Choosing a Martial Arts School is not something to be taken lightly, although it shouldn't be something you stress over either.
Martial Arts (whether Taekwondo, Karate, Jiu Jitsu, etc.) has the power to transform a life for the better in almost every way imaginable (confidence, fitness, focus, patience, good character …). However, if the right instructor or school is not chosen, all of the potential benefits may never come because the student will not be enrolled long enough to experience those benefits.
Just like anything else, you shouldn't just go with option # 1 without at least exploring other options (like getting one quote from a contractor or lender, going to one car dealership). The way this generally happens is that people just go to the Martial Arts school that is the closest. This is no different than thinking that all Italian restaurants will be the same and so let's just go the closest one (especially since it may turn into a 10-year relationship versus a one time experience). But often that one "bad" experience that the student or parent has with a martial arts school is all it takes to be turned off for the rest of their life (thus missing all that could be gained from this opportunity).
So how do you find the "right" Martial Arts school …? Well first, ask around (ask your friends / neighbors / elementary schools). In my community there are Martial Arts schools in almost every shopping center and so there are usually multiple options within a short driving distance.
Also, style is not nearly as important as who is teaching. Sometimes we hear that you need to find "such and such" a style, but in reality, the benefits you want can be found in other styles too. An instructors rank also does not necessarily dictate how good of a teacher they are (although it usually gives you an idea of how long they've been doing it).
Most schools have some sort of trial programs, whether it is free or paid, a class, a week or a month, you should definitely do it. You should try and watch a class or observe the students at the school. You will get a good "feel" for a school just by going inside. Is the facility clean or dirty, is the staff professional, does the culture fit what you want (disciplined, fun, tough …). Another great thing to look for is how the beginner class compares to the advanced class. If the beginner class is full and the advanced class is empty, it could be an indication of how well they retain students (unless they've been open for very long).
When I have a student that has to transfer to another area, I will try and find a school for them. If I cannot, I will suggest what I just wrote about, but tell them to "go with their gut" when looking for a school.
Again, you may have the best school you could find right down the road from you. But with so much potential good that can come, you may want to drive another five minutes instead of settling for whatever's closest.