Franchising in education – a threat or an opportunity?

Franchising. The word on many higher education (HE) and further education (FE) providers’ lips at the moment. For those who have worked in the education sector over the years, it is not exactly a new word or concept. The Further Education Funding Council (FEFC) issued circulars on franchising as far back as 1996. 

At the time of the circulars, the notion of franchising and collaborative provision was something new to the sector. These arrangements—where a university or further education college partners with another institution to deliver its courses—offered greater flexibility, new income streams, and improved efficiencies.

With financial pressures continuing to mount, education establishments have increasingly turned to franchised and collaborative provision. In fact, franchised provision has more than doubled in recent years. In 2022/23, it accounted for 6.5% (or £1.2bn) of all Student Loans Company (SLC) funded students. 

Engaging with franchised partnerships and collaborative provision continues to open up opportunities for the contracting entity, but also to potential students by broadening access to education. However, these opportunities also bring reputational risks and increase the likelihood of fraud where robust controls are not in place. 

The National Audit Office report: key findings

Following a series of concerns raised across governmental departments, the National Audit Office (NAO) undertook an investigation and released its findings in January 2024. The investigation highlighted weaknesses in the overarching governance and regulatory framework surrounding student loans. These included potential fraudulent applications, opaque recruitment practices, and insufficient evidence of student attendance and engagement. 

The concerns raised last year have not gone away. Many in the sector will have seen the Secretary of State for Education’s announcement in March 2025 that they “have asked the Public Sector Fraud Authority to co-ordinate immediate action across the system to halt this growing threat.”

Regulatory issues in franchised education

One of the particular concerns raised by the NAO involved franchised providers— nearly two-thirds of which are not being registered with the Office for Students (OfS). As a result, the regulatory responsibility falls on the lead provider (ie the HE/FE organisation), which must implement effective controls to monitor recruitment and attendance practices and mitigate the risk of student loan funding being paid out inappropriately. 

In response, the government launched a consultation that was released in January 2025, asking for views on requiring delivery partners with 300 or more students to register with the OfS.

While this move may help mitigate regulatory risks, sector responses have varied. Some have voiced concerns that these requirements could place an undue regulatory burden on smaller providers or conflict with the goals of the Lifelong Learning Entitlement.

Although it is not my intent to comment on the proposals (nor potential outcomes), a change in the regulatory framework does need to be considered when it comes to franchising. Regardless of the outcome of the proposals, education organisations need to review the control frameworks they have in place regarding the recruitment and registration of students at partner organisations, including how the institution is being assured over the quality and accuracy of student data.

What can the education sector learn from this?

As a leading provider of risk and governance services, as well as forensic and investigation support to the education sector, RSM (in both an advisory capacity as internal auditors, and investigatory capacity at the bequest of organisations) has undertaken a number of reviews in this area to help strengthen internal controls. We have included a self-assessment checklist below of some of the key controls that should be in place:

• Policies and procedures: cover the end-to-end process, capturing clear roles and responsibilities throughout.
• Due diligence: conduct financial and wider due diligence during onboarding and on an ongoing basis (typically annually). This includes verifying that owners are “fit and proper”, confirming contingency arrangements should the partner cease to trade, assessing strategic and cultural alignment, reviewing business plans, checking references, and evaluating the partner’s key policies.
• Induction and training: as part of the onboarding of partners, deliver training with senior management to ensure consistent messaging and expectations of the partnership. 
• Financial incentives: these should only be paid once the student has enrolled. 
• Annual monitoring: carry out annual monitoring reviews of each partner, covering recruitment practices, contract management, teaching quality, and student outcomes. Consider supplementing this with spot checks to verify compliance with policies and procedures (such as enrolment, teaching standards, and student engagement). Transparency and oversight serve both as deterrents and enablers of best practice.
• Exception reporting: establish mechanisms where the providers’ relationship managers meet partners regularly (typically termly) and escalate any issues through formal governance structures. Ensure there are processes to track corrective actions and monitor progress.
• Data trending: providers should be receiving regular data (on areas such as attendance and grades), which are reported within the governance structure operated. Identifying patterns can help detect risks early and inform broader preventative strategies.

How we can help with franchising in the education sector

If your organisation isn’t receiving regular assurances in the areas outlined above, suspects fraud, or has identified issues within its franchised provision, we can support you. For more information, please contact Andrea Deegan.