I have run a bicycle shop, owned several other business as well as worked in customer relations for almost 30 years.

The bicycle in question was arguably sent out in worse condition than it came in, i.e. with a serious safety defect at worst and a condition that could render it useless at best.
There is only one right response for a business to take in a case like this (IMHO) and that is a prompt and unhesitating full refund accompanied by a profuse apology and the owner or lead mechanic dropping all other work to immediately go over the bike to assure there were no other dependencies.

The best boss I ever had put it best.
"Treat customers like they are king and they will tell their friends, Treat them any less and they will tell EVERYONE THEY KNOW."

Thank You Vince.