Getting good grades? I do understand the expectation re behaviour inside and outside of the studio, but not all children can achieve good grades, regardless of their effort. For many of these kids, other activities (music, sports, martial arts etc.) give a great sense of achievement and accomplishment. It seems kind of punitive to me to demote children in martial arts simply because of their academic grades.
I understand what you mean, but I've seen martial arts studios do this in away that encouraged the students. In lower grades they students had to bring proof they had done their reading and homework for the week before to take classes. Since I had X practice is one of the most used excuses, the teachers really appreciated the support. If a kid was having problem with homework or concept the others at the Martial Arts School would help them out.
For secondary students they had to be passing and brought in progress reports and report cards. If they weren't passing, the martial arts instructors paired them with other student or even adults for tutoring. The Martial Arts School had a goal to make sure kids stayed out of gangs and graduated school. The instructor even helped kids find jobs after graduation and during vacations.
For both groups using the skills they learned inappropriately - got you in plenty of hot water and even kicked out.
One girl used her training to fend off an attack by another student (male). Due to the Zero Tolerance of aggressive violent behavior - the boy was suspended and confronted with the police (her parents declined to press charges). The girl was praised for her restraint, and not given a punishment. She knocked the other student on his rear end - actually throwing him some distance and stood her ground. I think communication among the public school, the Martial Arts School, and the local cops helped the Public School make the correct determination.