In this case I would be honest and explain that while you had HOPED to be able to help them out cause they had been loyal to you and you enjoyed serving them the fact is it is not working after experiencing the reality of doing it ... it is not personal it is business!

'Dear X;

After much consideration and reflection on the overall best interest of my program I regret to inform you that as of X date I will no longer be able to provide before and after school care for any of my clients as it is not working out for the over all balance of the younger children whose meals and naps are a challenge to balance around such a rigid clock as required by drop off and pick up at schools.

I realize that this will come as an inconvenience and to help to make the search for replacement service easier I wanted to share the following websites as they are popular places for providers to advertize and I am confident that you can find someone whose business plan caters more to school age programming (offer a list of places and if you know any providers with space to help out give a list of them specific)

If there is any thing else I can do to help with this transition easier please let me know. Also a reminder that if you find replacement care earlier than my last day of offering this services please remember our contract requires a minimum of X weeks notice.

Thank you
Alpha
Personally I would give at least a MONTH notice for them because finding quality childcare can be hard in some areas and you need time to research, book interviews and choose a client and set up the new arrangement!