Worldwide directory by country/state/city

Hi,
I’m creating a directory of belly dance classes, that will show countries, when a visitor clicks a country, it would show states, and when he hits a state, it would show a list of cities, and only in city it would show listings. People search for class in their cities and listings from other cities are useles & annoing for them. I spent couple days trying to do it and I’m confused & feel like I do it wrong and probably there is already built in way for doing that. Can you please advice the way how to achieve it in Directory Theme? Thanks in advance.

P.S. in case you need to take a look at what I did – http://www.bellydanceclasses.biz