We have this problem sometimes in a much larger group I help organize.
A. Make sure that in future years, you state the fee is non-refundable. As you mentioned, it's much easier to argue this issue if there's a stated policy on it.
B. If you are under budget restraints, than sometimes what I've done is tell the person if a replacement can be made (and as coach, you will make it, not them), they can get their money back. If none is found, they they do not get it back. Do you have any kids on the wait list? If you feel it's not in the best interest of the group to add a new member at this time, then let the parents know that the child is allowed to participate in the group and the choice to attend or not is theirs. (Attach any attendance policies you've created to this discussion). There's 7 weeks to the first tournament, and longer depending on where you are or which tournament you're attending. We've successfully added a member this late in the season.
It's never fun to deal with these non-Lego issues, but they do crop up.
Good luck on it,
I'm sure this happens all the time and I should have been prepared, but I
guess I am not. After 3 weeks, a child is quitting and his parent is
demanding his $ back. For budget reasons, this is a big problem. What
should I do? What do most people do? And the signed form doesn't mention
this, which is probably a big problem on my part. The parent wants to quit
because he missed a mtg because of location change (which was announced in
advance) and he is annoyed.
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