I started teaching classes at Joann's when my superstore opened in November 2009. While some employees teach the classes for their regular wage plus bonuses based on the number of students, most instructors, like myself, are contract. In 2009, we agreed to teach classes for 70% of what students paid. Joann's retains the additional 30% plus, of course, the profits on the supplies you buy. Instructors are required to make and provide all of the class samples that you see hanging in the store-- at their own expense. (They get a 10% discount at Joanns.) So,the instructors actual income would be 70%, minus self-employment tax, minus the cost of materials, minus the time to make the samples, minus the hours spent at Open House promoting the classes.
If you'd paid $40 for a 3 hour class, the teacher would be paid $9.33 per hour which is less than minimum wage after expenses. Teachers are permitted to cancel classes with fewer than 4 students, and they often do. Remember, though,this was in November 2009.
Two months later, Joann's reduced teacher compensation to 60%. That $9.33 an hour in the above example then became $8 per hour, again, before expenses. The odds of your class being canceled went up.
Very shortly thereafter, Joann's began offering 50% off classes, a great deal for customers, that cuts teacher pay by 50%. That $8 per hour in the above example (that had previously been $9.33) became $4 per hour. And this is the best case scenario; for classes longer than 3 hours, the hourly rate decreases. (Again, remember this number is further reduced by self-employment taxes, the cost of and time in making samples, the hours worked at Open House.)
It's not feasible for anyone to work for so little, so classes are canceled unless enough people sign up to make it financially worthwhile for the teacher. Who doesn't love a 50% off sale? The class sales should come with the caveat, though, that they increase the likelihood of your class being canceled due to insufficient students, particularly beyond beginner classes which tend to have more students.
Since the higher the class level, the fewer students at any price, the likelihood of canceling the class goes up. Many are disappointed to have their classes canceled, especially when they've already purchased their supplies and they're excited about their class. Joann's could simply forego their cut of the class fee, retain the profits from supply sales, and leave the teacher compensation whole, reducing the number of cancellations, but I don't see that happening. It's unfortunate because, as it stands, no one wins.
I hope this sheds some light, though, on why this happens so frequently. As many have discovered, at least there are always private classes where you learn what you want, when you want, at a much quicker pace in classes that are custom designed around you.