There are some LQS that do "add" an extra inch or so, just by the way they measure the fabric and depending on how much you get. If I'm in one of those stores, I will usually just buy the amount of fabric I need or want. However, if I'm someplace like JoAnns where they don't add any extra, and I know the fabric was put on the bolt crooked, I will add an extra couple of inches to what I need, to make sure I have enough to use for my project and straighten out the grain.
I do agree that customer service should be a priority, and losing an inch or two of fabric, that you can't "sell" to someone else, while it does add up from bolt to bolt, if you keep your customer happy, they will be back and buy more fabric than you would have "lost" to cutting instead of tearing it.
I think you should write a letter to the owner of the store, and let them know what you think about the employee, and the way you were treated. I would explain to them that the extra inch of fabric, they were going to lose by cutting rather than tearing would have only cost them pennies, as compared to the dollar they wanted to charge you, and they lost a customer that would have spent hundreds of dollars over time and so saving a few cents by tearing cost them more than what they "save" by tearing fabric. $10.99yd/36inches = .30527 That is 30 CENTS an inch or more than likely 15 cents if they mark up fabric 100% I wonder if the owner thinks losing a customer is worth 30 cents.