Concerns Rise Over University Franchising Practices
As many as ten British universities are facing the possibility of financial failure due to their dependence on precarious franchising agreements that allow private sector providers to run and teach courses under their names. This trend initially emerged as a strategy to expand higher education access to underserved communities in regions lacking universities. However, these franchising deals have become a lucrative source of income for cash-strapped institutions, generating significant tuition fee revenue for courses they do not directly teach. The rapid expansion of these arrangements has raised official concerns regarding the quality of some franchised courses and the prevalence of fraudulent activities associated with them.
Last year, alarming reports surfaced about agents recruiting students for university franchise courses, assuring them that their student loans could finance extravagant vacations abroad. In response to these troubling developments, the Government announced a crackdown on franchising practices aimed at addressing the issue of “rogue higher education operators.” Education Secretary Bridget Phillipson emphasized the necessity of implementing additional regulations to “protect students and safeguard taxpayer money.” This intervention could potentially lead to the closure of some external providers operating under these arrangements, raising fears within the higher education sector that the collapse of franchised courses could also jeopardize the institutions that have aligned their reputations with these operations.
Potential Bankruptcy Looms for Universities
A senior university executive, who preferred to remain anonymous, indicated that as many as ten institutions might face bankruptcy if their franchising agreements fail. “I can’t envision a resolution that doesn’t lead to a handful of universities either closing their doors or requiring government bailouts,” the executive told The i Paper. Their warning is echoed by other knowledgeable figures within higher education, emphasizing the urgency of the situation. The explosive growth of franchising—where the number of franchised students swelled to over 135,000 by the 2022/23 academic year, nearly tripling in just four years—has further heightened the risks involved.
Data obtained by The i Paper highlights the extent to which certain universities are banking on franchising, with some institutions reporting more students educated through external providers than those taught in-house. Nick Hilman, Director of the reputable Higher Education Policy Institute (HEPI), remarked that several universities have grown “extremely reliant on franchising.” He noted that these institutions, often among the less prestigious, are already grappling with significant financial challenges as the entire sector faces economic pressure.
The Reputation of Higher Education at Stake
Hilman cautioned that should this model result in university closures, the consequences would be far-reaching. “While it’s important to recognize that franchising plays a role in making higher education more accessible, we must also acknowledge that when it fails, it jeopardizes the reputation of the entire sector,” he stated. This warning comes in light of recent announcements regarding financial difficulties faced by institutions, including Bangor University, which plans to cut 200 jobs, and the University of South Wales, which is shedding another 90 positions. Similar job cuts have been announced by two prominent Russell Group universities, Durham and Cardiff, in the previous month.
The executive concerned about franchising arrangements expressed deep unease regarding the manner in which these agreements have operated, describing the tactics employed by some private providers’ agents as “aggressive.” However, it is the potential fallout from the collapse of these deals that raises the most alarm. “I believe we are at a critical juncture where the Government must prevent universities from entering into new franchises with UK-based private providers,” they stated. “Justifying such arrangements has become increasingly difficult.”
Furthermore, they emphasized the need for a structured approach to help universities exit from poorly performing partnerships in a way that minimizes disruption for students. When asked about the number of universities that might “go under,” they warned that “as many as ten could be at risk.” “Even without regulatory intervention, the worst-case scenarios for some of these institutions are becoming alarmingly plausible—some are so dependent on these partnerships that any move to terminate them could lead to bankruptcy,” the executive added.
Fraud and Quality Concerns Prompt Regulatory Action
The Government’s public spending watchdog has highlighted the troubling issue of student loan fraud affecting some franchise arrangements. The higher education regulator, the Office for Students (OfS), has also raised concerns about the risks posed to students, taxpayers, and the overall reputation of universities stemming from the franchising model. Official scrutiny over the rapid proliferation of university franchise courses and their value for money has intensified over the past year. By the 2022/23 academic year, 6.5 percent of all students with student loans were enrolled in franchised courses. In January 2024, the National Audit Office (NAO) reported that loans for courses offered by franchised providers accounted for a staggering 53 percent of the £4.1 million in fraud detected by the Student Loans Company (SLC) in that year. The NAO indicated that some of this franchise fraud was potentially linked to organized crime.
In September, the OfS concluded that university business models heavily reliant on franchising “represent increased risk.” They warned that if not managed diligently, such arrangements could adversely affect students, taxpayers, and the reputation of English higher education institutions. The regulator expressed “concerns that public funds are not always used appropriately” in universities’ subcontractual arrangements, which could result in “harm to both students and taxpayers.” For example, tuition fees might be allocated to fund subpar courses that do not provide good value for money, or funding may be disbursed to individuals who do not genuinely intend to pursue their studies.
In September, the Department for Education (DfE) committed to taking action in response to “truly shocking” reports that agents recruiting students for franchised courses were promising them that they could use their student loans to finance vacations and that “95 percent of individuals who receive this funding will never have to repay it.” Last month, Education Secretary Bridget Phillipson announced a crackdown on “rogue operators who misuse public funds and tarnish the reputation of our world-class universities.” The DfE’s current consultation plan aims to enhance scrutiny of university franchise operators, primarily private companies. By September 2027, these operators will be required to register with the OfS if they want their courses to qualify for student finance. Currently, over 200 providers are not directly accountable to the regulator. Once registered, they could face fines or suspension if they fail to meet required standards.
Franchise Students Outnumbering In-House Students
Recent figures reveal just how much some UK universities are depending on franchising as the sector’s financial situation deteriorates. However, there is no indication that these specific institutions’ arrangements are tied to fraud or low-quality courses or that they are on the brink of bankruptcy. For instance, at Canterbury Christ Church University, out of 27,110 registered full-time undergraduates, only 7,830 are directly taught by the university, according to the latest OfS figures for the 2022/23 academic year. The remaining 19,280 full-time undergraduates—representing over 70 percent of the total—are educated externally through franchised courses. Buckinghamshire New University reported 13,670 franchise students, making up 77 percent of its full-time undergraduates, and more than three times the 3,980 students it teaches in-house.
Nick Braisby, the university’s outgoing Vice Chancellor, noted that the franchise student count has decreased to “about 12,000 now,” attributing this decline to a “planned reduction.” He explained, “Historically, we’ve always had too many franchisee students, and we’ve been on a trajectory to reduce that number. But that’s not easy either, because pulling away from a franchisee can trigger their failure. You may find that there’s suddenly no franchisee left because they’ve gone under, so careful management is essential.” He added, “Some institutions are definitely on a path of rapidly increasing their numbers. I personally view that as a significant risk, and I wouldn’t support that at all.”
Proceed with Caution
Professor Braisby, who authored a HEPI paper advocating for reforms to franchising, warns of the “risks” to universities where the ratio of effectively franchise students to their own students is significantly skewed. He believes that this reliance could be mitigated if the Government implements the right regulatory framework. However, he cautioned, “If they mishandle it, they could easily precipitate institutional failures, and such events could occur rapidly. Therefore, we must proceed with caution.” He expressed concern about the potential delays in private franchise operators obtaining official registration under the new scheme and the implications if they fail to do so.
Universities could bear the financial burden of teaching students if a franchise course ends or is deemed inadequate by the regulator, potentially creating a significant liability for institutions already facing financial challenges. Leeds Trinity University, which recently topped national league tables for its journalism courses, reported that £19 million of its £53 million student income stemmed from franchising, according to its latest available accounts for 2022/23. However, this income stream may now be jeopardized following the OfS’s decision to investigate the quality and governance of its franchised courses.
In September, the OfS revealed that the Applied Business Academy, a private provider that collaborated with Leeds Trinity and the University of Buckingham, ceased all courses due to the investigation. The OfS temporarily revoked its access to tuition loan income while the inquiry was ongoing, leaving the universities to manage the fallout. A spokesperson for Leeds Trinity stated, “We understand and take seriously our obligation to comply with all relevant rules and guidelines to meet the sector’s regulatory requirements. Leeds Trinity University is working with the Office for Students to ensure transparency and assurance in relation to the institution’s franchise partnership arrangements.” Canterbury Christ Church University emphasized its commitment to widening access to higher education, stating that “working with a small number of high-quality partner providers” allows them to achieve this goal. A spokesperson added, “We also ensure that we invest in robust governance and management measures so that students studying through our partners receive an outstanding experience and a high-quality education that will benefit them and the communities they will eventually serve.”
Franchising: A Double-Edged Sword
Franchising was initially perceived as an effective means of expanding access to higher education for students from disadvantaged backgrounds who might otherwise miss out on a university education—and in some cases, it still serves this purpose. However, the model has also proven to be highly attractive and profitable for universities during a time when many are struggling to remain financially viable. Institutions that lend their names to a franchise typically receive between 12.5 to 30 percent of the £9,250 tuition fee for each enrolled student, as reported by the Office for Students, despite not being directly involved in their education. The OfS indicates that this income helps explain the “exponential growth” in the number of franchise students over recent years.
Private franchise providers also stand to profit from their share of the tuition fees and have a financial incentive to enroll as many students as possible. Reports indicate that students have, in some instances, been encouraged to enroll in courses with the assurance that their resulting student loans could cover vacation expenses. The NAO notes that providers have employed commission-based agents to recruit more students, with one scheme offering £500 for each new enrollment if existing students referred them. “These practices can lead to incentives for recruiting students who may not meet admission criteria, for whom the course is not suitable, or who may lack genuine commitment to the course,” the watchdog warns.
Recent statistics show that franchise operators do not reflect the typical mix of university subjects, with 62 percent of students enrolled in franchise courses studying business and management, according to the OfS. The regulator also reports that franchise students are significantly more likely to be over 31 years old and from disadvantaged backgrounds compared to their peers in traditional university settings. Over half (55.3 percent) of franchise students have no or unknown entry qualifications, and approximately two-thirds applying for student loans for franchised courses “are from nationalities where English is not the first language.” The OfS cautions, “Students’ opportunities will not be expanded if they are recruited onto courses that are poorly delivered, lead to weak student outcomes, or are not well-suited to their level of English language proficiency or prior educational experience.”
The NAO has documented instances of “widespread plagiarism and cheating” at one franchise provider, where the majority of the 1,389 students “failed to produce their own assignments.” The university responsible for the franchise later removed the students who had cheated from their courses but initially sought to retain the 20 percent of their tuition fees—amounting to £6.1 million—that it had already collected, which they ultimately had to reimburse. The OfS has noted that franchise students “have been encouraged to register for courses they do not genuinely intend to study to access public funding through maintenance loans.” “In certain cases, students have withdrawn shortly after receiving these funds; in others, there are grounds to question whether they are continuing their studies, despite their attendance being confirmed on a termly basis,” it warned in September.
Nick Hillman, director of the Higher Education Policy Institute, commented on the burgeoning franchising trend, stating, “I believe it’s a scandal waiting to unfold… some of the companies are reaping enormous profits, and one has to wonder where that money is going, as delivering a high-quality higher education does cost at least £9,500, which a regular university receives to provide.” He added, “There are significant risks involved, but for many individuals, it represents the only pathway to higher education. If you are a single mother with two children, you will only pursue higher education if it is accessible locally. Numerous towns across the UK lack traditional higher education options.” He cautioned against a reactionary approach that seeks to ban all franchising, advocating instead for a regulatory framework that addresses the issues while preserving access to education.
The OfS has assured The i Paper that it is actively working to ensure that university franchise arrangements maintain high quality. “This includes ensuring that students recruited onto courses possess the commitment and ability to succeed. It also involves implementing proper controls to safeguard public funds,” stated OfS Chief Executive Susan Lapworth. A spokesperson from Universities UK remarked, “Franchised partnerships play a crucial role in widening opportunities, enabling many individuals who might not otherwise access higher education to thrive. Universities take seriously the necessity of ensuring that students receive a high-quality education, regardless of where they study, and our franchise governance framework is aiding them in this endeavor.” A Department for Education spokesperson stated, “While universities are responsible for managing their own budgets, we have already made difficult yet necessary decisions to enhance their financial sustainability and stimulate growth through our Plan for Change. Franchising can serve as a valuable tool for broadening access to higher education, but we also need to ensure that students can trust the quality of their courses, irrespective of their mode of study, and our comprehensive reforms will protect students and preserve taxpayer money.”