
What I do now
I run month-to-month memberships with a thirty-day cancellation notice. A member who wants to leave gives written notice, the next thirty days are billed normally, and at the end of that period the membership ends. The thirty-day notice gives the academy a small operational buffer to manage the transition. It does not act as a barrier to anyone who has genuinely decided to leave.
I also know several incredibly successful academy owners who have abandoned even the thirty-day notice. When a member tells them they want to cancel, the response is to thank the member for their time at the academy, stop the billing that day, and wish them well. No notice period. No final month of charges. The relationship ends cleanly the moment the member chooses to end it.
Both models work. Both are defensible. The philosophical alignment is the same in both. The customer is paying for a service. When the customer decides the service is no longer worth what they are paying for it, the customer is free to stop paying for it. The academy's job is to be worth paying for. If the academy stops being worth paying for, the customer leaves. That is how every other healthy business works, and there is no good reason a Jiu-Jitsu academy should be different.
The cultural shift underneath this
Part of why contracts were the industry norm for so long is that Jiu-Jitsu in the United States was, for a long time, a deeply Brazilianized cultural product. The early generations of instructors brought their own cultural assumptions about what the instructor-student relationship was supposed to be. In the older, more Eastern-influenced tradition, the instructor occupied something close to a position of ownership over the student. The student belonged to the instructor's academy. The student's progression and even their permission to train at other places was the instructor's domain. The contract was a contractual expression of a cultural assumption that the instructor had a kind of authority over the customer that customers in other industries would never accept.
That cultural framing does not work in the United States anymore, and I would argue it should not work. The American consumer expects the relationship with a service provider to be transactional in the honest sense. The provider offers a service. The consumer pays for it. The consumer can stop at any time. The provider can refuse to continue serving the consumer at any time. The relationship has dignity precisely because either side can walk away.
Other martial arts traditions can retain whatever cultural frame works for them. I am not arguing that all martial arts should adopt the American consumer model. But Jiu-Jitsu in the United States has been steadily moving from a Brazilianized cultural product into a more thoroughly Americanized one. The expectations of the people walking through our doors have changed. The expectations of the staff we hire have changed. The expectations of the broader culture about what is acceptable in a business-customer relationship have changed. Contracts feel increasingly out of step with all of that.
Every lost member is information
The final argument against contracts is not a customer-facing argument. It is an argument to the owner about what kind of business they want to run.
When an academy retains members through contracts, the academy is partially insulated from its own quality of service. A member who would have left can be forced to keep paying. The academy can absorb the inefficiencies of its own operation because the contract is doing the retention work that the academy itself should be doing.
When an academy retains members through value alone, the academy has nowhere to hide. Every lost member is information. The member who quit at month four is telling the academy something about what the academy is not delivering. The member who tried the place and never came back is telling the academy something about the first-class experience. The member who stayed for eight months and then drifted away is telling the academy something about the engagement that the longer-term curriculum is failing to provide. None of this information is available when contracts are doing the retention work.
I treat every lost member as a learning event. Sometimes the loss was unavoidable. The member moved. The member had a life change. The member discovered that Jiu-Jitsu was not for them. But often there is something the academy could have done better, and the only way to find that signal is to remove the contract that was masking it.
I think this mindset, applied across the industry, would make Jiu-Jitsu academies generally better businesses. The academies that have to earn their members are the academies that improve fastest. The academies that improve fastest are the ones that grow most consistently. And the industry as a whole becomes more attractive to the broader public as the experience of being a member becomes more aligned with what good service looks like in every other category of business.
What I would tell my younger self
If I could go back to the version of me opening my first academy, I would tell him not to use contracts. Not because the legal mechanics are wrong, but because the cultural and business assumptions underneath them are wrong. The contract is doing work that the academy itself should be doing, the cultural framing it carries is one that the American market no longer accepts, and the downstream costs of enforcement are higher than the savings from retention.
I held the position I now reject for a decade. I am writing this as someone who used the tools I am arguing against and benefited from them in the short term, until I started seeing the long-term costs they were generating. I am not arguing that every owner using contracts today is making the same mistake I made. I am arguing that my reasons were wrong, the industry has shifted, and the case for moving away from contracts is worth taking seriously.
Open Minds. Open Mats. Open Source.