Karate and all the martial arts tend to loose alot when they are commertialized. But keeping a dojo is very expensive, and at least one teacher needs to make a living from it. In many cases, good teachers barely make enough to survive with additional jobs. For this reason, many dojos sacrifice quality to be appealing to large numbers of students.
Most students are looking for a good work out, some techniques that look impressive, and the false sense that they can really deffend demselves without much knowlege. So, These are the things you must look for to discard dojos.
First, karate is not a place for calisthenics. if the training includes more than 15 minutes of calisthenics, the school is really an aerobics school. Second, if the warm up or initial exercises focus on stretching, the sensei is not upto date with exercise science. Stretchings bellong after the exercise, not before. The body should warm up quickly with exercises related to what will be done during training.
The advanced students should be able to kick without moving their bodies too much. Their arms should be under their control as they kick. They should be able to punch very near their opponent without touching. They should be fast. Speed and control should be much more important than strength.
Advanced students should punch without moving the shoulder of the arm that punches.
Karate is a precission art. Starting at the green belt, you should see that students move more beautifully as they advance in belt.
Too many schools allow students advance just by the number of katas they know, rather than by the perfection of the basic movements. Observing the quality of the movements of the students in relation to their belts will tell you the most about the school. But in addition, you may want to wach a complete class or two.